<PAGE>
As filed with the Securities and Exchange Commission on October 8, 1999
Registration No. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Form S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
WOODS EQUIPMENT COMPANY
(Exact name of Registrant as specified in its charter)
--------------
Delaware 3523 36-3868249
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
--------------
WEC COMPANY
(Exact name of Registrant as specified in its charter)
--------------
Delaware 3523 36-3868248
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
6944 Newburg Road Thomas J. Laird
Rockford, Illinois 61108 President and Chief Executive Officer
Telephone: (815) 732-2141 Woods Equipment Company
(Address, including zip code, and 6944 Newburg Road
telephone number, Rockford, Illinois 61108
including area code, of Registrants' Telephone: (815) 732-2141
principal offices) (Address, including zip code, and
telephone number,
Copy to:
including area code, of Agent for
Service)
Dennis M. Myers, Esq.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telephone: (312) 861-2000
--------------
Approximate date of commencement of proposed sale to the public: The
exchange will occur as soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, please 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. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
maximum Proposed
Title of each class of Amount aggregate maximum Amount of
securities to be to be offering price aggregate registration
registered registered per unit (1) offering price fee
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<S> <C> <C> <C> <C>
15.0% Senior Discount
Debentures due 2011,
Series B, of Woods
Equipment Company
("Woods")............. $ 51,927,000 46.7% $ 24,269,139 $ 6,747
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12.0% Senior Notes due
2009, Series B, of WEC
Company............... $130,000,000 100.0% $130,000,000 $36,140
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Guarantee of Senior
Notes by Woods (2).... -- -- -- (3)
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of the securities
as of October 3, 1999.
(2) Woods has guaranteed the obligations of its wholly owned subsidiary, WEC
Company, with respect to the 12.0% senior notes.
(3) Pursuant to Rule 457(n), no separate fee is payable with respect to the
guarantee of the 12.0% senior notes by Woods being registered hereby.
--------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
file a further amendment which specifically states that this Registration
Statement will thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement becomes
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+This information in this prospectus is not complete and may be changed. These +
+securities may not be sold until the registration statement filed with the +
+SEC is effective. This prospectus is not an offer to sell nor is it an offer +
+to buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS [LOGO]
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1999
Woods Equipment Company
Exchange Offer for
$51,927,000 at Maturity of
15.0% Senior Discount Debentures due 2011
WEC Company
Exchange Offer for
$130,000,000 of
12.0% Senior Notes due 2009
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Material Terms of Exchange Offers
. The exchange offers . We will not receive any
will expire at 5:00 proceeds from the
p.m., New York City exchange offers.
time, ,
2000, unless extended.
. The terms of the
securities to be issued
in the exchange offers
are substantially
identical to the
outstanding securities,
except for transfer
restrictions and
registration rights
relating to the
outstanding securities.
. We will exchange all
debentures and notes
that you validly tender
and do not validly
withdraw.
. The exchange offers are
not subject to any
condition other than
they not violate
applicable law or any
applicable
interpretation of the
Staff of the SEC.
. There is no existing
public market exists
for the outstanding
securities or the
exchange securities. We
do not intend to list
the exchange securities
on any securities
exchange or seek
approval for quotation
through any automated
trading system.
. You may withdraw your
tender of debentures or
notes any time prior to
the expiration of the
exchange offers.
. Based on the advice of
our counsel, we believe
that the exchange of
securities will not be
a taxable exchange for
U.S. federal income tax
purposes.
- --------------------------------------------------------------------------------
Each broker-dealer that receives exchange securities for its own account
pursuant to the exchange offers must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange securities. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange securities received
in exchange for outstanding securities where such outstanding securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
expiration date of the exchange offers, we will make this prospectus available
to any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
For a discussion of certain factors that you should consider before
participating in the exchange offers, see "Risk Factors" beginning on page 16
of this prospectus.
Neither the SEC nor any state securities commission has approved the
securities to be distributed in the exchange offers, nor have any of these
organizations determined that this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary.........................1
Risk Factors..............................16.
The Exchange Offers.......................25.
Forward-Looking Statements................35.
Use of Proceeds...........................36.
Capitalization............................37.
Unaudited Pro Forma Financial Data........38.
Selected Historical Financial Data........50.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations...............................54.
Business..................................62.
Management................................79.
Principal Stockholders....................83.
Certain Relationships and Related
Transactions.............................84.
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Description of Other Financing Arrangements........................... 87
Description of the Exchange Debentures................................ 89
Description of the Exchange Notes..................................... 119
Description of Capital Stock.......................................... 153
United States Federal Income Tax Consequences......................... 157
Plan of Distribution.................................................. 157
Legal Matters......................................................... 158
Experts............................................................... 158
Where You Can Find More Information................................... 159
Index to Financial Statements......................................... F-1
</TABLE>
----------------
As used in this prospectus, references to "we," "our," "us" and "Woods"
refer to Woods Equipment Company and its operating subsidiary, WEC Company. In
those situations where it is important to distinguish between Woods Equipment
Company and WEC Company, we use the term "Parent" to refer only to Woods
Equipment Company and the term "WEC" to refer only to WEC Company. Woods
recently acquired three separate businesses. For ease of reference, we use the
following terms to identify these businesses in this prospectus:
"TISCO" refers to Tru-Part Manufacturing Corporation and its principal
operating subsidiary, Tractor Implement Supply Company;
"Central Fabricators" refers to Central Fabricators, Inc.; and
"Alitec Attachments Division" refers to the attachments division of
Alitec Corporation.
i
<PAGE>
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be important to
you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision. You should pay special
attention to the "Risk Factors" section beginning on page 16 of this prospectus
to determine whether you wish to participate in the exchange offers.
Our Business
Overview
Woods is a leading manufacturer of attachments for a variety of mowing,
cutting and clearing, construction, material handling, landscaping and grounds
maintenance applications. In July 1999, Woods acquired three separate
businesses:
. TISCO--one of the leading independent distributors of replacement parts
in the United States primarily for tractors over ten years old;
. Central Fabricators--one of the leading independent manufacturers of
pin-on excavator buckets for the U.S. construction industry; and
. Alitec Attachments Division--a manufacturer of patented hydraulic
powered attachments for the rapidly growing U.S. skid steer market.
As a result of these acquisitions, Woods enhanced its position as one of the
largest independent attachments manufacturers in the United States as well as
gained a new platform in the replacement parts business for tractors.
Our Management Team
Woods is managed by Thomas J. Laird and his executive management team. Mr.
Laird joined Woods in 1993 and has assembled an executive management team with
significant manufacturing and industry experience. Since 1993, Woods' executive
management team has transformed Woods from a manufacturer of niche agricultural
and landscaping products into a leading, diversified attachments manufacturer
through the successful introduction of new products and implementation of a
strategic acquisition program. From 1993 to 1998, Woods has completed and fully
integrated seven acquisitions. As a result of such acquisitions and new product
introductions, Woods' sales have increased from $57.6 million in 1992 to
approximately $154.7 million in 1998, representing a compound annual growth
rate of approximately 21.8%. In addition to increasing sales, Woods' executive
management team has also been successful in improving Woods' manufacturing
processes by implementing new operating procedures designed to increase
productivity, shorten manufacturing lead times and reduce costs and inventory
levels. As a result of the implementation of these operating procedures, Woods
generated approximately $22.0 million in cash through increasing its inventory
turns from 2.6 times in 1993 to 5.3 times in 1998.
Our Products
Woods' products are used in a variety of applications to enhance the
productivity and versatility of prime movers, which include tractors,
excavators, tractor loader backhoes and skid steers. Our products include
rotary cutting and finish mowing attachments, front end loaders, backhoes,
coupler systems, buckets, scrapers and other implements. We also offer a full
line of replacement parts for our increasing installed base of attachments as
well as replacement parts for tractors. The average lifespan of our attachments
range from one to five years due to the severe and wearing nature of the
applications for which they are used. In most instances, a prime mover will be
used for several different types of applications, each of which requires a
separate attachment. For example, a prime mover can be used in conjunction with
a mower, front end loader, backhoe or scraper, depending on the desired
application. Most of our products range in price from $1,000 to $10,000. Our
products are sold through our large and extensive dealer network and directly
to original equipment manufacturers. Our products are used by a variety of end-
users, including construction companies and
1
<PAGE>
contractors, utility contractors, landscaping and groundscare companies,
farmers, ranchers, homeowners and governmental agencies. No single customer
accounted for more than 3% of our pro forma net sales in 1998.
Our Markets
We sell our products to end-users located primarily in the United States.
The attachments market in the United States is very large and fragmented. We
believe the market for attachments in the United States had sales in excess of
$4.0 billion in 1998 and historically has grown at a rate of 2% to 4% annually.
With the acquisition of TISCO, we also operate in the $8 billion capital
equipment replacement parts market in the United States. For the most part, the
U.S. attachments and replacement parts markets are comprised of several hundred
small, regional manufacturers and distributors that offer a limited number of
products as well as a small number of national and international companies that
offer a broad range of products. In recent years, there has been a trend
towards consolidation among attachments manufacturers and parts suppliers in
order to achieve operating efficiencies and to better serve the needs of their
end-users. Similarly, there has been significant consolidation among dealers,
who are increasingly seeking suppliers, such as our company, who are able to
offer broad product lines, national distribution capabilities, innovative
products and reliable service.
When compared to original equipment manufacturers of prime movers, we
believe that the overall demand for our products is relatively stable and is
not dependent to any significant degree on the business cycle of any single
industry. We attribute this relative stability to:
. the diversity and balance of the end-users and applications of our
products;
. the required maintenance and ground engaging nature of our product
applications, which limits the end-user's ability to defer purchases and
encourages ongoing replacement;
. our large and geographically diverse customer base;
. the relative low cost of our products as compared to the cost of a prime
mover; and
. our significant replacement parts business.
Competitive Strengths
We believe that our success is attributable to the following competitive
strengths:
Proven Management Team with Significant Industry and Operational
Experience. Woods is operated under the leadership of Thomas J. Laird. Mr.
Laird joined Woods in 1993 and has over 25 years of manufacturing, marketing
and general management experience, including 21 years of experience at General
Electric Company. The eight member senior management team assembled at Woods by
Mr. Laird has over 150 years of combined manufacturing and industry experience
from world-class manufacturing companies.
Strong Operational Focus. Woods' management is focused on improving
profitability through a Total Cost Productivity program designed to achieve
continuous productivity gains, shorten manufacturing lead times and reduce
costs and inventory levels. In 1995, as part of the Total Cost Productivity
program, Woods began to implement continuous flow manufacturing and total
quality management techniques at certain of its manufacturing facilities. To
date, Woods has implemented continuous flow manufacturing and total quality
management at three of its facilities. As a result of these techniques, Woods
has successfully decreased its overall working capital requirements by
increasing inventory turnover from 2.6 times in 1993 to 5.3 times in 1998 and
reducing order-to-delivery times from 35 days to 16 days over the same period.
Extensive Distribution Network. Our extensive dealer network provides
geographical and customer diversification and facilitates the successful
introduction of new products and the cross-selling of acquired product lines.
Our distribution network includes dealers that have affiliations with all the
principal original equipment manufacturers of prime movers, such as New
Holland, Deere & Co., Case Corporation, AGCO Corporation, Ingersoll-Rand
Company, which manufacturers the Bobcat brand of skid steer, Caterpillar Inc.
and Kubota Corporation, as well as a number of independent dealers.
2
<PAGE>
Strong Brand Recognition and Product Breadth. Woods' well-known brands
include Woods(R), Wain-Roy(R), Gannon(R), Alloway(R) and Gill(R). Management
believes that Woods has the most comprehensive product line of tractor-mounted
attachments in the industry with 24 product categories. Our recent acquisitions
have provided us with a number of additional well-known brands, including
Central Fabricators(R), Tru-Part(R), TRU-POWER(R), TISCO(R) and CALCO(R).
Versatile Mounting Systems. Woods has developed a large number of mounting
systems that enable their products to be attached to all of the major brands of
prime movers. For example, Woods' mounting systems enable its front end loaders
to be attached to approximately 317 tractor models and its backhoes to be
attached to 243 tractor models. We believe that these mounting systems create
customer loyalty as end-users are reluctant to purchase attachments from other
manufacturers because doing so would also require the purchase of a new
mounting system at an additional cost.
Successful New Product Introductions. Woods has a successful product
development record and a strong research and development team. Over the last
four years, Woods has made substantial investments to support new product
development, including the purchase of 3-D solid modeling and CAD-CAM systems
to facilitate product design and the implementation of finite element analysis
testing for proposed prototypes. Woods' 37 engineering professionals in design,
testing and new product support have introduced over 90 new products since
1993, which accounted for approximately $31.8 million, or 20.6% of Woods' net
sales in 1998.
Acquisition Integration Capability. From 1993 to 1998, Woods' management
team has successfully integrated seven strategic acquisitions. With these
acquisitions, Woods has increased and leveraged its existing distribution
network, eliminated redundant corporate functions, increased sales and reduced
costs. Over the last five years, Woods' management increased Woods' product
categories from 7 to 24 through new product introductions and strategic
acquisitions.
Growth Strategy
Our strategy is to increase market share and profitability through the
following initiatives:
Capitalize on the Anticipated Benefits of the Acquisitions. Management
believes that the combination of Woods, TISCO, Central Fabricators and the
Alitec Attachments Division will provide several strategic benefits, including:
. expanded product offerings;
. increased distribution capabilities and cross-selling opportunities;
. improved relationships with original equipment manufacturers;
. anticipated cost savings; and
. complementary technology.
Continue to Implement Total Cost Productivity Initiatives. We intend to
continue to implement our Total Cost Productivity program in an effort to
become the lowest cost producer of attachments in each of our product
categories. Continuous flow manufacturing and total quality management are
important components of our strategy to improve productivity, shorten
manufacturing lead times and reduce costs and inventory levels.
Develop New and Enhance Existing Products. Management believes it can
continue to generate internal growth and increase our overall market share
through product innovation and new product development. We work closely with
dealers and customers to identify customer needs and product opportunities.
Management believes that our engineering department of 46 professionals will
provide us with the design, product development and technical expertise needed
to continue to successfully introduce new products and product improvements.
3
<PAGE>
Increase Depth of Product Penetration at Dealers. Woods is currently in the
process of reducing the size of its dealer network from approximately 4,000 to
under 3,000. The remaining dealers will represent those with greater than
$25,000 in annual sales of Woods' products. We believe our remaining dealers
will carry more of our products because they will be the predominant Woods
dealer in their county and we will be able to provide them with additional
marketing and logistical support. In addition, we should be able to achieve
transportation cost savings by increasing delivery sizes and reducing the
number of absolute deliveries.
Acquire Complementary Businesses. Management believes that it can continue
to expand our product offerings, further expand our dealer network and
supplement our internal growth through strategic acquisitions. In pursuing our
acquisition strategy, we intend to focus our efforts on acquiring businesses
with product lines that can be sold through our extensive dealer network.
Management believes that the highly fragmented nature of the U.S. attachments
industry provides a favorable environment for such acquisitions and the
continued success of our consolidation efforts.
Recent Acquisitions
TISCO. On July 28, 1999, we acquired substantially all of the assets of
TISCO for approximately $37.2 million in cash plus noncompete payments of an
aggregate of $0.5 million to its former owners to be made on a quarterly basis
over a two year period. TISCO had net sales of $65.0 million for the twelve
months ended May 21, 1999.
Central Fabricators. On July 28, 1999, we acquired Central Fabricators for
approximately $28.7 million in cash plus noncompete payments of an aggregate of
$0.6 million to its former owners to be made on a quarterly basis over a three
year period. Central Fabricators had net sales of $22.4 million for the twelve
months ended June 30, 1999.
Alitec. On July 29, 1999, Woods acquired the Alitec Attachments Division for
approximately $10.9 million in cash, subject to a possible earn-out payment of
up to $3.0 million if the acquired business has net sales in 1999 of
approximately $11.0 million or more. The Alitec Attachments Division had net
sales of $9.0 million for the twelve months ended June 30, 1999.
For ease of reference, we collectively refer to the foregoing acquisitions
in this prospectus as the "Acquisitions."
The Recapitalization
On August 7, 1998, Parent completed a recapitalization of its equity
structure, pursuant to which, among other things, Madison Dearborn Capital
Partners II, L.P. ("MDCP") and Woods' senior management acquired substantially
all of the outstanding capital stock of Parent. Woods used $155.0 million to
complete the recapitalization, including the payment of related fees and
expenses. The recapitalization was financed through:
. borrowings of $85.0 million under a new $110 million multi-tranche senior
secured credit facility;
. borrowings of $25.0 million under a subordinated bridge loan provided by
MDCP;
. the assumption of approximately $5.8 million of existing indebtedness of
Woods;
. an equity investment in Parent of approximately $39.8 million by MDCP,
senior management and certain other investors; and
. cash on hand of approximately $1.7 million.
----------------
Parent and WEC were incorporated under the laws of the State of Delaware on
January 28, 1993. Woods' origins date back to 1947 when its predecessor began
to manufacture rotary cutters for the agricultural industry. Our principal
executive office is located at 6944 Newburg Road, Rockford, Illinois 61108, and
our telephone number is (815) 732-2141.
4
<PAGE>
Summary of the Exchange Offers
Registration Rights We sold both the outstanding notes and the
Agreement.............. outstanding debentures on July 28, 1999 to Credit
Suisse First Boston Corporation, who we refer to in
this prospectus as the "initial purchaser." The
initial purchaser subsequently resold there
securities to:
. qualified institutional buyers pursuant to Rule
144A under the Securities Act and
. with respect to the notes only, qualified buyers
outside the United States in reliance upon
Regulation S under the Securities Act.
Simultaneously with the completion of the initial
offerings, we entered into registration rights
agreement with the initial purchaser, which provides
for the exchange offers. The exchange offers are
intended to satisfy your rights under the
registration rights agreement. After the exchange
offers are complete, you will generally no longer be
entitled to any exchange or registration rights with
respect to your outstanding securities.
The Exchange Offers:
15.0% Senior Discount
Debentures..............
We are offering to exchange $51,927,000 aggregate
principal amount at maturity of 15.0% senior discount
debentures due 2011, which have been registered under
the Securities Act for your existing 15.0% senior
discount debentures, which were issued on July 28,
1999 in a private offering.
12.0% Senior Notes...... We are offering to exchange $130,000,000 aggregate
principal amount of 12.0% senior notes due 2009,
which have been registered under the Securities Act
for your existing 12.0% senior notes, which were
issued on July 28, 1999 in a private offering.
In order to be exchanged, an outstanding security
must be properly tendered and accepted. All
outstanding securities that are validly tendered and
not validly withdrawn will be exchanged. We will
issue exchange securities promptly after the
expiration of the exchange offers.
Resale of the Exchange We believe that the exchange securities issued in the
Securities.............. exchange offers may be offered for resale, resold and
otherwise transferred by you without compliance with
the registration and prospectus delivery provisions
of the Securities Act. We have based this belief on
letters issued in connection with past offerings of
this kind in which the Staff of the SEC has
interpreted the laws and regulations relating to the
resale of notes to the public without the requirement
of further registration under the Securities Act. See
Shearman & Sterling (available July 2, 1993); Morgan
Stanley & Co. Incorporated (available June 5, 1991);
and Exxon Capital Holdings Corporation (available May
13, 1989). In order for the exchange securities to be
offered for resale, resold or otherwise transferred:
. you must acquire the exchange securities in the
ordinary course of your business;
5
<PAGE>
. you must not be participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the exchange securities
issued to you in the exchange offers;
. you must not be a broker-dealer who purchased
your outstanding securities directly from us for
resale under Rule 144A or any other available
exemption under the Securities Act; and
. you are not an "affiliate" of Woods with the
meaning of Rule 405 under the Securities Act.
If any of these conditions are not satisfied, you may
incur liability under the Securities Act if you
transfer any exchange securities issued to you in the
exchange offers without delivering a prospectus
meeting the requirements of the Securities Act or
without an exemption from registration of your
exchange securities from such requirements. We do not
assume or indemnify you against any such liability.
If you are a broker-dealer and you acquired
outstanding securities as a result of your market-
making or other trading activities, you must
acknowledge that you will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of the exchange securities
that you acquire for your own account in exchange for
the outstanding securities. You may use this
prospectus for an offer to resell, resale or other
retransfer of the exchange securities issued to you
in the exchange offers. See "Plan of Distribution."
We are not offering to exchange with you, and will
not accept surrenders for exchange from you, in any
jurisdiction in which this exchange offer or its
acceptance would not comply with the securities or
blue sky laws of that jurisdiction. Furthermore, if
you acquire the exchange notes, you are responsible
for compliance with securities or blue sky laws
regarding resales. We assume no responsibility for
compliance with these requirements.
Record Date............. We mailed this prospectus and the applicable exchange
offer documents to registered holders of outstanding
securities on , 1999.
Expiration Date......... The exchange offers will expire at 5:00 p.m., New
York City time, , 2000, unless we decide to
extend the expiration date.
Conditions to the
Exchange Offers........
The exchange offers are not subject to any condition
other than that the exchange offers not violate
applicable law or any applicable interpretation of
the Staff of the SEC.
Procedures for
Tendering Outstanding
Securities............. If you wish to tender your securities for exchange in
these exchange offers, you must transmit to the
exchange agent on or before the expiration date
either:
. an original or a facsimile of a properly
completed and duly executed copy of the letter of
transmittal, which accompanies this prospectus,
together with your outstanding securities and any
other
6
<PAGE>
documentation required by the letter of
transmittal, at the address provided on the cover
page of the letter of transmittal; or
. if the securities you own are held of record by
The Depository Trust Company in book-entry form
and you are making delivery by book-entry
transfer, a computer-generated message
transmitted by means of the Automated Tender
Offer Program System of The Depository Trust
Company in which you acknowledge and agree to be
bound by the terms of the letter of transmittal
and which, when received by the exchange agent,
forms a part of a confirmation of book-entry
transfer. As part of the book-entry transfer, The
Depository Trust Company will facilitate the
exchange of your securities and update your
account to reflect the issuance of the exchange
securities to you. The Automated Tender Offer
Program allows you to electronically transmit
your acceptance of the applicable exchange offer
to The Depository Trust Company instead of
physically completing and delivering a letter of
transmittal to the exchange agent.
In addition, you must deliver to the exchange agent
on or before the expiration date:
. if you are effecting delivery by book-entry
transfer, a timely confirmation of book-entry
transfer of your outstanding securities into the
account of the exchange agent at The Depository
Trust Company; or
. if necessary, the documents required for
compliance with the guaranteed delivery
procedures.
By executing and delivering the letter of transmittal
or effecting delivery by book-entry transfer, you are
representing to us that, among other things:
. the person receiving the exchange securities in
the exchange offers, whether or not that person
is the holder, is receiving them in the ordinary
course of business;
. neither you nor any other person receiving your
exchange securities in the exchange offers has an
arrangement or understanding with any person to
participate in the distribution of the exchange
securities and that you are not engaged in, and
do not intend to engage in, a distribution of the
exchange securities; and
. neither you nor any other person receiving your
exchange securities in the exchange offers is an
"affiliate" of ours within the meaning of Rule
405 under the Securities Act.
Special Procedures for
Beneficial Owners......
If you are the beneficial owner of book-entry
interests and your name does not appear on a security
position listing of The Depositary Trust Company as
the holder of such book-entry interests or if you are
a beneficial owner of outstanding securities that are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
you wish to tender such book-entry interest or
outstanding securities in the exchange offers, you
should contact such person in whose name
7
<PAGE>
your book-entry interests or outstanding securities
are registered promptly and instruct such person to
tender on your behalf.
Guaranteed Delivery If you wish to tender your outstanding securities
Procedures............. and:
. time will not permit your securities or other
required documents to reach the securities
exchange agent by the expiration date; or
. the procedure for book-entry transfer cannot be
completed on time;
you may tender your securities by completing a notice
of guaranteed delivery and complying with the
guaranteed delivery procedures.
Withdrawal Rights....... You may withdraw the tender of your outstanding
securities at any time prior to 5:00 p.m., New York
City time on , 2000.
Federal Income Tax
Considerations.........
Based upon the advice of our counsel, we believe that
the exchange of outstanding securities for the
exchange securities will not be a taxable event for
United States federal income tax purposes. See
"United States Federal Income Tax Consequences."
Use of Proceeds......... We will not receive any proceeds from the issuance of
exchange securities pursuant to the exchange offers.
We will pay all of the expenses incident to the
exchange offers.
Exchange Agent.......... United States Trust Company of New York is serving as
the exchange agent in connection with the exchange
offers.
8
<PAGE>
Summary of Terms of the Exchange Securities
The form and terms of the exchange securities are the same as the form and
terms of the outstanding securities, except that the exchange securities will
be registered under the Securities Act. As a result, the exchange securities
will not bear legends restricting their transfer and will not be subject to the
registration rights and liquidated damage provisions contained in the
outstanding securities. The exchange securities represent the same debt as the
outstanding securities. Both the outstanding securities and the exchange
securities are governed by the same applicable indenture. For case of
reference, we use the term "debentures" in this prospectus to refer to both the
outstanding debentures and the exchange debentures and the term "notes" to
refer to both the outstanding notes and the exchange notes.
The Senior Discount Debentures
Issuer.................. Woods Equipment Company.
Securities Offered...... $51,927,000 aggregate principal amount at maturity of
15% senior discount debentures due 2011.
Maturity................ July 15, 2011.
Yield and Interest...... The outstanding debentures were sold at a substantial
discount from their principal amount at maturity and
there will not be any cash payment of interest on the
debentures prior to October 15, 2004. From and after
July 15, 2004, the debentures will bear interest,
which will be payable quarterly in cash, at a rate of
15% per annum on each January 15th, April 15th, July
15th and October 15th, commencing October 15, 2004.
Ranking................. The debentures are general unsecured obligations of
Parent. The debentures will not be guaranteed by any
of the Parent's existing or future subsidiaries.
The debentures:
. effectively rank junior to all of Parent's secured
indebtedness to the extent of the value of the
assets securing such indebtedness;
. rank equally with all of Parent's existing and
future unsubordinated, unsecured indebtedness that
does not expressly provide that it is subordinated
to the debentures;
. rank ahead of all of Parent's future indebtedness
that expressly provides that it is subordinated to
the debentures; and
. are structurally subordinated in right of payment
to all existing and future indebtedness of Parent's
subsidiaries, including WEC.
As of July 3, 1999, after giving pro forma effect to
the Acquisitions and the initial offerings, Parent
would have had no indebtedness other than the
debentures and its guaranties of WEC's obligations
under the senior credit facility and the notes and
WEC would have had total liabilities of approximately
$174.0 million.
Optional Redemption..... Parent cannot redeem the debentures until July 15,
2004, except as described immediately below.
Thereafter, Parent can redeem some or all of the
debentures at the redemption prices listed in the
"Description of the Exchange Debentures--Optional
Redemption" section of this prospectus, plus accrued
interest.
9
<PAGE>
Optional Redemption
after Equity
Offerings..............
At any time before July 15, 2002, Parent can choose
to redeem all of the outstanding debentures with
money that it raises in certain equity offerings, as
long as:
. it pays to holders of the debentures a redemption
price of 115% of the accreted value of the
debentures it redeems, plus accrued interest; and
. it redeems the debentures within 60 days of
completing such equity offering.
Change of Control If a change of control of Parent occurs, Parent must
Offer.................. give holders of the debentures the opportunity to
sell to it their debentures at a purchase price of
101% of their face amount, plus accrued interest. The
term "change of control" is defined in the
"Description of the Exchange Debentures--Change of
Control" section of this prospectus.
Certain Covenants....... The indenture governing the debentures, which we
refer to as the "debenture indenture," contains
covenants that limit the ability of Parent and that
of its subsidiaries to:
. incur additional indebtedness;
. pay dividends or distributions on, or redeem or
repurchase, our capital stock;
. make investments;
. issue or sell preferred stock of subsidiaries;
. engage in transactions with affiliates;
. create liens on our assets to service certain debt;
. transfer or sell assets;
. guarantee indebtedness;
. restrict dividend or other payments to Parent;
. consolidate, merge or transfer all or substantially
all of Parent's assets and the assets of its
subsidiaries; and
. engage in unrelated businesses.
These covenants are subject to important exceptions
and qualifications, which are described in the
"Description of the Exchange Debentures" section of
this prospectus.
Senior Notes
Issuer.................. WEC Company.
Securities Offered...... $130.0 million aggregate principal amount of 12%
senior notes due 2009.
Maturity................ July 15, 2009.
Interest Rate........... 12% per year.
Interest Payment Dates.. January 15th and July 15th of each year, commencing
January 15, 2000.
10
<PAGE>
Ranking and Guaranties.. The notes are general unsecured obligations of WEC
and are unconditionally guaranteed by Parent and by
any future domestic subsidiary of WEC. WEC does not
currently have any subsidiaries.
The notes:
. effectively rank junior to all of WEC's secured
indebtedness to the extent of the value of the
assets securing such indebtedness;
. rank equally with all of WEC's existing and future
unsubordinated, unsecured indebtedness that does
not expressly provide that it is subordinated to
the notes; and
. rank ahead of all of WEC's future indebtedness that
expressly provides that it is subordinated to the
notes.
The Parent guaranty is a general unsecured obligation
of Parent and effectively ranks junior to all of
Parent's secured indebtedness to the extent of the
value of assets securing such indebtedness. The
Parent guaranty ranks equally with all of Parent's
existing and future unsubordinated, unsecured
indebtedness that does not expressly provide that it
is subordinated to the Parent guaranty.
Any future subsidiary guaranty will effectively rank
junior to all of the subsidiary guarantor's secured
indebtedness to the extent of the value of the assets
securing such indebtedness and will rank equally with
all of the subsidiary guarantor's existing and future
unsubordinated, unsecured indebtedness that does not
expressly provide that it is subordinated to the
subsidiary guaranty.
As of July 3, 1999, after giving pro forma effect to
the Acquisitions and the initial offerings, WEC would
have had secured indebtedness of approximately $15.6
million.
Optional Redemption..... WEC cannot redeem the notes until July 15, 2004,
except as described immediately below. Thereafter,
WEC can redeem some or all of the notes at the
redemption prices listed in the "Description of the
Exchange Notes--Optional Redemption" section of this
prospectus, plus accrued interest.
Optional Redemption
after Equity At any time on one or more occasions before July 15,
Offerings.............. 2002, WEC can choose to redeem up to 35% of the
original principal amount of the notes with money
that it raises in certain equity offerings, as long
as:
. it pays to holders of the notes a redemption price
of 112% of the face amount of the notes it redeems,
plus accrued interest;
. it redeems the notes within 120 days of completing
such equity offering; and
. at least 65% of the original aggregate principal
amount of notes issued remains outstanding
afterwards.
11
<PAGE>
Change of Control If a change of control of WEC or Parent occurs, WEC
Offer.................. must give holders of the notes the opportunity to
sell to it their notes at a purchase price of 101% of
their face amount, plus accrued interest. The term
"change of control" is defined in the "Description of
the Exchange Notes--Change of Control" section of
this prospectus.
Certain Covenants.......
The indenture governing the notes, which we refer to
as the "notes indenture," contains covenants that
limit the ability of WEC and any future subsidiary
to:
. incur additional indebtedness;
. pay dividends or distributions on, or redeem or
repurchase, WEC's capital stock;
. make investments;
. issue or sell preferred stock of subsidiaries;
. engage in transactions with affiliates;
. create liens on their assets to service certain
debt;
. transfer or sell assets;
. guarantee indebtedness;
. restrict dividend or other payments to WEC;
. consolidate, merge or transfer all or substantially
all of WEC's assets and the assets of its
subsidiaries; and
. engage in unrelated businesses.
These covenants are subject to important exceptions
and qualifications, which are described in the
"Description of the Exchange Notes" section of this
prospectus.
Risk Factors
Participating in the exchange offers involves substantial risks. See the
"Risk Factors" section of this prospectus for a description of certain of the
risks you should carefully consider before participating in the exchange
offers.
12
<PAGE>
Our Summary Unaudited Pro Forma Financial Data
The following unaudited pro forma financial data with respect to Woods
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical consolidated
financial statements of Woods, TISCO, Central Fabricators and the Alitec
Attachments Division and the related notes included elsewhere in this
prospectus. The pro forma data have been derived from the unaudited pro forma
financial data of Woods included elsewhere in this prospectus. The unaudited
pro forma financial data do not purport to represent what Woods' financial
position or results of operations actually would have been if the transactions
referred to therein had been consummated on the date or for the periods
indicated, or what such results will be for any future date or any future
period.
<TABLE>
<CAPTION>
Twelve
Six Months Ended, Months
Fiscal Year ------------------ Ended
Ended January 2, June 27, July 3, July 3,
1999(1) 1998(1) 1999(1) 1999(1)
---------------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Net sales..................... $252,401 $136,264 $137,066 $253,203
Costs of goods sold........... 176,422 94,014 94,832 177,240
-------- -------- -------- --------
Gross profit.................. 75,979 42,250 42,234 75,963
Selling, general and
administrative expenses...... 57,042 27,444 28,976 58,574
Noncash stock option
compensation charge.......... 4,310 -- -- 4,310
-------- -------- -------- --------
Income from operations........ 14,627 14,806 13,258 13,079
Interest and other expense,
net.......................... 21,320 10,155 10,180 21,345
-------- -------- -------- --------
Income (loss) before provision
(benefit) for income taxes... (6,693) 4,651 3,078 (8,266)
Provision (benefit) for income
taxes........................ (2,038) 2,082 1,839 (2,281)
-------- -------- -------- --------
Income (loss) from continuing
operations................... $ (4,655) $ 2,569 $ 1,239 $ (5,985)
======== ======== ======== ========
Other Data:
Depreciation and amortization. $ 10,239 $ 5,047 $ 5,187 $ 10,379
Capital expenditures.......... 3,970 1,432 2,820 5,358
EBITDA (2).................... 29,278 19,908 18,478 27,848
Ratio of earnings to fixed
charges (3).................. -- 1.4x 1.3x --
Balance Sheet Data (at end of
period):
Working capital............... $ 60,881
Total assets.................. 198,408
Total debt.................... 175,354
Stockholders' deficit......... (49,607)
</TABLE>
See Notes to Summary Unaudited Pro Forma Financial Data.
13
<PAGE>
Notes to Summary Unaudited Pro Forma Financial Data
(1) The pro forma statements of operations data for the fiscal year ended
January 2, 1999, the six months ended June 27, 1998 and the twelve months
ended July 3, 1999 give effect to the following transactions as if each had
been consummated at the beginning of the earliest period presented:
(A) the recapitalization;
(B) the Acquisitions;
(C) the initial offerings; and
(D) a $25.0 million equity investment by MDCP.
The pro forma statements of operations data for the six months ended July 3,
1999 give effect to items (B), (C) and (D) as if each had been consummated
at the beginning of the earliest period presented. The pro forma balance
sheet data give effect to items (B), (C) and (D) as if these transactions
had been consummated as of July 3, 1999. See "Unaudited Pro Forma Financial
Data."
(2) EBITDA is defined as operating income plus depreciation, amortization, and
the noncash stock option compensation charge and is presented because it is
generally accepted as providing useful information regarding a company's
ability to service debt. EBITDA should not be considered in isolation or as
a substitute for net income, cash flows from operating activities or other
cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of profitability or liquidity.
(3) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest expense, which includes amortization of deferred finance costs,
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
insufficient to cover fixed charges by approximately $6,693 and $8,266 for
the fiscal year ended January 2, 1999 and the twelve months ended July 3,
1999, respectively.
14
<PAGE>
Summary Consolidated Financial Data of Woods Equipment Company
The following table presents summary historical consolidated statements of
operations, balance sheet data and other data for Woods for the periods
presented and should only be read in conjunction with the audited and unaudited
consolidated financial statements of Woods, and the related notes thereto,
"Selected Historical Financial Data," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," all included elsewhere in
this prospectus. The data as of and for each of the three fiscal year periods
ended January 2, 1999 have been derived from the audited consolidated financial
statements of Woods. The data as of and for the six month periods ended June
27, 1998 and July 3, 1999 have been derived from the unaudited consolidated
financial statements of Woods which, in the opinion of management of Woods,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation. Results of operations for an interim period
are not necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
Fiscal Year Ended, Six Months Ended,
------------------------------------ ------------------
December 28, December 27, January 2, June 27, July 3,
1996 1997(1) 1999 1998 1999
------------ ------------ ---------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Net sales.............. $129,427 $137,924 $154,734 $ 83,694 $ 85,797
Costs of goods sold.... 97,025 104,983 113,205 59,674 61,588
-------- -------- -------- -------- --------
Gross profit........... 32,402 32,941 41,529 24,020 24,209
Selling, general and
administrative
expenses (2).......... 20,453 24,521 29,699 13,785 14,876
Noncash stock option
compensation charge... -- -- 4,310 -- --
-------- -------- -------- -------- --------
Income from operations. 11,949 8,420 7,520 10,235 9,333
Interest and other
expense, net.......... 7,326 7,831 10,261 3,964 5,585
-------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes and
extraordinary loss.... 4,623 589 (2,741) 6,271 3,748
Provision (benefit) for
income taxes.......... 1,971 494 (438) 2,662 1,826
-------- -------- -------- -------- --------
Income (loss) before
extraordinary loss.... 2,652 95 (2,303) 3,609 1,922
Extraordinary loss (3). -- 290 795 -- --
-------- -------- -------- -------- --------
Net income (loss)...... $ 2,652 $ (195) $ (3,098) $ 3,609 $ 1,922
======== ======== ======== ======== ========
Other Data:
Depreciation and
amortization.......... $ 3,409 $ 4,412 $ 6,196 $ 3,024 $ 3,267
Capital expenditures... 4,662 4,678 3,212 1,255 2,620
EBITDA (2) (4)......... 15,358 12,832 18,026 13,259 12,600
Net cash provided by
(used in):
Operating activities... 11,226 7,000 3,762 3,304 5,644
Investing activities... (1,872) (25,520) (3,182) (1,227) (2,620)
Financing activities... (9,297) 21,159 (1,944) (4,793) (4,376)
Ratio of earnings to
fixed charges (5)..... 1.6x 1.1x -- 2.4x 1.6x
Balance Sheet Data (at
end of period):
Working capital........ $ 29,838 $ 35,604 $ 39,679 $ 35,658 $ 36,869
Total assets........... 81,628 105,440 108,665 107,016 109,166
Total debt............. 58,623 82,367 119,161 78,126 114,838
Stockholders' equity
(deficit)............. 3,379 2,856 (54,224) 6,156 (53,513)
</TABLE>
- --------
(1) Woods acquired Baerts Metal Products in April 1997 and Wain-Roy in October
1997.
(2) Includes $0.6 million and $1.1 million of expenses incurred by Woods in the
fiscal year ended January 2, 1999 and the six months ended July 3, 1999,
respectively, relating to the failed acquisition of Alamo Group, Inc.
Excluding these expenses, EBITDA for the fiscal year ended January 2, 1999
and the six months ended July 3, 1999 would have been $18,588 and $13,738,
respectively.
(3) Extraordinary loss, net of income tax benefit, represents the write-off of
unamortized deferred finance costs on the early extinguishment of debt.
(4) EBITDA is defined as operating income plus depreciation, amortization and
the noncash stock option compensation charge and is presented because it is
generally accepted as providing useful information regarding a company's
ability to service debt. EBITDA should not be considered in isolation or as
a substitute for net income, cash flows from operating activities or other
cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of profitability or liquidity.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest expense, which includes amortization of deferred finance costs,
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
insufficient to cover fixed charges by approximately $2,741 the fiscal year
ended January 2, 1999.
15
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making a
decision to participate in the exchange offers. The risks described below are
not the only ones facing Woods. Additional risks not presently known to us or
that we currently deem immaterial may also impair our business operations.
Risks Relating to the Exchange Securities
Substantial Leverage; Ability to Service Debt-Wood's substantial indebtedness
could have a negative impact on its financial health and prevent it from
fulfilling its obligations under the notes and the debentures.
Woods incurred a significant amount of indebtedness in connection with the
recapitalization and the initial offerings. The following charts show certain
important credit statistics for WEC and Woods and are presented assuming we had
completed the recapitalization, the Acquisitions and the initial offerings as
of the date or at the beginning of the period specified below and applied the
net proceeds as intended:
<TABLE>
<CAPTION>
At July 3, 1999
----------------------
WEC Company
----------- (dollars in thousands)
<S> <C> <C>
Total indebtedness................................... $151,085
Stockholder's equity................................. $ 24,367
<CAPTION>
Woods Equipment Company
-----------------------
<S> <C> <C>
Total indebtedness................................... $175,354
Stockholders' deficit................................ $(49,607)
<CAPTION>
Fiscal Year Ended Six Months Ended
January 2, 1999 July 3, 1999
----------------- ----------------------
<S> <C> <C>
Pro forma ratio of earnings to
fixed charges of WEC (1).......... -- 1.5x
Pro forma ratio of earnings to
fixed charges of Woods (1)........ -- 1.3x
</TABLE>
- --------
(1) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consists of
interest expense, which includes amortization of deferred financing costs
and debt issuance costs, and one-third of rental expenses, deemed
representative of that portion of rental expense estimated to be
attributable to interest.
Earnings of WEC and Woods were insufficient to cover fixed charges by
approximately $2.3 million and $6.7 million, respectively, for the fiscal year
ended January 2, 1999 on a pro forma basis.
The ability of WEC and Parent, as the case may be, to make scheduled
payments of principal or interest on, or to refinance, their indebtedness will
depend on future operating performance and cash flow, which are subject to
prevailing economic conditions, prevailing interest rate levels and financial,
competitive, business and other factors beyond their control. The degree to
which Woods is leveraged could have important consequences to holders of the
notes and the debentures, including the following:
. Woods' ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired;
. a substantial portion of Woods' cash flow from operations must be
dedicated to the payment of interest on the notes, and interest on other
existing indebtedness, thereby reducing the funds available to Woods for
other purposes;
. the agreements governing the Woods' long-term indebtedness, including
the senior credit facility, the notes indenture and the debenture
indenture contain certain restrictive financial and operating covenants;
. the indebtedness under the senior credit facility will be at variable
rates of interest, which will cause Woods to be vulnerable to increases
in interest rates;
16
<PAGE>
. the indebtedness outstanding under the senior credit facility is secured
by all inventory, accounts receivable and general intangibles of WEC and
becomes due prior to the time the principal on the notes and the
debentures becomes due;
. Woods is substantially more leveraged than certain of its competitors,
which might place it at a competitive disadvantage;
. Woods may be hindered in its ability to adjust rapidly to changing
market conditions;
. Woods' substantial degree of leverage may negatively affect certain
suppliers' willingness to give Woods favorable payment terms; and
. Woods' substantial degree of leverage could make it more vulnerable in
the event of a downturn in general economic conditions or in its
business.
If operating cash flow of WEC and Parent is insufficient to meet their
operating expenses or to service their debt requirements as they become due,
WEC and Parent may be required to refinance a portion of the principal of the
notes and the debentures prior to their maturity. If WEC and Parent are unable
to service their indebtedness, they will be forced to take actions such as
reducing or delaying capital expenditures, selling assets, restructuring or
refinancing their indebtedness or seeking additional equity capital. We cannot
assure you that any of these remedies can be effected on satisfactory terms, if
at all. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
Additional Borrowings Available--Despite its current level of indebtedness,
Woods may still be able to incur substantially more debt. This could further
exacerbate the risks described above.
Woods may be able to incur substantial additional indebtedness in the
future. The terms of the notes indenture and the debenture indenture do not
fully prohibit Parent or WEC or their respective subsidiaries from doing so.
The senior credit facility permits additional borrowings of up to $40.0
million, and all of those borrowings are secured. If new debt is added to
Woods' current debt levels, the related risks that it now faces could
intensify. See "Capitalization," "Selected Historical Financial Data,"
"Description of the Debentures" and "Description of the Notes."
Substantial Restrictions and Covenants--The senior credit facility, the notes
indenture and the debenture indenture contain various covenants which limit our
management's discretion in the operation of our business.
The senior credit facility, the notes indenture and the debenture indenture
contain numerous restrictive covenants, including, but not limited to,
covenants that restrict the ability of Parent and/or WEC to incur indebtedness,
pay dividends, create liens, sell assets, engage in certain mergers and
acquisitions and refinance indebtedness. In addition, the senior credit
facility also requires WEC to maintain financial ratios. The ability of Woods
to comply with the covenants and other terms of the senior credit facility, the
notes indenture and the debenture indenture, to make cash payments with respect
to the notes and the debentures, and to satisfy its other respective debt
obligations, including borrowings and other obligations under the senior credit
facility, will depend on the future operating performance of Woods. In the
event Woods fails to comply with the various covenants contained in the senior
credit facility, the notes indenture and the debenture indenture, it would be a
default thereunder, and in any such case, the maturity of substantially all of
its long-term indebtedness could be accelerated.
A default under the notes indenture or debenture indenture would also
constitute an event of default under the senior credit facility. In addition,
the lenders under the senior credit facility could elect to declare all amounts
borrowed thereunder, together with accrued interest, to be due and payable. If
Woods was unable to repay such borrowings, such lenders could proceed against
the assets of Woods securing its borrowings under the senior credit facility.
If the indebtedness under the senior credit facility were to be accelerated,
the assets of Woods may not be sufficient to repay such indebtedness and the
notes and the debentures in full. The senior credit facility will prohibit the
repayment, purchase, redemption, defeasance or other payment of any of the
principal of the notes and the debentures at any time prior to their stated
maturity. See "Description of the Debentures" and "Description of the Notes."
17
<PAGE>
Ranking of the Notes, the Guaranties and the Debentures--The notes and
guaranties will be effectively subordinated to the secured indebtedness of WEC
and the guarantors, as applicable, and the debentures will be effectively
subordinated to the secured indebtedness of Parent and structurally
subordinated to all current and future liabilities of Parent's subsidiaries.
The indebtedness evidenced by the notes are unsecured obligations of WEC,
the indebtedness evidenced by the Parent's Guaranty will be an unsecured
obligation of the Parent and the indebtedness evidenced by each subsidiary
guaranty, if any, will be an unsecured obligation of the relevant subsidiary
guarantor. The payment of principal, premium, if any, and interest on the notes
and the payment of the Parent guaranty or any subsidiary guaranty, if any, will
be effectively subordinated in right of payment to any secured indebtedness of
WEC, Parent or the relevant subsidiary guarantor, as the case may be, including
all indebtedness and obligations of WEC under the senior credit facility and
Parent's guaranty of such obligations. The indebtedness evidenced by the
debentures will be unsecured obligations of Parent and will be effectively
subordinated to the secured indebtedness of Parent and structurally
subordinated in right of payment to all existing and future indebtedness of
Parent's subsidiaries, including WEC, which is the issuer of the notes. As of
July 3, 1999, after giving pro forma effect to the Acquisitions and the initial
offerings, the notes would have been effectively subordinated to approximately
$15.6 million of secured indebtedness of WEC and the debentures would have been
structurally subordinated to liabilities of WEC of approximately $174.0
million. In addition, after giving pro forma effect to the Acquisitions and the
initial offerings, WEC would have had approximately $23.4 million available
under the senior credit facility and all borrowings under such facility are
guaranteed by Parent and secured by substantially all of WEC's assets and a
pledge by Parent of all the capital stock of WEC. Subject to certain
restrictions under the senior credit facility, the notes indenture and the
debenture indenture, WEC may incur additional indebtedness, including
additional secured indebtedness and senior indebtedness, from time to time.
In the event of insolvency, liquidation, reorganization, dissolution or
other winding-up of WEC, Parent or a subsidiary guarantor, holders of secured
indebtedness of WEC, Parent or a subsidiary guarantor, as the case may be, will
generally be entitled to payment of their claims from the assets serving as
collateral before WEC makes payments in respect of the notes, Parent makes
payments in respect of the Parent guaranty or the debentures or such subsidiary
guarantor makes payments in respect of its subsidiary guaranty. Accordingly,
there may be insufficient assets remaining after such payments to pay amounts
due on the notes, the guaranties or the debentures. See "Description of the
Debentures--Ranking."
Risks Associated with Holding Company Structure--Parent is a holding company
and is dependent on dividends and other intercompany transfers of funds from
WEC to meet its obligations under the Parent guaranty and the debentures.
Parent is a holding company that conducts substantially all of its business
through WEC. As a holding company, Parent is dependent on dividends or other
intercompany transfers of funds from WEC to meet its debt service and other
obligations, including its obligations under the Parent guaranty and the
debentures. The senior credit facility and the notes indenture contain certain
restrictions on the ability of WEC to make dividends and other distributions to
Parent. In addition, under the terms of the notes indenture and the debenture
indenture, WEC may incur certain indebtedness pursuant to agreements that may
restrict the ability to make such dividends or other intercompany transfers
necessary to service Parent's debt obligations. Any failure by Parent to
satisfy its obligations with respect to the debentures at maturity, with
respect to payments of principal, or prior thereto, with respect to payments of
interest or required repurchases, would constitute a default under the
debenture indenture and could cause a default under agreements governing other
indebtedness of Parent and WEC, including the senior credit facility and the
notes indenture.
Limitations on Repurchases of the Notes or the Debentures upon a Change of
Control-Woods may not have the ability to raise the funds necessary to finance
the change of control offer required by the notes indenture and the debenture
indenture.
Upon the occurrence of certain specific types of change of control events,
each holder of notes and debentures will have the right to require WEC or
Parent, as the case may be, to purchase all or part of such
18
<PAGE>
holder's notes or debentures, as the case may be, at a repurchase price equal
to 101% of the aggregate principal amount or accreted value, as the case may
be, plus accrued and unpaid interest. The repurchase of the notes or the
debentures as a result of a change of control would constitute a default under
the senior credit facility. In addition, the change of control purchase feature
of the notes and the debentures may in certain circumstances discourage or make
more difficult a sale or takeover of WEC or Parent and, thus, the removal of
incumbent management.
The holders of the notes and the debentures have limited rights to require
the repurchase or redemption of the notes and the debentures in the event of a
takeover, recapitalization or similar restructuring, including a
recapitalization or similar transaction with management. Consequently, the
change of control provisions will not afford any protection in a highly
leveraged transaction, including such a transaction initiated by WEC or Parent,
management of WEC or Parent or an affiliate of WEC or Parent, if such
transaction does not result in a change of control. In addition, the senior
credit facility provides that certain change of control events with respect to
Parent and/or WEC constitute a default thereunder permitting the lending
parties thereto to accelerate the indebtedness thereunder. In addition, certain
events that may obligate WEC or Parent to offer to repay all outstanding
obligations under the senior credit facility may not constitute a change of
control under the notes indenture or the debenture indenture. Furthermore,
neither WEC nor Parent may have sufficient resources to repay indebtedness
under the senior credit facility and may have insufficient resources to
repurchase tendered securities.
In the event a change of control occurs at a time when WEC and/or Parent is
directly or indirectly prohibited from purchasing these securities, WEC and/or
Parent could seek the consent of its creditors to the purchase of the
securities or could attempt to refinance the indebtedness that contains such
prohibition. If WEC and/or Parent do not obtain such a consent or refinance
such indebtedness, the purchase of the securities would remain prohibited. The
failure by WEC or Parent, as the case may be, to purchase tendered securities
would constitute a breach of the notes indenture and/or the debenture indenture
which would, in turn, constitute a default under the senior credit facility and
could lead to the acceleration of the indebtedness thereunder.
Fraudulent Conveyance Statutes--Federal and state laws allow courts, under
specific circumstances, to void debts and require holders of some high yield
securities to return payments received from debtors.
Woods believes that the indebtedness incurred by WEC in connection with the
issuance of the notes and Parent in connection with the issuance of the
debentures and the Parent guaranty were incurred for proper purposes and in
good faith and that, based on present forecasts, asset valuations and other
financial information, WEC and Parent is, and after the consummation of the
initial offerings was, solvent, had sufficient capital for carrying on its
business and is able to pay its debts as they mature. However, if a court of
competent jurisdiction were to find that WEC or Parent did not receive fair
consideration or reasonably equivalent value for incurring such indebtedness or
obligation, including any guarantee thereof, and, at the time of such
incurrence, WEC or Parent:
(1) was insolvent,
(2) was rendered insolvent by reason of such incurrence or the
Acquisitions,
(3) was engaged in a business or transaction for which the assets
remaining in WEC or Parent, as the case may be, constituted unreasonably
small capital, or
(4) intended to incur or believed it would incur debts beyond its
ability to pay such debts as they mature,
such court, subject to applicable statutes of limitation, could, among other
things, (a) invalidate, in whole or in part, such indebtedness and obligation,
including any guarantee thereof, as fraudulent conveyances, the effect of which
could be that the holders of, the notes or the debentures may not be repaid in
full, and/or (b) subordinate such indebtedness and obligation, including any
guarantee thereof, to existing or future creditors of WEC or
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Parent, as the case may be, the effect of which would be to entitle such other
creditors to be paid in full before any payment could be made on the notes or
the debentures. If a court were to find that WEC or Parent, as the case may be,
satisfied the measures of insolvency or capital inadequacy described in (1)
through (4) above, such court could void any previous distribution by such
entity in respect of such indebtedness, including, without limitation, any
payment of principal or interest, or obligation, including any guarantee
thereof, and order that it be returned to WEC or Parent, as the case may be, or
to a fund for the benefit of the creditors of such entity.
With respect to the Parent guaranty, a court may compare its estimate of the
value received by Parent with the magnitude of its obligation under such Parent
guaranty. If the value received by Parent is found to be disproportionately
small as compared with its obligation under such Parent guaranty, then, to that
extent, there would be a lack of fair consideration for the giving of the
Parent guaranty and if the Parent guaranty came within any of the foregoing
clauses (1) through (4) above, such Parent guaranty could be held invalid to
such extent. The obligation of Parent under its Parent guaranty will be limited
in a manner intended to avoid it being deemed a fraudulent conveyance under
applicable law.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, WEC or Parent
would be considered insolvent at a particular time if the sum of its debts was
then greater than all of its property at a fair valuation or if the present
fair saleable value of its assets was then less than the amount that would be
required to pay its probable liabilities on its existing debts as they became
absolute and matured. Woods believes, based upon the financial information
contained elsewhere in this prospectus, the recent operating history as
discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other factors, that, after giving effect to the
issuance of the notes by WEC and the debentures and the Parent guaranty by
Parent, neither WEC nor Parent will be rendered insolvent and each such entity
will have sufficient capital for the businesses in which it is engaged and will
be able to pay its debts as they mature. While Woods believes that WEC is and
Parent is, and after the consummation of the Offerings will be, solvent, there
can be no assurance as to whether a court would concur with such beliefs.
Risks Relating to Our Business
Implementation of Business Strategy; Failure to Achieve Anticipated Cost
Savings-We may not be able to successfully implement our business strategy.
Woods' business strategy includes plans to:
. capitalize on the anticipated benefits of the Acquisitions;
. continue to reduce manufacturing and operating costs;
. develop new and enhance existing products; and
. continue to acquire complementary businesses.
Our strategic plan should be considered in light of the risks and expenses
associated with implementing these strategies. Successful implementation of
these strategies will depend on numerous factors, many of which are beyond our
control, including economic, competitive and other conditions and uncertainties
and the ability to retain qualified management personnel. We cannot assure you
that we will be successful in implementing our business strategy.
In addition, as discussed under "Prospectus Summary," "Business" and
elsewhere in this prospectus, we have adopted a detailed integration plan for
the Acquisitions through which we expect to achieve cost savings. The estimates
of these cost savings contained in this prospectus constitute forward-looking
information and involve known and unknown risks, uncertainties and other
factors that may cause the actual cost savings generated to be materially
different from the foregoing estimate. In addition to the general factors
discussed
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under "Forward-Looking Statements," such estimates are based on a variety of
other factors and were derived utilizing numerous important assumptions,
including:
. achieving estimated reductions in personnel at currently projected
severance cost levels, while maintaining historical sales levels;
. achieving a sufficient level of sales necessary to yield planned
production efficiencies and absorption of fixed costs;
. eliminating certain components of fixed overhead without affecting our
ability to manage the downsized production facility efficiently;
. no disruption to planned production schedules; and
. achieving operating improvements at these facilities similar to those
achieved by Woods at certain of its facilities as a result of the
implementation of continuous flow manufacturing and total quality
management.
The failure of one or more of these assumptions to be realized may cause the
actual annual cost savings to differ materially from the estimates contained in
this prospectus.
Integration of Acquisitions--We may make acquisitions which could subject us to
a number of operational risks.
In order to expand our markets and to broaden our product portfolio, Woods'
growth strategy includes making acquisitions of complementary businesses. We
are continually investigating opportunities for domestic and foreign
acquisitions. We cannot assure you, however, that future acquisitions can be
consummated on acceptable terms or that any acquired companies can be
successfully integrated into our operations. Our ability to make future
acquisitions may also be constrained by our ability to obtain financing.
Future acquisitions may also involve a number of special risks, including:
. initial reductions in our operating results;
. diversion of management's attention;
. unanticipated problems or legal liabilities; and
. a possible reduction in earnings due to amortization of acquired
intangible assets in the event that such acquisitions are made at levels
that exceed the fair market value of net tangible assets.
Some or all of these items could have a negative impact on our business. We
cannot assure you that businesses acquired in the future will achieve sales and
profitability that justify our investment. In addition, to the extent that
consolidation becomes more prevalent in the industry, the prices for attractive
acquisition candidates may increase to unacceptable levels.
The Acquisitions significantly increased our size in terms of net sales. The
full benefits of the Acquisitions will require the integration of Woods and
certain of the acquired companies' respective administrative, finance,
manufacturing, engineering and sales and marketing organizations, the
coordination of sales efforts and the implementation of appropriate operations,
financial and management systems and controls. We cannot assure you that we
have sufficient financial and management resources to accomplish this
integration, or that we will not experience difficulties with customers,
personnel or other factors. We initiated a rationalization of our production
operations following the Acquisitions, which involves the closing of certain
facilities. These transition and integration activities will require
substantial attention from our management team. The diversion of management
attention, as well as any other difficulties which may be encountered in the
transition and integration process, could have a negative impact on our
revenues and operating results. We cannot assure you that we will be able to
successfully integrate the operations of the acquired companies or that any
expected cost reductions will be achieved.
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In addition, Woods expects that it will have to upgrade its management
information systems in order to facilitate the integration of the acquired
companies. These systems will significantly affect many aspects of our
business, including our manufacturing, sales and marketing, and accounting
functions, and the successful implementation of these systems will be important
to Woods' current operations and to facilitate future growth. Integration of
the management information systems could cause significant disruption in
operations. If we are not successful in integrating our systems or if we
experience difficulties in such integration, we could experience problems with
the delivery of our products or a negative impact on our ability to access
timely and accurate financial and operating information.
Current Industry Conditions--Our business may be negatively impacted by market
conditions.
Our products are sold to a wide variety of end-users, including construction
companies and contractors, utility contractors, landscaping and groundscare
companies, farmers, ranchers, homeowners and governmental agencies. All of
these end-users are affected by general economic conditions and other factors
such as consumer spending patterns, weather patterns, interest rates,
government policies, commodities prices and the availability of financing.
Approximately 2% of our pro forma net sales in the fiscal year ended January
2, 1999 and in the six months ended July 3, 1999 were derived from the sale of
specialty agricultural products, such as sugar beet defoliators, harvesters and
cultivators. Demand for these products closely correlates with the demand for
agricultural equipment in general. In recent months, many agricultural
equipment companies have forecasted softness in agricultural markets through
1999 due to strong harvests, low commodity prices, weak export markets and
recent unfavorable weather conditions. See "Business--Industry Overview."
Competition--Our business is very competitive and increased competition could
adversely affect us.
The attachments and capital equipment replacement parts industries are
highly competitive. In both industries, we compete with the major original
equipment manufacturers of prime movers as well as with several hundred
companies producing one or more models of attachments. Price, quality, service,
brand name and product availability are all factors in product selection. Some
of our competitors are significantly larger than we are and have substantially
greater financial and other resources at their disposal. We cannot assure you
that such competitors will not substantially increase the resources devoted to
the development and marketing of products competitive with our products.
Accordingly, we cannot be sure that we will be able to maintain our market
share relative to our competition. See "Business--Competition."
Consolidation Among Attachments Dealers--Continued consolidation in our
industry could have a negative impact on our business.
Our attachment products are sold primarily through independent dealers. In
recent years, there has been significant consolidation among attachments
dealers. In the event that such consolidation continues, we may face increased
pricing pressures on our products and become more dependent on individual
dealers. As a result, continued consolidation could have a negative impact on
our business, financial condition or results of operations.
Year 2000 Compliance--Any year 2000 information systems problem in our or any
of our principal vendor's operational software could have a negative impact on
our business.
During the next few months, most large companies will face a potentially
serious information systems problem because many software applications and
operational programs written in the past may not properly recognize calendar
dates beginning in the year 2000. This problem could force information systems
to either shut down or provide incorrect data or information. Woods began the
process of identifying the necessary changes to its computer programs and
hardware as well as assessing the progress of its significant vendors in their
remediation efforts in 1998. Based upon its assessment to date, Woods believes
that all of its computer programs and hardware is Year 2000 compliant. To date,
the aggregate cost to Woods to achieve Year 2000
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compliance has not been material. Based on its assessment to date, Woods
believes that its principal vendors are already Year 2000 compliant. We cannot
assure you, however, that Woods or its principal vendors will not experience
unforeseen difficulties with respect to Year 2000 compliance or that such
difficulties will not have a negative impact on our business, financial
condition or results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Year 2000 Compliance."
Environmental Risks--The nature of our business exposes us to the risk of
liabilities or claims relating to environmental matters.
Our operations and properties are subject to federal, state, local and
foreign laws, regulations and ordinances relating to the use, storage,
handling, generation, transportation, treatment, emission, release, discharge
and disposal of certain materials, substances and wastes. The nature of our
operations exposes us to the risk of liabilities or claims with respect to
environmental matters, including off-site disposal matters, and we cannot
assure you that we will not incur significant costs in connection with such
liabilities or claims or that the indemnities provided by the sellers of the
various businesses acquired will be applicable or available.
We believe that we are in material compliance with all relevant
environmental regulations and that our reserves are sufficient to cover any
known environmental claims related to our properties. Based upon our experience
to date, we believe that the future cost of compliance with existing
environmental laws, regulations and ordinances or liability for known
environmental claims will not have a material adverse effect on our business,
financial condition or results of operations. However, future events, such as
changes in existing laws and regulations or their interpretation, may give rise
to additional compliance costs or liabilities that could have a negative impact
on our business, financial condition or results of operations. Compliance with
more stringent laws or regulations, as well as more vigorous enforcement
policies of regulatory agencies or stricter or different interpretations of
existing laws, may require additional expenditures by Woods.
Product Liability--The nature of our business exposes us to risk of personal
injury claims relating to our products.
Due to the nature of our business, we are subject to product liability
claims for personal injuries allegedly relating to our products. Although we
currently maintain insurance coverage for product liability losses, we cannot
assure you that our insurance coverage will be sufficient to cover one or more
large claims or that an insurer will be solvent at the time of any covered
loss. Further, we cannot assure you that we will be able to obtain insurance
coverage at acceptable levels and costs in the future. Successful assertion
against us of one or a series of claims exceeding insurance coverage could have
a negative impact on our business, financial condition or result of operations.
Governmental Regulation--Regulatory matters could impact our ability to conduct
our business.
We are subject to various federal, state, and local laws affecting our
business, as well as a variety or regulations relating to such matters as
working conditions, equal employment opportunities, product safety, and our
relationship with our dealers. It is our policy to comply with all applicable
laws and regulations, and we believe we currently are in material compliance
with all such applicable laws and regulations. However, should we be found out
of compliance with existing laws or regulations or should these laws or
regulations change, this could have a negative impact on our business,
financial condition or results of operations.
Control by Principal Stockholder--We are controlled by a principal stockholder
and its interests may conflict with your interests.
MDCP owns approximately 90% of the outstanding voting stock of Parent.
Parent owns all of the outstanding capital stock of WEC. Consequently, Madison
Dearborn Partners, as the sole general partner of MDCP, has the ability to
control the business and affairs of WEC and Parent, by virtue of its ability to
elect a majority of Parent's and WEC's respective board of directors and its
voting power with respect to actions requiring stockholder approval. In
addition, three representatives of Madison Dearborn Partners currently serve
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on Parent's board of directors, which is currently comprised of six members.
Some decisions regarding our operations or financial structure may present
conflicts of interest between Madison Dearborn Partners and the holders of our
debt securities. For example, Madison Dearborn Partners may be willing to
approve acquisitions, divestures or other transactions undertaken by us that it
believes could increase the value of its equity investment. These type of
transactions, however, could increase the financial risk to the holders of our
debt securities. See "Principal Stockholders" and "Certain Relationships and
Related Transactions."
Risks Associated with the Exchange Offers
Lack of Public Market for the Exchange Securities--You may not be able to sell
your exchange securities.
The outstanding securities were not registered under the Securities Act or
under the securities laws of any state and may not be resold unless they are
subsequently registered or an exemption from the registration requirements of
the Securities Act and applicable state securities laws is available. The
exchange securities will be registered under the Securities Act, but will
constitute a new issue of securities with no established trading market, and
there can be no assurance as to:
. the liquidity of any such market that may develop;
. the ability of holders to sell their exchange securities; or
. the price at which the holders would be able to sell their exchange
securities.
If such a market were to exist, the exchange securities may trade at higher or
lower prices than their principal amount or purchase price, depending on many
factors, including prevailing interest rates, the market for similar debentures
and the financial performance of Woods.
We understand that the initial purchaser presently intend to make a market
in the exchange securities. However, it is not obligated to do so, and any
market-making activity with respect to the exchange securities may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act, and may be limited during the exchange offers or the
pendency of an applicable shelf registration statement. There can be no
assurance that an active trading market will exist for the securities or that
such trading market will be liquid.
Consequences of a Failure to Exchange the Outstanding Securities--Your
outstanding securities will continue to be subject to transfer restrictions.
Outstanding securities that are not tendered or are tendered but not
accepted will, following the consummation of the exchange offers, continue to
be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the exchange offers, certain registration rights with respect
to the outstanding securities will terminate. In addition, any outstanding
security holder who tenders in the exchange offers for the purpose of
participating in a distribution of the exchange securities may be deemed to
have received restricted securities, and if so, will be required to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent that outstanding
securities are tendered and accepted in the exchange offers, the trading market
for untendered and tendered but unaccepted outstanding securities could be
adversely affected.
No Obligation to Notify--We are not obligated to notify you of untimely or
defective tenders of outstanding securities.
We will issue exchange securities pursuant to this exchange offers only
after a timely receipt of your outstanding securities, a properly completed and
duly executed letter of transmittal and all other required documents.
Therefore, if you want to tender your outstanding securities, please allow
sufficient time to ensure timely delivery. We are under no duty to give
notification of defects or irregularities with respect to the tenders of
outstanding securities for exchange.
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THE EXCHANGE OFFERS
Purpose and Effect of the Exchange Offers
We originally sold the outstanding securities on July 28, 1999 to the
initial purchaser, who subsequently resold the outstanding securities to: (1)
qualified institutional buyers in reliance on Rule 144A under the Securities
Act and (2) with respect to the notes only, qualified buyers outside the United
States in reliance upon Registration S under the Securities Act.
Simultaneously with the initial sale of the outstanding securities, we
entered into the registration rights agreement with the initial purchaser. The
registration rights agreement provides that we will:
(1) prior to October 26, 1999, file a registration statement with the
SEC with respect to a registered offer to exchange the outstanding
securities for new securities having terms substantially identical in all
material respects to the outstanding securities, except that the exchange
securities will not contain terms with respect to transfer restrictions;
(2) use our reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities Act
prior to January 24, 2000;
(3) as soon as reasonably practicable after the effectiveness of the
exchange offer registration statement, offer the exchange securities in
exchange for surrender of the outstanding securities; and
(4) to keep the exchange offers open for not less than 30 days, or
longer if required by applicable law, after the date notice of the
applicable exchange offer is mailed to the holders of the outstanding
securities.
For each outstanding security surrendered to us pursuant to the exchange
offers, the holder of such outstanding security will receive an exchange
security having a principal amount equal to that of the surrendered note.
Interest on each outstanding security will accrue or accrete, as the case may
be, from the last interest payment date on which interest was paid on the
outstanding security surrendered in exchange therefor or, if no interest has
been paid on such outstanding security, from the date of its original issue.
Interest on each exchange security will accrue or accrete, as the case may be,
from the date of its original issue.
Under existing interpretations of the Staff of the SEC contained in several
no-action letters to third parties, we believe that the exchange securities
will in general be freely tradeable after the exchange offers without further
registration under the Securities Act. See Sherman & Sterling (available July
2, 1993); Morgan Stanley & Co. Incorporated (available June 5, 1991); and Exxon
Capital Holdings Corporation (available May 13, 1989). However, any purchaser
of outstanding securities who is our "affiliate," within the meaning of Rule
405 under the Securities Act, or who intends to participate in the exchange
offers for the purpose of distributing the exchange securities:
(1) will not be able to rely on the interpretation of the Staff of the
SEC;
(2) will not be able to tender its outstanding securities in the
exchange offers; and
(3) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer
of the exchange securities, unless such sale or transfer is made pursuant
to an exemption from such requirements.
As contemplated by these no-action letters and the registration rights
agreement, each holder accepting the exchange offers is required to represent
to us in the letter of transmittal or through a message transmitted pursuant to
the Automated Tender Offer Program System of The Depositary Trust Company that:
(1) the exchange securities are to be acquired by the holder or the
person receiving such exchange securities, whether or not such person is
the holder, in the ordinary course of business;
(2) the holder or any such other person, other than a broker-dealer
referred to in the next sentence, is not engaging and does not intend to
engage, in distribution of the exchange securities;
(3) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the
exchange securities;
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(4) neither the holder nor any such other person is our "affiliate"
within the meaning of Rule 405 under the Securities Act; and
(5) the holder or any such other person acknowledges that if such
holder or any other person participates in the exchange offers for the
purpose of distributing the exchange securities it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the exchange securities and cannot rely on
those no-action letters.
As indicated above, each participating broker-dealer that receives an exchange
security for its own account in exchange for outstanding securities must
acknowledge that it:
(1) acquired the outstanding securities for its own account as a result
of market-making activities or other trading activities;
(2) has not entered into any arrangement or understanding with us or
any of our "affiliates," within the meaning of Rule 405 under the
Securities Act, to distribute the exchange securities to be received in the
exchange offers; and
(3) will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such exchange securities.
For a description of the procedures for resales by participating broker-
dealers, see "Plan of Distribution."
In the event that applicable interpretations of the staff of the SEC do not
permit us to effect the exchange offers, or if for any other reason the
exchange offers are not consummated prior to February 23, 2000, or if the
initial purchaser so requests with respect to outstanding securities not
eligible to be exchanged for exchange securities in the exchange offers, or if
any holder of outstanding securities is not eligible to participate in the
exchange offers or does not receive freely tradeable exchange securities in the
exchange offers, we have agreed, at our cost, to:
(1) as promptly as reasonably practicable, file a shelf registration
statement covering resales of the outstanding securities or exchange
securities, as the case may be;
(2) use our reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act; and
(3) keep the shelf registration statement effective until the time when
the securities covered by the shelf registration statement can be sold
pursuant to Rule 144 without any limitations under clauses (c), (e), (f)
and (h) of Rule 144.
We will, in the event of the filing of the shelf registration statement,
provide to each applicable holder of the outstanding securities copies of the
prospectus which is a part of the shelf registration statement, notify each
such holder when the shelf registration statement has become effective and take
certain other actions as are required to permit unrestricted resale of the
outstanding securities. A holder of the outstanding securities that sells such
outstanding securities pursuant to the shelf registration statement:
. will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers;
. will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales; and
. will be bound by the provisions of the registration rights agreement
which are applicable to such a holder, including certain indemnification
obligations.
In addition, each holder of the outstanding securities will be required to
deliver information to be used in connection with the shelf registration
statement and to provide comments on the shelf registration statement within
the time periods set forth in the registration rights agreement in order to
have its outstanding securities
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included in the shelf registration statement and to benefit from the provisions
set forth in the following paragraph.
If:
(1) by October 26, 1999, neither the exchange offer registration
statement nor the shelf registration statement has been filed with the SEC;
(2) by February 23, 2000, the exchange offers are not consummated and,
if applicable, the shelf registration statement is not declared effective;
or
(3) after either the exchange offer registration statement or the shelf
registration statement is declared effective, such registration statement
thereafter ceases to be effective or usable, subject to limited exceptions,
in connection with resales of outstanding securities or exchange securities
in accordance with and during the periods specified in the registration
rights agreement.
Each such event referred to in clauses (1) through (3) above is referred to in
this prospectus as a "registration default."
Additional interest will accrue on the applicable securities and the exchange
securities at the rate of 0.50% per annum from and including the date on which
any such registration default will occur to but excluding the date on which all
registration defaults have been cured. Such interest is payable in addition to
any other interest payable from time to time with respect to the securities and
the exchange securities.
Following the consummation of the exchange offers, holders of the
outstanding securities who were eligible to participate in the exchange offers
but who did not tender its outstanding securities will not have any further
registration rights and such outstanding securities will continue to be subject
to certain restrictions on transfer. Accordingly, the liquidity of the market
for such outstanding securities could be adversely affected.
Terms of the Exchange Offers
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all outstanding
securities validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the expiration date. We will issue $1,000 principal amount of exchange
securities in exchange for each $1,000 principal amount of outstanding
securities accepted in the exchange offers. Holders may tender some or all of
its outstanding securities pursuant to the exchange offers. However,
outstanding securities may be tendered only in integral multiples of $1,000.
The form and terms of the exchange securities are the same as the form and
terms of the outstanding securities except that:
(1) the exchange securities bear a Series B designation and a different
CUSIP number from the outstanding securities;
(2) the exchange securities have been registered under the Securities
Act and therefore will not bear legends restricting their transfer; and
(3) the holders of the exchange securities will not be entitled to the
rights under the registration rights agreement, including the provisions
providing for an increase in the interest rate on the outstanding
securities in certain circumstances relating to the timing of the exchange
offers, all of which rights will terminate when the exchange offers are
terminated.
The exchange securities will evidence the same debt as the outstanding
securities and will be entitled to the benefits of the applicable indenture. As
of the date of this prospectus, $130,000,000 aggregate principal amount of
senior notes and $51,927,000 aggregate principal amount at maturity of senior
discount debentures were outstanding. We have fixed the close of business on
, 1999 as the record date for the exchange offers for purposes
of determining the persons to whom this prospectus and the letter of
transmittal will be mailed initially.
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Holders of outstanding securities do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware, or the applicable
indenture in connection with the exchange offers. We intend to conduct the
exchange offers in accordance with the applicable requirements of the
Securities Exchange Act and the rules and regulations of the SEC thereunder.
We will be deemed to have accepted validly tendered outstanding securities
when, as and if we have given oral or written notice thereof to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the exchange securities from us.
If any tendered outstanding securities are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth in this
prospectus or otherwise, the certificates for any such unaccepted outstanding
securities will be returned, without expense, to the tendering holder thereof
as promptly as practicable after the expiration date.
Holders who tender outstanding securities in the exchange offers will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
outstanding securities pursuant to the exchange offers. We will pay all charges
and expenses, other than transfer taxes in certain circumstances, in connection
with the exchange offers. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" will mean 5:00 p.m., New York City time, on
, 2000, unless we, in our sole discretion, extend one or both of
the exchange offers, in which case the term "expiration date" will mean the
latest date and time to which the applicable exchange offer is extended.
In order to extend one or both of the exchange offers, we will notify the
exchange agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
We reserve the right, in our sole discretion, (1) to delay accepting any
outstanding securities, to extend one or both of the exchange offers or to
terminate one or both of the exchange offers if any of the conditions set forth
below under "--Conditions" will not have been satisfied, by giving oral or
written notice of such delay, extension or termination to the exchange agent or
(2) to amend the terms of one or both of the exchange offers in any manner. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof to the registered
holders.
Interest on the Exchange Securities
Senior Notes
The senior exchange notes will bear interest from their date of issuance.
Holders of outstanding senior notes that are accepted for exchange will
receive, in cash, accrued interest thereon to, but not including, the date of
issuance of the senior exchange notes. Such interest will be paid with the
first interest payment on the senior exchange notes on January 15, 2000.
Interest on the outstanding senior notes accepted for exchange will cease to
accrue upon issuance of the senior exchange notes. Interest on the new senior
notes is payable semi-annually on each January 15 and July 15, commencing on
January 15, 2000.
Senior Discount Debentures
The outstanding senior discount debentures will continue to accrete at the
rate of 15% per annum to, but excluding the date of issuance of the exchange
debentures and will cease to accrete upon cancellation of the outstanding
senior discount debentures and issuance of the exchange debentures. Any
outstanding senior discount debentures not tendered or accepted for exchange
will continue to accrete at the rate of 15% per annum in accordance with their
terms. From and after the date of issuance of the exchange debentures, the
exchange debentures shall accrete at the rate of 15% per annum, but no cash
interest will be payable in respect of the senior discount debentures prior to
July 15, 2004. From and after July 15, 2004, interest on the senior discount
debentures will accrue on the principal amount at maturity at the rate of 15%
per annum and will be payable quarterly on each January 15, April 15, July 15
and October 15 commencing October 15, 2004.
28
<PAGE>
Procedures for Tendering
Only a holder of outstanding securities may tender such outstanding
securities in the exchange offers. To tender in the exchange offers, a holder
must complete, sign and date the letter of transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the letter of transmittal
or transmit an "agent's message" in connection with a book-entry transfer, and
mail or otherwise deliver such letter of transmittal or such facsimile,
together with the outstanding securities and any other required documents, to
the exchange agent prior to 5:00 p.m., New York City time, on the expiration
date. To be tendered effectively, the outstanding securities, letter of
transmittal or an agent's message and other required documents must be
completed and received by the exchange agent at the address set forth below
under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date. Delivery of the outstanding securities may be made by book-
entry transfer in accordance with the procedures described below. Confirmation
of such book-entry transfer must be received by the exchange agent prior to the
expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the outstanding securities that such
participant has received and agrees: (1) to participate in the Automated Tender
Offer Program System of The Depositary Trust Company; (2) to be bound by the
terms of the letter of transmittal; and (3) that we may enforce such agreement
against such participant.
By executing the letter of transmittal, each holder will make to us the
representations set forth above in the fourth paragraph under the heading "--
Purpose and Effect of the Exchange Offers."
The tender by a holder and our acceptance thereof will constitute agreement
between such holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal or
agent's message.
The method of delivery of outstanding securities and the letter of
transmittal or agent's message and all other required documents to the exchange
agent is at the election and sole risk of the holder. As an alternative to
delivery by mail, holders may wish to consider overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure delivery to
the exchange agent before the expiration date. No letter of transmittal or
outstanding securities should be sent to us. Holders may request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect the above transactions for such holders.
Any beneficial owner whose outstanding securities are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the letter of transmittal.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of the Medallion System (an
"eligible institution") unless the outstanding securities tendered pursuant
thereto are tendered (1) by a registered holder who has not completed the box
entitled "Special Registration Instructions" or "Special Delivery Instructions"
on the letter of transmittal or (2) for the account of an eligible institution.
In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by an eligible institution.
If the letter of transmittal is signed by a person other than the registered
holder of any outstanding securities listed in this prospectus, such
outstanding securities must be endorsed or accompanied by a properly completed
bond power, signed by such registered holder as such registered holder's name
appears on such outstanding securities with the signature thereon guaranteed by
an eligible institution.
29
<PAGE>
If the letter of transmittal or any outstanding securities or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-
fact, offices of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to us of its authority to so act must be submitted with the letter
of transmittal.
We understand that the exchange agent will make a request promptly after the
date of this prospectus to establish accounts with respect to the outstanding
securities at The Depositary Trust Company, for the purpose of facilitating the
exchange offers, and subject to the establishment thereof, any financial
institution that is a participant in The Depositary Trust Company's system may
make book-entry delivery of outstanding securities by causing The Depositary
Trust Company to transfer such outstanding securities into the exchange agent's
account with respect to the outstanding securities in accordance with The
Depositary Trust Company's procedures for such transfer. Although delivery of
the outstanding securities may be effected through book-entry transfer into the
exchange agent's account at The Depositary Trust Company, unless an agent's
message is received by the exchange agent in compliance with the Automated
Tender Offer Program System of The Depositary Trust Company, an appropriate
letter of transmittal properly completed and duly executed with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the exchange agent at its address
set forth below on or prior to the expiration date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to The Depositary Trust
Company does not constitute delivery to the exchange agent.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered outstanding securities and withdrawal of
tendered outstanding securities will be determined by us in our sole
discretion, which determination will be final and binding. We reserve the
absolute right to reject any and all outstanding securities not properly
tendered or any outstanding securities our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserves the right in our sole
discretion to waive any defects, irregularities or conditions of tender as to
particular outstanding securities. Our interpretation of the terms and
conditions of the exchange offers, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of outstanding securities
must be cured within such time as we will determine. Although we intend to
notify holders of defects or irregularities with respect to tenders of
outstanding securities, neither the Issuers, the exchange agent nor any other
person will incur any liability for failure to give such notification. Tenders
of outstanding securities will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any outstanding securities
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the exchange agent to the tendering holders, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration date.
Guaranteed Delivery Procedures
Holders who wish to tender their outstanding securities and (1) whose
outstanding securities are not immediately available, (2) who cannot deliver
their outstanding securities, the letter of transmittal or any other required
documents to the exchange agent or (3) who cannot complete the procedures for
book-entry transfer, prior to the expiration date, may effect a tender if:
(A) the tender is made through an eligible institution;
(B) prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed Notice of
Guaranteed Delivery setting forth the name and address of the holder, the
certificate number(s) of such outstanding securities and the principal
amount of outstanding securities tendered, stating that the tender is being
made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the letter of transmittal together
with the certificate(s) representing the outstanding securities or a
confirmation of book-entry transfer of such outstanding securities into the
exchange agent's account at The Depositary Trust Company, and any other
documents required by the letter of transmittal will be deposited by the
eligible institution with the exchange agent; and
30
<PAGE>
(C) such properly completed and executed letter of transmittal, as well
as the certificate(s) representing all tendered outstanding securities in
proper form for transfer or a confirmation of book-entry transfer of such
outstanding securities into the exchange agent's account at The Depositary
Trust Company, and all other documents required by the letter of
transmittal are received by the exchange agent upon five New York Stock
Exchange trading days after the expiration date.
Upon request to the exchange agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their outstanding securities according to
the guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, tenders of outstanding
securities may be withdrawn at any time prior to 5:00 p.m., New York City time,
on the expiration date.
To withdraw a tender of outstanding securities in the exchange offers, a
telegram, telex, letter or facsimile transmission notice of withdrawal must be
received by the exchange agent at its address set forth in this prospectus
prior to 5:00 p.m., New York City time, on the expiration date. Any such notice
of withdrawal must:
(1) specify the name of the person having deposited the outstanding
securities to be withdrawn;
(2) identify the outstanding securities to be withdrawn, including the
certificate number(s) and principal amount of such outstanding securities,
or, in the case of outstanding securities transferred by book-entry
transfer, the name and number of the account at The Depositary Trust
Company to be credited;
(3) be signed by the holder in the same manner as the original signature
on the letter of transmittal by which such outstanding securities were
tendered, including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee with respect to the
outstanding securities register the transfer of such outstanding securities
into the name of the person withdrawing the tender; and
(4) specify the name in which any such outstanding securities are to be
registered, if different from that of the depositor.
All questions as to the validity, form and eligibility, including time of
receipt, of such notices will be determined by us, whose determination will be
final and binding on all parties. Any outstanding securities so withdrawn will
be deemed not to have been validly tendered for purposes of the exchange offers
and no exchange securities will be issued with respect thereto unless the
outstanding securities so withdrawn are validly retendered. Any outstanding
securities which have been tendered but which are not accepted for exchange
will be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
exchange offers. Properly withdrawn outstanding securities may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the expiration date.
Conditions
Notwithstanding any other term of the exchange offers, we will not be
required to accept for exchange, or exchange notes for, any outstanding
securities, and may terminate or amend the exchange offers as provided in this
prospectus before the acceptance of such outstanding securities, if:
(1) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the exchange offers
which, in our sole judgment, might materially impair our ability to proceed
with the exchange offers or any material adverse development has occurred
in any existing action or proceeding with respect to us or any of our
subsidiaries; or
(2) any law, statute, rule, regulation or interpretation by the Staff of
the SEC is proposed, adopted or enacted, which, in our sole judgment, might
materially impair our ability to proceed with the exchange offers or
materially impair the contemplated benefits of the exchange offers to us;
or
(3) any governmental approval has not been obtained, which approval we
will, in our sole discretion, deem necessary for the consummation of the
exchange offers as contemplated in this prospectus.
31
<PAGE>
If we determine in our sole discretion that any of the conditions are not
satisfied, we may:
(1) refuse to accept any outstanding securities and return all tendered
outstanding securities to the tendering holders;
(2) extend the exchange offers and retain all outstanding securities
tendered prior to the expiration of the exchange offers, subject, however,
to the rights of holders to withdraw such outstanding securities (see "--
Withdrawal of Tenders"); or
(3) waive such unsatisfied conditions with respect to the exchange
offers and accept all properly tendered outstanding securities which have
not been withdrawn.
Exchange Agent
United States Trust Company of New York has been appointed as exchange agent
for the exchange offers. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for Notice of Guaranteed Delivery should be directed to the exchange
agent addressed as follows:
By Overnight Delivery:
By Mail: By Hand: United States Trust
United States Trust United States Trust Company of Company of
Company of New York New York
New York 111 Broadway 770 Broadway
844 Cooper Station New York, New York 10006 New York, New York 10003
New York, New York Attention: Lower Level CorporateAttention: Corporate
10274-0844 Trust Window Trust
Attention: Corporate Operations
Trust Operations
By Facsimile for Eligible Institutions:
(212) 420-6152
Attention: Corporate Trust Department
For Confirmation and/or Information call:
(800) 548-6565
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by
telegraph, telecopy, telephone or in person our and our affiliates' officers
and regular employees.
We have not retained any dealer-manager in connection with the exchange
offers and will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offers. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
We will pay the cash expenses to be incurred in connection with the exchange
offers. Such expenses include fees and expenses of the exchange agent and
Trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The exchange securities will be recorded at the same carrying value as the
outstanding securities, which is face value for the senior notes and the
accreted value of the senior discount debentures, as reflected in our
accounting records on the date of exchange. Accordingly, we will not recognize
any gain or loss for accounting purposes as a result of the exchange offers.
The expenses of the exchange offers will be deferred and charged to expense
over the term of the exchange securities.
32
<PAGE>
Consequences of Failure to Exchange
The outstanding securities that are not exchanged for exchange securities
pursuant to the exchange offers will remain restricted securities. Accordingly,
such outstanding securities may be resold only:
. to Woods, either upon redemption or otherwise,
. so long as the outstanding securities are eligible for resale pursuant to
Rule 144A, to a person inside the United States whom the seller
reasonably believes is a qualified institutional buyer within the meaning
of Rule 144A under the Securities Act in a transaction meeting the
requirements of Rule 144A, in accordance with Rule 144 under the
Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act and based upon an opinion of counsel
reasonably acceptable to us,
. outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act, or
. pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any
state of the United States.
Resale of the Exchange Securities
With respect to resales of the exchange securities, based on interpretations
by the Staff of the SEC set forth in no-action letters issued to third parties,
we believe that a holder or other person who receives exchange securities,
whether or not such person is the holder, will be allowed to resell the
exchange securities to the public without further registration under the
Securities Act and without delivering to the purchasers of the exchange
securities a prospectus that satisfies the requirements of Section 10 of the
Securities Act provided that:
. the holder acquired the exchange securities in the ordinary course of its
business;
. the holder is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the exchange securities;
. the holder is not an "affiliate" of ours within the meaning of Rule 405
under the Securities Act; and
. the holder is not a broker-dealer who purchased its outstanding
securities from us for resale under Rule 144A or any other available
exemption under the Securities Act.
However, if any holder acquires exchange securities in the exchange offers
for the purpose of distributing or participating in a distribution of the
exchange securities, such holder cannot rely on the position of the Staff of
the SEC expressed in such no-action letters or any similar interpretive
letters, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Further, each
participating broker-dealer that receives exchange securities for its own
account in exchange for outstanding securities, where such outstanding
securities were acquired by such participating broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such exchange
securities.
Although a broker-dealer may be an "underwriter" within the meaning of the
Securities Act, the letter of transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of exchange securities received in
exchange for outstanding securities.
As contemplated by these no-action letters and the registration rights
agreement, each holder tendering securities in the exchange offers is required
to represent to us in the letter of transmittal, that, among things:
(1) the person receiving the exchange securities pursuant to the exchange
offer, whether or not such person is the holder, is receiving them in
the ordinary course of business;
33
<PAGE>
(2) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of
such exchange securities and that such holder is not engaged in, and
does not intend to engage in, a distribution of exchange securities;
(3) neither the holder nor any such other person is an "affiliate" of ours
within the meaning of Rule 405 under the Securities Act;
(4) the holder acknowledges and agrees that:
(a) any person participating in the exchange offer for the purpose of
distributing the exchange securities must comply with the
registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction with respect
to the exchange securities acquired by such person and cannot rely
on the position of the Staff of the SEC set forth in no-action
letters that are discussed above and under the heading "--Purpose
and Effect of the Exchange Offers;" and
(b) any broker-dealer that receives exchange securities for its own
account in exchange for notes pursuant to the exchange offer must
deliver a prospectus in connection with any resale of such exchange
notes, but by so acknowledging, the holder shall not be deemed to
admit that, by delivering a prospectus it is an "underwriter"
within the meaning of the Securities Act; and
(5) the holder understands that a secondary resale transaction described in
clause (4)(a) above should be covered by an effective registration
statement containing the selling securityholder information required by
Item 507 of Regulation S-K of the SEC.
The exchange offers are not being made to, and we will not accept surrenders
for exchange from, holders of the outstanding securities in any jurisdiction in
which the exchange offers or their acceptance would not comply with the
securities or blue sky laws of such jurisdiction.
All resales must be made in compliance with state securities or "blue sky"
laws. Such compliance may require that the exchange securities be registered or
qualified in a state or that the resales be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. We
assume no responsibility with regard to compliance with these requirements.
34
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements, which relate to
analyses and other information which are based on forecasts of future results
and estimates of amounts not yet determinable. These statements also relate to
our future prospects, developments and business strategies.
These forward-looking statements are identified in this prospectus by the
use of terms and phrases such as "believes," "anticipates," "expects,"
"estimate," "intends" and similar terms and phrases, including references to
assumptions. These statements are contained in sections entitled "Prospectus
Summary," "Risk Factors," "Business," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other sections of this
prospectus.
Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or
achievements of Woods, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These factors include, among other things, the
following:
(1) changes in general economic conditions in the United States;
(2) decreases in the current or planned levels of governmental spending;
(3) increased competition in the attachments and replacement parts
markets;
(4) continued consolidation among attachment dealers;
(5) our inability to successfully integrate the operations of newly
acquired companies as planned or achieve the anticipated cost savings from
such integration;
(6) our inability to successfully introduce continuous flow
manufacturing and total quality management techniques at the acquired
facilities;
(7) adverse weather conditions during the spring and summer months;
(8) our failure to develop or successfully introduce new products;
(9) changes in the regulatory environment;
(10) our inability to successfully complete acquisitions; and
(11) various other factors beyond our control.
Our risks are more specifically described in "Risk Factors." If one or more
of these risks or uncertainties materialize, or if underlying assumptions prove
incorrect, our actual results may vary materially from those expected,
estimated or projected.
We do not undertake to update our forward-looking statements or risk factors
to reflect future events or circumstances.
35
<PAGE>
USE OF PROCEEDS
These exchange offers are intended to satisfy our obligations under the
registration rights agreement. We will not receive any cash proceeds from the
issuance of the exchange securities. In consideration for issuing the exchange
securities contemplated in this prospectus, we will receive outstanding
securities in like principal amount, the form and terms of which are the same
as the form and terms of the exchange securities, except as otherwise
described in this prospectus.
Woods received gross proceeds from the initial offerings of $155.0 million.
The following table summarizes the sources and uses of funds in connection
with the initial offerings as of the closing date of July 28, 1999:
<TABLE>
<CAPTION>
Amount
-------------
(in millions)
<S> <C>
Senior notes.............. $130.0
Units..................... 25.0
New equity investment (1). 25.0
Senior credit facility.... 10.7
Cash on hand.............. 5.0
</TABLE>
<TABLE>
<CAPTION>
Amount
-------------
(in millions)
<S> <C>
Existing senior credit facility.............................. $ 84.6
Acquisition of TISCO (2)..................................... 37.3
Acquisition of Central Fabricators (2)....................... 29.0
Acquisition of Alitec Attachments Division................... 10.9
Subordinated bridge loan..................................... 27.4
Estimated fees and expenses.................................. 6.5
------
Total uses................................................. $195.7
======
------
Total sources........... $195.7
======
</TABLE>
- --------
(1) The new equity investment was made by MDCP and consisted of approximately
$18.4 million of 8% cumulative redeemable preferred stock of Parent and
approximately $6.6 million of common stock of Parent. See "Description of
Capital Stock."
(2) In connection with the Acquisitions, Woods entered into noncompete
agreements with the former owners of TISCO and Central Fabricators. The
noncompete payment for TISCO is $0.5 million, which is payable in
erly installments over a two year period. The noncompete payment for
Central Fabricators is $0.6 million, which is payable in quarterly
installments over a three year period. These noncompete payments are not
included in the acquisition costs listed in the table.
As of June 30, 1999, the interest rate on borrowings under the senior
credit facility was 8.3% and the interest rate on the subordinated bridge loan
was 11.5%. The senior credit facility matures on September 30, 2003 and the
subordinated bridge loan matures on October 1, 2007. Borrowings under the
senior credit facility and the subordinated bridge loan were used to finance
the recapitalization. An affiliate of the initial purchaser was a lender under
the senior credit facility and MDCP was the lender under the subordinated
bridge loan.
In connection with the initial offerings, Woods amended and restated its
senior credit facility to provide for a $40.0 million revolving line of credit
for working capital needs and future acquisitions. Woods is not currently a
party to any contracts, letters of intent, commitments or agreements with
respect to any acquisitions.
36
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of Woods as of
July 3, 1999 and as adjusted to give effect to the initial offerings, the new
equity investment by MDCP and the Acquisitions as if such transactions had
occurred on July 3, 1999. See "Use of Proceeds" and "Unaudited Pro Forma
Financial Data."
<TABLE>
<CAPTION>
At July 3, 1999
-----------------
Pro
Actual Forma
------- --------
(in thousands)
<S> <C> <C>
Long-term debt, including
current maturities:
Senior credit facility:
Revolving credit facility. $ -- $ 15,597
Term Loan A............... 25,000 --
Term Loan B............... 34,738 --
Term Loan C............... 24,812 --
12% Senior Notes............ -- 130,000
15% Senior Discount
Debentures (3)............. -- 24,269
Seller notes and other (4).. 5,288 5,488
Subordinated bridge loan
(5)........................ 25,000 --
Accrued interest on
subordinated bridge loan... 2,412 --
------- --------
Total long-term debt.... 117,250 175,354
Cumulative redeemable
preferred stock and accrued
dividends.................. 31,274 49,705
Stockholders' equity
(deficit):
Common stock.............. 6 10
Additional paid-in
capital.................. 14,937 22,233
Treasury stock, at cost... (96) (96)
Notes receivable from
stockholders............. (578) (578)
Retained earnings
(deficit)................ (67,782) (71,176)
------- --------
Total stockholders' equity
(deficit).................. (53,513) (49,607)
------- --------
Total capitalization.... $95,011 $175,452
======= ========
</TABLE>
- --------
(1) The value of the debentures represents $25.0 million less $0.7 million
ascribed to the shares of common stock issued in connection with the units.
We cannot assure you that the value ascribed to the common stock is
indicative of the price at which the common stock may trade in the future.
(2) Interest and principal payments on the seller notes issued to Baerts Metal
Products with an outstanding principal balance of $0.5 million were
suspended in May 1998 in connection with the complaint filed by Woods
against the former owners of Baerts alleging that such owners made material
misrepresentations in connection with the sale of Baerts to Woods.
37
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined financial data of Woods have been
derived by the application of pro forma adjustments to the historical financial
statements of Woods, TISCO, Central Fabricators and the Alitec Attachments
Division for the periods indicated. The adjustments are described in the
accompanying notes.
The unaudited statement of operations for the fiscal year ended January 2,
1999 and the six month period ended June 27, 1998 gives effect to the following
transactions as if such transactions had occurred at the beginning of the
earliest period presented:
(1) the recapitalization;
(2) the Acquisitions;
(3) the initial offerings; and
(4) the new equity investment by MDCP.
The unaudited statement of operations for the six month period ended July 3,
1999 gives effect to items (2), (3) and (4) set forth above, as if such
transactions had occurred at the beginning of the earliest period presented.
The unaudited pro forma balance sheet as of July 3, 1999 gives effect to: (1)
the Acquisitions; (2) the initial offerings and (3) the new equity investment
by MDCP, as if such transactions occurred on that date. The unaudited pro forma
statement of operations for the twelve months ended July 3, 1999 has been
derived by adding the pro forma financial data for the year ended January 2,
1999 and the pro forma financial data for the six months ended July 3, 1999 and
subtracting the pro forma financial data for the six months ended June 27,
1998. The unaudited pro forma financial data do not give effect to any other
transactions except those discussed in the accompanying notes. The unaudited
pro forma financial data are provided for informational purposes only and do
not purport to represent the results of operations or financial position of
Woods had these transactions in fact occurred on such dates, nor do they
purporting to be indicative of the financial position or results of operations
as of any future date or for any future period.
The Acquisitions will be accounted for using the purchase method of
accounting. The total cost of the Acquisitions will be allocated to the
tangible and intangible assets acquired and liabilities assumed based upon
their respective fair values as of the time the respective Acquisitions were
consummated. The excess of purchase cost over the historical basis of the net
assets acquired has been allocated in the accompanying unaudited pro forma
financial data based upon preliminary estimates. These estimates are based upon
available information and upon certain assumptions that management believes are
reasonable.
The unaudited pro forma financial data and accompanying notes should be read
in conjunction with the financial statements and accompanying notes thereto and
the other financial information included elsewhere in this prospectus.
38
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Twelve Month Period Ended July 3, 1999
(In Thousands)
<TABLE>
<CAPTION>
Historical
-----------------------------------------------------
Alitec
Central Attachments Pro Forma Company
Woods TISCO Fabricators Division Combined(1) Adjustments Pro Forma
-------- ------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales.............. $156,837 $64,955 $22,423 $8,988 $253,203 $ -- $253,203
Cost of goods sold..... 115,119 40,379 16,240 5,502 177,240 -- 177,240
-------- ------- ------- ------ -------- ------- --------
Gross profit........... 41,718 24,576 6,183 3,486 75,963 -- 75,963
Selling, general and
administrative
expenses.............. 30,790 21,750 3,588 2,010 58,138 436 (2)(3) 58,574
Noncash stock option
compensation charge... 4,310 -- -- -- 4,310 -- 4,310
-------- ------- ------- ------ -------- ------- --------
Income from operations. 6,618 2,826 2,595 1,476 13,515 (436) 13,079
Interest and other
expense, net.......... 11,882 430 171 184 12,667 8,678 (5)(6) 21,345
-------- ------- ------- ------ -------- ------- --------
Income (loss) before
provision (benefit)
for income taxes...... (5,264) 2,396 2,424 1,292 848 (9,114) (8,266)
Benefit for income
taxes................. (1,274) -- -- 668 (606) (1,675)(7) (2,281)
-------- ------- ------- ------ -------- ------- --------
Income (loss) from
continuing operations. $ (3,990) $ 2,396 $ 2,424 $ 624 $ 1,454 $(7,439) $ (5,985)
======== ======= ======= ====== ======== ======= ========
Other Data:
Depreciation and
amortization.......... $ 6,439 $ 513 $ 306 $ 193 $ 7,451 $ 2,928 $ 10,379
Capital expenditures... 4,577 361 249 171 5,358
EBITDA (4)............. 17,367 3,339 2,901 1,749 25,356 2,492 27,848
Ratio of earnings to
fixed charges (9)..... --
</TABLE>
39
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Fiscal Year Ended January 2, 1999
(In Thousands)
<TABLE>
<CAPTION>
Historical
-----------------------------------------------------
Alitec
Central Attachments Pro Forma Company
Woods TISCO Fabricators Division Combined(1) Adjustments Pro Forma
-------- ------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales.............. $154,734 $65,609 $22,901 $9,157 $252,401 $ -- $252,401
Cost of goods sold..... 113,205 40,937 16,628 5,652 176,422 -- 176,422
-------- ------- ------- ------ -------- -------- --------
Gross profit........... 41,529 24,672 6,273 3,505 75,979 -- 75,979
Selling, general and
administrative
expenses.............. 29,699 21,540 3,439 1,970 56,648 394 (2)(3) 57,042
Noncash stock option
compensation charge... 4,310 -- -- -- 4,310 -- 4,310
-------- ------- ------- ------ -------- -------- --------
Income from operations. 7,520 3,132 2,834 1,535 15,021 (394) 14,627
Interest and other
expense, net.......... 10,261 500 153 135 11,049 10,271 (5)(6) 21,320
-------- ------- ------- ------ -------- -------- --------
Income (loss) before
provision (benefit)
for income taxes...... (2,741) 2,632 2,681 1,400 3,972 (10,665) (6,693)
Benefit for income
taxes................. (438) -- -- 487 49 (2,087)(7) (2,038)
-------- ------- ------- ------ -------- -------- --------
Income (loss) from
continuing operations. $ (2,303) $ 2,632 $ 2,681 $ 913 $ 3,923 $ (8,578) $ (4,655)
======== ======= ======= ====== ======== ======== ========
Other Data:
Depreciation and
amortization.......... $ 6,196 $ 642 $ 298 $ 175 $ 7,311 $ 2,928 $ 10,239
Capital expenditures... 3,212 433 215 110 3,970
EBITDA(4).............. 18,026 3,774 3,132 1,812 26,744 2,534 29,278
Ratio of earnings to
fixed charges(9)...... --
</TABLE>
40
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Six Month Period Ended June 27, 1998
(In Thousands)
<TABLE>
<CAPTION>
Historical
---------------------------------------------------
Alitec
Central Attachments Pro Forma Company
Woods TISCO Fabricators Division Combined(1) Adjustments Pro Forma
------- ------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............. $83,694 $34,985 $12,388 $5,197 $136,264 $ -- $136,264
Cost of goods sold.... 59,674 22,008 8,882 3,450 94,014 -- 94,014
------- ------- ------- ------ -------- ------- --------
Gross profit.......... 24,020 12,977 3,506 1,747 42,250 -- 42,250
Selling, general and
administrative
expenses............. 13,785 10,780 1,703 870 27,138 306 (2)(3) 27,444
------- ------- ------- ------ -------- ------- --------
Income from
operations........... 10,235 2,197 1,803 877 15,112 (306) 14,806
Interest and other
expense, net......... 3,964 292 74 60 4,390 5,765 (5)(6) 10,155
------- ------- ------- ------ -------- ------- --------
Income (loss) before
provision (benefit)
for income taxes..... 6,271 1,905 1,729 817 10,722 (6,071) 4,651
Provision (benefit)
for income taxes..... 2,662 -- -- 370 3,032 (950)(7) 2,082
------- ------- ------- ------ -------- ------- --------
Income from continuing
operations........... $ 3,609 $ 1,905 $ 1,729 $ 447 $ 7,690 $(5,121) $ 2,569
======= ======= ======= ====== ======== ======= ========
Other Data:
Depreciation and
amortization......... $ 3,024 $ 354 $ 134 $ 71 $ 3,583 $ 1,464 $ 5,047
Capital expenditures.. 1,255 123 9 45 1,432
EBITDA(4)............. 13,259 2,551 1,937 1,003 18,750 1,158 19,908
Ratio of earnings to
fixed charges(9)..... 1.4x
</TABLE>
41
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Six Month Period Ended July 3, 1999
(In Thousands)
<TABLE>
<CAPTION>
Historical
---------------------------------------------------
Alitec
Central Attachments Pro Forma Company
Woods TISCO Fabricators Division Combined(1) Adjustments Pro Forma
------- ------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............. $85,797 $34,331 $11,910 $5,028 $137,066 $ -- $137,066
Cost of goods sold.... 61,588 21,450 8,494 3,300 94,832 -- 94,832
------- ------- ------- ------ -------- ------- --------
Gross profit.......... 24,209 12,881 3,416 1,728 42,234 -- 42,234
Selling, general and
administrative
expenses............. 14,876 10,990 1,852 910 28,628 348 (2)(3) 28,976
------- ------- ------- ------ -------- ------- --------
Income from
operations........... 9,333 1,891 1,564 818 13,606 (348) 13,258
Interest and other
expense, net......... 5,585 222 92 109 6,008 4,172 (5)(6) 10,180
------- ------- ------- ------ -------- ------- --------
Income (loss) before
provision (benefit)
for income taxes..... 3,748 1,669 1,472 709 7,598 (4,520) 3,078
Provision (benefit)
for income taxes..... 1,826 -- -- 551 2,377 (538)(7) 1,839
------- ------- ------- ------ -------- ------- --------
Income from continuing
operations........... $ 1,922 $ 1,669 $ 1,472 $ 158 $ 5,221 $(3,982) $ 1,239
======= ======= ======= ====== ======== ======= ========
Other Data:
Depreciation and
amortization......... $ 3,267 $ 225 $ 142 $ 89 $ 3,723 $ 1,464 $ 5,187
Capital expenditures.. 2,620 51 43 106 2,820
EBITDA(4)............. 12,600 2,116 1,706 940 17,362 1,116 18,478
Ratio of earnings to
fixed charges (9).... 1.3x
</TABLE>
42
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Twelve Months Ended July 3, 1999, Fiscal Year Ended January 2, 1999 and
Six Month Periods Ended June 27, 1998 and July 3, 1999
(In Thousands)
(1) The combined historical data gives pro forma effect to the acquisition of
TISCO, Central Fabricators and the Alitec Attachments Division (exclusive
of the adjustments set forth under "Pro Forma Adjustments") and was derived
from audited historical statements of operations of Woods, WEC, TISCO,
Central Fabricators and the Alitec Attachments Division, all included
elsewhere herein. The periods presented for each of the companies is as
follows:
<TABLE>
<CAPTION>
For the Twelve
Month Period For the Fiscal For the Six For the Six
Ended July 3, Year Ended Months Ended Months Ended
1999 January 2, 1999 July 3, 1999 June 27, 1998
-------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Woods................. July 3, 1999 January 2, 1999 July 3, 1999 June 27, 1998
TISCO................. May 21, 1999 November 28, 1998 May 21, 1999 May 22, 1998
Central Fabricators... June 30, 1999 December 31, 1998 June 30, 1999 June 30, 1998
Alitec Attachments Di-
vision............... June 30, 1999 December 31, 1998 June 30, 1999 June 30, 1998
(2) Adjustments reflect the following:
Selling, general
administrative
expenses:
Elimination of
certain management
positions (a)...... $1,153 $1,155 $459 $461
Elimination of
certain employee
positions (b)...... 1,258 1,298 616 656
Elimination of
facility rental
costs (c).......... 39 39 20 20
------------- ----------------- ------------- -------------
Total............. $2,450 $2,492 $1,095 $1,137
============= ================= ============= =============
(a) Adjustment
reflects the
elimination of
compensation,
benefits and
other expenses
of the
owners/managers
of TISCO and
Central
Fabricators as
they will cease
employment as of
the acquisition
date and not be
replaced. Such
amounts are
summarized as
follows:
TISCO............. $ 348 $ 374 $159 $185
Central
Fabricators...... 805 781 300 276
------------- ----------------- ------------- -------------
Total........... $1,153 $1,155 $459 $461
============= ================= ============= =============
</TABLE>
(b) Adjustment reflects the elimination of compensation and benefit
costs of certain sales, engineering and other employee positions of
TISCO and the Alitec Attachments Division that are redundant with
existing positions at Woods and the individuals will cease
employment as of the acquisition date.
43
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Twelve Months Ended July 3, 1999, Fiscal Year Ended January 2, 1999 and
Six Month Periods Ended June 27, 1998 and July 3, 1999--(Continued)
(In Thousands)
<TABLE>
<CAPTION>
For the Twelve For the Fiscal For the Six For the Six
Month Period Year Ended Months Ended Months Ended
Ended July 3, 1999 January 2, 1999 July 3, 1999 June 27, 1998
------------------ --------------- ------------ -------------
<S> <C> <C> <C> <C>
(c) Elimination of
non-recurring
facility rental
costs to bring
such costs down
to the level
agreed upon in
connection with
the Central
Fabricators
Acquisition..... $ 111 $ 111 $ 56 $ 56
Elimination of
non-recurring
facility rental
costs in
connection with
the TISCO
headquarters
facility as the
building will be
acquired in the
TISCO Acquisition. 132 132 66 66
Adjustment
reflects the
incremental
depreciation
expense in
connection with
the TISCO
headquarters
facility to be
acquired in the
TISCO Acquisition. (42) (42) (21) (21)
Adjustment
reflects the
incremental rent
expense in
connection with
the Alitec
Attachments
Division
acquisition....... (162) (162) (81) (81)
--------- --------- -------- --------
$ 39 $ 39 $ 20 $ 20
========= ========= ======== ========
(3) Adjustment reflects
the incremental
goodwill and
noncompete
amortization
associated with the
acquisitions of
TISCO, Central
Fabricators and the
Alitec Attachments
Division as if such
acquisitions had
occurred at the
beginning of the
period presented.
For pro forma
purposes, goodwill
is being amortized
over a period of 20
years and the TISCO
and Central
Fabricators non-
competes are being
amortized over a
period of two and
three years,
respectively........ $ 2,886 $ 2,886 $ 1,443 $ 1,443
========= ========= ======== ========
(5) Increase in interest
expense to reflect
the interest
associated with the
notes, the
debentures, and
revolving credit
facility as if the
transactions had
been consummated as
of the beginning of
the period presented
summarized as
follows:
Interest expense
with respect to the
notes, the
debentures, and
revolving credit
facility........... $ 19,773 $ 19,773 $ 9,887 $ 9,887
Amortization of
deferred finance
costs, net (i)..... 69 260 12 203
--------- --------- -------- --------
Total........... $ 19,842 $ 20,033 $ 9,899 $ 10,090
========= ========= ======== ========
</TABLE>
(4) EBITDA is defined as operating income plus depreciation, amortization and
the noncash stock option compensation charge and is presented because it is
generally accepted as providing useful information regarding a company's
ability to service debt. EBITDA should not be considered in isolation or as
a substitute for net income, cash flows from operating activities or other
cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of profitability or liquidity.
44
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Twelve Months Ended July 3, 1999, Fiscal Year Ended January 2, 1999 and
Six Month Periods Ended June 27, 1998 and July 3, 1999--(Continued)
(In Thousands)
<TABLE>
<CAPTION>
For the Twelve For the Six
Month Period For the Fiscal For the Six Months Ended
Ended Year Ended Months Ended June
July 3, 1999 January 2, 1999 July 3, 1999 27, 1998
-------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
(i) Adjustment
reflects
amortization of
the capitalized
deferred finance
costs incurred
in connection
with the
financing of the
transactions.
For pro forma
purposes,
deferred finance
costs are being
amortized, as
interest
expense, over a
period of 10
years. The
adjustment is
offset by
deferred finance
costs written
off in the
refinancing.
This is
summarized as
follows:
Amortization of
new deferred
finance costs in
connection with
the transactions. $ 580 $ 580 $ 290 $ 290
Write off of
amortization of
old deferred
finance costs on
existing debt in
connection with
the refinancing.. 483 205 278 --
Write off of
amortization of
old deferred
finance costs on
old debt (prior
to the
recapitalization
on August 7,
1998)............ 28 115 -- 87
-------- -------- -------- --------
Total........... $ 69 $ 260 $ 12 $ 203
======== ======== ======== ========
(6) Reduction in
interest expense to
reflect the use of
proceeds of the
initial offerings,
the new equity
investment and new
revolving credit
facility as follows:
Net proceeds of the
initial offerings,
new equity
investment and new
revolving credit
facility .......... $210,707 $210,707 $210,707 $210,707
Funding of TISCO.... 38,500 38,500 38,500 38,500
Funding of Central
Fabricators........ 29,100 29,100 29,100 29,100
Funding of the
Alitec Attachments
Division........... 11,000 11,000 11,000 11,000
Funding of deferred
finance costs...... 5,800 5,800 5,800 5,800
Payoff of accrued
interest on
subordinated
promissory notes... 2,412 2,412 2,412 2,412
-------- -------- -------- --------
Net proceeds
available to pay
down existing debt. 109,550 109,550 109,550 109,550
Average 1998
interest rate on
existing debt...... 8.5% 8.5% 8.5% 8.5%
-------- -------- -------- --------
Reduction in
interest expense
related to interest
incurred on
existing debt
(beginning August
7, 1998 through the
end of the period
presented)......... 9,547 4,240 5,307 --
Reduction in
interest expense
related to interest
incurred on old
debt prior to the
recapitalization on
August 7, 1998..... 824 4,701 -- 3,877
Reduction in
interest expense
related to net
interest incurred
on notes payable to
shareholders and
other long-term
debt related to
TISCO, Central
Fabricators and the
Alitec Attachments
Division for
liabilities not
assumed in the
acquisitions....... 793 821 420 448
-------- -------- -------- --------
Total........... $ 11,164 $ 9,762 $ 5,727 $ 4,325
======== ======== ======== ========
(7) Adjusted to reflect
the income tax
effect of the pro
forma and offering
adjustments based on
an estimated
marginal tax rate of
39%, offset by the
income tax effect of
both TISCO and
Central Fabricators
becoming C
corporations in
connection with the
acquisitions........ $ (1,675) $ (2,087) $ (538) $ (950)
======== ======== ======== ========
(8) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest expense (which includes amortization of deferred finance costs)
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
insufficient to cover fixed charges by the following amounts for the
periods indicated:
<CAPTION>
For the Twelve For the Six
Month Period For the Fiscal For the Six Months Ended
Ended Year Ended Months Ended June
July 3, 1999 January 2, 1999 July 3, 1999 27, 1998
-------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Fixed charges........... $ 8,266 $ 6,693 N/A N/A
</TABLE>
45
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
July 3, 1999
(In Thousands)
<TABLE>
<CAPTION>
Historical
------------------------------------------------------
Central Alitec
Alitec TISCO Fabricators Attachments
Central Attachments Historical Acquisition Acquisition Division
Woods TISCO Fabricators Division Combined (1) Adjustments (2) Adjustments (4) Adjustments (9)
-------- ------- ----------- ----------- ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash............ $ -- $ -- $ 136 $ 5 $ 141 $ -- $ (136) $ ( 5)
Trade accounts
receivable,
net............ 29,736 14,202 3,087 1,684 48,709 -- -- --
Inventories,
net............ 18,510 7,326 2,310 1,645 29,791 -- -- --
Deferred income
taxes.......... 3,083 -- -- 41 3,124 -- -- --
Prepaid expenses
and other
current assets. 2,100 201 1 36 2,338 -- -- --
-------- ------- ------ ------- -------- -------- ------- -------
Total current
assets......... 53,429 21,729 5,534 3,411 84,103 -- (136) ( 5)
Property and
equipment, net.. 26,588 964 766 685 29,003 -- -- --
Goodwill, net.... 23,266 -- -- 508 23,774 16,888 23,990 7,836
Other assets,
net............. 5,883 3,515 -- 51 9,449 500 600 --
-------- ------- ------ ------- -------- -------- ------- -------
Total assets.... $109,166 $26,208 $6,300 $ 4,655 $146,329 $ 17,388 $24,454 $ 7,831
======== ======= ====== ======= ======== ======== ======= =======
Liabilities and
Stockholders'
Equity:
Current
liabilities:
Notes payable to
officers and
stockholders... $ -- $12,419 $2,800 $ -- $ 15,219 $(12,419) $(2,800) $ --
Current
maturities of
long-term
obligations.... 3,153 200 300 4,028 7,681 -- (300) (4,028)
Accounts
payable........ 6,085 3,042 993 1,104 11,224 -- -- --
Accrued
expenses....... 7,322 2,667 493 434 10,916 -- -- --
-------- ------- ------ ------- -------- -------- ------- -------
Total current
liabilities.... 16,560 18,328 4,586 5,566 45,040 (12,419) (3,100) (4,028)
Long-term
obligations,
less current
maturities...... 111,685 -- 18 5 111,708 32,305 (3) (18) 10,875
25,120 (5) --
Deferred income
taxes........... 3,083 -- -- 68 3,151 -- -- --
Other long-term
liabilities..... 77 -- -- -- 77 -- -- --
-------- ------- ------ ------- -------- -------- ------- -------
Total
liabilities.... 131,405 18,328 4,604 5,639 159,976 19,886 22,002 6,847
Redeemable
preferred stock
and accrued
dividends....... 31,274 -- -- -- 31,274 3,855 (3) 2,971 (5) --
Stockholders'
equity:
Common stock.... 6 21 -- 49 76 (20)(3) 1 (5) (49)
Additional paid-
in capital..... 14,937 -- 31 43 15,011 1,526 (3) 1,145 (5) (43)
Treasury stock,
at cost........ (96) -- -- -- (96) -- -- --
Notes receivable
from
stockholders... (578) -- -- -- (578) -- -- --
Retained
earnings
(accumulated
deficit)....... (67,782) 7,859 1,665 (1,076) (59,334) (7,859) (1,665) 1,076
-------- ------- ------ ------- -------- -------- ------- -------
Total
stockholder's
equity
(deficit)...... (53,513) 7,880 1,696 (984) (44,921) (6,353) (519) 984
-------- ------- ------ ------- -------- -------- ------- -------
Total
liabilities and
shareholders'
equity......... $109,166 $26,208 $6,300 $ 4,655 $146,329 $ 17,388 $24,454 $ 7,831
======== ======= ====== ======= ======== ======== ======= =======
<CAPTION>
Pro Forma Company
Adjustments Pro Forma
-------------- ----------
<S> <C> <C>
Assets:
Current assets:
Cash............ $ -- $ --
Trade accounts
receivable,
net............ -- 48,709
Inventories,
net............ -- 29,791
Deferred income
taxes.......... -- 3,124
Prepaid expenses
and other
current assets. -- 2,338
-------------- ----------
Total current
assets......... -- 83,962
Property and
equipment, net.. -- 29,003
Goodwill, net.... -- 72,488
Other assets,
net............. 2,406 (6) 12,955
-------------- ----------
Total assets.... $ 2,406 $198,408
============== ==========
Liabilities and
Stockholders'
Equity:
Current
liabilities:
Notes payable to
officers and
stockholders... $ -- $ --
Current
maturities of
long-term
obligations.... -- 3,353
Accounts
payable........ -- 11,224
Accrued
expenses....... (2,412)(7) 8,504
-------------- ----------
Total current
liabilities.... (2,412) 23,081
Long-term
obligations,
less current
maturities...... 5,800 (6) 172,001
(13,789)(7)
Deferred income
taxes........... -- 3,151
Other long-term
liabilities..... -- 77
-------------- ----------
Total
liabilities.... (10,401) 198,310
Redeemable
preferred stock
and accrued
dividends....... 11,605 (8) 49,705
Stockholders'
equity:
Common stock.... 2 (8) 10
Additional paid-
in capital..... 4,594 (8) 22,233
Treasury stock,
at cost........ -- (96)
Notes receivable
from
stockholders... -- (578)
Retained
earnings
(accumulated
deficit)....... (3,394)(6) (71,176)
-------------- ----------
Total
stockholder's
equity
(deficit)...... 1,202 (49,607)
-------------- ----------
Total
liabilities and
shareholders'
equity......... $ 2,406 $198,408
============== ==========
</TABLE>
46
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
July 3, 1999
(In Thousands)
(1) The combined historical data gives pro forma effect to the acquisitions of
TISCO, Central Fabricators and the Alitec Attachments Division (exclusive
of the adjustments set forth under "Pro Forma Adjustments") and was derived
from unaudited interim financial statements of TISCO, Central Fabricators
and Alitec included elsewhere herein. The balance sheet date for each of
the companies is as follows:
<TABLE>
<S> <C>
Woods.......................................................... July 3, 1999
TISCO.......................................................... May 21, 1999
Central Fabricators............................................ June 30, 1999
Alitec Attachments Division.................................... June 30, 1999
</TABLE>
(2) Reflects the acquisition of TISCO which will be accounted for as a purchase
in accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations." The purchase price is being allocated to tangible and
identifiable intangible assets and liabilities based upon preliminary
estimates of their fair values, with the excess of purchase price over fair
value allocated to goodwill. Woods has not yet determined the final
allocation of the purchase price as current information regarding the fair
value of assets to be acquired is not available and accordingly, the
amounts shown below may differ from the amounts ultimately determined.
Allocation of purchase price based upon preliminary estimated values is as
follows:
<TABLE>
<S> <C>
Purchase price (includes estimated transaction costs of $400)....... $37,687
Book value of net assets acquired (i)............................. 20,299
-------
Increase in basis................................................. $17,388
=======
Allocation of increase in basis:
Non-compete agreements........................................ $ 500
Goodwill...................................................... 16,888
-------
Total....................................................... $17,388
=======
</TABLE>
(i) Comprised of total assets of $26,208 less liabilities assumed of $5,909
as of May 21, 1999. Therefore, adjustment also includes elimination of
liabilities not assumed related to notes payable to officers and
stockholders of $12,419. In addition, adjustment includes the
elimination of TISCO's historical equity.
(3) Includes the portion of the purchase price (including estimated transaction
costs of $400) for the acquisition of TISCO estimated to be financed in the
following form:
<TABLE>
<S> <C>
Senior Notes due 2009................................................ $25,974
Units--Debentures.................................................... 5,075
Units--Common Stock.................................................. 153
New Equity Investment--8% Cumulative Redeemable Preferred Stock...... 3,855
New Equity Investment--Common Stock.................................. 1,374
Revolving credit facility............................................ 1,256
-------
Total.............................................................. $37,687
=======
</TABLE>
47
<PAGE>
(4) Reflects the acquisition of Central Fabricators which will be accounted for
as a purchase in accordance with Accounting Principles Board Opinion No.
16, "Business Combinations." The purchase price is being allocated to
tangible and identifiable intangible assets and liabilities based upon
preliminary estimates of their fair values, with the excess of purchase
price over fair value allocated to goodwill. Woods has not yet determined
the final allocation of the purchase price as current information regarding
the fair value of assets to be acquired is not available and accordingly,
the amounts shown below may differ from the amounts ultimately determined.
Allocation of purchase price based upon preliminary estimated values is as
follows:
<TABLE>
<S> <C>
Purchase price (includes estimated transaction costs of $300)....... $29,268
Book value of net assets acquired (i)............................. 4,678
-------
Increase in basis................................................. $24,590
=======
Allocation of increase in basis:
Non-compete agreements........................................ $ 600
Goodwill...................................................... 23,990
-------
Total....................................................... $24,590
=======
</TABLE>
(i) Comprised of total assets being acquired of $6,164 less liabilities
assumed of $1,486 as of June 30, 1999. Therefore, adjustment also
includes elimination of cash not being acquired of $136, liabilities
not assumed related to notes payable to stockholders of $3,100 and
long-term debt of $18. In addition, adjustment includes the elimination
of Central Fabricators' historical equity.
(5) Includes the portion of the purchase price, including estimated transaction
costs of $300, for the acquisition of Central Fabricators estimated to be
financed in the following form:
<TABLE>
<S> <C>
Senior Notes due 2009................................................ $20,024
Units--Debentures.................................................... 3,913
Units--Common Stock.................................................. 118
New Equity Investment--8% Cumulative Redeemable Preferred Stock...... 2,971
New Equity Investment--Common Stock.................................. 1,059
Revolving credit facility............................................ 1,183
-------
Total.............................................................. $29,268
=======
</TABLE>
(6) Adjustment reflects the new capitalized deferred finance costs of $5,800,
net of $3,394 of capitalized deferred finance costs written off upon the
refinancing. The new deferred finance costs of $5,800 will be incurred
primarily in connection with the offering of the notes of $130,000 and the
new revolving credit facility of $15,597. The deferred finance costs of
$3,394 written off upon the refinancing are in connection with the
following: (a) term loans of $84,550, and (b) subordinated promissory notes
of $25,000.
(7) Adjustment reflects the net decrease in long-term debt associated with (i)
the Notes of $78,202, the debentures of $15,281, and a revolving credit
facility of $2,278 (excluding borrowings for the Acquisitions--see (3), (5)
and (10) and also excluding deferred finance costs of $5,800--see (6))
offset by, (ii) the refinancing of the following: (a) term loans of $84,550
and (b) subordinated promissory notes of $25,000, plus accrued interest of
$2,412.
(8) Adjustment reflects the increase in equity associated with the issuance of
8% cumulative redeemable preferred stock of $11,605 and common stock of
$4,136 relating to the new equity investment and $460 relating to the
issuance of shares of common stock in connection with the units (excluding
equity infusions for the TISCO and Central Fabricators' acquisitions--see
(3) and (5) above).
48
<PAGE>
(9) Reflects the acquisition of the Alitec Attachments Division which will be
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations." The purchase price is being
allocated to tangible and identifiable intangible assets and liabilities
based upon preliminary estimates of their fair values, with the excess of
purchase price over fair value allocated to goodwill. Woods has not yet
determined the final allocation of the purchase price as current
information regarding the fair value of assets to be acquired is not
available and accordingly, the amounts shown below may differ from the
amounts ultimately determined. Allocation of purchase price based upon
preliminary estimated values is as follows:
<TABLE>
<S> <C>
Purchase price ..................................................... $10,880
Book value of net assets acquired (i)............................. 3,044
-------
Increase in basis................................................. $ 7,836
=======
Allocation of increase in basis:
Goodwill...................................................... $ 7,836
=======
</TABLE>
(i) Comprised of total assets of $4,650 less liabilities assumed of $1,606
as of March 31, 1999. Therefore, adjustment also includes elimination
of liabilities not assumed of $4,033. In addition, adjustment includes
the elimination of the Alitec Attachments Division's historical equity.
(10) Includes the portion of the purchase price for the acquisition of the
Alitec Attachments Division estimated to be financed in the following
form:
<TABLE>
<S> <C>
Revolving credit facility........................................... $10,880
=======
</TABLE>
49
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
Woods Equipment Company
The following table presents selected historical consolidated statements of
operations, balance sheet, and other data for Woods for the periods presented
and should only be read in conjunction with the audited and unaudited
consolidated financial statements of Woods, and the related notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," all included elsewhere in this prospectus. The data as of and for
each of the five fiscal year periods ended January 2, 1999 have been derived
from the audited consolidated financial statements of Woods. The data as of and
for the six month periods ended June 27, 1998 and July 3, 1999 have been
derived from the unaudited consolidated financial statements of Woods which, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation. Results of operations
for an interim period are not necessarily indicative of results for a full
year.
<TABLE>
<CAPTION>
Fiscal Year Ended,
--------------------------------------------------------------
December 31, December 30, December 28, December 27, January 2,
1994 1995 1996 1997(1) 1999
------------ ------------ ------------ ------------ ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales............................... $96,333 $122,795 $129,427 $137,924 $154,734
Costs of goods sold..................... 69,707 89,277 97,025 104,983 113,205
------- -------- -------- -------- --------
Gross profit............................ 26,626 33,518 32,402 32,941 41,529
Selling, general and administrative expenses (2). 20,020 23,396 20,453 24,521 29,699
Noncash stock option compensation
charge................................. -- -- -- -- 4,310
------- -------- -------- -------- --------
Income from operations.................. 6,606 10,122 11,949 8,420 7,520
Interest and other expense, net......... 9,132 8,184 7,326 7,831 10,261
------- -------- -------- -------- --------
Income (loss) before provision (benefit)
for income taxes and extraordinary
loss................................... (2,526) 1,938 4,623 589 (2,741)
Provision (benefit) for income taxes.... (891) 941 1,971 494 (438)
------- -------- -------- -------- --------
Income (loss) before extraordinary loss. (1,635) 997 2,652 95 (2,303)
Extraordinary loss (3).................. -- -- -- 290 795
------- -------- -------- -------- --------
Net income (loss)....................... $(1,635) $ 997 $ 2,652 $ (195) $ (3,098)
======= ======== ======== ======== ========
Other Data:
Depreciation and amortization........... $ 2,020 $ 2,981 $ 3,409 $ 4,412 $ 6,196
Capital expenditures.................... 2,084 3,302 4,662 4,678 3,212
EBITDA (2) (4).......................... 8,626 13,103 15,358 12,832 18,026
Net cash provided by (used in):
Operating activities................... (2,681) 524 11,226 7,000 3,762
Investing activities................... (18,060) (5,242) (1,872) (25,520) (3,182)
Financing activities................... 21,064 4,340 (9,297) 21,159 (1,944)
Ratio of earnings to fixed charges (5).. -- 1.2x 1.6x 1.1x --
Balance Sheet Data (at end of period):
Working capital......................... $31,020 $ 36,325 $ 29,838 $ 35,604 $ 39,679
Total assets............................ 84,801 88,742 81,628 105,440 108,665
Total debt.............................. 61,859 66,999 58,623 82,367 119,161
Stockholders' equity (deficit).......... (112) 990 3,379 2,856 (54,224)
<CAPTION>
Six Months Ended,
-------------------
June 27, July 3,
1998 1999
--------- ---------
<S> <C> <C>
Statements of Operations Data:
Net sales............................... $ 83,694 $ 85,797
Costs of goods sold..................... 59,674 61,588
--------- ---------
Gross profit............................ 24,020 24,209
Selling, general and administrative expenses (2). 13,785 14,876
Noncash stock option compensation
charge................................. -- --
--------- ---------
Income from operations.................. 10,235 9,333
Interest and other expense, net......... 3,964 5,585
--------- ---------
Income (loss) before provision (benefit)
for income taxes and extraordinary
loss................................... 6,271 3,748
Provision (benefit) for income taxes.... 2,662 1,826
--------- ---------
Income (loss) before extraordinary loss. 3,609 1,922
Extraordinary loss (3).................. -- --
--------- ---------
Net income (loss)....................... $ 3,609 $ 1.922
========= =========
Other Data:
Depreciation and amortization........... $ 3,024 $ 3,267
Capital expenditures.................... 1,255 2,620
EBITDA (2) (4).......................... 13,259 12,600
Net cash provided by (used in):
Operating activities................... 3,304 5,644
Investing activities................... (1,227) (2,620)
Financing activities................... (4,793) (4,376)
Ratio of earnings to fixed charges (5).. 2.4x 1.6x
Balance Sheet Data (at end of period):
Working capital......................... $ 35,658 $ 36,869
Total assets............................ 107,016 109,166
Total debt.............................. 78,126 114,838
Stockholders' equity (deficit).......... 6,156 (53,513)
</TABLE>
- -------
(1) Woods acquired Baerts Metal Products in April 1997 and Wain-Roy in October
1997.
(2) Includes $0.6 million and $1.1 million of expenses incurred by Woods in the
fiscal year ended January 2, 1999 and the six months ended July 3, 1999,
respectively, relating to the failed acquisition of Alamo Group, Inc.
Excluding these expenses, EBITDA for the fiscal year ended January 2, 1999
and the six months ended July 3, 1999 would have been $18,588 and $13,738,
respectively.
(3) Extraordinary loss, net of income tax benefit, represents the write-off of
unamortized deferred finance costs on the early extinguishment of debt.
(4) EBITDA is defined as operating income plus depreciation, amortization and
the noncash stock option compensation charge and is presented because it is
generally accepted as providing useful information regarding a company's
ability to service debt. EBITDA should not be considered in isolation or as
a substitute for net income, cash flows from operating activities or other
cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of profitability or liquidity.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest expense (which includes amortization of deferred finance costs)
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
insufficient to cover fixed charges by approximately $2,526 and $2,741 for
the fiscal year ended December 31, 1994 and January 2, 1999, respectively.
50
<PAGE>
TISCO
The following table presents selected historical statements of operations,
balance sheet and other data for TISCO for the periods presented and should
only be read in conjunction with the audited and unaudited financial statements
of TISCO and the related notes thereto, included elsewhere in this prospectus.
The data as of and for each of the three fiscal year periods ended November 30,
1996, November 29, 1997 and November 28, 1998 have been derived from the
audited consolidated financial statements of TISCO. The data as of and for the
six month periods ended May 22, 1998 and May 21, 1999 have been derived from
the unaudited financial statements of TISCO which, in the opinion of management
of TISCO, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation. Results of operations for an
interim period are not necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
Fiscal Year Ended, Six Months Ended,
-------------------------------------- ------------------
November 30, November 29, November 28, May 22, May 21,
1996 1997 1998 1998 1999
------------ ------------ ------------ -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Net sales............... $ 65,771 $66,366 $65,610 $ 34,985 $ 34,331
Costs of goods sold..... 40,923 41,566 40,937 22,008 21,450
-------- ------- ------- -------- --------
Gross profit............ 24,848 24,800 24,673 12,977 12,881
Selling, general and ad-
ministrative
expenses............... 21,535 21,723 21,541 10,780 10,990
-------- ------- ------- -------- --------
Income from operations.. 3,313 3,077 3,132 2,197 1,891
Interest and other ex-
pense, net............. 781 510 500 292 222
-------- ------- ------- -------- --------
Net income.............. $ 2,532 $ 2,567 $ 2,632 $ 1,905 $ 1,669
======== ======= ======= ======== ========
Other Data:
Depreciation and amorti-
zation................. $ 1,002 $ 980 $ 642 $ 354 $ 225
Capital expenditures.... 283 296 433 123 51
EBITDA (1).............. 4,315 4,057 3,774 2,551 2,116
Net cash provided by
(used in):
Operating activities.. 5,246 2,132 3,604 (5,843) (5,531)
Investing activities.. 1,683 (303) (746) (165) (214)
Financing activities.. (3,172) (2,917) (2,397) 1,589 (1,715)
Balance Sheet Data (at
end of period):
Working capital......... $ 1,149 $ 1,555 $ 1,722 $ 3,649 $ 3,401
Total assets............ 25,104 24,395 25,483 28,832 26,208
Total debt.............. 12,436 12,051 11,965 15,951 12,619
Stockholders' equity.... 6,197 5,947 6,211 7,852 7,880
</TABLE>
- --------
(1) EBITDA is defined as operating income plus depreciation and amortization
and is presented because it is generally accepted as providing useful
information regarding a company's ability to service debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash
flows from operating activities or other cash flow statement data prepared
in accordance with generally accepted accounting principles or as a measure
of profitability or liquidity.
51
<PAGE>
Central Fabricators
The following table presents selected historical statements of operations,
balance sheet, and other data for Central Fabricators for the periods presented
and should only be read in conjunction with the audited and unaudited financial
statements of Central Fabricators and the related notes thereto included
elsewhere in this prospectus. The data as of and for each of the two fiscal
year periods ended December 31, 1997 and 1998 have been derived from the
audited financial statements of Central Fabricators. The data as of and for the
six month periods ended June 30, 1998 and 1999 have been derived from the
unaudited financial statements of Central Fabricators which, in the opinion of
management of Central Fabricators, include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation. Results of
operations for an interim period are not necessarily indicative of results for
a full year.
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
December 31, June 30,
------------------ ------------------
1997 1998 1998 1999
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Net sales.............................. $ 18,629 $ 22,901 $ 12,388 $ 11,910
Costs of goods sold.................... 13,216 16,628 8,882 8,494
-------- -------- -------- --------
Gross profit........................... 5,413 6,273 3,506 3,416
Selling, general and administrative ex-
penses................................ 3,116 3,439 1,703 1,852
-------- -------- -------- --------
Income from operations................. 2,297 2,834 1,803 1,564
Interest and other expense net......... 92 153 74 92
-------- -------- -------- --------
Income (loss) before provision for in-
come taxes............................ 2,205 2,681 1,729 1,472
Provision (benefit) for income taxes... -- -- -- --
-------- -------- -------- --------
Net income............................. $ 2,205 $ 2,681 $ 1,729 $ 1,472
======== ======== ======== ========
Other Data:
Depreciation and amortization.......... $ 243 $ 298 $ 134 $ 142
Capital expenditures................... 493 215 9 43
EBITDA (1)............................. 2,540 3,132 1,937 1,706
Net cash provided by (used in):
Operating activities................. 2,158 2,275 979 794
Investing activities................. (493) (215) (9) (43)
Financing activities................. (1,763) (2,059) (1,150) (1,219)
Balance Sheet Data (at end of period):
Working capital........................ $ 1,257 $ 1,729 $ 1,225 $ 948
Total assets........................... 5,007 5,654 6,118 6,300
Total debt............................. 1,753 1,984 2,489 3,118
Stockholders' equity................... 2,186 2,577 2,028 1,696
</TABLE>
- --------
(1) EBITDA is defined as operating income plus depreciation and amortization
and is presented because it is generally accepted as providing useful
information regarding a company's ability to service debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash
flows from operating activities or other cash flow statement data prepared
in accordance with generally accepted accounting principles or as a measure
of profitability or liquidity.
52
<PAGE>
Alitec Attachments Division
The following table presents selected unaudited historical statements of
operations, balance sheet, and other data for the Alitec Attachments Division
for the periods presented and should only be read in conjunction with the
audited financial statements of the Alitec Attachments Division and the related
notes thereto included elsewhere in this prospectus. The data as of and for
each of the years ended December 31, 1997 and 1998 have been derived from the
audited financial statements of the Alitec Attachments Division. The data as of
and for the six month periods ended June 30, 1998 and 1999 have been derived
from the unaudited financial statements of the Alitec Attachments Division
which, in the opinion of management of the Alitec Attachments Division, include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation. Results of operations for an interim period are not
necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
---------------- ------------------
1997 1998 1998 1999
------- ------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Net sales................................ $ 7,740 $ 9,157 $ 5,197 $ 5,028
Costs of goods sold...................... 5,054 5,652 3,450 3,300
------- ------- -------- --------
Gross profit............................. 2,686 3,505 1,747 1,728
Selling, general and administrative ex-
penses.................................. 1,561 1,970 870 910
------- ------- -------- --------
Income from operations................... 1,125 1,535 877 818
Interest and other expense net........... 3 135 60 109
------- ------- -------- --------
Income (loss) before provision for income
taxes................................... 1,122 1,400 817 709
Provision (benefit) for income taxes..... -- 487 370 551
------- ------- -------- --------
Net income............................... $ 1,122 $ 913 $ 447 $ 158
======= ======= ======== ========
Other Data:
Depreciation and amortization............ $ 191 $ 175 $ 71 $ 89
Capital expenditures..................... 102 110 45 106
EBITDA (1)............................... 1,497 1,812 1,003 940
Net cash provided by (used in):
Operating activities................... 1,195 1,118 (255) 74
Investing activities................... (95) 72 (45) (183)
Financing activities................... (1,100) (1,191) 299 114
Balance Sheet Data (at end of period):
Working capital.......................... $(1,019) $(1,461) $ (1,641) $ (2,155)
Total assets............................. 3,526 3,822 4,480 4,655
Total debt............................... 2,868 3,859 4,137 4,033
Stockholders' equity..................... (283) (988) (1,242) (984)
</TABLE>
- --------
(1) EBITDA is defined as operating income plus depreciation and amortization
and is presented because it is generally accepted as providing useful
information regarding a company's ability to service debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash
flows from operating activities or other cash flow statement data prepared
in accordance with generally accepted accounting principles or as a measure
of profitability or liquidity.
53
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Our Business. Woods is a leading manufacturer of attachments for a variety
of mowing, cutting and clearing, construction, material handling, landscaping
and grounds maintenance applications. During July 1999, Woods acquired TISCO,
Central Fabricators and the Alitec Attachments Division. As a result of the
Acquisitions, Woods enhanced its position as one of the largest independent
attachments manufacturers in the United States as well as gained a new platform
in the replacement parts business for tractors.
Outlook. While we believe our revenue base is reasonably diversified by
industry, geographic region, application and end-user, any weakness in one or
more of our end markets can impact our revenue and profitability. In recent
months, our revenue growth has been impacted by softness in certain segments of
the construction market, particularly with equipment rental companies who are
adjusting inventory levels following a period of consolidation in that sector.
In addition, the agricultural market continued to be soft due to a depressed
agricultural commodities market caused by a weak farm export market, strong
harvests and poor regional weather conditions in 1998. Despite these market
conditions, we have been able to increase sales 2.5% in the six months ended
July 3, 1999 from the corresponding six months ended June 27, 1998. This growth
in revenues reflects our diversified end-user customer base and, in particular,
growth in our roadside maintenance, grounds maintenance and replacement parts
businesses.
While short term fluctuations in revenue and earnings can result from
volatility in our end-user markets, we believe that a number of current
initiatives, industry developments and recent and planned product introductions
will help make an increasing contribution to our financial performance
throughout the next 12 to 18 months. Some of these initiatives and developments
are highlighted below:
. Sales of under 40 horsepower tractors, on which many of our attachments
are used, are up 25.5% year-to-date through August 31, 1999 as compared
to the same period last year.
. There are some general indications that the Asian economies have begun to
stabilize, which could improve the environment for agricultural exports.
. We believe that the recent softness in demand for our construction
buckets is relatively short-term given construction spending is up 3.4%
year-to-date through August 31, 1999 as compared to the same period last
year and disbursements of road construction funds related to the recently
enacted $216 billion Transportation Equity Act began in late May 1999.
. We recently introduced several new products including a new line of
attachments for the rapidly growing skid steer market. In addition, we
are now an approved supplier of backhoes to Caterpillar's new range of
skid steer products. The U.S. market for skid steers grew approximately
18.6% between 1998 and 1997.
. We anticipate introducing several other new products in the next several
months, including a medium duty Batwing(R) rotary cutter, a mid-mount
Mow'n Machine, a heavy duty Wain-Roy(R) coupler and an extended line of
coupler products.
Working Capital Requirements. Our accounts receivables significantly
increases throughout the first quarter of each year to allow dealers to
accumulate inventory for sale during the warmer months of the year. These
dealer inventories are non-returnable to Woods and invoiced upon shipment. Our
average borrowings under our revolving credit facility for the twelve month
period ended July 3, 1999 was approximately $3.8 million.
Purchase Accounting Effects. The Acquisitions were accounted for using the
purchase method of accounting. As a result, the Acquisitions will prospectively
affect our results of operations in certain significant
54
<PAGE>
respects. The aggregate acquisition costs (including the assumption of
liabilities and estimated transaction expenses) of approximately $77.8 million
will be allocated to the tangible and intangible assets acquired and
liabilities assumed by us based upon their respective fair values as of the
date of Acquisitions. The allocation of the purchase price of the assets
acquired in the Acquisitions will result in a significant increase in our
annual depreciation and amortization expense. In addition, due to the effects
of the increased borrowings of Woods to finance the recapitalization and the
Acquisitions, our interest expense will increase significantly in the periods
following the Acquisitions.
Results of Operations
The following table sets forth each category of statement of operations
data as a percentage of net sales:
<TABLE>
<CAPTION>
Fiscal Year Ended, Six Months Ended,
------------------------------------ --------------------
December 28, December 27, January 2, June 27, July 3,
1996 1997 1999 1998 1999
------------ ------------ ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of goods sold..... 75.0 76.1 73.2 71.3 71.8
----- ----- ----- -------- --------
Gross profit............ 25.0 23.9 26.8 28.7 28.2
Selling, general and ad-
ministrative expenses.. 15.8 17.8 19.2 16.5 17.3
Noncash stock option
compensation charge.... -- -- 2.8 -- --
----- ----- ----- -------- --------
Income from operations.. 9.2 6.1 4.8 12.2 10.9
Interest and other ex-
pense.................. 5.7 5.7 6.6 4.7 6.5
----- ----- ----- -------- --------
Income before provision
for income taxes and
extraordinary loss..... 3.5 0.4 (1.8) 7.5 4.4
Provision for income
taxes.................. 1.5 0.4 (0.3) 3.2 2.1
----- ----- ----- -------- --------
Income before extraordi-
nary loss.............. 2.0 0.0 (1.5) 4.3 2.3
Extraordinary loss...... -- 0.2 0.5 --
----- ----- ----- -------- --------
Net income (loss)....... 2.0% (0.2)% (2.0)% 4.3% 2.3%
===== ===== ===== ======== ========
</TABLE>
Six Months Ended July 3, 1999 Compared to Six Months Ended June 27, 1998
Net sales were $85.8 million for the six months ended July 3, 1999, an
increase of $2.1 million, or 2.5%, from $83.7 million in the comparable period
in the prior year. The increase was primarily due to the strength in the
grounds maintenance market, which resulted in increased sales of front-end
loaders in the amount of $2.3 million, batwings in the amount of $1.0 million
and rear mount mowers in the amount of $1.6 million. The strength in this
market offset the decline in sales on product lines within the specialty
agricultural market (e.g., sugar beet harvesters, defoliators and cultivators)
during the period. Sales to the construction market for the period declined
slightly compared to the prior year as the rental market demand softened.
Gross profit was $24.2 million for the six months ended July 3, 1999, an
increase of $0.2 million, or 0.8%, from $24.0 million in the comparable period
in the prior year. The increase in gross profit was entirely attributable to
sales growth for the period. Inflation and increases in lower-margin OEM
business offset cost reduction achievements to reduce our gross margin to
28.2%.
Selling, general and administrative expenses were $14.9 million for the six
months ended July 3, 1999, an increase of $1.1 million, or 8.0%, from $13.8
million in the comparable period in the prior year. The increase in selling,
general and administrative expenses is due primarily to the costs incurred by
Woods in connection with its failed acquisition of Alamo. On a pro forma basis
without such acquisition costs, selling, general and administrative expenses
would have been $13.8 million, or 16.1% of net sales, for the six months ended
July 3, 1999, compared to 16.5% of net sales for the prior comparable period.
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Income from operations was $9.3 million for the six months ended July 3,
1999, a decrease of $0.9 million, or 8.8%, from $10.2 million in the comparable
period in the prior year. The decrease in earnings is due to costs relating to
the failed acquisition of Alamo. On a pro forma basis without such acquisition
costs, income from operations would have been $10.4 million for the six months
ended July 3, 1999, an increase of $0.2 million, or 2.0%.
Interest and other expense was $5.6 million for the six months ended July 3,
1999, an increase of $1.6 million, or 40.9%, from $4.0 million in the
comparable period in the prior year as the result of additional interest
expense and finance cost amortization relating to the recapitalization.
Provision for income taxes was $1.8 million for the six months ended July 3,
1999, a decrease of $0.9 million, or 31.4%, from $2.7 million in the comparable
period in the prior year as a result of lower earnings from operations due to
fees and expenses incurred in connection with the failed acquisition of Alamo.
The higher effective tax rate is due to the impact of nondeductible goodwill
relating to the acquisition of Wain-Roy.
Year Ended January 2, 1999 Compared to Year Ended December 27, 1997
Net sales were $154.7 million for the year ended January 2, 1999, an
increase of $16.8 million, or 12.2%, from $137.9 million in the prior year. The
increase was primarily due to the continued strength of the end-user markets
for our grounds maintenance, general purpose maintenance, roadside maintenance
and construction products and the impact of the acquisition of Wain-Roy, which
was completed in October 1997. Sales of the Wain-Roy(R) product line accounted
for approximately $12.2 million, or 72.6%, of the increase in net sales. Woods'
sales growth occurred despite negative market conditions for product lines
dependant upon the sugar beet market, which include harvesters, defoliators and
cultivators, during the period and temporary declines in construction spending
in the Pacific Northwest due to adverse weather conditions.
Gross profit was $41.5 million for the year ended January 2, 1999, an
increase of $8.6 million, or 26.1%, from $32.9 million in the prior year.
Approximately $5.9 million, or 63.4%, of this increase was directly
attributable to the increase in net sales during the period and the remaining
$2.7 million increase was the result of variable cost reductions in Woods'
manufacturing plants. Investments in new equipment and tooling, totaling $3.2
million during 1998, enabled Woods to realize productivity gains that have
reduced its variable costs per unit by approximately 5.3% during the year ended
January 2, 1999. Such reductions were accomplished despite an approximately
0.7% increase in raw material prices and an approximately 1.9% overall increase
in labor and material prices.
Selling, general and administrative expenses were $34.0 million for the year
ended January 2, 1999, an increase of $9.5 million, or 38.8%, from $24.5
million in the prior year. As a percent of net sales, these expenses increased
to 22.0% during the year ended January 2, 1999 from 17.8% for the prior year.
Approximately $4.3 million, or 45%, of this increase is the result of a noncash
stock option compensation charge incurred in connection with the
recapitalization, approximately $2.0 million, or 21.0%, resulted from an
increase in amortization expense and administrative costs associated with the
acquisition of Wain-Roy and approximately $0.6 million, or 6.3%, of this
increase is the result of costs incurred by Woods in connection with its failed
acquisition of Alamo. The remaining balance of the increase was due to an
increase in net sales and increased marketing expenses associated with the
integration of the Wain-Roy(R) product line into Woods' construction business
unit. On a pro forma basis without the compensation charge, the one-time
charges associated with the acquisition of Wain-Roy and the Alamo acquisition
expenses, selling, general and administrative expenses would have been $27.1
million for the year ended January 2, 1999, or 17.5% of net sales, an increase
of $2.6 million, or 10.6%.
Income from operations was $7.5 million for the year ended January 2, 1999,
a decrease of $0.9 million, or 10.7%, from $8.4 million in the prior year. The
decrease in profitability is primarily due to the noncash stock option
compensation charge incurred in connection with the recapitalization.
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Interest expense was $10.3 million for the year ended January 2, 1999, an
increase of $2.5 million, or 32.0%, from $7.8 million in the prior year. The
increase is the result of fees and expenses and additional interest costs
relating to the recapitalization.
Provision (benefit) for income tax decreased from a benefit of $0.4 million
for the year ended January 2, 1999, from a provision of $0.5 million in the
prior year as a result of lower earnings from operations resulting from a
noncash stock option compensation expense of $4.3 million relating to the
recapitalization.
In the year ended January 2, 1999, there was an extraordinary loss of $0.8
million related to the early extinguishment of debt attributable to the
recapitalization. In the prior year, there was an extraordinary loss of $0.3
million related to the early extinguishment of debt associated with repayment
of Woods' senior credit facility.
Year Ended December 27, 1997 Compared to Year Ended December 28, 1996
Net sales were $137.9 million for the year ended December 27, 1997, an
increase of $8.5 million, or 6.6%, from $129.4 million in the prior year.
Approximately $5.0 million, or 58.8%, of this increase was attributable to the
acquisitions of Baerts and Wain-Roy, which were completed in April 1997 and
October 1997, respectively. Contributing to the increase was the strengthening
agriculture and construction markets, particularly demand for the agricultural
backhoes and front end loaders and construction buckets and box scrapers. Our
agricultural and construction sales increased $4.0 million, or 5.3%, and $2.9
million, or 17.8%, respectively, during the year ended December 27, 1997. Each
of these product lines experienced a second year of significant unit volume
increases as we leveraged our dealer network to offer these product lines
nationally.
Gross profit was $32.9 million for the year ended December 27, 1997, an
increase of $0.5 million, or 1.5%, from $32.4 million in the prior year.
Variable cost increases limited the growth of gross profit for the year.
Approximately $0.9 million of productivity gains realized as a result of the
implementation of continuous flow manufacturing at our Sioux Falls facility
were offset by $1.2 million of expenses associated with implementing continuous
flow manufacturing at our facilities located in Oregon, Charlotte and LaMirada.
Additionally, gross profit was adversely affected by approximately $2 million
relating to an increase in cash discounts associated with timely payment of
invoices taken by dealers and an increase in the relative weighting of lower-
margin OEM business.
Selling, general and administrative expenses were $24.5 million for the year
ended December 27, 1997, an increase of $4.0 million, or 20.0%, from $20.5
million in the prior year. As a percentage of net sales, these expenses
increased to 17.8% for 1997, from 15.8% in 1996. This increase is primarily due
to an investment in a new computer aided drawing system of $0.6 million, higher
than historical levels of executive relocation expenses of $0.3 million, wage
inflation of $0.5 million, incremental selling and administrative costs
relating to the acquisitions of Baerts and Wain-Roy of $1.1 million, and the
impact of operating expenses in 1996 being below normal levels due to a one-
time reduction in product liability expenses.
Income from operations was $8.4 million for the year ended December 27,
1997, a decrease of $3.5 million, or 29.4%, from $11.9 million in the prior
year. The primary factors adversely affecting profitability were an increase in
cash discounts taken by dealers, a sales mix weighted toward lower margin OEM
customers, investments in technology and personnel, and implementation costs
associated with continuous flow manufacturing initiatives.
Interest and other expense was $7.8 million for the year ended December 27,
1997. Interest and other expense for the prior year was $7.3 million.
Provision for income taxes was $0.5 million for the year ended December 27,
1997, a decrease of $1.5 million, or 75.0%, from $2.0 million in the prior year
due to a decrease in income from operations. However, the effective tax rate
increased from 42.6% in 1996 to 83.9% in 1997 due to the impact of
nondeductible amortization of goodwill relating to the acquisition of Wain-Roy.
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In the year ended December 27, 1997, there was an extraordinary loss of $0.3
million due to the writeoff of fees associated with the 1993 senior bank
facility as the result of the new senior bank facility originated in October
1997 to finance the acquisition of Wain-Roy. There were no extraordinary items
in the prior year.
Seasonality
The markets within which Woods operates are somewhat seasonal with peak use
for Woods' products coming in the prime moving, landscaping and construction
season during the spring and summer months. Woods has pre-season sales programs
which provide certain quarterly and cash discount incentives to Woods' dealers
to encourage pre-season orders. As a result of these programs, demand for
Woods' products is fairly constant over the entire year. However, greater than
60% of Woods' EBITDA is generated during the first half of the year, in part
due to the holiday season in the fourth calendar quarter. Woods' working
capital requirements reach their seasonal peak during the first quarter due
primarily to increased accounts receivable.
Backlog
At July 3, 1999, Woods had unfilled whole goods orders of approximately $5.2
million compared to approximately $10.0 million at June 27, 1998. This decrease
in backlog is primarily the result of a eight day decrease in Woods' order-to-
delivery time from 22 days in 1997 to 14 days in 1998. The amount of unfilled
orders at a particular time is affected by a number of factors, including the
scheduling of the manufacturing and shipping of the product which in most cases
is dependent on pre-season sales programs at Woods and the needs of the
customer. Orders generally are subject to cancellation at any time before
shipment, and, therefore, a comparison of unfilled orders from period to period
may not be meaningful or indicative of eventual shipments.
Liquidity and Capital Resources
Woods' principal sources of cash during the six months ended July 3, 1999
and fiscal years ended January 2, 1998, December 27, 1997 and December 28, 1996
were from operations and borrowings under existing credit facilities. Cash
generated from operating activities during such periods was $5.6 million, $3.8
million, $7.0 million and $11.2 million, respectively.
On October 31, 1997, Woods acquired Wain-Roy for approximately $19.2 million
in cash, including the fees and expenses of the acquisition. The purchase price
was funded through borrowings under a new senior credit facility, which
provided for revolving credit borrowings of up to $40.0 million, subject to a
borrowing base, and term loans of $50.0 million.
Capital expenditures for the six months ended July 3, 1999, and fiscal years
ended January 2, 1999, December 27, 1997 and December 28, 1996 amounted to $2.6
million, $3.2 million, $4.7 million and $4.7 million, respectively. Capital
expenditures for all these periods were used to purchase additional equipment
and tooling. Woods intends to make capital expenditures of $7.3 million in the
remainder of 1999 primarily for capacity expansion at certain facilities and
information technology upgrades.
On August 7, 1998, Parent completed the recapitalization. Woods used $155.0
million to complete the recapitalization, including the payment of related fees
and expenses. The recapitalization was financed through:
. borrowings of approximately $85.0 million under a new $110 million multi-
tranche senior secured credit facility;
. borrowings of $25.0 million under a subordinated bridge loan provided by
MDCP;
. the assumption of approximately $5.8 million of existing indebtedness of
Woods;
. an equity investment of approximately $39.8 million in Parent by MDCP,
senior management and certain other investors; and
. cash on hand of approximately $1.7 million.
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As of July 3, 1999, Woods had no outstanding revolving credit borrowings,
seller notes of $4.5 million, $84.6 million of term loan borrowings and a
subordinated bridge loan of $27.4 million. See "Certain Relationships and
Related Transactions."
At various points in time during 1998, 1997 and 1996, Woods was briefly in
default of certain restrictive covenants under its senior credit facility and
obtained appropriate waivers or amendments to the respective debt agreements.
Woods used the proceeds from the initial offerings, together with the new
equity investment by MDCP, borrowings under the senior credit facility and
cash on hand of approximately $5.0 million, to repay approximately $111.5
million of its existing indebtedness, to finance the Acquisitions and to pay
the related fees and expenses. See "Use of Proceeds."
The Acquisitions and the initial offerings had a significant impact on the
capitalization of Woods. At July 3, 1999, the pro forma indebtedness of Woods
would have been $175.4 million compared to $114.8 million for Woods on a
stand-alone basis at that date.
In connection with the initial offerings, WEC amended and restated its
existing senior credit facility. The new senior credit facility provides a
$40.0 million revolving line of credit, all of which is undrawn and available.
The senior credit facility will mature on July 31, 2004. Interest on revolving
loans under the senior credit facility will bear interest at rates based upon
federal or Eurodollar rates plus an applicable margin. All borrowings under
the senior credit facility will be guaranteed by Parent and will be secured by
substantially all of the assets of WEC. See "Risk Factors--Substantial
Leverage; Ability to Service Debt," "--Substantial Restrictions and Covenants"
and "Description of Other Financing Arrangements--Senior Credit Facility."
Woods anticipates that its principal use of cash will be working capital
requirements, debt service requirements and capital expenditures. Based upon
current and anticipated levels of operations, Woods believes that its cash
flow from operations, together with amounts available under the senior credit
facility, will be adequate to meet its anticipated requirements. We cannot
assure you, however, that our business will continue to generate sufficient
cash flow from operations in the future to service our debt, and we may be
required to refinance all or a portion of our existing debt or to obtain
additional financing. These increased borrowings may result in higher interest
payments. In addition, there can be no assurance that any such refinancing
would be possible or that any additional financing could be obtained. The
inability to obtain additional financing could have a negative impact on us.
Market Risk
We are exposed to market risks relating to changes in interest rates. We do
not enter into derivatives or other financial instruments for trading or
speculative purposes. We enter into financial instruments to manage and reduce
the impact of changes in interest rates. The counterparties are major
financial institutions.
We manage our interest rate risk by balancing the amount of our fixed and
variable debt. For fixed rate debt, interest rate changes affect the fair
market value of such debt but do not impact earnings or cash flows. Conversely
for variable rate debt, interest rate changes generally do not affect the fair
market value of such debt but do impact future earnings and cash flows,
assuming other factors are held constant. At July 3, 1999, we had variable
rate debt of $110.3 million.
Inflation
We believe that inflation generally has not had a material impact on our
operations or liquidity to date.
Year 2000 Compliance
Introduction. Over the next few months, most large companies will face a
potentially serious information systems problem because many software
applications and operational programs written in the past
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may not properly recognize calendar dates beginning in the year 2000. This
problem could force information systems to either shut down or provide
incorrect data or information. Woods began the process of identifying the
necessary changes to its computer programs and hardware as well as assessing
the progress of its significant vendors in their remediation efforts in 1998.
The discussion below details the efforts of Woods to ensure Year 2000
compliance.
State of Readiness. Woods has identified and evaluated the readiness of its
internal and third party information technology and non-information technology
systems which, if not Year 2000 compliant, could have a direct major impact to
Woods. This evaluation focused on the following areas: (1) Woods' accounting
and financial reporting system, (2) Woods' systems used in its manufacturing
and engineering activities, (3) the systems of third party vendors which supply
raw materials to Woods, and (4) the systems of its dealers used for tracking
inventory levels.
Woods' accounting and financial reporting system has already been upgraded
with the provider's latest release which is certified to be Year 2000
compliant. In addition, Woods believes that its systems used in its
manufacturing and engineering activities are Year 2000 compliant.
Woods has also assessed the state of readiness of its major servers and
shared hardware devices. It has determined that its hardware systems are either
already Year 2000 compliant or can be made so through upgrades of operating
system software. Where necessary, these upgrades will be completed by mid-year
1999.
Based on its assessment and its vendors' representations, Woods believes
that the systems of its significant third party vendors are already Year 2000
compliant.
Year 2000 Costs. In fiscal 1998, Woods expensed approximately $130,000 on
the assessment and evaluation phase of its Year 2000 initiatives and estimates
that it will expense approximately $150,000 in fiscal 1999 to complete the
remediation efforts. These efforts have been, and are expected to continue to
be, funded through cash from operations. The Year 2000 compliance project has
not resulted in the deferral of any significant information systems initiatives
by Woods.
Risks from Year 2000 Issues. Woods believes the greatest year 2000
compliance risk, in terms of magnitude of risk, is that the computer systems of
its major third party vendors could be interrupted for a period of time. Other
than representations made by the vendors, the Company is unable to predict the
likelihood of this risk occurring. Any significant interruption of raw
materials as a result of a Year 2000 problem could have a material adverse
effect on Woods' results of operations, liquidity or financial condition.
Contingency Plans. At this time, Woods fully expects to be Year 2000
compliant and is satisfied that its significant vendors are already compliant.
As such, Woods has not developed any specific contingency plan in the event it
fails to complete its Year 2000 projects.
New Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and for Hedging Activities
("Statement 133"). Statement 133 is effective for years beginning after June
15, 1999. Statement 133 provides a comprehensive and consistent standard for
the recognition and measurement of derivatives and hedging activities.
Management does not anticipate that the adoption of Statement 133 will have a
material impact on its financial position or the results of its operations.
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BUSINESS
Our Business
Woods is a leading manufacturer of attachments for a variety of mowing,
cutting and clearing, construction, material handling, landscaping and grounds
maintenance applications. In July 1999, Woods acquired three separate
businesses:
. TISCO--one of the leading independent distributors of replacement parts
in the United States primarily for tractors over ten years old;
. Central Fabricators--one of the leading independent manufacturers of pin-
on excavator buckets for the U.S. construction industry; and
. Alitec Attachments Division--a manufacturer of patented hydraulic powered
attachments for the rapidly growing U.S. skid steer market.
As a result of these acquisitions, Woods enhanced its position as one of the
largest independent attachments manufacturers in the United States as well as
gained a new platform in the replacement parts business for tractors.
Woods is managed by Thomas J. Laird and his executive management team. Mr.
Laird joined Woods in 1993 and has assembled an executive management team with
significant manufacturing and industry experience. Since 1993, Woods' executive
management team has transformed Woods from a manufacturer of niche agricultural
and landscaping products into a leading, diversified attachments manufacturer
through the successful introduction of new products and implementation of a
strategic acquisition program. From 1993 to 1998, Woods has completed and fully
integrated seven acquisitions. As a result of such acquisitions and new product
introductions, Woods' sales have increased from $57.6 million in 1992 to
approximately $154.7 million in 1998, representing a compound annual growth
rate of approximately 21.8%. In addition to increasing sales, Woods' executive
management team has also been successful in improving Woods' manufacturing
processes by implementing new operating procedures designed to increase
productivity, shorten manufacturing lead times and reduce costs and inventory
levels. As a result of the implementation of these operating procedures, Woods
generated approximately $22.0 million in cash through increasing its inventory
turns from 2.6 times in 1993 to 5.3 times in 1998.
Woods' products are used in a variety of applications to enhance the
productivity and versatility of prime movers, which include tractors,
excavators, tractor loader backhoes and skid steers. Our products include
rotary cutting and finish mowing attachments, front end loaders, backhoes,
coupler systems, buckets, scrapers and other implements. We also offer a full
line of replacement parts for our increasing installed base of attachments as
well as replacement parts for tractors. The average lifespan of our attachments
range from one to five years due to the severe and wearing nature of the
applications for which they are used. In most instances, a prime mover will be
used for several different types of applications, each of which requires a
separate attachment. For example, a prime mover can be used in conjunction with
a mower, front end loader, backhoe or scraper, depending on the desired
application. Most of our products range in price from $1,000 to $10,000. Our
products are sold through our large and extensive dealer network and directly
to original equipment manufacturers. Our products are used by a variety of end-
users, including construction companies and contractors, utility contractors,
landscaping and groundscare companies, farmers, ranchers, homeowners and
governmental agencies. No single customer accounted for more than 3% of our pro
forma net sales in 1998.
We sell our products to end-users located primarily in the United States.
The attachments market in the United States is very large and fragmented. We
believe the market for attachments in the United States had sales in excess of
$4.0 billion in 1998 and historically has grown at a rate of 2% to 4% annually.
With the acquisition of TISCO, we also operate in the $8 billion capital
equipment replacement parts market in the United States. For the most part, the
U.S. attachments and replacement parts markets are comprised of several hundred
small, regional manufacturers and distributors that offer a limited number of
products as well as a small number of national and international companies that
offer a broad range of products. In recent years, there has been a trend
towards consolidation among attachments manufacturers and parts suppliers in
order to
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achieve operating efficiencies and to better serve the needs of their end-
users. Similarly, there has been significant consolidation among dealers, who
are increasingly seeking suppliers, such as our company, who are able to offer
broad product lines, national distribution capabilities, innovative products
and reliable service.
Acquisition Rationale
We believe that the acquisition of TISCO, Central Fabricators and the Alitec
Attachments Division will provide us with several strategic benefits, including
the following:
Expanded Product Offering. The acquisition of Central Fabricators will
significantly expand our construction buckets product offerings. In addition,
we will substantially increase our replacement parts business through the
acquisition of TISCO, which will provide us a new platform for growth in the $8
billion capital equipment replacement parts market.
Increased Distribution Capabilities and Cross Selling Opportunities. We
believe the acquisitions will provide us with significant cross-selling
opportunities and distribution capabilities. For example, TISCO provides us
with five additional distribution centers and the marketing and logistical
capability to deliver on a national basis small product quantities within 24
hours. In addition, TISCO has not yet penetrated the construction market where
Woods has approximately 1,100 dealers. Furthermore, Central Fabricators'
dealers are heavily concentrated in Wisconsin, Illinois and Michigan and will
benefit from Woods' national dealer network.
Improved Relationships with Original Equipment Manufacturers. In most cases,
new prime movers are shipped and sold with attachments. As a result,
relationships with original equipment manufacturers provide a valuable source
of demand as well as insight into their new designs and end user preferences.
Currently, Woods sells approximately 8% of its products directly to original
equipment manufacturers compared to approximately 54% for Central Fabricators.
We believe that Central Fabricators' established relationships will allow Woods
to better penetrate the original equipment manufacturer market with its
existing product lines.
Anticipated Cost Savings. We believe that the Acquisitions will provide us
with a number of opportunities to reduce costs and improve operational
efficiency. In total, we expect over $6.5 million of annual cost savings to be
realized in the next three years through a combination of:
. the elimination of redundant selling, administrative and marketing
functions;
. reduced transportation and distribution costs; and
. elimination of duplicate executive management positions.
In addition, we expect to realize additional cost savings and working
capital reductions through the implementation of continuous flow manufacturing
at Central Fabricators.
Leverage Complementary Technology. We believe that we can improve certain of
Central Fabricators' products by utilizing certain of Woods' patented value
added features, such as those features found in Woods' coupler system, which
allows the user to change attachments without leaving the cab of the prime
mover.
Competitive Strengths
We believe that our success is attributable to the following competitive
strengths:
Proven Management Team with Significant Industry and Operational
Experience. Woods is operated under the leadership of Thomas J. Laird. Mr.
Laird joined Woods in 1993 and has over 25 years of manufacturing, marketing
and general management experience, including 21 years of experience at General
Electric Company. The eight member senior management team assembled at Woods by
Mr. Laird has over 150 years of combined manufacturing and industry experience
from world-class manufacturing companies, including GE, New Holland, Newell,
IBM and Kubota. Since 1993, Woods' management team has transformed Woods from a
manufacturer of niche agricultural and landscaping products into a leading,
diversified
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attachments manufacturer through the successful introduction of new products
and implementation of a
strategic acquisition program. We also expect to benefit from the significant
operational experience of the management teams of TISCO and Central
Fabricators. Our management team currently owns approximately 8% of our common
stock.
Strong Operational Focus. Woods' management is focused on improving
profitability through a Total Cost Productivity program designed to achieve
continuous productivity gains, shorten manufacturing lead times and reduce
costs and inventory levels. In 1995, as part of the Total Cost Productivity
program, Woods began to implement continuous flow manufacturing and total
quality management techniques at certain of its manufacturing facilities. To
date, Woods has implemented continuous flow manufacturing and total quality
management at three of its facilities. As a result of these techniques, Woods
has successfully decreased its overall working capital requirements by
increasing inventory turnover from 2.6 times in 1993 to 5.3 times in 1998 and
reducing order-to-delivery times from 35 days to 16 days over the same period.
While the implementation costs and realizable savings from continuous flow
manufacturing and total quality management will vary from plant-to-plant, at
its Sioux Falls facility, which generated approximately $12.9 million in net
sales in 1998, Woods has permanently reduced its manufacturing and operating
costs by $1.5 million per year, increased sales per employee three-fold to
$119,000, increased inventory turns from 1.4 times to 5.7 times per year and
reduced required square footage by approximately 23%.
Extensive Distribution Network. Our extensive dealer network provides
geographical and customer diversification and facilitates the successful
introduction of new products and the cross-selling of acquired product lines.
Our distribution network includes dealers that have affiliations with all the
principal original equipment manufacturers of prime movers, such as New
Holland, Deere, Case, AGCO, Ingersoll-Rand, which is the manufacturer of the
Bobcat brand of skid steer, Caterpillar and Kubota, as well as a number of
independent dealers. As an independent attachments manufacturer, we believe
that we are able to distribute our products through a larger network of dealers
than our prime mover original equipment manufacturers competitors, which are
generally restricted from distributing their products through other original
equipment manufacturer-affiliated dealers.
Strong Brand Recognition and Product Breadth. Woods' well-known brands
include Woods(R), Wain-Roy(R), Gannon(R), Alloway(R) and Gill(R). Management
believes that Woods has the most comprehensive product line of tractor-mounted
attachments in the industry with 24 product categories. Our recent acquisitions
have provided us with a number of additional well-known brands, including
Central Fabricators(R), Tru-Part(R), TRU-POWER(R), TISCO(R) and CALCO(R). In
addition, the acquisition of TISCO has provided us with a new platform in the
replacement parts business for tractors.
Versatile Mounting Systems. Woods has developed a large number of mounting
systems that enable their products to be attached to all of the major brands of
prime movers. For example, Woods' mounting systems enable its front end loaders
to be attached to approximately 317 tractor models and its backhoes to be
attached to 243 tractor models. In addition, these mounting systems permit
Woods' products to be attached to several types of prime movers. For example,
Woods' Groundbreaker(R) backhoe can be attached to a compact tractor, a skid
steer or trencher using different mounting systems. We believe that these
mounting systems create customer loyalty as end-users are reluctant to purchase
attachments from other manufacturers because doing so would also require the
purchase of a new mounting system at an additional cost. In addition, through
its acquisition of Wain-Roy, Woods gained access to Wain-Roy(R)'s unique
coupler system, which enables users to quickly and safely change attachments to
large excavators or tractor loader backhoes without leaving the cab of the
prime mover.
Successful New Product Introductions. Woods has a successful product
development record and a strong research and development team. Over the last
four years, Woods has made substantial investments to support new product
development, including the purchase of 3-D solid modeling and CAD-CAM systems
to facilitate product design and the implementation of finite element analysis
testing for proposed prototypes. Woods' 37 engineering professionals in design,
testing and new product support have introduced over 90 new
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products since 1993, which accounted for approximately $31.8 million, or 20.6%
of Woods' net sales in 1998. TISCO and Central Fabricators also have a history
of successful product introductions and Central Fabricators employs 9
professionals in its engineering department.
Acquisition Integration Capability. From 1993 to 1998, Woods' management
team has successfully integrated seven strategic acquisitions. With these
acquisitions, Woods has increased and leveraged its existing distribution
network, eliminated redundant corporate functions, increased sales and reduced
costs. For example, in connection with Woods' acquisition of Du-Al
Manufacturing Company in September 1993, Woods has almost tripled sales of Du-
Al's products and improved its EBITDA margin from 10.2% in 1993 to 16.1% in
1998. Over the last five years, Woods' management increased Woods' product
categories from 7 to 24 through new product introductions and strategic
acquisitions.
Growth Strategy
Our strategy is to increase market share and profitability through the
following initiatives:
Capitalize on the Anticipated Benefits of the Acquisitions. Management
believes that the combination of Woods, TISCO, Central Fabricators and the
Alitec Attachments Division will provide several strategic benefits, including:
. expanded product offerings;
. increased distribution capabilities and cross-selling opportunities;
. improved OEM relationships;
. anticipated cost savings; and
. leverage complementary technology.
In addition, TISCO's strategy will focus on three additional growth
initiatives:
. increasing sales directly to the end user through promotional marketing
and the Internet;
. focusing on the construction, grounds maintenance and roadside
maintenance markets, all of which are not currently served by TISCO; and
. relocating up to two additional distribution facilities to better serve
the U.S. market.
Continue to Implement Total Cost Productivity Initiatives. We intend to
continue to implement our Total Cost Productivity program in an effort to
become the lowest cost producer of attachments in each of our product
categories. Continuous flow manufacturing and total quality management are
important components of our strategy to improve productivity, shorten
manufacturing lead times and reduce costs and inventory levels. Woods has
successfully introduced continuous flow manufacturing and total quality
management at certain of its facilities, which has increased inventory turnover
from 2.6 times in 1993 to 5.3 times in 1998 and reduced order-to-delivery times
from 35 days to 16 days over the same period. Management expects that
continuous flow manufacturing and total quality management will be implemented
at the acquired facilities over the next 12 to 18 months and that all of our
facilities will be utilizing these techniques by 2001.
Develop New and Enhance Existing Products. Management believes it can
continue to generate internal growth and increase our overall market share
through product innovation and new product development. We work closely with
dealers and customers to identify customer needs and product opportunities.
Management believes that our engineering department of 46 professionals
provides us with the design, product development and technical expertise needed
to continue to successfully introduce new products and product improvements.
Woods expects to introduce several new products in the next 12 to 18 months,
including a completely re-engineered line of front end loaders, a new patented
coupler system and a new line of construction buckets. TISCO typically
introduces over 1,000 new and replacement products each year to its replacement
parts product offering.
Increase Depth of Product Penetration at Dealers. Woods is currently in the
process of reducing the size of its dealer network from approximately 4,000 to
under 3,000. The remaining dealers will represent those with greater than
$25,000 in annual sales of Woods' products. We believe our remaining dealers
will carry
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more of our products because they will be the predominant Woods dealer in their
county and we will be able to provide them with additional marketing and
logistical support. In addition, we should be able to achieve transportation
cost savings by increasing delivery sizes and reducing the number of absolute
deliveries. A similar dealer rationalization initiative is also under way at
TISCO, in addition to its focus on other emerging distribution channels, such
as the Internet and national farm supply retailers.
Acquire Complementary Businesses. Management believes that it can continue
to expand our product offerings, further expand our dealer network and
supplement our internal growth through strategic acquisitions. In pursuing our
acquisition strategy, we intend to focus our efforts on acquiring businesses
with product lines that can be sold through our extensive dealer network.
Management believes that the highly fragmented nature of the U.S. attachments
industry provides a favorable environment for such acquisitions and the
continued success of our consolidation efforts. Additionally, with the TISCO
acquisition we will have a new operating platform in the $8 billion capital
equipment replacement parts market, which, like the attachments market, is
highly fragmented.
Industry Overview
The attachments industry generally encompasses products used in a broad
range of residential, commercial, industrial, governmental and agricultural
applications to enable end users to significantly enhance the productivity and
flexibility of their prime movers, which include tractors, excavators, tractor
loader backhoes and skid steers. These products are attached to prime movers in
order to complete a variety of applications including mowing, cutting,
clearing, material handling and landscaping as well as the preparation of
ground surfaces for the agricultural and construction industries. While their
respective life cycles vary, attachments tend to be used as consumables with a
usable life of approximately one to five years due to the severe and wearing
nature of the applications for which they are used. Attachments are used by a
wide variety of end-users, including construction companies and contractors,
utility contractors, landscaping and groundscare companies, farmers, ranchers,
homeowners and governmental agencies.
Our products are sold to end-users located primarily in the United States.
The attachments market in the United States is very large and fragmented. We
believe the U.S. attachments market had sales in excess of $4.0 billion in 1998
and historically has grown at a rate of 2% to 4% annually. We believe that the
U.S. market for replacement parts for capital equipment was approximately $8
billion in 1998. For the most part, the U.S. attachments and replacement parts
market are comprised of several hundred small, regional manufacturers and
distributors that offer a limited number of products as well as a small number
of national and international companies that offer a broad range of products.
In recent years, there has been a trend towards consolidation among attachments
manufacturers and parts suppliers in order to achieve operating efficiencies
and to better serve the needs of their end-users. Similarly, there has been
significant consolidation among attachment dealers, who are increasingly
seeking suppliers, such as Woods, who are able to offer broad product lines,
innovative products, national distribution capabilities and reliable service.
The market for our products can generally be divided into six categories
delineated by the end-use of the product. The following table identifies these
end-use categories as well as the percentage of net sales in 1998 to each
category by Woods, TISCO, Central Fabricators, the Alitec Attachments Division
and Woods on a pro forma basis:
<TABLE>
<CAPTION>
Fiscal Year 1998
-------------------------------------------
Alitec
Central Attachments Pro
Description of End-Use Woods TISCO Fabricators Division Forma
---------------------- ----- ----- ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
Replacement parts.............. 13.9% 100.0% 8.7% 1.0% 35.8%
Construction and utility....... 21.3 -- 91.3 99.0% 24.8%
Grounds maintenance............ 29.9 -- -- -- 18.2%
General purpose maintenance
(agricultural)................ 17.3 -- -- -- 10.5%
Roadside maintenance (primarily
governmental)................. 13.7 -- -- -- 8.3%
Specialty agricultural......... 3.9 -- -- -- 2.4%
----- ----- ----- ----- -----
Total........................ 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
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Set forth below is a brief overview of each of these product categories and
the factors which we believe generally influence the demand for such products.
Replacement Parts. Replacement parts are sold to end-users across all of our
other product categories. A significant portion of our existing replacement
parts are sold to end-users in the roadside maintenance market due to the
intensive use of such attachments. TISCO's replacement parts are predominantly
sold for use on tractors, and they provide a platform for Woods to enter the $8
billion market for capital equipment replacement parts in the United States.
Approximately 55% of this market is currently served by original equipment
manufacturers, with the remainder being served by co-operative organizations
and companies similar to TISCO who specialize in replacement parts. Demand for
replacement parts is generally not subject to significant fluctuations due to
the required nature of their uses and the low average cost as compared to the
total cost of a prime mover.
Construction and Utility. The end-users in this product category generally
include construction companies and utility contractors. Demand for these
products is closely correlated to the overall demand for construction
equipment, which is driven by several factors, including general economic
conditions, interest rates, weather conditions and governmental spending. The
construction industry has exhibited strong growth in recent years in response
to a strong overall economy and a relatively favorable interest rate
environment. Since 1992, the total domestic construction machinery market has
increased at a compound annual growth rate of 6.6% annually to an estimated
$568 billion in 1998. This market is also expected to benefit from the recently
enacted Transportation Equity Act, which appropriates $216 billion over the
next six years to finance the repair and new construction of roads, mass
transit, bridges, bike paths and other infrastructure in the United States. The
Transportation Equity Act increases national construction spending by
approximately 44% from current levels over the next six years. The acquisition
of Central Fabricators increases our presence in the U.S. excavator bucket
market, which in 1998 totaled approximately 17,500 units, almost double from
8,900 units sold in 1993.
Grounds Maintenance. This product category includes attachments used to
maintain the grounds surrounding industrial and office parks, large estates,
resort complexes, universities, golf courses and individual homes. In general,
the demand for these products is dependent upon a variety of conditions,
including general economic conditions, consumer spending patterns, weather
conditions as well as state and municipal government spending. In recent years,
the overall demand for these products has increased due to the increasing
number of second and larger homes, and the growth in disposable income, dual
career households and the outsourcing of traditional domestic tasks. Domestic
shipments of grounds and turf equipment, as measured by the U.S. Census Bureau,
have grown at a compound annual growth rate of 5.1% since 1990 to $20.7 billion
in 1997.
General Purpose Maintenance. The end-users in this product category are
predominantly farmers and ranchers, who use these products for applications
associated with general maintenance activities, including mowing, material
handling and optimizing the productivity of their land. Unlike the demand for
the speciality agricultural products, which is influenced by the conditions in
the agricultural industry, the demand for attachments used for general purpose
maintenance, such as rotary cutters, backhoes, front end loaders and post hole
diggers, tends not to be directly influenced by this industry due to the type
of applications for which these products are used. We believe that farmers and
ranchers continue to purchase these types of products regardless of the
conditions in the agricultural industry due to the importance of maintaining
the productivity of their land.
Roadside Maintenance. The end-users in this product category are
predominantly federal, state and local government agencies in the United
States. In general, demand for roadside maintenance attachments is strongly
influenced by overall levels of governmental spending.
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Specialty Agricultural. The end-users in this product category are
predominantly farmers and ranchers, who use these products principally in the
planting, cultivating and harvesting of their crops. The demand for these
products closely correlates to the demand for agricultural equipment in
general, which is influenced by a number of factors, including total farm cash
receipts, acreage under crop or livestock, crop yields, government programs,
general economic conditions, interest rates, weather and technological trends
in agriculture.
When compared to prime mover original equipment manufacturers, we believe
that the overall demand for our products is relatively stable and is not
dependent to any significant degree on the business cycle of any single
industry. We attribute this relative stability to:
. the diversity and balance of the end-users and applications of our
products;
. the required maintenance and ground engaging nature of our product
applications, which limits the end-user's ability to defer purchases and
encourages ongoing replacement;
. our large and geographically diverse customer base;
. the relative low cost of our products as compared to the cost of a prime
mover; and
. our significant replacement parts business.
Background
Woods is a successor to a business founded in 1947. Parent and WEC were
organized in January 1993 for the purpose of acquiring substantially all of the
assets and business of the Woods Division of Fiatallis North America, Inc. From
1993 to 1998, Woods has successfully completed and fully integrated seven
strategic acquisitions:
Du-AL Manufacturing. In September 1993, Woods acquired the assets and
business of Du-Al Manufacturing Company for approximately $6.4 million and the
assumption of certain liabilities. Du-Al was a manufacturer of tractor-mounted
front end loaders. Through the acquisition of Du-Al, Woods expanded its product
offerings and dealer network in the upper Midwest and achieved significant cost
savings and efficiencies by consolidating Du-Al's sales force, customer
service, marketing, employee benefits and certain manufacturing activities in
Woods' headquarters.
Gannon Manufacturing. In July 1994, Woods acquired Gannon Manufacturing Co.
for approximately $12.8 million. Gannon was a manufacturer of scrapers, pin-on
backhoe buckets, excavator buckets and multi-purpose loader buckets. The
acquisition of Gannon expanded Woods' product offerings by adding products used
primarily in construction applications and strengthened its dealer network in
the western and southwestern regions of the United States.
Alloway Manufacturing. In November 1994, Woods acquired Alloway
Manufacturing Co. for approximately $8.7 million. Alloway was a manufacturer of
tractor-mounted flail shredders, cultivators, sugar beet defoliators and snow
blowers. The acquisition of Alloway:
. added flail cutting technology to complement Woods' rotary cutter
technology;
. further broadened Woods' product offerings by adding speciality
agricultural products; and
. expanded Woods' dealer network to include dealers focused on the
speciality agricultural market.
Gill Manufacturing. In July 1995, Woods acquired Gill Manufacturing Co.,
L.P. for approximately $3.0 million. Gill was a manufacturer of landscape
blades, scrapers, pulverizers, turf renovators, construction backhoes and skid
steer buckets for landscaping applications. The acquisition of Gill:
. added turf products to Woods' product offerings;
. strengthened Woods' dealer network in the southeastern region of the
United States; and
. added a manufacturing facility located in the eastern portion of the
United States.
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Beetec. In June 1996, Woods acquired Beetec L.L.C. for approximately
$600,000. Beetec was a manufacturer of sugar beet harvesters and folding sugar
beet defoliators. The acquisition of Beetec expanded Woods' sugar beet product
offerings.
Baerts Metal Products. In April 1997, Woods acquired Baerts Metal Products,
Inc. for approximately $3.0 million. Baerts was a manufacturer of heavy duty
excavator buckets, hydraulic thumbs, grapples and compactors. The acquisition
of Baerts further broadened Woods' product line and strengthened Woods' dealer
network in the Pacific Northwest.
Wain-Roy. In October 1997, Woods acquired Wain-Roy, Inc. for approximately
$19.2 million. Wain-Roy manufactures a unique coupler system, grapples and jaw
and ripper buckets designed for use on heavy construction equipment. The
acquisition of Wain-Roy expanded Woods' product offerings by adding heavy duty
jaw and ripper buckets, added complementary coupler technology and strengthened
Woods' dealer network by adding a significant number of construction dealers.
Recent Acquisitions
In July 1999, Woods acquired TISCO, Central Fabricators and the Alitec
Attachments Division. A brief description of each of these businesses is set
forth below:
TISCO
TISCO is one of the largest independent distributors of agricultural
equipment replacement parts in the United States. TISCO provides replacement
parts to tractor and farm equipment end users through retail farm equipment
dealers and OEM brands, including Allis Chalmers, Case, John Deere, Ford,
International Harvester, Massey Ferguson, New Holland and all the brands
associated with AGCO. TISCO has been operating since 1937 and has developed a
strong reputation for integrity, high quality products and exceptional service.
Many of TISCO's dealers have been customers for more than 40 years. TISCO
focuses primarily on tractors, combines and other farm equipment that are ten
years old or older because that is the primary usage period for replacement
parts. TISCO is headquartered in St. Paul, Minnesota and operates five
distribution centers across the U.S. During the twelve months ended May 21,
1999, TISCO had approximately $65.0 million in net sales and was purchased for
approximately $37.2 million in cash plus noncompete payments of an aggregate of
$0.5 million to its former owners to be made on a quarterly basis over a two
year period.
TISCO maintains an inventory of approximately 24,000 stock keeping units and
introduces approximately 1,000 new and replacement stock keeping units each
year. Currently, most major tractor OEMs provide a five year warranty on their
new tractors and combines. As a result, TISCO does not introduce replacement
parts for models that are still under warranty. TISCO focuses on providing
replacement parts for tractors with less than 100 horsepower. Tractor models
over 10 years old tend not to be a core focus of the major tractor original
equipment manufacturers and as a result these markets are highly fragmented.
TISCO presently serves approximately 9,500 dealers in the United States, of
which 40% are affiliated with one of the four major tractor original equipment
manufacturers, Deere, Case, New Holland and AGCO, and 60% are independent
dealers selling non-major brand tractors and/or attachments, replacement parts
and doing farm machinery repair work.
TISCO's practice is to ship orders the same day as received. TISCO supports
its business with 54 territory managers who live in selected territories across
the U.S. and service dealers in their geographic territories. TISCO also has a
telemarketing support system and can accept dealer orders by fax and via the
Internet. In addition, TISCO has a five-man technical assistance center that
provides advice at no charge to the dealer customers.
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TISCO does not manufacture its products. Instead, its products are
manufactured and supplied by numerous third party manufacturers predominantly
in North America and Asia. During the last twelve months ending May 21, 1999,
no one supplier produced more than 3% of all the stock keeping units sold by
TISCO.
Central Fabricators
Central Fabricators, headquartered in Schofield, Wisconsin and founded in
1967, is one of the leading manufacturers of pin-on excavator buckets for the
U.S. construction industry. During the last twelve months ending June 30, 1999,
Central Fabricators had approximately $22.4 million in sales and was purchased
for approximately $29.3 million in cash, including the noncompete payments of
$0.6 million.
Central Fabricators sells predominantly excavator buckets with an average
retail cost of approximately $3,350. Approximately 54% of these buckets are
sold to OEMs, with the remainder being sold to dealers. Sales are administered
through telemarketing and all products are manufactured at three facilities
located in Wisconsin. Like Woods, Central Fabricators has focused on reducing
its order-to-delivery times, which are currently approximately 12 days.
Management believes that its low order-to-delivery time is a competitive
advantage.
Alitec Attachments Division
Alitec, headquartered in Brownsburg, Indiana and founded in 1987, is a
manufacturer of patented hydraulic powered attachments for the rapidly growing
U.S. skid steer market. During the last twelve months ended June 30, 1999, the
Alitec Attachments Division had approximately $9.1 million in sales and was
purchased for approximately $11 million in cash. Approximately 55,000 skid
steers were sold in the United States in 1998, up 16.5% per annum since 1992.
The acquisition of Alitec provided us with a substantially larger range of skid
steer attachments. Alitec's skid steer attachments include cold planers,
vibratory rollers, augers, stump grinders, rock wheels and tillers.
Substantially all of Alitec's attachments center around complex hydraulic
products that are used in ground engaging applications. Due to the complexity
of these products and the various patents protecting their design, we believe
that there are few competitors to Alitec's products.
Products and Applications
We sell our products under a variety of well-recognized brand names. The
following table lists our brands used in each of the end-user categories we
serve. Brand names that appear in bold are those that were acquired by Woods as
a result of the Acquisitions.
<TABLE>
<CAPTION>
Description of End-Use Brand Names Representative End Users
- ---------------------- ------------------------------ ------------------------------
<S> <C> <C>
Replacement Parts TISCO(R), Tru-Part(R), All of the other end-users
TRU-POWER(R), CALCO(R), listed in this table.
WoodsCare(R), all of the other
brands listed in this table
Construction and Utility Woods(R), Gannon(R), Wain- General and construction
Roy(R), GannonBMP, Central contractors, utility
Fabricators(R) companies, government
contractors and industrial
manufacturing companies.
Grounds Maintenance Woods(R), Gill(R), Alloway(R) Homeowners, landscape and
mowing contractors, building
and snow removal contractors,
sod farms, cemeteries and golf
courses.
General Purpose Woods(R), Alloway(R) Farmers and ranchers for
Maintenance general ground maintenance
purposes.
Roadside Maintenance Woods(R) State and local governments,
landscape and mowing
contractors and building and
snow removal contractors.
Specialty Agricultural Woods(R), Alloway(R) Farmers and ranchers.
</TABLE>
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<PAGE>
Woods organizes its operations according to its product lines, enabling it
to focus a team of engineering, manufacturing, marketing and sales personnel on
each component of its business. The product lines primarily consist of
different types of attachments for prime movers manufactured by various
original equipment manufacturers. These product lines can generally be grouped
into the following general categories: replacement parts, buckets, finish
mowers, flail mowers and rotary cutters, backhoes, front end loaders,
agricultural equipment, couplers, parts and other products.
The following table sets forth the percentage of sales derived from the sale
of certain product lines in fiscal 1998:
Percentage of Sales by Product Line
<TABLE>
<CAPTION>
Fiscal Year 1998
-----------------------------------------------
Alitec
Central Attachments
Product line Woods TISCO Fabricators Division Pro Forma
------------ ----- ----- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Replacement Parts........... 13.9% 100.0% 9.6% 1.0% 35.8%
Buckets..................... 18.4 -- 90.4 -- 19.4%
Finish Mowers............... 20.4 -- -- -- 12.5%
Rotary Cutters and Flail
Mowers..................... 16.5 -- -- -- 10.0%
Backhoes.................... 9.6 -- -- -- 5.9%
Front End Loaders........... 8.3 -- -- -- 5.1%
Agricultural Equipment...... 2.6 -- -- -- 1.5%
Couplers.................... 2.5 -- -- -- 1.5%
Other....................... 7.8 -- -- 99.0% 8.3%
----- ----- ----- ----- ------
Total..................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ======
</TABLE>
Set forth below is a brief description of each of Woods' principal product
lines:
Replacement Parts
Historically, Woods replacement parts complemented its attachments business
and have represented a source of consistent revenues and profits. For 1998,
approximately 30% of Woods' replacement part sales were for its own products,
including parts manufactured by Woods and parts manufactured to Woods'
specifications by other manufacturers of replacement parts. Replacement parts
and accessories are typically more profitable than sales of new equipment.
Following the acquisition of TISCO, we will become a distributor of over
24,000 different replacement parts for tractors, usually over 10 years old.
TISCO products are focused on high-wear components and TISCO provides a full
range of replacement parts for brand name tractors such as Allis Chalmers, John
Deere, Ford, Massey Ferguson, New Holland and White.
Buckets
Woods' bucket line includes material handling units for tractor loader
backhoes, excavators and skid steers. This product line also includes
attachments with related designs, such as jaws, rippers, industrial scrapers
and certain multi-purpose attachments. The Gannon(R) line of attachments is
focused on the smaller construction applications. The GannonBMP line and the
Central Fabricators line are focused on hydraulic excavators and includes
heavy-duty excavator buckets, bucket clamps and excavator mounted compaction
equipment.
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Finish Mowers
Finish mowers are used when a high-quality cut is desired. Our finish mower
product line includes rearmount and undermount mowers as well as Turf-
Batwings(R) and the Mow'n Machine line of riding mowers.
. Rearmount mowers feature a hitch that allows the mower to be easily
attached to and detached from the rear of a tractor. We offer both belt
and gear drive versions of rearmount mowers, which feature heavy-duty
gearboxes and industrial grade blade spindles.
. Undermount mowers are mounted beneath the tractor, between the front and
rear wheels. In general, undermount mowers provide a better quality cut
than rearmount mowers because the cutting occurs before the large rear
wheels of the tractor have traveled over the grass. We offer over 200
different mountings which allow its undermount mowers to be used on most
new and used compact tractors. We believe we are one of the only
manufacturers to offer a broad line of replacement undermount mowers that
can be attached to tractors that are out of production.
. Turf-Batwing(R) is a line of gang mowers, which consist of three
rearmount mowers connected with a flexible frame, which will cut a swath
ranging from twelve to seventeen feet. The flexible frame of the Turf-
Batwing(R) mowers assures uniform mowing on both rolling and level
terrain. The Turf-Batwing(R) gang mowers are designed to mow large areas
requiring a high-quality cut.
. Mow'n Machine riding mowers are a line of premium, self-propelled, zero-
turn radius riding mowers sold under the tradename Mow'n Machine. These
highly maneuverable, rear-engine riding mowers provide a manicured cut
and, unlike our attachment products, are self-propelled units with a
gasoline or diesel engine. We currently offer nine models of the Mow'n
Machine, all of which are manufactured under contract for us by an
unrelated third party. We also sell a line of accessories for the Mow'n
Machine, including mulching decks, sweepers, snow blowers and snowplows,
all of which are manufactured for us by unrelated third parties. See "--
Suppliers."
Rotary Cutters and Flail Mowers
Rotary Cutters. Rotary cutters are typically used in high-volume
applications where the finish of the cut is relatively unimportant. Rotary
cutters use fixed or free-swinging blades that are attached to a horizontal,
rotating blade carrier. Rotary cutters are more popular than other types of
tractor-mounted cutters, and are generally less expensive to maintain than
flail mowers. Cutting widths range from four to twenty feet on mechanical
rotary cutters and from five to fifteen feet on hydraulic cutters. We
manufacture four principal types of rotary cutters: Batwing(R), single spindle,
multi-spindle and ditchbank rotary cutters.
. Batwing(R) mowers are large rotary cutters featuring a central cutting
section and two hinged wing sections with overall cutting widths of ten
to twenty feet. The hinged wing sections on the Batwing(R) cutters enable
the housing to flex, assuring uniform mowing on both rolling and level
terrain and enabling the end-user to transport the cutter more easily on
highways. During use, the Batwing(R) utilizes constant velocity
drivelines and gearboxes to maintain a constant horsepower rating for
uniform clearing of brush up to 3 1/2 inches in diameter.
. Single spindle rotary cutters have one pair of blades, feature heavy-duty
gear drives, and can clear light vegetation.
. Multi-spindle cutters have two or three pairs of blades and are generally
designed for large area mowing and clearing, such as industrial parks,
airports, agricultural fields, pastures and orchards.
. Ditchbank rotary cutters are designed to maintain roadside ditches,
drainage ditches, catfish farms and difficult to access road shoulders.
These cutters can be angled off the side of a prime mover from 90 degrees
straight up an embankment to 90 degrees straight down a ditch. Ditchbank
cutters feature belt, mechanical or hydraulic drives and can be attached
to the three point hitch of a tractor.
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Flail Mowers. Most flail mowers are purchased for use in high-volume,
intensive-use mowing applications. Flail mowers have a rotor shaft parallel to
the ground which has multiple sets of blades attached in a free swinging
manner. As the rotor shaft turns, the cutting blades rotate perpendicular to
the cutting surface delivering a consistent fine cut. The design of a flail
mower generally makes it more expensive to purchase and maintain than a rotary
mower. End-users of flail mowers prefer them because they deliver a finer cut,
distribute cuttings more evenly and have superior mulching action. In addition,
the perpendicular cutting motion of the flail mower deflects debris in a
mulching action making it generally safer than other types of mowers and thus
more popular for use in urban and congested areas. Mechanical flail mowers are
sold with cutting widths of between three and eight feet and hydraulic flail
mowers are sold with cutting widths of between four and twenty-one feet.
Backhoes
Our line of hydraulic backhoes are used in numerous applications, including
light construction and general grounds maintenance. Our backhoes can be
attached to approximately 243 of the models of tractors manufactured since
1990. Several of our backhoes can also be attached to skid steers.
Front End Loaders
We offer a line of twelve different models of tractor-mounted front end
loaders designed for tractors ranging from 11 to 200 horsepower. Loaders are
used in a wide range of applications, including farmstead maintenance,
landscaping, snow removal, care of livestock and other general grounds
maintenance. We offer approximately 317 mounting systems which enables its
loaders to be attached to a majority of the tractors manufactured since 1990,
including models produced by all major original equipment manufacturers. We
also manufacture mountings systems for numerous tractor models that are out-of-
production, while original equipment manufacturers generally do not offer
mounting systems for out-of-production tractors.
Agricultural Equipment
We design, manufacture and sell a broad line of tractor-mounted equipment to
serve the needs of the sugar beet industry, including a precise, narrow-row
cultivator, two types of sugar beet defoliators (rigid and folding), which
remove the vegetation from the beet prior to harvest, and a sugar beet
harvester.
Couplers
This product line includes backhoe couplers, excavator couplers, swingers
and hydraulic clamps, or "thumbs." These attachments, which are sold under the
Gannon(R), GannonBMP and Wain-Roy(R) brand names, are useful for a variety of
applications, including forestry and debris clearing. With the acquisition of
Wain-Roy in October 1997, we expanded this product line to include an
innovative coupler system that utilizes a "quick change" tool hitch. Recent
refinements of this coupler system allow the changing of buckets, jaws,
grapples and other attachments without requiring the operator to leave the cab
of the prime mover.
Other Products
In addition to the product lines mentioned above, we also produce industrial
grading scrapers, landscape rakes, tillers and other tillage attachments,
snowblowers, post hole diggers, box blades and other attachment products.
Customers
We market and distribute our products to end-users through one of the
attachments industry's largest dealer networks in the United States. We believe
that our national dealer network provides an efficient platform through which
we can expand the distribution of products from acquired regional attachment
manufacturers. Additionally, we believe that our dealer network provides a
significant competitive advantage by allowing us to support a large direct
factory sales force, effective marketing programs and a highly trained staff of
dealer service representatives. Management is committed to strengthening its
relationships with dealers through continued sales and aftermarket support and
by offering a broader product line resulting from new product introductions and
strategic acquisitions.
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<PAGE>
Unlike many of our smaller competitors, we are not dependent upon any one
geographic area. Management expects that our sales base will become even more
geographically diverse as we continue to diversify our product offering through
new product introductions and additional strategic acquisitions. Currently, we
sell our products into eight major geographic regions in the United States. The
following table identifies each of these geographic regions as well as the
percentage of net sales in 1998 to each region by Woods, TISCO, Central
Fabricators and Woods on a pro forma basis:
Percent of Sales by Geographic Region
<TABLE>
<CAPTION>
Fiscal Year 1998 (1)
-----------------------------------
Central
Region Woods TISCO Fabricators Pro Forma
- ------ ----- ----- ----------- ---------
<S> <C> <C> <C> <C>
Northeast................................... 16.5% 7.5% -- % 13.3%
Southeast................................... 12.7 13.4 16.5 13.1
South Central............................... 12.5 14.6 11.3 13.0
Lakes....................................... 16.3 12.0 16.5 15.1
Upper Mid West.............................. 8.2 9.5 22.0 9.1
Central Mid West............................ 11.6 12.0 11.0 11.7
Southern Mid West........................... 9.5 15.0 8.5 11.0
West........................................ 12.7 16.0 14.2 13.7
----- ----- ----- -----
Total..................................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
- --------
(1) Due to the large percentage of sales made by the Alitec Attachments
Division to original equipment manufacturers, it is not meaningful to
segment its sales by geographic region.
Attachments are sold primarily by construction, commercial, agricultural and
outdoor power equipment dealers that sell prime movers and other equipment
produced by the major original equipment manufacturers. Our distribution
network includes dealers that have affiliations with all of the principal
original equipment manufacturers of prime movers, such as New Holland, Deere,
Case, AGCO, which manufactures the Massey Ferguson brand of prime mover,
Ingersoll, which manufactures the Bobcat brand of skid steer, Caterpillar and
Kubota. We also sell our products through a substantial number of independent
dealers that are not affiliated with the major original equipment manufacturers
of prime movers. Most dealers offer tractor and prime mover attachments from
independent manufacturers which complement or compete with attachments sold by
the major tractor and prime mover manufacturers. In most cases, dealers also
offer products manufactured by our competitors.
We support our dealers' efforts with national, regional and local
advertising and participation in approximately a dozen major trade shows and
exhibits annually in the United States. We advertise in trade journals and
provide our dealers with sales support literature and other point-of-purchase
material, in addition to running various merchandising and sales promotion
programs. Dealers often jointly participate in regional and local advertising
and sales promotion programs that we organize.
As a result of the acquisition of Central Fabricators, we also sell our
products directly to original equipment manufacturers. During 1998, original
equipment manufacturers accounted for approximately 54% of Central Fabricators'
net sales.
There has been significant consolidation among attachment dealers over the
last several decades. Management believes that the consolidation among dealers
is a favorable trend for Woods as it looks to focus its sales efforts on the
largest dealers. Larger dealers prefer a relationship with national attachment
manufacturers that offer the benefits of brand identity, volume discounts,
geographic coverage, warranty services and rapid delivery. We are well
positioned to capitalize on this trend with our superior service, high order
fill rates, quick delivery and brand strength, in conjunction with our ability
to offer a broad range of products.
Our sales are not dependent on any customer, specific dealer or group of
dealers. Woods' top 20 customers accounted for 14% of its net sales for 1998
with no single dealer accounting for more than 3% of net sales.
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<PAGE>
TISCO's top 20 customers accounted for approximately 10% of its net sales for
1998 with no single dealer accounting for more than 0.3% of net sales. Central
Fabricators' top 20 customers accounted for approximately 17% of its net sales
for 1998 with no single dealer accounting for more than 3% of net sales.
We sell our attachments to original equipment manufacturers based on a net
price and to dealers based on a list price. Dealers may qualify for various
levels of trade discounts to the list price depending upon the dollar volume of
their purchases and the timing of their payment. In order to moderate the
seasonality of our sales, we offer pre-season sales programs to dealers which
provide for discounts on attachments purchased during off-season periods. We
also offer cash discounts as part of these programs to encourage dealers to
accelerate payment for its attachments. We do not provide our dealers with
floor financing or return privileges.
Competition
The attachment and replacement parts industries are highly competitive. Our
products are sold in markets where the principal competitive factors are price,
quality, service, brand name and product availability. We compete with the
major original equipment manufacturers of prime movers as well as with several
hundred companies producing one or more models of attachments. Some of these
competitors are significantly larger than us and have substantially greater
financial and other resources at their disposal. As an independent attachments
manufacturer, we believe that we are able to distribute our products through a
larger network of dealers than if we were a prime mover OEM, which are
generally restricted from distributing their products through other OEM-
affiliated dealers. Our principal competitors in the attachments market are
Alamo Group Inc., Bush Hog, which is a division of Allied Products Corporation,
Land Pride, which is a division of Great Plains Manufacturing Company, and
Deere. Within the replacement parts markets, TISCO is one of the largest
independent distributors in the United States. Other independent competitors
include Heschel-Adams, SMA, Riverside, Shoup and Hy-Capacity.
We believe that our ability to compete successfully in our markets is a
result of containing our manufacturing costs, reducing shipping times to our
dealers, offering high quality products, focusing purely on the attachment and
replacement parts markets and designing and developing innovative products.
Product Development and Engineering
Management believes that its ability to provide innovative responses to
customer needs, to continue developing and manufacturing new products and to
enhance its existing product lines is critical to our success. Consequently,
our sales and design teams work closely with dealers and customers to identify
customer needs and product opportunities. Once a new product opportunity is
identified, our sales, marketing, engineering and manufacturing departments
work together during the design, engineering and development process to ensure
that new products meet both customer needs and our own internal rate of return
thresholds.
Woods develops all of its products to be compatible with the latest tractor
designs and uses a sophisticated 3-D solid modeling CAD-CAM engineering and
design system, extensive field testing and the evaluation of competitors'
products to validate new products.
Over the last three years, Woods expended approximately $10 million on
engineering, research and new product development. Woods currently has 37
engineers in its facilities working on product design, prototype development,
product testing and new product research. Since 1993, Woods introduced over 90
new products, including a new line of Batwing(R) cutters, a skid steer
attachment product line, a line of rear discharge mowers and the
Groundbreaker(R) line of backhoes.
Central Fabricators currently employs approximately 9 engineers in product
development.
Total Cost Productivity Program
In 1995, management began Woods' Total Cost Productivity program,
implementing continuous flow manufacturing and total quality management
techniques at certain of Woods' manufacturing facilities. In
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<PAGE>
connection with this program, Woods has focused on reducing its order-to-
delivery schedule, as well as improving quality, reducing production costs and
inventory levels, improving environmental, health and safety and enhancing
plant profitability and flexibility through a more efficient plant layout.
Woods has significantly improved its manufacturing efficiency by focusing on
its core competencies within each facility, which include fabricating, welding,
assembling and painting, and changing its manufacturing techniques.
Woods invested $2.0 million to complete the transformation of the Sioux
Falls, South Dakota facility to continuous flow manufacturing and total quality
management. While the implementation costs and realizable savings from
continuous flow manufacturing and total quality management will vary from
plant-to-plant, at this facility, which generated approximately $12.9 million
in net sales in 1998, Woods has permanently reduced its manufacturing and
operating costs by $1.5 million per year, increased sales per employee three-
fold to $119,000, increased inventory turns from 1.4 times in 1994 to 5.7 times
per year in 1998 and reduced required square footage by approximately 23%.
Continuous flow manufacturing and total quality management techniques were
introduced at Woods' Oregon, Illinois facility in 1996 and were substantially
completed by the end of 1998. Continuous flow manufacturing and total quality
management initiatives at Woods' facilities in La Mirada, California and
Charlotte, North Carolina were started in 1997 and should be substantially
completed in 1999. Woods' Hubbardston facility is scheduled to begin adopting
its Total Cost Productivity program in late 1999.
As a result of continuous flow manufacturing and total quality management
implementation to date, Woods has successfully decreased its overall working
capital requirements by increasing inventory turnover from 2.6 times per year
in 1993 to 5.3 times per year in 1998 and reducing order-to-delivery times from
35 days to 16 days over the same period. Management believes that the programs
used to achieve the results at its Sioux Falls, Oregon, La Mirada and Charlotte
facilities can be successfully employed at several of our other facilities,
particularly at the facilities of the acquired companies where Woods'
continuous flow manufacturing and total quality management techniques have yet
to be initiated. Even though continuous flow manufacturing initiatives have
been implemented at several facilities, Woods expects to realize additional
costs savings from the continued implementation of continuous flow
manufacturing.
Warranty
Woods generally provides dealers with limited one-year warranties. Dealers
typically provide warranty service for end-users pursuant to their own express
warranties and warranties implied by state law. The dealers are compensated by
us for warranty service provided to end-users based upon the nature of the
dealers' warranty claims against us. Woods' warranty expenses have averaged
approximately 0.9% of invoiced sales for 1995 to 1998. TISCO and Central
Fabricators' warranty expenses over the same period have averaged approximately
0% and 0.9% of invoiced sales, respectively.
75
<PAGE>
Facilities
Our corporate headquarters are located in Rockford, Illinois. Information
regarding our manufacturing and distribution facilities is set forth below:
<TABLE>
<CAPTION>
Owned/ Square
Plant Location Company Products Manufactured Leased Feet
- -------------- ----------- ---------------------------- ------ -------
<S> <C> <C> <C> <C>
Manufacturing Facili-
ties:
La Mirada, CA........... Woods Buckets Owned 80,000
Oregon, IL.............. Woods Backhoes, Rear-mount Mowers Owned 420,000
and Batwing cutters
Gardner, MA(1).......... Woods Couplers and Buckets Leased 68,000
Hubbardston, MA(1)...... Woods Couplers and Buckets Owned 34,400
Charlotte, NC........... Woods Blades, Buckets and Leased 65,000
Landscape Equipment
Fargo, ND(2)............ Woods Flail Shredders, Row Crop Owned(3) 130,000
Cultivators, Beet Harvesters
and Defoliators and Snow
Blowers
Sioux Falls, SD......... Woods Loaders Owned 108,000
Seguin, TX.............. Woods Blades and Buckets Owned 65,000
Schofield, WI (3 loca- Central Buckets Leased 70,000
tions)................. Fabricators
Brownsburg, IN.......... Alitec Skid Steer Attachments Leased 65,000
Distribution Warehouses:
West St. Paul, MN....... TISCO NA Leased 47,270
West St. Paul, MN....... TISCO NA Leased 14,800
Sacramento, CA.......... TISCO NA Leased 43,200
Nashville, TN........... TISCO NA Leased 41,760
Dallas, TX.............. TISCO NA Leased 32,500
Richmond, VA............ TISCO NA Leased 25,600
</TABLE>
- --------
(1) The Gardner, Massachusetts facility is in the process of being
constructed. Woods has entered into a "build to suit" lease for the
facility, which is expected to be ready for occupancy by October 1999. At
that time, Woods expects to sell its Hubbardston facility.
(2) Capital expenditures at the Fargo, North Dakota facility are financed with
earnings from the joint venture and are therefore excluded from the
calculation of annual maintenance capital expenditures for Woods.
(3) The Fargo, North Dakota facility John is owned by Alloway Industries,
L.L.C., which is jointly owned on an equal basis by Woods and Deere.
All of our properties are pledged as collateral to secure our borrowings
under the senior credit facility. We believe that substantially all of our
properties and equipment all in good condition and that we have sufficient
capacity to meet our current manufacturing needs. Utilization of our
facilities varies depending on demand for the products produced at such
facility. Overall, we estimate that our facilities are operating at
approximately 70% capacity.
Patents and Trademarks
Woods owns numerous U.S. and foreign patents and have several applications
for patents pending. While we consider our patents to be advantageous to our
business, we do not believe our business is dependent on any single patent or
group of patents. Management believes that our trademarks are well known in
our markets, are valuable and are increasing in value with the development of
the business, but that the business is not
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<PAGE>
dependent on such trademarks. Woods owns United States federal registrations
for several marks, including Woods(R), Alloway(R), WoodsCare(R), Gill(R),
Gannon(R) and Wain-Roy(R). TISCO and Central Fabricators' products are sold
under numerous trademarks, including Central Fabricators(R), Tru-Part(R), TRU-
POWER(R), TISCO(R) and CALCO(R).
Suppliers
The principal raw materials that we use include steel, other metals and
hydraulic tubing. While we manufacture many of the parts for our products, some
parts, including most drive lines, blades, hydraulic pumps and motors, are
purchased from outside suppliers who manufacture parts to our specifications.
We purchase all of our self-propelled riding mowers, marketed under the
brand name Mow'n Machine, from Ariens Corporation, a private company located in
Brillion, Wisconsin. This manufacturing relationship is pursuant to a five-year
agreement expiring on December 7, 1999, with an option to renew for an
additional five years. We own the designs, tooling and drawings for the current
Mow'n Machine products.
TISCO does not manufacture its products. Instead, its products are
manufactured and supplied by numerous third party manufacturers predominantly
in North America and Asia. During the LTM period, no one supplier produced more
than 3% of all the stock keeping units sold by TISCO.
Employees
As of July 3, 1999, Woods employed 975 full-time employees, of whom 37 were
employed in engineering and research and development, 794 in manufacturing and
144 marketing, sales, customer service and administration. None of Woods'
employees are subject to collective bargaining agreements and Woods considers
its relationship with its employees to be good.
As of June 30, 1999, TISCO employed 289 full-time employees, Central
Fabricators employed 173 full-time employees and the Alitec Attachments
Division employed 71 full-time employees.
Legal Matters
From time-to-time, we are is subject to product liability claims that arise
in the ordinary course of business, and we maintain insurance believed to be
adequate to cover these claims.
We are subject to numerous environmental laws and regulations concerning air
emissions, discharges into waterways and the generation, handling, storage,
transportation, treatment and disposal of waste materials. It is our policy to
comply with all applicable environmental, health and safety laws and
regulations, and we believe we currently are in material compliance with all
such applicable laws and regulations.
Management is not aware of any material environmental issues at any of its
facilities. We have commissioned environmental studies of each of the Woods'
facilities within the past five years. As part of the Wain-Roy acquisition in
1997, additional tests were performed at Wain-Roy's Hubbardston, Massachusetts
facility. Woods is currently in consultation with the Massachusetts Department
of Environmental Protection to determine an appropriate remediation plan for
trichloroethylene found on the property. We expect minimal remediation, if any,
to be required.
We are subject to various federal, state, and local laws affecting our
business, as well as a variety of regulations relating to such matters as
working conditions, equal employment opportunities and product safety. A
variety of state laws regulate our relationship with our dealers, some of which
impose substantive standards on such relationships, including events of
default, grounds for termination, non-renewal of dealer contracts and equipment
repurchase requirements. We believe we are currently in material compliance
with all such applicable laws and regulations.
77
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information regarding the directors
of Parent and the executive officers of Parent and WEC as of September 30,
1999:
<TABLE>
<CAPTION>
Name Age Principal Position
---- --- ------------------
<S> <C> <C>
Paul R. Wood............ 45 Chairman of the Board
Thomas J. Laird......... 49 President, Chief Executive Officer and Director
Michael S. Carney....... 41 Chief Operating Officer and Director
D. Stephen Crider....... 37 Chief Financial Officer, Secretary and Treasurer
David W. Ferguson....... 55 Vice President--Ag and Turf Business
L. William Templeton.... 65 Vice President--Parts Business
Timothy M. Hurd......... 30 Director
Paul R. Lederer......... 60 Director
Thomas R. Reusche....... 44 Director
</TABLE>
Paul R. Wood has served as Chairman of the Board and a director of Parent
and as the sole director of WEC since the recapitalization. Since their
respective formations in March 1999, June 1996 and January 1993, Mr. Wood has
served as a principal of the three investment funds associated with Madison
Dearborn Partners and as a Vice President or Managing Director of Madison
Dearborn Partners, their indirect general partner. Prior to that time, Mr. Wood
served as Vice President of First Chicago Venture Capital, which comprised the
private equity investment activities of First Chicago Corporation, the holding
company parent of First National Bank of Chicago. Mr. Wood serves on the board
of directors of Hines Horticulture, Inc., Eldorado Bancshares Inc. and a number
of private companies.
Thomas J. Laird has served as the President, Chief Executive Officer and a
director of Woods since April 1993. From March 1991 to March 1993, Mr. Laird
was the President and Chief Executive Officer of Casablanca Fan Co., a
manufacturer of ceiling fans. During this period, Casablanca Fan Co.
accelerated new product introduction and expanded its distribution network
which contributed to improved profitability. From August 1985 to March 1991,
Mr. Laird was employed by GE Motors, a manufacturer of motors located in Ft.
Wayne, Indiana. He held positions of Plant Manager of several of that
business's commercial equipment plants, was Marketing Director of the
Industrial Components Division and also held the position of General Manager of
the Industrial Components Division.
Michael S. Carney has served as Chief Operating Officer of Woods since 1995.
Prior to joining Woods, Mr. Carney spent 15 years in a variety of manufacturing
and marketing positions at GE. Mr Carney's last position with GE was General
Manager of AC Motors and Controls Division, where he had profit and loss
responsibility for the $300 million business which spanned five international
and domestic plants. Prior to such time, Mr. Carney was in charge of the
Owensboro, Kentucky plant for GE Motors as the Plant Manager. Mr. Carney also
spent four years in the Marketing Department of GE Motors, where he was
involved with setting up an international joint venture and several
international sourcing initiatives.
D. Stephen Crider has served as Chief Financial Officer, Secretary and
Treasurer of Woods since April 1996. Prior to joining Woods, Mr. Crider spent
nine years with Newell, where his last position was Vice President-Controller
of a $125 million division located in Memphis, Tennessee. Prior to joining
Newell, Mr. Crider spent three years in public accounting and internal audit.
David W. Ferguson has served as Vice President--Ag and Turf Business of
Woods since October 1997. Prior to joining Woods, Mr. Ferguson spent 28 years
working for New Holland. Mr. Ferguson's most recent assignment as General
Manager, Parts Operations with New Holland North America, Inc. included
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<PAGE>
responsibility for parts supply, distribution, inventory, systems and
transportation. While at New Holland, Mr. Ferguson served as General Manager,
Parts and Service, where he was accountable for parts sales, supply,
distribution, service education, warranty and policy administration,
publications and product support.
L. William Templeton will be named Vice President--Parts Business upon the
completion of TISCO Acquisition. Mr. Templeton has served as President and
Chief Operating Officer of TISCO since 1992. Prior to joining TISCO, Mr.
Templeton worked for NAEDA Financial Services, T Enterprises, Deutz-Allis
Corporation, Kubota Tractor Corporation, Ford and McCarty Sherwan Distribution
Corporation. Mr. Templeton has over 42 years of experience in senior management
for finance, sales and marketing functions primarily in the farm and
construction equipment industries.
Timothy M. Hurd has served as a director of Parent since the
recapitalization. Mr. Hurd has served as a director of Madison Dearborn Capital
Partners III, L.P. since its formation in March 1999. Mr. Hurd joined Madison
Dearborn Partners in 1996. From 1994 to 1996, Mr. Hurd attended business school
at Harvard University. From 1992 to 1994, Mr. Hurd was employed by Goldman,
Sachs & Co.
Paul R. Lederer has served as a director of Parent since June 1999. Prior to
his retirement in October 1998, Mr. Lederer served as Executive Vice President-
Worldwide Aftermarket of Federal-Mogul Corporation since February 1998; from
November 1994 to February 1998, President and Chief Operating Officer of Fel-
Pro Inc., which was acquired by Federal-Mogul Corporation; and from January
1993 to November 1994, an automotive consultant and member of the advisory
boards of Fullerton Metals and Fel-Pro Inc. Mr. Lederer also currently serves
as a director of R&B Inc. and Trans-Pro Corporation and as a member of the
advisory boards of Ampere Inc., Newcorp., Richco Inc., Turtle Wax, Inc. and
Wine Discount Center.
Thomas R. Reusche has served as a director of Parent since the
recapitalization. Since their respective formations in March 1999, June 1996
and January 1993, Mr. Reusche has served as a principal of the three investment
funds associated with Madison Dearborn Partners, and a Vice President or
Managing Director of Madison Dearborn Partners. Prior to that time, Mr. Reusche
was a senior investment manager at First Chicago Venture Capital. Mr. Reusche
serves on the board of directors of Hines Horticulture, Inc. and a number of
private companies.
At present, all directors are elected and serve until a successor is duly
elected and qualified or until his or her earlier death, resignation or
removal. All members of the board of directors set forth herein were elected
pursuant to a stockholders agreement that was entered into in connection with
the recapitalization. See "Certain Relationships and Related Transactions."
There are no family relationships between any of the directors or executive
officers of Woods. Executive officers of Woods are elected by and serve at the
direction of the board of directors.
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<PAGE>
Executive Compensation
Summary Compensation Table
The following table sets forth information concerning the compensation for
services in all capacities to Woods for the fiscal year ended January 2, 1999
of those persons who (1) served during the fiscal year ended January 2, 1999 as
the chief executive officer of Woods and (2) were, at January 2, 1999, the
other executive officers of Woods who earned more than $100,000 in salary and
bonus in fiscal 1998. For case of reference, we refer to these persons as our
"named executive officers."
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------ ------------
Securities
Fiscal Other Annual Underlying All Other
Year Salary Bonus Compensation Options/SARS Compensation
Name and Principal Position Ended ($) ($) ($)(1) (#) ($)(3)
- --------------------------- ------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Laird......... 1998 $247,131 $122,919 $ (1) -- $ 4,850
President and Chief
Executive Officer
Michael S. Carney....... 1998 184,708 79,216 88,990(2) -- 4,850
Chief Operating Officer
D. Stephen Crider....... 1998 131,077 57,734 (1) -- 3,932
Chief Financial Officer
David W. Ferguson....... 1998 141,302 81,865 199,248(2) -- 4,239
Vice President--Sales
and Service
</TABLE>
- --------
(1) The total amount of perquisites and other personal benefits for the named
executive officer did not exceed the reporting threshold, which is the
lesser of $50,000 or 10% of total annual salary and bonus.
(2) Reflects payments made to the named executive officer for relocation
expenses.
(3) Represents matching contributions made by Woods to such named executive
officers under its 401(k) plan.
Compensation Committee Interlocks and Insider Participation
We currently do not have a compensation committee. The compensation
arrangement for our chief executive officer was established pursuant to the
terms of his employment agreement with Woods. The compensation arrangements for
each of the other executive officers of Woods was established by the board of
directors. On a going forward basis, any changes in the compensation
arrangements of the executive officers of Woods will be determined by the board
of directors, which is controlled by Madison Dearborn Partners.
Compensation of Directors
Directors serving on the board of directors are not entitled to receive any
compensation for serving on the board. Directors are reimbursed for their out-
of-pocket expenses incurred in connection with such services.
1999 Stock Option Plan
The board of directors of Parent expects to adopt the Woods Equipment
Company 1999 Stock Option Plan by the end of 1999. The option plan is intended
to advance the best interests of Woods by providing those persons who have a
substantial responsibility for its management and growth with additional
incentives by allowing them to increase their ownership interest in Woods and
thereby encouraging them to contribute to the success of Woods and to remain in
its employ. The availability and offering of stock options under the plan will
also increase our ability to retain individuals of exceptional managerial
talent upon whom, in large measure, the sustained progress, growth and
profitability of our company depends.
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<PAGE>
The option plan will be administered by a committee of the board. Subject to
the limitations of the option plan, the committee will have the sole and
complete authority to:
. select participants,
. grant options to participants in such forms and amounts as it shall
determine,
. impose such limitations, restrictions and conditions upon such options as
it shall deem appropriate,
. interpret the option plan and adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the option plan,
. correct any defect or omission or reconcile any inconsistency in the
option plan or in any option granted thereunder and
. make all other determinations and take all other actions necessary or
advisable for the implementation and administration of the option plan.
The number of shares of common stock with respect to which options may be
granted under the option plan and which may be issued upon the exercise thereof
will be limited to an aggregate of 50,000 shares. The type and the aggregate
number of shares which may be subject to options is subject to adjustment in
the event of certain changes to our capital structure.
Options granted under the option plan may be "incentive stock options"
within the meaning of Section 422 of the Code or nonqualified stock options.
The option plan will provide that in no event shall the committee grant an
option intended to be an incentive stock option after the date which is 10
years from the earlier of (1) the date the option plan was adopted and (2) the
date the option plan was approved by our stockholders and that the aggregate
fair market value of all common stock with respect to which incentive stock
options are exercisable for the first time by an individual during any calendar
year exceed $100,000. The option exercise price per share of common stock shall
be determined by the committee; provided that if the option is intended to be
an incentive stock option, the option exercise price per share of common stock
may not be less than 100% of the fair market value of a share of common stock
on the date of grant of such option or 110% of the fair market value if, at the
time of the grant, the participant owns common stock possessing more than 10%
of Woods' combined voting power.
Except as otherwise provided by the committee, any portion of a
participant's option that was not vested and exercisable on the date of the
termination of such participant's employment shall expire and be forfeited as
of such date, and any portion of a participant's option that was vested and
exercisable on the date of the termination of such participant's employment
shall expire and be forfeited as of such date, except that:
. if any participant dies or becomes subject to any disability, such
participant's option shall expire 180 days after the date of his death or
disability, but in no event after the expiration date,
. if any participant retires (with the approval of the board), his option
shall expire 90 days after the date of his retirement, but in no event
after the expiration date, and
. if any participant is discharged other than for cause, such participant's
option shall expire 30 days after the date of his discharge, but in no
event after the expiration date.
The board or the committee may suspend or terminate the option plan or any
portion thereof at any time and may amend it from time to time in such respects
as the board or the committee may deem advisable; provided that no such
amendment shall be made without stockholder approval to the extent such
approval is required by law, agreement or the rules of any exchange upon which
the common stock is listed, and no such amendment, suspension or termination
shall impair the rights of participants under outstanding options without the
consent of the participants affected thereby. No options may be granted under
the option plan after the tenth anniversary of the adoption of the option plan.
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<PAGE>
PRINCIPAL STOCKHOLDERS
All of the outstanding capital stock of WEC is owned by Parent. The
following table sets forth certain information regarding the beneficial
ownership of Parent's common stock and redeemable preferred stock as of
September 30, 1999 of:
. each person known by Parent to own beneficially more than 5% of the
common stock;
. each person known by Parent to own beneficially more than 5% of the
redeemable preferred stock;
. each director of Parent;
. the named executive officers; and
. all directors and executive officers of Woods as a group.
<TABLE>
<CAPTION>
Redeemable
Preferred Stock Common Stock
------------------ ---------------------
Number Percent Number of Percent
Name and Address of Beneficial Owner of Shares of Class Shares of Class
------------------------------------- --------- -------- ------------ --------
<S> <C> <C> <C> <C>
Madison Dearborn Capital Partners II,
L.P. (1)............................. 43,680.66 91.8% 967,039.94 90.7%
Thomas J. Laird (2)................... 1,076.48 2.3 28,942.23 2.7
Michael S. Carney..................... 523.43 1.1 14,072.84 1.3
D. Stephen Crider..................... 348.95 1.0 9,381.89 1.0
David W. Ferguson..................... 174.48 * 4,690.95 *
Paul R. Wood (1)...................... 43,680.66 91.8 967,039.94 90.7
Thomas R. Reusche (1)................. 43,680.66 91.8 967,039.94 90.7
Timothy M. Hurd (1)................... 43,680.66 91.8 967,039.94 90.7
Paul R. Lederer....................... -- -- -- --
All directors and executive officers
as a group (8 persons)............... 45,804.00 96.2 1,024,127.85 96.1
</TABLE>
- --------
*Indicates less than 1% of the outstanding redeemable preferred stock or common
stock, as the case may be.
(1) All of such shares are held by MDCP. The address for MDCP and Messrs. Wood,
Reusche and Hurd is Three First National Plaza, Suite 3800, Chicago,
Illinois 60602. Messrs. Wood, Reusche and Hurd are executive officers of
Madison Dearborn Partners, Inc., which is the general partner of Madison
Dearborn Partners II, L.P., which, in turn, is the general partner of MDCP,
and therefore may be deemed to share voting and investment power over the
shares owned by MDCP and therefore to beneficially own such shares. Each of
Messrs. Wood, Reusche and Hurd disclaims beneficial ownership of the shares
owned by MDCP in which such person does not have a pecuniary interest.
(2) All shares listed are held by the Thomas J. Laird Trust, of which Mr. Laird
serves as the trustee.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Recapitalization
On August 7, 1998, Woods effected the recapitalization pursuant to a
recapitalization agreement among the Parent, MDCP, Brian P. Simmons, as the
seller's representative, and the then-existing stockholders of Parent.
Pursuant to the recapitalization agreement:
. MDCP purchased shares of the common stock and preferred stock of Parent
for an aggregate of $34.3 million,
. some of the prior stockholders of Parent redeemed all of their shares of
capital stock of Parent for cash,
. some of the prior stockholders exchanged all of their shares of capital
stock for new shares of common stock and redeemable preferred stock, and
. some of the prior stockholders redeemed some shares of capital stock,
including options, and exchanged their remaining shares of capital stock
for new shares of common stock and redeemable preferred stock.
Pursuant to the recapitalization agreement:
. the prior stockholders who redeemed their shares of capital stock
received, in the aggregate, approximately $68.5 million in cash,
. the prior stockholders who exchanged their shares of capital stock
received shares of common stock and redeemable preferred stock having
an aggregate value for purposes of the recapitalization of
approximately $3.25 million.
In connection with the recapitalization, the following named executive
officers received the following securities and cash from Woods:
<TABLE>
<CAPTION>
No. of Shares Received
-----------------------
Preferred Common
Name Stock Stock Cash
---- ----------------------- ----------
<S> <C> <C> <C>
Thomas J. Laird........................ 1,076.48 28,942.23 $4,866,304
Michael S. Carney...................... 175.93 14,072.84 376,452
D. Stephen Crider...................... 24.03 9,381.88 85,478
David W. Ferguson...................... 97.87 4,690.95 68,458
</TABLE>
Stockholders Agreement
General. In connection with the recapitalization, Woods and all its
stockholders entered into a stockholders agreement. The stockholders agreement
generally:
. restricts the transfer of any shares of common stock and preferred stock
held by the employee stockholders,
. grants Woods and MDCP the right to repurchase an employee stockholder's
shares of common stock and preferred stock in the event such employee
stockholder leaves the employment of Woods or its subsidiaries for any
reason,
. grants Woods and MDCP a right of first refusal in connection with any
proposed transfer by any other party, subject to certain exceptions, and
. grants participation rights to the stockholders in the event the
contemplated transfer results in a sale of Woods to an independent third
party.
In addition, the stockholders agreement requires each party to consent to a
sale of Woods to an independent third party if such sale is approved by Woods'
board of directors and MDCP.
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Registration Rights. Each of the parties to the stockholders agreement has
piggyback registration rights with respect to any regulation by Woods of any of
its common stock or securities convertible into or exchangeable for common
stock, other than a registration statement on Form S-8 or Form S-4 or successor
forms thereto, and the registration form to be used may be used for the
registration of the common stock held by the stockholders. Woods will bear the
costs of such piggyback registrations, excluding any underwriting discounts or
commissions, transfer taxes on the sale of such Registrable Securities or the
fees and expenses of any counsel retained by the selling Stockholders. In
addition, each stockholder has agreed not to effect any public sale or
distribution, including sales pursuant to Rule 144, of equity securities of
Woods, or any securities convertible into or exchangeable or exercisable for
such securities, during the seven days prior to and the 180-day period
beginning on the effective date of any underwritten piggyback registration if
so requested by the underwriters managing the registered public offering. The
right of any holder of registrable securities to request a piggyback
registration shall terminate after the holders of registrable securities have
had the opportunity to participate with respect to at least a majority of their
registrable securities.
Confidentiality, Protection of Company Inventions and Non-
Competition. Pursuant to the stockholders agreement, each employee stockholder
agrees not to disclose any confidential information concerning the business or
affairs of Woods, any of its subsidiaries and their customers and vendors,
unless and to the extent that the employee stockholder can demonstrate that the
aforementioned matters have become generally known to and available for use by
the public other than as a result of employee Stockholder's acts or omissions.
In addition, each employee stockholder acknowledges that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable)
which relate to Woods' or any of its subsidiaries' actual or anticipated
business, research and development or existing or future products or services
and which are conceived, developed or made by the employee stockholder while
employed by Woods and its subsidiaries belong to Woods or such subsidiary.
Furthermore, in consideration for the continued employment of each employee
Stockholder as an employee-at-will after the date of the stockholders agreement
and in order to preserve and protect the interests of Woods in its confidential
information and work product, each employee stockholder agrees, for a specified
period of time, that it will not directly or indirectly own any interest in,
manage, control, participate in, consult with, render services for, or in any
manner engage in any business competing with the businesses of Woods or its
subsidiaries, within any geographical area in which Woods or its subsidiaries
engage or has current plans to engage in such businesses.
Management Stock Purchasers
In connection with the recapitalization, Messrs. Michael S. Carney, D.
Stephen Crider and David W. Ferguson purchased 347.50, 324.92 and 76.60 shares
of redeemable preferred stock, respectively, at a purchase price equal to
approximately $1,000.00 per share.
Management Indebtedness
In connection with the recapitalization, certain employees of Woods
purchased additional shares of common stock and/or preferred stock of the
Parent with promissory notes and/or cash. Such promissory notes were issued on
August 7, 1998 and are secured by a pledge of all of the stock purchased by
such employee stockholder. Michael S. Carney, Chief Operating Officer, issued
to Woods an 8% promissory note in the aggregate principal amount of $100,000
pursuant to which the principal balance and all accrued and unpaid interest is
payable on August 7, 2003. D. Stephen Crider, Chief Financial Officer,
Secretary and Treasurer of Woods, issued to Woods an 8% promissory note in the
aggregate principal amount of $285,000 pursuant to which the principal balance
and all accrued and unpaid interest is payable on August 7, 2003.
Loan from Principal Stockholder
In connection with the recapitalization, WEC borrowed $25 million from MDCP
through the issuance of a subordinated promissory note. The note is a general
unsecured obligation of WEC, subordinated in right of
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payment to all current and future senior debt of WEC, as defined in the note.
The note matures on October 1, 2007. The note may be repaid without premium or
penalty, from time to time until maturity. The interest rate per annum
applicable to the note is initially 10.0% and increases by 0.5% at the end of
each three-month period after August 7, 1998 until October 1, 2007. The note
contains customary events of default, including payment defaults and certain
events of bankruptcy and insolvency. Woods used a portion of the proceeds from
the initial offerings to repay the note.
Management Services Agreement
In connection with the recapitalization, Parent entered into a management
services agreement with MDP, pursuant to which MDP will provide certain
management consulting services to Woods in exchange for an annual fee of
$300,000 to commence in the year 2000, plus out-of-pocket expenses. MDP
received fees of $1.8 million, plus reimbursement for out-of-pocket expenses
for services rendered to Woods from the date of the recapitalization through
January 2, 1999.
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DESCRIPTION OF OTHER FINANCING ARRANGEMENTS
Senior Credit Facility
General. In connection with the recapitalization, WEC, as borrower, Parent,
as guarantor, Credit Suisse First Boston, New York Branch, an affiliate of
Credit Suisse First Boston Corporation, as administrative agent, and certain
other financial institutions entered into a $110 million multi-tranche senior
secured bank credit facility. As of July 3, 1999, WEC had unused borrowing
capacity under its revolving credit facility of approximately $24.1 million. On
July 28, 1999, the existing senior credit facility was amended and restated in
connection with the initial offerings.
As amended, the senior credit facility provides for revolving loans to WEC
for up to $40.0 million, including letters of credit. Subject to certain
restrictions, the senior credit facility may be used to finance the
acquisitions and for working capital and general corporate purposes of WEC and
its subsidiaries.
Repayment. The revolving loans must be repaid on July 31, 2004. The
revolving loans made pursuant to the senior credit facility may be repaid and
borrowed and reborrowed, without premium or penalty, from time to time until
maturity, subject to the satisfaction of certain conditions on the date of any
such borrowing. Prepayments of eurodollar rate loans, however, may be subject
to customary breakage costs. In addition, the senior credit facility provides
for mandatory repayments of any outstanding borrowings out of any net cash
proceeds received from:
. a sale of assets, other than sales of inventory in the ordinary course of
business and sales of less than $0.5 million worth of assets;
. net cash proceeds of permitted debt issuances, subject to certain
exceptions, including the initial offerings;
. 50.0% of net cash proceeds of permitted equity issuances, reducing to
0.0% when WEC's leverage ratio is less than 3.5:1, subject to certain
exceptions;
. net cash proceeds from insurance recovery and condemnation events,
subject to certain reinvestment rights; and
. 50.0% of annual excess cash flow, reducing to 0.0% when the WEC's
leverage ratio is less than 3.5:1.
Security; Guaranty. The obligations of WEC under the senior credit facility
are guaranteed by Parent and will be guaranteed by each of WEC's future direct
and indirect domestic subsidiaries and, so long as there are no adverse tax
consequences, foreign subsidiaries, if any. The obligations of WEC under the
senior credit facility and each of the guarantors under its guarantee is or
will be secured by
. a first priority security interest in substantially all of the assets of
such person,
. a pledge of all of the capital stock of each direct and indirect domestic
subsidiary of Parent and WEC and
. a pledge of 65.0% of the capital stock of each foreign subsidiary of
Parent and WEC, if any.
Interest. At WEC's option, the interest rates per annum applicable to the
loans under the senior credit facility will be a fluctuating rate of interest
measured by reference to one or a combination of the following at WEC's
election:
. the base rate (as defined in the senior credit facility), plus the
applicable borrowing margin, which is 1.25% for revolving loans, subject
to adjustment based on WEC's leverage ratio; or
. the relevant reserve adjusted eurodollar rate (as defined in the senior
credit facility), plus the applicable borrowing margin, which is 2.25%
for revolving loans, subject to adjustment based on WEC's leverage ratio.
Fees. WEC has agreed to pay certain fees in connection with the senior
credit facility, including letter of credit fees, agency fees and commitment
fees. Commitment fees are payable at a rate per annum of 0.5% on the undrawn
amounts of the senior credit facility.
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Covenants. The senior credit facility requires WEC to meet certain financial
tests, including, without limitation, a maximum leverage ratio, a minimum
interest coverage ratio and a minimum fixed charge coverage ratio. The senior
credit facility also contains covenants which, among other things, restrict the
ability of Parent, WEC and their subsidiaries, subject to certain exceptions,
to incur liens, transact with affiliates, incur indebtedness, declare dividends
or redeem or repurchase capital stock, make loans and investments, engage in
mergers, acquisitions, consolidations and asset sales, acquire assets, stock or
debt securities of any person, have additional subsidiaries, amend its
certificate of incorporation and make capital expenditures. The senior credit
facility also requires Parent, WEC and their subsidiaries to satisfy certain
customary affirmative covenants and to make certain customary indemnifications
to the lenders under the senior credit facility and the administrative agent
under the senior credit facility.
Events of Default. The senior credit facility contains customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of bankruptcy
and insolvency, ERISA violations, judgment defaults, cross-defaults to certain
other indebtedness and a change in control of Parent or WEC.
Seller Promissory Notes
In connection with the acquisition of all of the capital stock of Gannon by
WEC in June 1994, WEC issued a $5.0 million promissory note to the former
stockholders of Gannon. Such note accrues interest at a rate of 7.5% per annum
and is payable in monthly installments of principal and interest in the amount
of $34,960.73 with a final payment due on July 1, 2009, at which time, all
accrued interest and principal is due and payable. WEC's obligations under the
note are secured by deeds of trusts relating to WEC's facilities located in La
Mirada, California and Seguin, Texas. Such note may be prepaid in whole or in
part on any monthly payment date without penalty. A default in any payment of
more than 10 days after its due date will result in the additional payment of a
late charge equal to 2.5% of such over-due payment.
In April 1997, WEC issued a $700,000 subordinated term note in connection
with its acquisition of Baerts. Such note accrues interest at a rate of 8% per
annum and principal is payable in monthly instalments of $19,444.44, with a
final payment due on April 15, 2000 of the entire unpaid principal balance. In
the event of any default under this note, the principal amount then due shall
bear interest at 10% per annum. The payments of principal and interest on this
note is subordinated to all "senior indebtedness" of WEC, which is defined as
all indebtedness of WEC to any and all of its creditors, secured or unsecured
and whether outstanding as of April 18, 1997 or thereafter incurred, except
indebtedness of WEC to its stockholders or affiliates. Interest and principal
payments on the notes were suspended by WEC in May 1998 in connection with the
complaint filed by Woods against the former owners of Baerts alleging that such
owners made material misrepresentations in connection with the sale of Baerts
to Woods.
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DESCRIPTION OF THE EXCHANGE DEBENTURES
Parent will issue the exchange debentures under the debenture indenture,
dated as of July 28, 1999, between Woods Equipment Company and United States
Trust Company of Texas, N.A., as trustee. The following is a summary of certain
provisions of the debenture indenture; it does not restate these provisions in
their entirety. We have filed a complete copy of the debenture indenture as an
exhibit to the registration statement of which this prospectus forms a part.
See "Where You Can Find More Information." We urge you to read the debenture
indenture because it, and not this description, define your rights as holders
of these debentures. We use the term "debentures" in this prospectus to refer
to both the outstanding notes and the exchange debentures.
The form and terms of the exchange debentures are the same as the form and
terms of the outstanding debentures except that:
. the exchange debentures bear a Series B designation and a different CUSIP
number from the outstanding debentures;
. the exchange debentures have been registered under the Securities Act
and, therefore, will not bear legends restricting their transfer; and
. the holders of the exchange debentures will not be entitled to the rights
under the registration rights agreement, including the provisions for an
increase in the interest rate on the outstanding debentures in certain
circumstances relating to the timing of the exchange offer.
The exchange debentures will evidence the same debt as the outstanding
debentures and will be entitled to the benefits of the debentures indenture.
The exchange debentures will rank equally with the outstanding debentures if
all of the outstanding debentures are not exchanged in this exchange offer.
General
The debentures are limited to $51.9 million aggregate principal amount at
maturity, plus any additional interest as a result of our failure to comply
with the registration provisions in the registration right agreement, and will
mature on July 15, 2011. Interest will accrue on the accreted value of the
debentures at 15.0% but will not be payable in cash prior to October 15, 2004.
From July 15, 2004, or from the most recent date to which interest has been
paid or provided for, interest will be payable in cash on the debentures at the
interest rate stated on the cover page, quarterly on January 15th, April 15th,
July 15th and October 15th of each year. Parent will make each interest payment
to the person in whose name the debenture is registered at the close of
business on the January 1st, April 1st, July 1st or October 1st, immediately
preceding the interest payment date. Parent will pay cash interest on overdue
principal at an annual interest rate of 2% in excess of such rate, and will pay
cash interest on overdue installments of cash interest at such higher rate to
the extent lawful.
Parent will make cash payments on the debentures, including principal,
premium and interest, by wire transfer of immediately available funds to the
accounts specified by the holders or, if no such account is specified, by
mailing a check to each holder's address, as it appears in the register of the
debentures maintained by the registrar. You may transfer and exchange the
debentures at the office of the registrar and any co-registrar. Parent will
issue the debentures in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange of debentures, but
Parent may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection with certain transfers
and exchanges.
Optional Redemption
The debentures will be redeemable at Parent's option, in whole or in part,
at any time on or after July 15, 2004, at the respective redemption price set
forth below, which is expressed as a percentage of accreted value, plus accrued
and unpaid interest to the redemption date, subject to the right of holders of
record on the
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relevant record date to receive interest due on the relevant interest payment
date, if redeemed during the 12-month period beginning on July 15, of the year
indicated below:
<TABLE>
<CAPTION>
Redemption
Period Price
------ ----------
<S> <C>
2004........................................................... 107.500%
2005........................................................... 105.000%
2006........................................................... 102.500%
2007 and thereafter............................................ 100.000%
</TABLE>
In addition, before July 15, 2002, Parent may at its option redeem all of
the outstanding debentures with the proceeds of one or more public equity
offerings, at a redemption price, expressed as a percentage of accreted value,
of 115% plus accrued interest to the redemption date, subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date; provided that such redemption must occur within
60 days of the public equity offering.
Selection and Notice of Redemption
If Parent is redeeming less than all the debentures at any time, the trustee
will select debentures on a pro rata basis, by lot or by such other method as
the trustee in its sole discretion will deem to be fair and appropriate.
Parent will redeem debentures of $1,000 in principal amount at maturity or
less in whole and not in part. Parent will cause notices of redemption to be
mailed by first-class mail at least 30 and not more than 60 days before the
redemption date to each holder's registered address.
If any debenture is to be redeemed in part only, the notice of redemption
relating to such debenture will state the portion of the principal amount
thereof to be redeemed. Parent will issue a new debenture in principal amount
equal to the unredeemed portion of the original debenture in the name of the
holder thereof upon cancellation of the original debenture. On or after the
date of redemption, interest will cease to accrue on debentures or portions
thereof called for redemption.
Ranking
The outstanding debentures are, and the exchange debentures will be, senior
unsecured obligations of Parent, rank or will rank equal in right of payment
with all existing and future senior unsecured indebtedness of Parent, are or
will be senior in right of payment to all future subordinated indebtedness of
Parent. The outstanding debentures are, and the exchange debentures will be,
effectively subordinated to any secured indebtedness of Parent to the extent of
the value of the assets securing such indebtedness. As of July 3, 1999 after
giving pro forma effect to the Acquisitions and the initial offerings, Parent
would have had no indebtedness other than the debentures and its guaranties of
WEC's obligations under the senior credit facility and the notes. Although the
debenture indenture contains limitations on the amount of additional
indebtedness that Parent may incur, under certain circumstances the amount of
such Indebtedness could be substantial or secured. See "--Certain Covenants--
Limitation on Indebtedness."
All of Parent's operations are conducted through WEC. Claims of creditors of
WEC, including trade creditors, secured creditors and creditors holding
indebtedness and guarantees issued by WEC, and claims of preferred
stockholders, if any, of WEC generally will have priority with respect to the
assets and earnings of WEC over the claims of Parent's creditors, including
holders of the debentures. Therefore, the outstanding debentures are, and the
exchange debentures will be, effectively subordinated to creditors, including
trade creditors, and preferred stockholders, if any, of Parent's existing and
future subsidiaries. At July 3, 1999, after giving pro forma effect to the
Acquisitions and the initial offerings, the total liabilities of WEC would have
been approximately $174.1 million, including trade payables. Although the
debenture indenture limits the incurrence of indebtedness and preferred stock
of certain of Parent's subsidiaries, such limitation is subject to a
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number of significant qualifications. Moreover, the debenture indenture does
not impose any limitation on the incurrence by such subsidiaries of liabilities
that are not considered indebtedness under the debenture indenture. See "--
Certain Covenants--Limitation on Indebtedness."
Same-Day Payment
The debenture indenture requires Parent to make cash payments in respect of
debentures, including principal, premium and interest, be made by wire transfer
of immediately available funds to the accounts specified by the holders thereof
or, if no such account is specified, by mailing a check to each such holder's
registered address.
Change of Control
Upon the occurrence of any of the following events (each a "change of
control"), each holder will have the right to require Parent to repurchase such
holder's debentures at a purchase price in cash equal to 101% of the accreted
value thereof plus accrued and unpaid interest, if any, to the date of
purchase, subject to the right of holders of record on the relevant record date
to receive interest due on the relevant interest payment date:
(1) Prior to the earlier to occur of the first public offering of common
stock of Parent, the permitted holders cease to be the "beneficial owner,"
as defined in Rules 13d-3 and 13d-5 under the Exchange Act, directly or
indirectly, of at least 35% of the aggregate of the total voting power of
Parent's voting stock, as a result of issuance of Parent's securities,
Parent's merger, consolidation, liquidation or dissolution, any direct or
indirect transfer of securities by Parent or otherwise. For purposes of
this clause (1) and clause (2) below, the permitted holders will be deemed
to beneficially own any voting stock of a corporation (the "specified
corporation") held by any other corporation (the "parent corporation") so
long as the permitted holders beneficially own, directly or indirectly, in
the aggregate a majority of the voting power of the voting stock of the
parent corporation.
(2) Any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act, other than one or more permitted holders, is or becomes
the "beneficial owner," as defined in clause (1) above, except that for
purposes of this clause (2) such person will be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time, directly or indirectly, of more than 35% of the total voting power of
Parent's voting stock. The foregoing will only be deemed to be a change of
control if the permitted holders "beneficially own," as defined in clause
(1) above, directly or indirectly, in the aggregate a lesser percentage of
the total voting power of Parent's voting stock than such other person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of Parent's board of directors.
For the purposes of this clause (2), such other person will be deemed to
beneficially own any voting stock of a specified corporation held by a
parent corporation, if such other person is the "beneficial owner," as
defined in this clause (2), directly or indirectly, of more than 35% of the
voting power of the voting stock of such parent corporation and the
permitted holders "beneficially own," as defined in clause (1) above,
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the voting stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation.
(3) During any period of two consecutive years, individuals who at the
beginning of such period constituted Parent's board of directors, together
with any new directors whose election by Parent's Board of Directors or
whose nomination for election by Parent's shareholders, as applicable, was
approved by a vote of a majority of Parent's directors, as applicable, then
still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority of Parent's board of
directors, as applicable, then in office.
(4) The adoption of a plan relating to Parent's liquidation or
dissolution.
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(5) The merger or consolidation of Parent with or into another person or
the merger of another person with or into Parent, or the sale of all or
substantially all of Parent's assets to another person, (other than a
person that is controlled by the permitted holders, and, in the case of any
such merger or consolidation, Parent's securities that are outstanding
immediately prior to such transaction and which represent 100% of the
aggregate voting power of Parent's voting stock are changed into or
exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving corporation that
represent immediately after such transaction, at least a majority of the
aggregate voting power of the voting stock of the surviving corporation.
Within 30 days following any change of control, Parent will mail a notice to
each holder with a copy to the trustee stating:
(1) that a change of control has occurred and that such holder has the
right to require Parent to purchase such holder's debentures at a purchase
price in cash equal to 101% of the accreted value thereof plus accrued and
unpaid interest, if any, to the date of purchase, subject to the right of
holders of record on the relevant record date to receive interest on the
relevant interest payment date;
(2) the circumstances and relevant facts regarding such change of
control, including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such change of control;
(3) the repurchase date, which will be no earlier than 30 days nor later
than 60 days from the date such notice is mailed; and
(4) the instructions determined by Parent, consistent with the covenant
described hereunder, that a holder must follow in order to have its
debentures purchased.
Parent will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of debentures pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws
or regulations conflict with the provisions of the covenant described
hereunder, Parent will comply with the applicable securities laws and
regulations and will not be deemed to have breached Parent's obligations under
the covenant described hereunder by virtue thereof.
The change of control purchase feature is a result of negotiations between
Parent and the initial purchaser. Parent's management has no present intention
to engage in a transaction involving a change of control, although it is
possible that Parent would decide to do so in the future. Subject to the
limitations discussed below, Parent could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a change of control under the debenture indenture,
but that could increase the amount of indebtedness outstanding at such time or
otherwise affect Parent's capital structure or credit ratings. Restrictions on
Parent's ability to incur additional indebtedness are contained in the covenant
described under "--Certain Covenants--Limitation on Indebtedness." Such
restrictions can only be waived with the consent of the holders of a majority
in principal amount of the debentures then outstanding. Except for the
limitations contained in such covenants, however, the debenture indenture will
not contain any covenants or provisions that may afford holders of the
debentures protection in the event of a highly leveraged transaction.
The senior credit facility restricts Parent from purchasing any debentures
prior to September 30, 2007, and will also provide that the occurrence of
certain change of control events with respect to Parent would constitute a
default thereunder. In the event a change of control occurs at a time when
Parent is prohibited from purchasing debentures, Parent could seek the consent
of the lenders under the senior credit facility to the purchase of debentures
or could attempt to refinance the borrowings that contain such prohibition. If
Parent does not obtain such a consent or repay such borrowings, Parent will
remain prohibited from purchasing debentures. In such case, Parent's failure to
purchase tendered debentures would constitute an event of default under the
debenture indenture which would, in turn, constitute a default under the senior
credit facility.
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Future indebtedness that Parent may incur may contain prohibitions on the
occurrence of certain events that would constitute a change of control or
require such indebtedness to be repurchased upon a change of control. Moreover,
the exercise by the holders of their right to require Parent to repurchase the
debentures could cause a default under such indebtedness, even if the change of
control itself does not, due to the financial effect of such repurchase on
Parent. Finally, Parent's ability to pay cash to the holders of debentures
following the occurrence of a change of control may be limited by Parent's then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required repurchases.
Certain Covenants
The debenture indenture contains covenants including, among others, the
following:
Limitation on Indebtedness. (a) Parent will not, and will not permit any of
its restricted subsidiaries to, incur, directly or indirectly, any
indebtedness; provided, however, that Parent and any restricted subsidiary may
incur indebtedness if, on the date of such Incurrence and after giving effect
thereto, the Consolidated Coverage Ratio exceeds 1.75 to 1 if such indebtedness
is incurred prior to July 31, 2001 or 2.0 to 1 if such indebtedness is incurred
thereafter.
(b) Notwithstanding the foregoing paragraph (a), Parent and its restricted
subsidiaries may incur any or all of the following indebtedness:
(1) indebtedness Incurred pursuant to the senior credit facility;
provided, however, that, after giving effect to any such incurrence, the
aggregate principal amount of such indebtedness then outstanding does not
exceed $40 million less the sum of all principal payments with respect to
such indebtedness pursuant to paragraph (a)(2)(A) of the covenant described
under "--Limitation on Sales of Assets and Subsidiary Stock";
(2) indebtedness owed to and held by Parent or any of its restricted
subsidiaries; provided, however, that (x) any subsequent issuance or
transfer of any capital stock which results in any such restricted
subsidiary ceasing to be a restricted subsidiary or any subsequent transfer
of such indebtedness, other than to Parent or any of its restricted
subsidiaries, will be deemed, in each case, to constitute the incurrence of
such indebtedness by the obligor thereon that is not permitted to be
incurred under this clause (2) and (y) if Parent is the obligor on such
indebtedness, such indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the debenture;
(3) the debentures, the notes issued by WEC on the July 28, 1999 and
their respective exchange notes;
(4) indebtedness outstanding on the July 28, 1999, other than
indebtedness described in clause (1), (2) or (3) of this covenant;
(5) indebtedness of a subsidiary incurred and outstanding on or prior to
the date on which such subsidiary was acquired by Parent, other than
indebtedness incurred in connection with, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such subsidiary became a
subsidiary or was acquired by Parent; provided, however, that on the date
of such acquisition and after giving effect thereto, Parent would have been
able to issue at least $1.00 of additional indebtedness pursuant to clause
(a);
(6) refinancing indebtedness in respect of indebtedness incurred
pursuant to paragraph (a) above or pursuant to clause (3), (4) or (5) above
or this clause (6);
(7) hedging obligations or commodity agreements not entered into for
speculative purposes and directly related to indebtedness permitted to be
incurred by Parent or any of its restricted subsidiaries pursuant to the
debenture indenture;
(8) the incurrence by Parent or any of its restricted subsidiaries of
indebtedness represented by capital lease obligations, mortgage financings
or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of Parent
or such restricted subsidiaries, in an aggregate principal amount to not
exceed $5.0 million at any time outstanding;
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(9) the guarantee by Parent of indebtedness of a restricted subsidiary
that was permitted to be incurred by another provision of this covenant;
(10) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any indebtedness in the form of
additional indebtedness with the same terms, and the payment of dividends
on disqualified stock in the form of additional shares of the same class of
disqualified stock will not be deemed to be an incurrence of Indebtedness
or an issuance of disqualified stock for purposes of this covenant;
provided, in each case, that the amount thereof is included in Consolidated
Interest Expense of Parent as accrued;
(11) indebtedness arising from agreements of Parent or a restricted
subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a subsidiary, other than
guarantees of indebtedness incurred by any person acquiring all or any
portion of such business, assets or a subsidiary for the purpose of
financing such acquisition; provided, however, that (a) such indebtedness
is not reflected on the balance sheet of Parent or any restricted
subsidiary with contingent obligations referred to in a footnote to
financial statements and not otherwise reflected on the balance sheet will
not be deemed to be reflected on such balance sheet for purposes of this
clause (a) and (b) the maximum assumable liability in respect of all such
indebtedness shall at no time exceed the gross proceeds including noncash
proceeds, with the fair market value of such noncash proceeds being
measured at the time received and without giving effect to any subsequent
changes in value actually received by Parent and its restricted
subsidiaries in connection with such disposition;
(12) the incurrence of obligations in respect of performance and surety
bonds provided by Parent or any of its restricted subsidiaries in the
ordinary course of business;
(13) the incurrence of indebtedness consisting of guarantees of loans
made to management for the purpose of permitting management to purchase
equity interests of Parent, in an amount not to exceed $1.0 million at any
one time outstanding;
(14) indebtedness of Parent or any restricted subsidiary arising from
the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently, except in the case of daylight
overdrafts, drawn against insufficient funds in the ordinary course of
business, provided that such indebtedness is satisfied within five business
days of incurrence;
(15) indebtedness of Parent or WEC issued to directors, employees,
officers or consultants of Parent, WEC or a restricted subsidiary in
connection with the redemption or purchase of capital stock of Parent or
WEC that, by its terms, is subordinated to the debentures, is not secured
by any assets of the Parent, WEC or its Restricted Subsidiaries and does
not require cash payments prior to the stated maturity of the debentures
and refinancing indebtedness in respect thereof, in an aggregate principal
amount which, when added together with the amount of indebtedness incurred
pursuant to this clause (15) and then outstanding, does not exceed $1.0
million; and
(16) indebtedness in an aggregate principal amount which, together with
Parent's other indebtedness outstanding on the date of such incurrence,
other than indebtedness permitted by clauses (1) through (15) above or
paragraph (a), does not exceed $10 million at any one time outstanding.
(c) Notwithstanding the foregoing, neither Parent nor any of its restricted
subsidiaries will incur any indebtedness pursuant to the foregoing paragraph
(b) if the proceeds thereof are used, directly or indirectly, to refinance any
of Parent's subordinated obligations unless such indebtedness will be
subordinated to the debentures to at least the same extent as such subordinated
obligations.
(d) For purposes of determining compliance with the foregoing covenant, (1)
in the event that an item of indebtedness meets the criteria of more than one
of the types of indebtedness described above, Parent, in its sole discretion,
will classify such item of indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (2) an
item of indebtedness may be divided and classified in more than one of the
types of indebtedness described above.
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(e) If Parent incurs indebtedness which is subordinate or junior in right
of payment to any other indebtedness of Parent, Parent shall cause such
subordinate or junior indebtedness to be subordinated to the debentures to the
same extent as such other indebtedness.
(f) Parent will not permit any unrestricted subsidiary to incur any
indebtedness other than non-recourse debt; provided, however, that if any such
indebtedness ceases to be non-recourse debt, such event will be deemed to
constitute an incurrence of indebtedness by Parent or any of its restricted
subsidiaries.
Limitation on Restricted Payments. (a) Parent will not, and will not permit
any restricted subsidiary, directly or indirectly, to make a restricted
payment if at the time Parent or such restricted subsidiary makes such
restricted payment:
(1) a default will have occurred and be continuing or would result
therefrom;
(2) Parent is not able to Incur an additional $1.00 of indebtedness
pursuant to paragraph (a) of the covenant described under "--Limitation on
Indebtedness"; or
(3) the aggregate amount of such restricted payment and all other
restricted payments since July 28, 1999 would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period,
treated as one accounting period, from July 3, 1999 to the end of the
most recent fiscal quarter ending at least 45 days prior to the date of
such restricted payment, or, in case such Consolidated Net Income will
be a deficit, minus 100% of such deficit;
(B) 100% of the aggregate Net Cash Proceeds received by Parent from
the issuance or sale of Parent's capital stock (other than disqualified
stock) or an equity contribution from a holder of Parent's capital stock
subsequent to July 28, 1999, other than an issuance or sale to any of
Parent's subsidiaries and other than an issuance or sale to an employee
stock ownership plan or to a trust established by Parent or any of its
subsidiaries for the benefit of their employees, or from the issue or
sale of convertible or exchangeable disqualified stock or convertible or
exchangeable debt securities of Parent that have been converted into or
exchanged for such equity interests, other that equity interests or
disqualified stock or debt securities sold to Parent or a subsidiary of
Parent, together with the net proceeds received by Parent upon such
conversion or exchange, if any, plus;
(C) an amount equal to the aggregate net proceeds (including the fair
market value, as determined in good faith by a resolution of the Board
of Directors of Parent, of property other than cash that would
constitute marketable securities or a related business so long as there
is no restriction on the sale of such property) of any
(1) sale or other disposition of Investments made by Parent and its
restricted subsidiaries, or
(2) dividend from, or the sale of the stock of, an unrestricted
subsidiary;
provided, however, that the foregoing amount shall not exceed the amount of
such Investment previously made, and treated as a restricted payment, by
Parent or any restricted subsidiary, and, in the case of any such clause (2),
the amount of Investments previously made, and treated as a restricted
payment, by Parent or any restricted subsidiary in such unrestricted
subsidiary.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(1) any acquisition of any capital stock of Parent made out of the
proceeds of the substantially concurrent sale of, or made by exchange for,
Parent's capital stock, other than disqualified stock and other than
capital stock issued or sold to any of Parent's subsidiaries or an employee
stock ownership plan or to a trust established by Parent or any of its
subsidiaries for the benefit of Parent or their employees; provided,
however, that (A) such acquisition of capital stock will be excluded in the
calculation of the amount of restricted payments and (B) the Net Cash
Proceeds from such sale will be excluded from the calculation of amounts
under clause (3)(B) of paragraph (a) above;
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(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of subordinated obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, indebtedness of Parent's which is permitted to be incurred pursuant to
the covenant described under "--Limitation on Indebtedness"; provided,
however, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value will be excluded in the calculation of
the amount of restricted payments;
(3) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of disqualified stock made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
disqualified stock of Parent which is permitted to be issued pursuant to
the debenture indenture; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value will be
excluded in the calculation of the amount of restricted payments;
(4) dividends paid or the consummation at any irrevocable redemption
within 60 days after the date of declaration or notice of redemption
thereof if at such date of declaration or notice such dividend or
redemption would have complied with this covenant; provided, however, that
such dividend will be included in the calculation of the amount of
restricted payments;
(5) so long as no default has occurred or will occur as a result of such
payment, the repurchase or other acquisition of shares of, or options to
purchase shares of, Parent's common stock or the common stock of any of
Parent's subsidiaries from former employees or former directors of Parent's
or any of Parent's subsidiaries, or permitted transferees of such former
employees or former directors, pursuant to the terms of the agreements,
including employment agreements, or plans or amendments thereto approved by
Parent's board of directors under which such individuals purchase or sell
or are granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases and other
acquisitions will not exceed $1 million in any calendar year; provided
further, however, that such repurchases and other acquisitions will be
deducted in the calculation of the amount of restricted payments;
(6) prepayments, repayments or purchases of indebtedness pursuant to
clause (2)(D) under "--Limitation on Asset Sales and Subsidiary Stocks";
provided, however, that such prepayment, repayment or purchase will be
included in the calculation of the amount of restricted payments;
(7) repurchase of equity interests of Parent deemed to occur upon
exercise of stock options to the extent equity interests represent a
portion of the exercise price of such options; or
(8) so long as no default has occurred and is continuing or would be
caused thereby, other restricted payments in an aggregate amount not to
exceed $3 million since the date of the debenture indenture.
The amount of all restricted payments, other than cash, shall be the fair
market value on the date of the restricted payment of the asset(s) or
securities proposed to be transferred or issued to or by Parent or such
restricted subsidiary, as the case may be, pursuant to the restricted payment.
The fair market value of any assets or securities that are required to be
valued by this covenant shall be determined in good faith by the board of
directors whose resolution with respect thereto shall be conclusive. The board
of directors' determination must be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of national standing if
the fair market value exceeds $10.0 million.
The board of directors of Parent may designate any restricted subsidiary to
be an unrestricted subsidiary if such designation would not cause a default.
For purposes of making such determination, all outstanding Investments by
Parent and its restricted subsidiaries, except to the extent repaid in cash, in
the subsidiary so designated will be deemed to be restricted payments at the
time of such designation and will reduce the amount available for restricted
payments under clause (a) of this covenant. All such outstanding Investments
will be deemed to constitute Investments in an amount equal to the fair market
value of such Investments as the time of such designation. Such designation
will only be permitted if such restricted payment would be permitted at such
time and if such restricted subsidiary otherwise meets the definition of an
unrestricted subsidiary.
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Limitation on Restrictions on Distributions from Restricted Subsidiaries.
Parent will not, and will not permit any of Parent's restricted subsidiaries
to, create or otherwise cause or permit to exist or become effective any
consensual encumbrance or consensual restriction on the ability of any
restricted subsidiary to:
(1) pay dividends or make any other distributions on its capital stock
to Parent or any of its restricted subsidiaries or pay any indebtedness
owed to Parent,
(2) make any loans or advances to Parent or
(3) transfer any of its property or assets to Parent,
except:
(1) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on July 28, 1999, including restrictions under the
debenture indenture, the debentures, the notes indenture, the notes and the
guarantees of the notes;
(2) any encumbrance or restriction with respect to a restricted
subsidiary pursuant to an agreement relating to any indebtedness incurred
by such restricted subsidiary on or prior to the date on which such
restricted subsidiary was acquired by Parent, other than indebtedness
incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such restricted subsidiary became a
restricted subsidiary or was acquired by Parent, and outstanding on such
date;
(3) any such encumbrance or restriction consisting of customary non-
assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder;
(4) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing indebtedness of a restricted subsidiary to
the extent such restrictions restrict the transfer of the property subject
to such security agreements or mortgages; provided that such security
agreements or mortgages constitute Permitted Liens and such indebtedness is
permitted to be incurred under the debenture indenture;
(5) any restriction with respect to a restricted subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the capital stock or assets of such restricted subsidiary
pending the closing of such sale or disposition;
(6) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
and
(7) restrictions on the transfer of assets subject to any Lien permitted
under the debenture indenture imposed by the holder of such Lien;
(8) encumbrances or restrictions existing under or arising pursuant to
credit facilities entered into in accordance with the debenture indenture;
provided that the encumbrances or restrictions in such credit facilities
are not materially more restrictive than those contained in the senior
credit facility as in effect on the date hereof;
(9) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the first paragraph of this covenant;
and
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(11) any agreement or instrument governing capital stock, other than
disqualified stock, of any person that is in effect on the date such person
is acquired by Woods or a restricted subsidiary; and
(12) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (11) above; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good
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faith judgment of the board of directors of Parent, not materially more
restrictive with respect to such dividend and other payment restrictions
than those contained in the dividends or other payment restrictions prior
to such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing.
Limitation on Sales of Assets and Subsidiary Stock. (a) Parent will not, and
will not permit any of Parent's restricted subsidiaries to, directly or
indirectly, consummate any Asset Disposition unless:
(1) Parent or such restricted subsidiary receives consideration at the
time of such Asset Disposition at least equal to the fair market value,
including as to the value of all non-cash consideration, as determined in
good faith by Parent's board of directors, of the shares and assets subject
to such Asset Disposition and at least 75% of the consideration thereof
received by Parent or such restricted subsidiary is in the form of cash or
cash equivalents or marketable securities and
(2) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Parent or such restricted subsidiary, as the case
may be;
(A) first, to the extent Parent elects, or is required by the terms
of any indebtedness, to prepay, repay, redeem or purchase indebtedness
under the senior credit facility or indebtedness, other than any
disqualified stock, of a restricted subsidiary required to be repaid
upon such Asset Sale, including the notes, in each case other than
indebtedness owed to Parent or any of its affiliates, within one year
from the later of the date of such Asset Disposition or the receipt of
such Net Available Cash;
(B) second, to the extent of the balance of such Net Available Cash
after application in accordance with clause (A), to the extent Parent
elects, to acquire Additional Assets within one year from the later of
the date of such Asset Disposition or the receipt of such Net Available
Cash;
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B) and to the
extent the Net Available Cash is permitted to be distributed to Parent
pursuant to the terms of the indenture governing the notes, to make an
offer to the holders of the debentures, and, to holders of other
indebtedness that ranks equals with the debentures designated by
Parent, to purchase debentures, and such other equal indebtedness,
pursuant to and subject to the conditions contained in the debenture
indenture; and
(D) fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C) to (x)
the acquisition by Parent or any of its restricted subsidiaries of
Additional Assets or (y) the prepayment, repayment or purchase of
Parent's indebtedness (other than any disqualified stock and other than
indebtedness owed to any of Parent's affiliates or indebtedness of any
subsidiary, other than indebtedness owed to Parent or any of its
affiliates, in each case within one year from the later of the receipt
of such Net Available Cash and the date the offer described in clause
(b) below is consummated;
provided, however, that in connection with any prepayment, repayment or
purchase of indebtedness pursuant to clause (A), (C) or (D) above, Parent or
any such restricted subsidiary will permanently retire such indebtedness and
will cause the related loan commitment, if any, to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this paragraph, Parent and its
restricted subsidiaries will not be required to apply any Net Available Cash in
accordance with this paragraph except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this paragraph exceeds $1.0 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash will be invested in
Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: any liabilities, as shown on Parent's or such Restricted
Subsidiary's most recent balance sheet, of Parent or any restricted subsidiary,
other than contingent liabilities and liabilities that are by their terms
subordinated to the debentures, that are assumed by the transferee of any such
assets; and any securities, notes or other obligations received by Parent or
any such restricted subsidiary from such transferee that are converted, sold or
exchanged by Parent or such restricted subsidiary into cash within 30 days of
the related Asset Sale to the extent of the cash received in that conversation.
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(b) In the event of an Asset Disposition that requires the purchase of the
debentures, and other pari passu indebtedness pursuant to clause (a)(2)(C)
above, Parent will be required to purchase debentures tendered pursuant to an
offer by Parent for the debentures and other pari passu indebtedness at a
purchase price of 100% of their accreted value, without premium, plus accrued
but unpaid interest, or, in respect of such other pari passu indebtedness, 100%
of the principal amount or such lesser price, if any, as may be provided for by
the terms of such pari passu indebtedness, in accordance with the procedures,
including prorating in the event of oversubscription, set forth in the
debenture indenture. If the aggregate purchase price of debentures, and any
other pari passu indebtedness, tendered pursuant to such offer is less than the
Net Available Cash allotted to the purchase thereof, Parent will be required to
apply the remaining Net Available Cash in accordance with clause (a)(2)(D)
above. Parent will not be required to make such an offer to purchase
debentures, and other pari passu indebtedness, pursuant to this covenant if the
Net Available Cash available therefor is less than $5.0 million, which lesser
amount will be carried forward for purposes of determining whether such an
offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition.
(c) Notwithstanding paragraphs (a) and (b) above, Parent and its restricted
subsidiaries will be permitted to consummate an Asset Disposition with respect
to assets in any transaction or series of related transactions with a fair
market value of $2.0 million or less without complying with such paragraphs to
the extent (i) at least 75% of the consideration for such Asset Sale
constitutes cash, cash equivalents, marketable securities or Productive Assets
and (ii) such Asset Disposition is for fair market value, as determined in good
faith by Parent's Board of Directors; provided that any consideration not
constituting Productive Assets received by Parent or any restricted subsidiary
in connection with an Asset Disposition permitted to be consummated under this
paragraph shall be subject to the provisions of paragraphs (a) and (b) above
and included in Net Available Cash.
(d) Parent will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of debentures pursuant to this covenant. To
the extent that the provisions of any securities laws or regulations conflict
with provisions of this covenant, Parent will comply with the applicable
securities laws and regulations and will not be deemed to have breached
Parent's obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions. (a) Parent will not, and will not
permit any restricted subsidiary to, enter into or permit to exist any
transaction, including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service, with any of
Parent's affiliates (an "affiliate transaction") unless the terms thereof:
(1) are no less favorable to Parent or such Restricted Subsidiary than
those that could be obtained at the time of such transaction in arm's-
length dealings with a Person who is not such an affiliate,
(2) if such affiliate transaction involves an amount in excess of $1
million, (A) are set forth in writing and (B) have been approved by a
majority of the members of Parent's board of directors having no personal
stake in such affiliate transaction; and
(3) if such affiliate transaction involves as amount in excess of $10
million, have been determined by nationally recognized investment banking
or accounting firm to be fair, from a financial standpoint, to Parent and
its restricted subsidiaries.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(1) any restricted payment permitted to be paid pursuant to the covenant
described under "--Limitation on Restricted Payments,"
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by Parent's
board of directors,
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(3) the grant of stock options or similar rights to Parent's employees
and directors pursuant to plans approved by Parent's board of directors,
(4) loans or advances to employees in the ordinary course of business in
accordance with Parent's past practices or past practices of Parent's
restricted subsidiaries, but in any event not to exceed $1 million in the
aggregate outstanding at any one time,
(5) the payment of reasonable fees to Parent's directors and directors
of restricted subsidiaries who are not Parent's employees or employees of
restricted subsidiaries,
(6) any affiliate transaction between Parent and a restricted subsidiary
or between restricted subsidiaries,
(7) the issuance or sale of any capital stock of Parent other than
Disqualified Stock,
(8) any employment agreement with reasonable terms entered into by
Parent or any of its restricted subsidiaries in the ordinary course of
business and consistent with the past practice of Parent or such restricted
subsidiary,
(9) transactions with a person that is an affiliate of Parent solely
because Parent owns an equity interest in such person so long as no other
affiliate of Parent owns an interest in such person,
(10) the payment of transaction, management, consulting and advisory
fees and related expenses to Madison Dearborn Partners, LLC and its
Affiliates; provided, that such fees shall not, in the aggregate, exceed:
(a) in the case of a management fee, $600,000 in any twelve-month
period, and
(b) in the case of a transaction fee, 1.0% of the total equity value
of, plus the indebtedness assumed from, the business acquired in such
transaction or series of related transactions;
(11) reasonable fees and expenses and compensation paid to, and
indemnity provided on behalf of, officers, directors or employees of Parent
or any subsidiary as determined in good faith by the board of directors of
Parent or senior management; and
(12) any agreement as in effect as of July 28, 1999 or any amendment
thereto so long as such amendment is not more disadvantageous to the
holders in any material respect.
Limitation on Liens. Parent will not, and will not permit any restricted
subsidiary to, directly or indirectly, create or permit to exist any Lien on
any of its property or assets, including capital stock, whether owned on July
28, 1999 or thereafter acquired, securing any obligation, other than Permitted
Liens, unless contemporaneously therewith effective provision is made to secure
the debentures equally and ratably with, or on a senior basis to the
subordinated obligations, such obligation for so long as such obligation is so
secured.
Limitation on the Sale or Issuance of Preferred Stock of Restricted
Subsidiaries. Parent will not sell or otherwise dispose of any capital stock of
a restricted subsidiary, and will not permit any restricted subsidiary,
directly or indirectly, to issue or sell or otherwise dispose of any of its
preferred stock except to Parent or any of its wholly owned subsidiaries.
Limitation on Sale/Leaseback Transactions. Parent will not, and will not
permit any restricted subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless
(1) Parent or such restricted subsidiary would be entitled to (A) incur
indebtedness in an amount equal to the attributable debt with respect to
such Sale/Leaseback Transaction pursuant to the covenant described under
"--Certain Covenants--Limitation on Indebtedness" and (B) create a Lien on
such property securing such attributable indebtedness without equally and
ratably securing the debentures pursuant to the covenant described under
"--Certain Covenants--Limitation on Liens," and
(2) the transfer of such property is permitted by, and Parent or such
restricted subsidiary applies the proceeds of such transaction in
compliance with, the covenant described under "--Certain Covenants--
Limitation on Sales of Assets and Subsidiary Stock."
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Merger and Consolidation. Parent will not consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all Parent's assets to, any person, unless:
(1) the resulting, surviving or transferee person (the "successor
company") will be a person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the successor company, if not Parent, will expressly assume, by an
indenture supplemental thereto, executed and delivered to the trustee, in
form satisfactory to the trustee, all Parent's obligations under the
debentures and the debenture indenture;
(2) immediately after giving effect to such transaction, and treating
any indebtedness which becomes an obligation of the successor company or
any subsidiary as a result of such transaction as having been incurred by
such successor company or such subsidiary at the time of such transaction,
no default will have occurred and be continuing;
(3) immediately after giving effect to such transaction, the successor
company would be able to Incur an additional $1.00 of indebtedness pursuant
to paragraph (a) of the covenant described under "--Limitation on
indebtedness"; and
(4) Parent will have delivered to the trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture, if any, comply with the debenture
indenture.
The successor company will be Parent's successor and will succeed to, and be
substituted for, and may exercise every right and power Parent has under the
debenture indenture, but Parent's predecessor in the case of a conveyance,
transfer or lease will not be released from the obligation to pay the principal
of and interest on the debentures.
SEC Reports. Notwithstanding that Parent may not be subject to the reporting
requirements of Section 13 or 15 (d) of the Exchange Act, Parent will file with
the SEC, to the extent the SEC will accept such filings, and provide the
trustee and debentureholders with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections,
such information, documents and other reports to be so filed and provided at
the times specified for the filing of such information, documents and reports
under such Sections.
Limitations on Status as Investment Company. The debenture indenture
prohibits Parent and its subsidiaries from becoming "investment companies" (as
that term is defined in the Investment Company Act of 1940, as amended), or
from otherwise becoming subject to regulation under the Investment Company Act.
Defaults
An event of default is defined in the debenture indenture as:
(1) a default in the payment of cash interest on the debentures when
due, continued for 30 days,
(2) a default in the payment of principal of any debenture when due at
its stated maturity, upon optional redemption, upon required repurchase,
upon declaration or otherwise,
(3) Parent's failure to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above,
(4) Parent's failure to comply for 30 days after notice with any of its
obligations in the covenants described above under "Change of Control,"
other than a failure to purchase debentures, or under "--Certain Covenants"
under "--Limitation on Indebtedness," "--Limitation on Restricted
Payments," "--Limitation on Restrictions on Distributions from Restricted
Subsidiaries" or "--Limitation on Sales of Assets and Subsidiary Stock,"
other than a failure to purchase debentures, "--Limitation on Affiliate
Transactions," "--Limitation on the Sale or Issuance of Preferred Stock of
Restricted Subsidiaries" or "--SEC Reports,"
(5) Parent's failure to comply for 60 days after notice with its other
agreements contained in the debenture indenture,
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(6) indebtedness of Parent or any of its significant subsidiaries is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such indebtedness unpaid or accelerated exceeds $5 million (the
"cross acceleration provision"),
(7) certain events of bankruptcy, insolvency or reorganization of Parent
or any of its significant subsidiaries (the "bankruptcy provisions"),
(8) any judgment or decree for the payment of money in excess of $5
million is entered against Parent or any of its significant subsidiaries,
remains outstanding for a period of 90 days following such judgment and is
not discharged, waived or stayed within 10 days after notice (the "judgment
default provision").
However, a default under clauses (4) , (5) and (8) will not constitute an
event of default until the trustee or the holders of 25% in principal amount of
the outstanding debentures notify Parent of the default and Parent does not
cure such default within the time specified after receipt of such notice.
If an event of default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount at maturity of the outstanding debentures
may declare the principal of and accrued but unpaid interest on all the
debentures to be due and payable. Upon such a declaration, such principal and
interest will be due and payable immediately. If an event of default relating
to certain events of bankruptcy, insolvency or reorganization of Parent occurs
and is continuing, the principal of and interest on all the debentures will
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the trustee or any holders of the debentures.
Under certain circumstances, the holders of a majority in principal amount
at maturity of the outstanding debentures may rescind any such acceleration
with respect to the debentures and its consequences. Subject to the provisions
of the debenture indenture relating to the duties of the trustee, in case an
event of default occurs and is continuing, the trustee will be under no
obligation to exercise any of the rights or powers under the debenture
indenture at the request or direction of any of the holders of the debentures
unless such holders have offered to the trustee reasonable indemnity or
security against any loss, liability or expense.
Except to enforce the right to receive payment of principal, premium, if
any, or interest when due, no holder of a debenture may pursue any remedy with
respect to the debenture indenture or the debentures unless:
(1) such holder has previously given the trustee notice that an event of
default is continuing,
(2) holders of at least 25% in principal amount at maturity of the
outstanding debentures have requested the trustee to pursue the remedy,
(3) such holders have offered the trustee reasonable security or
indemnity against any loss, liability or expense,
(4) the trustee has not complied with such request within 60 days after
the receipt thereof and the offer of security or indemnity and
(5) the holders of a majority in principal amount at maturity of the
outstanding debentures have not given the trustee a direction inconsistent
with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount at maturity of
the outstanding debentures are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
trustee or of exercising any trust or power conferred on the trustee. The
trustee, however, may refuse to follow any direction that conflicts with
law or the debenture indenture or that the trustee determines is unduly
prejudicial to the rights of any other holder of a debenture or that would
involve the trustee in personal liability.
The debenture indenture provides that if a default occurs and is continuing
and is known to the trustee, the trustee must mail to each holder of the
debentures notice of the default within 90 days after it occurs. Except in the
case of a default in the payment of principal of or interest on any debenture,
the trustee may withhold notice if and so long as a committee of its trust
officers determines that withholding notice is not opposed to
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the interest of the holders of the debentures. In addition, Parent is required
to deliver to the trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any default that
occurred during the previous year. Parent is also required to deliver to the
trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain defaults, their status and what action
Parent is taking or proposes to take in respect thereof.
Amendments and Waivers
Subject to certain exceptions, the debenture indenture may be amended with
the consent of the holders of a majority in principal amount at maturity of the
debentures then outstanding, including consents obtained in connection with a
tender offer or exchange for the debentures, and any past default or compliance
with any provisions may also be waived with the consent of the holders of a
majority in principal amount at maturity of the debentures then outstanding.
However, without the consent of each holder of an outstanding debenture
affected thereby, no amendment may, among other things:
(1) reduce the amount of debentures whose holders must consent to an
amendment,
(2) reduce the rate of or extend the time for payment of interest on any
debenture or make any change to the calculation of the accreted value of
the debentures,
(3) reduce the principal of or extend the stated maturity of any
debenture,
(4) reduce the amount payable upon the redemption of any debenture or
change the time at which any debenture may be redeemed as described under
"--Optional Redemption,"
(5) make any debenture payable in money other than that stated in the
debenture,
(6) impair the right of any holder of the debentures to receive payment
of principal of and interest on such holder's debentures on or after the
due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such holder's debentures, or
(7) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
Without the consent of any holder of the debentures, Parent and the trustee
may amend the debenture indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of
Parent's obligations under the debenture indenture, to provide for
uncertificated debentures in addition to or in place of certificated
debentures, provided that the uncertificated debentures are issued in
registered form for purposes of Section 163(f) of the U.S. tax code, or in a
manner such that the uncertificated debentures are described in Section
163(f)(2)(B) of the U.S. tax code, to add guarantees with respect to the
debentures, to secure the debentures, to add to Parent's covenants for the
benefit of the holders of the debentures or to surrender any right or power
conferred upon Parent, to make any change that does not adversely affect the
rights of any holder of the debentures or to comply with any requirement of the
SEC in connection with the qualification of the debenture indenture under the
Trust Indenture Act.
The consent of the holders of the debentures is not necessary under the
debenture indenture to approve the particular form of any proposed amendment.
It is sufficient if such consent approves the substance of the proposed
amendment.
After an amendment under the debenture indenture becomes effective, Parent
is required to mail to holders of the debentures a notice briefly describing
such amendment. However, the failure to give such notice to all holders of the
debentures, or any defect therein, will not impair or affect the validity of
the amendment.
Transfer
The debentures will be issued in registered form and will be transferable
only upon the surrender of the debentures being transferred for registration of
transfer. Parent may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.
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Defeasance
At any time Parent may terminate all its obligations under the debentures
and the debenture indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the debentures, to replace mutilated,
destroyed, lost or stolen debentures and to maintain a registrar and paying
agent in respect of the debentures. At any time Parent may terminate its
obligations under "change of control" and under the covenants described under
"--Certain Covenants," other than the covenant described under "--Merger and
Consolidation", the operation of the cross acceleration provision, the
bankruptcy provisions with respect to significant subsidiaries and the judgment
default provision described under "--Defaults" above and the limitations
contained in clause (3) and (4) under "--Certain Covenants--Merger and
Consolidation" above ("covenant defeasance").
Parent may exercise its legal defeasance option notwithstanding Parent's
prior exercise of its covenant defeasance option. If Parent exercises its legal
defeasance option, payment of the debentures may not be accelerated because of
an event of default with respect thereto. If Parent exercises its covenant
defeasance option, payment of the debentures may not be accelerated because of
an event of default specified in clause (4), (6), (7) (with respect only to
Significant Subsidiaries), (8) or (9) under "--Defaults" above or because
Parent failed to comply with clause (3) or (4) under "--Certain Covenants--
Merger and Consolidation" above.
In order to exercise either defeasance option, Parent must irrevocably
deposit in trust (the "defeasance trust") with the trustee money or U.S.
Government Obligations for the payment of principal and interest on the
debentures to redemption or maturity, as the case may be, and must comply with
certain other conditions, including delivery to the trustee of an opinion of
counsel to the effect that holders of the debentures will not recognize income,
gain or loss for Federal income tax purposes as a result of such deposit and
defeasance and will be subject to Federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and, in the case of legal defeasance
only, such opinion of counsel must be based on a ruling of the IRS or other
change in applicable Federal income tax law.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Parent, as
such, shall have any liability for any obligations of Parent under the
debentures, the debenture indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creations. Each holder of debentures
by accepting a debenture waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the debentures. The
waiver may not be effective to waive liabilities under the federal securities
laws.
Concerning the Trustee
United States Trust Company of Texas, N.A. is the trustee under the
debenture indenture and has been appointed by Parent as registrar and paying
agent with regard to the debentures.
The debenture indenture contains certain limitations on the rights of the
trustee, should it become a creditor of Parent, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The trustee will be permitted to engage in
other transactions; provided, however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
The holders of a majority in principal amount at maturity of the outstanding
debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the trustee,
subject to certain exceptions. The debenture indenture provides that if an
event of default occurs and is not cured, the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the trustee will be
under no obligation to exercise
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any of its rights or powers under the debenture indenture at the request of any
holder of debentures, unless such holder will have offered to the trustee
security and indemnity satisfactory to it against any loss, liability or
expense and then only to the extent required by the terms of the debenture
indenture.
Governing Law
The debenture indenture provides that it and the debentures will be governed
by, and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
Certain Definitions
"accreted value" means, as of any date prior to July 15, 2004, an amount per
$1,000 principal amount at maturity of debentures that is equal to the sum of
(a) the initial offering price ($481.45 per $1,000 principal amount at maturity
of debentures) of such debentures and (b) the portion of the excess of the
principal amount of such debentures over such initial offering price which
shall have been amortized through such date, such amount to be so amortized on
a daily basis and compounded quarterly on each January 15th, April 15th,
July 15th and October 15th, commencing October 15, 1999, at the rate of 15% per
annum from the date of original issue of the debentures through the date of
determination computed on the basis of a 360-day year of twelve 30-day months,
and as of any date on or after July 15, 2004, the principal amount of each
debenture.
"Additional Assets" means
(1) any property or assets, other than indebtedness and capital stock,
in a Related Business;
(2) the capital stock of a person that becomes a restricted subsidiary
as a result of the acquisition of such capital stock by Parent or a
restricted subsidiary; or
(3) capital stock constituting a minority interest in any person that at
such time is a Restricted Subsidiary; provided, however, that any such
restricted subsidiary described in clauses (2) or (3) above is primarily
engaged in a Related Business.
"affiliate" of any specified person means any other person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants--Limitation on
Restricted Payments," "--Certain Covenants--Limitation on Affiliate
Transactions" and "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, "affiliate" will also mean any beneficial owner of
Parent's capital stock representing 10% or more of the total voting power of
the voting stock on a fully diluted basis or of rights or warrants to purchase
such capital stock whether or not currently exercisable and any person who
would be an affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition or
series of related sales, leases, transfers or dispositions by Parent or any
restricted subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of
(1) any shares of capital stock of a restricted subsidiary other than
directors' qualifying shares or shares required by applicable law to be
held by a person other than Parent or a restricted subsidiary,
(2) all or substantially all the assets of any division or line of
business of Parent's or any restricted subsidiary or
(3) any other assets of Parent or any restricted subsidiary outside of
Parent's ordinary course of business or such restricted subsidiary.
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Notwithstanding the preceding, the following items shall not be deemed to be
Asset Dispositions:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(2) a transfer of assets between or among Parent and its wholly owned
subsidiaries,
(3) an issuance of Equity Interests by a wholly owned subsidiary to
Parent or to another wholly owned subsidiary;
(4) the sale, license or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business;
(5) the sale or other disposition of cash or cash equivalents or
marketable securities;
(6) a restricted payment that is permitted by the covenant described
above under the caption "--Certain Covenants--Limitation on Restricted
Payments."
"Attributable Debt" when used with respect to any Sale/Leaseback Transaction
means, as at the time of determination, the present value, discounted at the
interest rate borne by the debentures, compounded annually, of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction, including any period for
which such lease has been extended.
"average life" means, as of the date of determination, with respect to any
indebtedness or preferred stock, the quotient obtained by dividing (1) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such indebtedness or
redemption or similar payment with respect to such preferred stock multiplied
by the amount of such payment by (2) the sum of all such payments.
"banks" has the meaning specified in the credit agreement.
"bank indebtedness" means all obligations pursuant to the senior credit
facility.
"board of directors" means Parent's board of directors or any committee
thereof duly authorized to act on behalf of such board.
"Business Day" means each day which is not a legal holiday.
"capital lease obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation will be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof will be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"capital stock" of any person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in, however designated, equity of such person, including any
preferred stock, but excluding any debt securities convertible into such
equity.
"cash equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guarantee or insured by the
Untied States government or any agency or instrumentality thereof, provided
that the full faith and credit of the United States is pledged in support
thereof, having maturities of no more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding twelve months and overnight bank
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deposits, in each case, with any lender party to the credit agreement or
with any domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institutions meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within twelve months after the date of acquisition; and
(6) money marked funds at least 95% of the assets of which constitute
cash equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Code" means the Internal Revenue Code of 1986, as amended.
"commodity agreement" means in respect of a person, any commodity futures
contract, commodity option or other similar agreement or arrangement designed
to protect such person against fluctuations in the price of energy, commodities
and raw materials.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (1) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters prior to the date of such determination to (2)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that
(1) if Parent or any restricted subsidiary has incurred any indebtedness
since the beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an incurrence of indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period will be calculated after giving effect on
a pro forma basis to such Indebtedness as if such Indebtedness had been
incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period,
(2) if Parent or any restricted subsidiary has repaid, repurchased,
defeased or otherwise discharged any indebtedness since the beginning of
such period or if any indebtedness is to be repaid, repurchased, defeased
or otherwise discharged (in each case other than indebtedness incurred
under any revolving credit facility unless such indebtedness has been
permanently repaid and has not been replaced) on the date of the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio, EBITDA and Consolidated Interest Expense for such period will be
calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as Parent or such restricted subsidiary has
not earned the interest income actually earned during such period in
respect of cash or temporary cash investments used to repay, repurchase,
defease or otherwise discharge such indebtedness,
(3) if since the beginning of such period Parent or any restricted
subsidiary will have made any Asset Disposition, the EBITDA for such period
will be reduced by an amount equal to the EBITDA, if positive, directly
attributable to the assets which are the subject of such Asset Disposition
for such period, or increased by an amount equal to the EBITDA, if
negative, directly attributable thereto for such period and Consolidated
Interest Expense for such period will be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to Parent's
indebtedness or any restricted subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to Parent and its continuing restricted
subsidiaries in connection with such Asset Disposition for such period (or,
if the capital stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the indebtedness
of such restricted subsidiary to the extent Parent and its continuing
restricted subsidiaries are no longer liable for such Indebtedness after
such sale,
(4) if since the beginning of such period Parent or any restricted
subsidiary (by merger or otherwise) will have made an Investment in any
restricted subsidiary (or any person which becomes a restricted
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subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction requiring a calculation
to be made hereunder, which constitutes all or substantially all of an
operating unit of a business, EBITDA and Consolidated Interest Expense for
such period will be calculated after giving pro forma effect thereto
(including the incurrence of any indebtedness or any cost saving permitted
to be adjusted in accordance with Article 11 of Regulation S-X) as if such
Investment or acquisition occurred on the first day of such period and
(5) if since the beginning of such period any person (that subsequently
became a restricted subsidiary or was merged with or into Parent or any
restricted subsidiary since the beginning of such period) will have made
any Asset Disposition, any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (3) or (4) above if made by
Parent or a restricted subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period will be calculated after
giving pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations will be determined
by Parent in good faith by a responsible financial or accounting officer. If
any indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness will be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any interest rate agreement applicable to such
indebtedness if such interest rate agreement has a remaining term in excess of
12 months).
"Consolidated Interest Expense" means, for any period, Parent's total
interest expense and that of Parent's consolidated restricted subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by Parent or its restricted subsidiaries, without duplication,
(1) interest expense attributable to capital leases and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction,
(2) amortization of debt discount and debt issuance cost,
(3) capitalized interest,
(4) non-cash interest expenses,
(5) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing,
(6) net costs associated with hedging obligations (including
amortization of fees),
(7) preferred Stock dividends in respect of all preferred stock held by
persons other than Parent or a wholly owned Subsidiary,
(8) interest incurred in connection with Investments in discontinued
operations,
(9) interest accruing on any Indebtedness of any other Person to the
extent such indebtedness is guaranteed by (or secured by the assets of)
Parent or any restricted subsidiary and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any person (other than Parent) in
connection with indebtedness incurred by such plan or trust.
"Consolidated Net Income" means, for any period, Parent's net income and
that of Parent's consolidated subsidiaries; provided, however, that there will
not be included in such Consolidated Net Income:
(1) any net income of any person (other than Parent) if such person is
not a restricted subsidiary, except that
(A) subject to the exclusion contained in clause (4) below, Parent's
equity in the net income of any such Person for such period will be
included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such person during such period to Parent
or a
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restricted subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution paid to a restricted
subsidiary, to the limitations contained in clause (3) below) and
(B) Parent's equity in a net loss of any such person for such period
will be included in determining such Consolidated Net Income;
(2) any net income (or loss) of any Person acquired by Parent or a
subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income of any restricted subsidiary if such restricted
subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such restricted
subsidiary, directly or indirectly, to Parent, except that
(A) this clause (3) shall not apply to the restriction contained in
the indenture governing the notes of WEC or contained in the senior
credit facility,
(B) subject to the exclusion contained in clause (4) below, Parent's
equity in the net income of any such restricted subsidiary for such
period will be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such restricted
subsidiary during such period to Parent or another restricted
subsidiary as a dividend or other distribution, subject, in the case of
a dividend or other distribution paid to another restricted subsidiary,
to the limitation contained in this clause, and
(C) Parent's equity in a net loss of any such restricted subsidiary
for such period will be included in determining such Consolidated Net
Income;
(4) any gain (but not loss) realized upon the sale or other disposition
of any of Parent's assets, Parent's consolidated subsidiaries or any other
person (including pursuant to any sale-and-leaseback arrangement) which is
not sold or otherwise disposed of in the ordinary course of business and
any gain (but not loss) realized upon the sale or other disposition of any
capital stock of any person;
(5) extraordinary gains or losses; and
(6) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described
under "Certain Covenants--Limitation on Restricted Payments" only, there will
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from unrestricted subsidiaries to Parent
or a restricted subsidiary to the extent such dividends, repayments or
transfers increase the amount of restricted payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"credit facilities" means, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables), working capital
loans, swing lines, advances or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced, restructured or refinanced in
whole or in part from time to time.
"currency agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to
protect such Person against fluctuations in currency values.
"default" means any event which is, or after notice or passage of time or
both would be, an event of default.
"disqualified stock" means, with respect to any person, any capital stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any
event
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
(2) is convertible or exchangeable for Indebtedness or disqualified
stock or
(3) is redeemable or must be purchased, upon the occurrence of certain
events or otherwise, by such person at the option of the holder thereof, in
whole or in part,
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in each case on or prior to the first anniversary of the stated maturity of the
debentures; provided, however, that any capital stock that would not constitute
disqualified stock but for provisions thereof giving holders thereof the right
to require such person to purchase or redeem such capital stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the stated maturity of the debentures will not constitute
disqualified stock if (x) the "asset sale" or "change of control" provisions
applicable to such capital stock are not more favorable to the holders of such
capital stock than the terms applicable to the debentures and described under
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" and
"--Certain Covenants--Change of Control" and (y) any such requirement only
becomes operative after compliance with such terms applicable to the
debentures, including the purchase of any debentures tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income:
(1) all Parent's income tax expense and that of Parent's consolidated
restricted subsidiaries,
(2) Parent's depreciation expense and that of Parent's consolidated
restricted subsidiaries,
(3) Parent's amortization expense and that of Parent's consolidated
restricted subsidiaries (excluding amortization expense attributable to a
prepaid cash item that was paid in a prior period),
(4) all Parent's other non-cash charges and those of Parent's
consolidated restricted subsidiaries (excluding any such non-cash charge to
the extent that it represents an accrual of or reserve for cash
expenditures in any future period), in each case for such period, and
(5) all one-time compensation payments made in connection with the
recapitalization.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
restricted subsidiary will be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such restricted subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to Parent by such restricted subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such restricted subsidiary or
its stockholders. If since the beginning of the relevant period, Parent or any
restricted subsidiary will have made an Investment in any restricted subsidiary
(or any person which becomes a restricted subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction requiring a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, EBITDA for such period
will be calculated after giving pro forma effect thereto (including any cost
saving permitted to be adjusted in accordance with Article 11 of Regulation S-
X).
"equity interest" means capital stock and all warrants, options or other
rights to acquire capital stock, but excluding any debt security that is
convertible into, or exchangeable for, capital stock.
"equity offering" means an offering of stock of Parent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of July 28, 1999, including those set forth in
(1) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants,
(2) statements and pronouncements of the Financial Accounting Standards
Board,
(3) such other statements by such other entity as approved by a
significant segment of the accounting profession and
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(4) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Indebtedness of any person and any
obligation, direct or indirect, contingent or otherwise, of such person
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such indebtedness or other obligation of such person (whether
arising by virtue of partnership arrangements, or by agreements to keep-
well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or
(2) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "guarantee" will not include endorsements for
collection or deposit in the ordinary course of business.
The term "guarantee" used as a verb has a corresponding meaning. The term
"guarantor" will mean any person guaranteeing any obligation.
"hedging obligations" of any person means the obligations of such person
pursuant to any interest rate agreement or currency agreement.
"holder" or "debentureholder" means the person in whose name a debenture is
registered on the registrar's books.
"incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or capital stock of a person
existing at the time such person becomes Parent's subsidiary (whether by
merger, consolidation, acquisition or otherwise) will be deemed to be incurred
by such Subsidiary at the time it becomes a subsidiary. The term "incurrence"
when used as a noun will have a correlative meaning. The accretion of
principal of a non-interest bearing or other discount security will be deemed
the incurrence of indebtedness.
"indebtedness" means, with respect to any person on any date of
determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(2) all capital lease obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(3) all obligations of such person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such person
and all obligations of such person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(4) all obligations of such person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (1) through (3)
above) entered into in the ordinary course of business of such person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the tenth
business day following payment on the letter of credit);
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(5) the amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any disqualified stock or,
with respect to any subsidiary of such person, the liquidation preference
with respect to, any preferred stock (but excluding, in each case, any
accrued dividends);
(6) all obligations of the type referred to in clauses (1) through (5)
of other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
guarantee;
(7) all obligations of the type referred to in clauses (1) through (5)
of other persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, hedging
obligations of such person.
The amount of indebtedness of any person at any date will be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date.
"interest rate agreement" means in respect of a person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed solely to protect such person against fluctuations in
interest rates.
"Investment" in any person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of the lender) or other extensions
of credit (including by way of guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition of capital stock, Indebtedness or other similar
instruments issued by such person. For purposes of the definition of
"unrestricted subsidiary," the definition of "restricted payment" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments,"
(1) "Investment" will include the portion (proportionate to Parent's
equity interest in such subsidiary) of the fair market value of the net
assets of any subsidiary of Parent at the time that such subsidiary is
designated an unrestricted subsidiary; provided, however, that upon a
redesignation of such subsidiary as a restricted subsidiary, Parent will be
deemed to continue to have a permanent "Investment" in an unrestricted
subsidiary equal to an amount (if positive) equal to (x) Parent's
"Investment" in such subsidiary at the time of such redesignation less (y)
the portion (proportionate to Parent's equity interest in such subsidiary)
of the fair market value of the net assets of such subsidiary at the time
of such redesignation; and
(2) any property transferred to or from an unrestricted subsidiary will
be valued at its fair market value at the time of such transfer, in each
case as determined in good faith by the board of directors.
"issue date" means the date on which the debentures are originally issued,
which was July 28, 1999.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind including any conditional sale or other title retention
agreement or lease in the nature thereof.
"marketable securities" means publicly traded debt or equity securities that
are listed for trading on a national securities exchange and that were issued
by a corporation whose debt securities are rated in one of the three highest
categories by either Standard & Poor's Corporation or Moody's Investors
Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments, cash
equivalents and marketable securities received therefrom including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or other
disposition of any
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securities received as consideration, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring person of indebtedness or other obligations relating to such
properties or assets or received in any other noncash form, in each case net
of:
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition,
(2) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien
upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to
such Asset Disposition, or by applicable law, be repaid out of the proceeds
from such Asset Disposition,
(3) all distributions and other payments required to be made to minority
interest holders in restricted Subsidiaries as a result of such Asset
Disposition and
(4) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and
retained by Parent or any restricted subsidiary after such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of capital stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"non-recourse debt" means indebtedness
(1) as to which neither Parent nor any restricted subsidiary
(A) provides any guarantee or credit support of any kind including
any undertaking, guarantee, indemnity, agreement or instrument that
would constitute indebtedness or
(B) is directly or indirectly liable (as a guarantor or otherwise)
and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an unrestricted
subsidiary) would permit (upon notice, lapse of time or both) any holder of
Parent's other indebtedness or that of any restricted subsidiary to declare
a default under such other indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"permitted holders" means Madison Dearborn Partners, Inc. and any affiliate
thereof.
"Permitted Investment" means an Investment by Parent or any restricted
subsidiary in
(1) Parent, a restricted subsidiary or a person that will, upon the
making of such Investment, become a restricted subsidiary; provided,
however, that the primary business of such restricted subsidiary is a
Related Business;
(2) another person if as a result of such Investment such other person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, Parent or a restricted subsidiary;
provided, however, that such Person's primary business is a Related
Business;
(3) Investments in cash equivalents and marketable securities;
(4) receivables owing to Parent or any restricted subsidiary, including
negotiable interests held for deposit or collecting, if created or acquired
in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade
terms may include such concessionary trade terms as Parent or any such
restricted subsidiary deems reasonable under the circumstances;
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(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees made in the ordinary course of
business consistent with Parent's past practices or that of such restricted
subsidiary;
(7) any person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under "--Certain Covenants--Limitation
on Sales of Assets and Subsidiary Stock";
(8) any acquisition of assets to the extent acquired in exchange for the
issuance of equity interests, other than disqualified stock of Parent;
(9) hedging obligations permitted by clause (7) under the caption "--
Limitation on Indebtedness";
(10) an Investment existing on the date of the debenture indenture;
(11) any Investment in securities of trade creditors or customers
received in compromise of obligations of such persons incurred in the
ordinary course of business, including pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers; and
(12) any Investments in any person having an aggregate fair market value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (12) that are at the time
outstanding not to exceed the greater of $5.0 million or 5% of Total
Tangible Assets.
"Permitted Liens" means, with respect to any person,
(1) pledges or deposits by such person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of indebtedness) or leases to which such person is a party, or
deposits to secure public or statutory obligations of such person or
deposits or cash or United States government bonds to secure surety or
appeal bonds to which such person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
incurred in the ordinary course of business;
(2) Liens imposed by law, such as carriers', warehousemen's and
mechanic's Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceeding or other Liens arising out of
judgments or awards against such person with respect to which such person
will then be proceeding with an appeal or other proceedings for review;
(3) Liens for property taxes not yet subject to penalties for non-
payment, which are being contested in good faith by appropriate proceedings
or with respect to which adequate reserves have been recorded in accordance
with GAAP;
(4) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such person in the
ordinary course of its business;
(5) survey exceptions, encumbrances, easements or reservations of, or
rights of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to use of real properties or liens incidental to the
conduct of the business of such Person or to the ownership of its
properties;
(6) Liens securing hedging obligations so long as the related
Indebtedness is, and is permitted to be under the debenture indenture,
secured by a Lien on the same property securing such hedging obligations;
(7) leases and subleases of real property which do not interfere with
the ordinary conduct of Parent's business or that of any of Parent's
restricted subsidiaries, and which are made on customary and usual terms
applicable to similar properties;
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(8) Liens existing as of the issue date and Liens created by the
debenture indenture or the notes indenture;
(9) Liens created solely for the purpose of securing the payment of all
or a part of the purchase price of assets or property acquired or
constructed in the ordinary course of business after the date on which the
debentures are originally issued; provided, however, that
(A) the aggregate principal amount of indebtedness secured by such
Liens will not exceed the lesser of cost or fair market value of the
assets or property so acquired or constructed,
(B) the indebtedness secured by such Liens will have otherwise been
permitted to be issued under the debenture indenture and
(C) such Liens will not encumber any of Parent's other assets or
property or that of any of Parent's restricted subsidiaries and will
attach to such assets or property within 180 days of the construction
or acquisition of such assets or property;
(10) Liens on the assets or property of any of Parent's restricted
subsidiaries existing at the time such restricted subsidiary became a
subsidiary of Parent and not incurred as a result of (or in connection with
or in anticipation of) such restricted subsidiary becoming a subsidiary of
Parent; provided, however, that:
(A) any such Lien does not by its terms cover any property or assets
after the time such restricted subsidiary becomes a subsidiary which
were not covered immediately prior to such transaction,
(B) the incurrence of the indebtedness secured by such Lien will
have otherwise been permitted to be issued under the debenture
indenture, and
(C) such Liens do not extend to or cover any of Parent's other
property or assets or that of any of Parent's restricted subsidiaries;
(11) Liens to secure capitalized lease obligations permitted to be
incurred under the debenture indenture;
(12) Liens securing Indebtedness outstanding or committed under the
senior credit facility;
(13) Liens extending, renewing or replacing in whole or in part a Lien
permitted by the debenture indenture; provided, however, that:
(A) such Liens do not extend beyond the property subject to the
existing Lien and improvements and construction on such property and
(B) the Indebtedness secured by the Lien may not exceed the
indebtedness secured at the time by the existing Lien;
(14) Liens on inventory deemed to arise by reason of the consignment of
inventory in Parent's ordinary course of business and that of Parent's
restricted subsidiaries;
(15) Liens on the assets or property of any of Parent's restricted
subsidiaries to secure indebtedness of such restricted subsidiary owing to
and held by Parent; and
(16) Liens incurred in the ordinary course of business with respect to
obligations that do not exceed $1.0 million at any one time outstanding.
"person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"preferred stock," as applied to the capital stock of any person, means
capital stock of any class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
person, over shares of capital stock of any other class of such person.
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"principal" of a debenture means the accreted value of the debenture plus
the premium, if any, payable on the debenture which is due or overdue or is to
become due at the relevant time.
"principal amount at maturity" of a debenture means the amount specified as
such on the face of such debenture.
"public equity offering" means an underwritten primary public offering of
Parent's common stock pursuant to an effective registration statement under the
Securities Act.
"refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "refinanced"
and "refinancing" will have correlative meanings.
"refinancing indebtedness" means indebtedness that refinances any of
Parent's indebtedness or that of any restricted subsidiary referred to in
clause (b)(6) under the covenant "--Limitation on Indebtedness," including
indebtedness that refinances refinancing indebtedness; provided, however, that:
(1) such refinancing indebtedness has a stated maturity no earlier than
the stated maturity of the indebtedness being refinanced,
(2) such refinancing indebtedness has an average life at the time such
refinancing indebtedness is incurred that is equal to or greater than the
average life of the indebtedness being refinanced and
(3) such refinancing indebtedness has an aggregate principal amount (or
if incurred with original issue discount, an aggregate issue price) that is
equal to or less than the aggregate principal amount (or if Incurred with
original issue discount, the aggregate accreted value) then outstanding or
committed (plus fees and expenses, including any premium and defeasance
costs) under the indebtedness being refinanced; provided further, however,
that refinancing indebtedness will not include (x) indebtedness of a
subsidiary that refinances Parent's indebtedness or (y) Parent's
indebtedness or that of a restricted subsidiary that refinances
indebtedness of an unrestricted subsidiary.
"Related Business" means any business related, ancillary or complementary to
Parent's businesses and that of the restricted subsidiaries on the issue date.
"restricted payment" with respect to any person means
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its capital stock (including any
payment in connection with any merger or consolidation involving such
person) or similar payment to the direct or indirect holders of its capital
stock (other than dividends or distributions payable solely in its capital
stock (other than disqualified stock) and dividends or distributions
payable solely to Parent or a restricted subsidiary, and other than pro
rata dividends or other distributions made by a Subsidiary that is not a
wholly owned subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a subsidiary that is an entity other
than a corporation),
(2) the purchase, redemption or other acquisition or retirement for
value of any capital stock of Parent held by any person or of any capital
stock of a restricted subsidiary held by any affiliate of Parent's (other
than a restricted subsidiary), including the exercise of any option to
exchange any capital stock (other than into Parent's capital stock that is
not disqualified stock),
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any subordinated
obligations, other than the purchase, repurchase or other acquisition of
subordinated obligations purchased in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition, or
(4) the making of any Investment in any person, other than a Permitted
Investment.
"restricted subsidiary" means any subsidiary of Parent that is not an
unrestricted subsidiary.
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"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby Parent or a restricted subsidiary transfers
such property to a person and Parent or a restricted subsidiary leases it from
such person.
"SEC" means the Securities and Exchange Commission.
"senior credit facility" means that certain credit agreement, dated on or
about July 28, 1999, among WEC, Parent, the subsidiaries named therein and the
lenders from time to time party thereto, including any collateral documents,
instruments and agreements executed in connection therewith, and the term
"senior credit facility" will also include any amendments, supplements,
modifications, extensions, renewals, restatements or refundings thereof and any
credit facilities that replace, refund or refinance any part of the loans,
other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility that increases the amount
borrowable thereunder or alters the maturity thereof.
"significant subsidiary" means any restricted subsidiary that would be a
"significant subsidiary" of Parent within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"stated maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"subordinated obligation" means any of Parent's indebtedness (whether
outstanding on the issue date or thereafter Incurred) which is subordinate or
junior in right of payment to the debentures, pursuant to a written agreement
to that effect.
"subsidiary" means, in respect of any person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of capital stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by:
(1) such person,
(2) such person and one or more subsidiaries of such person or
(3) one or more subsidiaries of such person.
"temporary cash investments" means any of the following:
(1) any investment in direct obligations of the United States of America
or any agency thereof or obligations guaranteed by the United States of
America or any agency thereof,
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above,
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
affiliate of Parent's) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and
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(5) investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Total Tangible Assets" means the total consolidated assets of Parent and
its restricted subsidiaries as set forth on Parent's most recent balance sheet
excluding goodwill, trademarks, patents and minority interests of others and
other intangible assets, all as determined in accordance with GAAP.
"unrestricted subsidiary" means
(1) any subsidiary of parent that at the time of determination will be
designated an unrestricted subsidiary by the board of directors in the
manner provided below and
(2) any subsidiary of an unrestricted subsidiary.
Parent's board of directors may designate any of its subsidiaries (including
any newly acquired or newly formed subsidiary) to be an unrestricted subsidiary
unless such subsidiary or any of its subsidiaries owns any of Parent's capital
stock or indebtedness, or holds any Lien on Parent's property or that of any
subsidiary of Parent's that is not a subsidiary of the subsidiary to be so
designated; provided, however, that either (A) the subsidiary to be so
designated has total assets of $1,000 or less or (B) if such subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments."
Parent's board of directors may designate any unrestricted subsidiary to be
a restricted subsidiary; provided, however, that immediately after giving
effect to such designation (x) Parent could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness" and (y) no default will have occurred
and be continuing. Any such designation by Parent's board of directors will be
evidenced to the trustee by promptly filing with the trustee a copy of the
resolution of the board of directors giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at Parent's option.
"voting stock" of a person means all classes of capital stock or other
interests (including partnership interests) of such person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"wholly owned subsidiary" means a restricted subsidiary all the capital
stock of which (other than directors' qualifying shares) is owned by Parent or
one or more wholly owned subsidiaries.
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DESCRIPTION OF THE EXCHANGE NOTES
WEC will issue the exchange notes under the notes indenture, dated as of
July 28, 1999, between WEC, Parent, and United States Trust Company of New
York, as trustee (the "trustee"). The following is a summary of certain
provisions of the notes indenture; it does not restate these provisions in
their entirety. We have filed a complete copy of the notes indenture as an
exhibit to the registration statement, which this prospectus forms a part. See
"Where You Can Find More Information." WEC urges you to read the notes
indenture because it, and not this description, define your rights as holders
of these notes. We use the term "notes" in this prospectus to refer to both the
outstanding notes and the exchange notes.
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes except that:
. the exchange notes bear a Series B designation and a different CUSIP
number from the outstanding notes;
. the exchange notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer; and
. the holders of the exchange notes will not be entitled to the rights
under the registration rights agreement, including the provisions
providing for an increase in the interest rate on the outstanding notes
in certain circumstances relating to the timing of the exchange offer.
The exchange notes will evidence the same debt as the outstanding notes and
will be entitled to the benefits of the notes indenture. The exchange notes
will rank equally with the outstanding notes if all of the outstanding notes
are not exchanged in this exchange offer.
General
The outstanding notes were initially issued in an aggregate principal amount
of $130 million and mature on July 15, 2009. Additional notes in an aggregate
principal amount of $50 million may be issued from time to time after the date
of the notes indenture, subject to the provisions of the notes indenture,
including those described under "Certain Covenants--Limitation on
Indebtedness." The notes bear an annual interest rate of 12.0% from July 28,
1999. WEC will pay interest semiannually on January 15th and July 15th of each
year, beginning January 15, 2000. WEC will make each interest payment to the
person in whose name the note is registered at the close of business on the
January 1 or July 1 immediately preceding the interest payment date. WEC will
pay interest on overdue principal at an annual interest rate of 1% in excess of
such rate, and will pay interest on overdue installments of interest at such
higher rate to the extent lawful.
WEC will make payments on the notes, including principal, premium and
interest, by wire transfer of immediately available funds to the accounts
specified by the holders or, if no such account is specified, by mailing a
check to each holder's address, as it appears in the register of the notes
maintained by the registrar. You may transfer and exchange the notes at the
office of the registrar and any co-registrar. WEC will issue the notes in fully
registered form, without coupons, in denominations of $1,000 and any integral
multiple thereof. No service charge will be made for any registration of
transfer or exchange of notes, but WEC may require payment of a sum sufficient
to cover any transfer tax or other similar governmental charge payable in
connection with certain transfers and exchanges.
Optional Redemption
The notes will be redeemable at WEC's option, in whole or in part, at any
time on or after July 15, 2004, at the respective redemption price set forth
below, which are expressed as a percentage of principal amount, plus accrued
and unpaid interest to the redemption date, subject to the right of holders of
record on the relevant
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record date to receive interest due on the relevant interest payment date, if
redeemed during the 12-month period beginning on the year indicated below:
<TABLE>
<CAPTION>
Redemption
Period Price
------ ----------
<S> <C>
2004........................................................... 106.000%
2005........................................................... 104.000%
2006........................................................... 102.000%
2007 and thereafter............................................ 100.000%
</TABLE>
In addition, before July 15, 2002, WEC may at its option on one or more
occasions redeem up to 35% of the original principal amount of the notes,
including the original principal amount of any additional notes, with the
proceeds of (i) one or more public equity offerings or (ii) any other equity
offering so long as the gross proceeds to WEC or Parent from such offering
exceeds $50 million, at a redemption price, expressed as a percentage of
principal amount, of 112% plus accrued interest to the redemption date, subject
to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date; provided that at least 65%
of the aggregate principal amount of the notes, including the original
principal amount of any additional notes initially issued must remain
outstanding after each such redemption; provided, further, that such redemption
must occur within 120 days of the public equity offering or equity offering, as
the case may be.
Selection and Notice of Redemption
If WEC is redeeming less than all the notes at any time, the trustee will
select notes on a pro rata basis, by lot or by such other method as the trustee
in its sole discretion will deem to be fair and appropriate.
WEC will redeem notes of $1,000 in original principal amount or less in
whole and not in part. WEC will cause notices of redemption to be mailed by
first-class mail at least 30 and not more than 60 days before the redemption
date to each holder's registered address.
If any note is to be redeemed in part only, the notice of redemption
relating to such note will state the portion of the principal amount thereof to
be redeemed. WEC will issue a new note in principal amount equal to the
unredeemed portion of the original note in the name of the Holder thereof upon
cancellation of the original note. On or after the date of redemption, interest
will cease to accrue on notes or portions thereof called for redemption.
Guaranties
WEC's obligations pursuant to the notes, including the repurchase obligation
resulting from a change of control, are unconditionally guaranteed, jointly and
severally, on a subordinated basis by Parent and will be unconditionally
guaranteed by each future domestic subsidiary of WEC, if any. Parent is a
holding company that derives all its operating income and cash flow primarily
from WEC, the common stock of which is pledged to secure Parent's indebtedness
outstanding under the senior credit facility. The obligations of each
subsidiary guarantor will be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such subsidiary
guarantor, including, without limitation, any guarantees under the senior
credit facility, and after giving effect to any collections from or payments
made by or on behalf of any other subsidiary guarantor in respect of the
obligations of such other subsidiary guarantor under its subsidiary guaranty or
pursuant to its contribution obligations under the notes indenture, result in
the obligations of such subsidiary guarantor under the subsidiary guaranty not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law.
Each subsidiary guarantor may consolidate with or merge into or sell its
assets to WEC or another subsidiary guarantor without limitation. Upon the sale
or disposition, by merger or otherwise, of a subsidiary guarantor or all or
substantially all of its assets to a person, whether or not an affiliate of the
subsidiary
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guarantor which is not a subsidiary of WEC, which sale or disposition is
otherwise in compliance with the notes indenture, including the covenant
described under "Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock", such subsidiary guarantor will be deemed released from all
its obligations under the notes indenture and its subsidiary guaranty and such
subsidiary guaranty will terminate; provided, however, that any such
termination will occur only to the extent that all obligations of such
subsidiary guarantor under the senior credit facility and all of its guarantees
of, and under all of its pledges of assets or other security interests which
secure, any other indebtedness of WEC's or any of its restricted subsidiaries
will also terminate upon such release, sale or transfer.
The provisions under the notes indenture relating to the guaranties may be
waived or modified with the written consent of the holders of a majority in
principal amount of the notes then outstanding.
Ranking
The outstanding notes are, and the exchange notes will be, senior unsecured
obligations of WEC, are and will rank, equal in right of payment with all
existing and future senior unsecured indebtedness of WEC, are and will be,
senior in right of payment to all future subordinated indebtedness of WEC and
are and will be guaranteed on a senior unsecured basis by Parent and any future
domestic subsidiary of WEC. On the issue date of the exchange notes, WEC will
have no subsidiaries. The notes and the guaranties will be effectively
subordinated to any secured indebtedness, including indebtedness under the
senior credit facility, of WEC or the applicable guarantor, to the extent of
the value of the assets securing such indebtedness. As of July 3, 1999 after
giving pro forma effect to the Acquisitions and the initial offerings, WEC
would have had approximately $15.6 million of indebtedness outstanding under
its senior credit facility and would have been able to borrow an additional
$9.3 million under the senior credit facility. WEC and the guarantors had no
additional secured indebtedness as of July 3, 1999. Although the notes
indenture contains limitations on the amount of additional indebtedness that
WEC may incur, under certain circumstances the amount of such indebtedness
could be substantial or secured. See "--Certain Covenants--Limitation on
Indebtedness."
Book-Entry, Delivery and Form
The outstanding notes were, and the exchange notes will be, issued in the
form of one or more global notes. The global note representing the exchange
notes will be deposited with, or on behalf of, the Depository Trust Company
("DTC") and registered in the name of DTC or its nominee. Except as set forth
below, the global note may be transferred, in whole and not in part, only to
DTC or another nominee of DTC. Investors may hold their beneficial interests in
the global note directly through DTC if they have an account with DTC or
indirectly through organizations which have accounts with DTC.
Upon the transfer of an exchange note in definitive form, such note will,
unless the global note has previously been exchanged for notes in definitive
form, be exchanged for an interest in the global note representing the
principal amount of notes being transferred.
DTC has advised WEC as follows: DTC is a limited-purpose trust company and
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and "a clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with DTC ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers, which may include the initial purchaser, banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's book-entry system is also available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of the global note, DTC will credit, on its book-entry
registration and transfer system, the principal amount of the notes represented
by such global note to the accounts of participants. The accounts
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to be credited will be designated by the initial purchaser of such notes.
Ownership of beneficial interests in the global note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the global note will be shown on, and the transfer
of those ownership interests will be effected only through, records maintained
by DTC, with respect to participants' interest and such participants, with
respect to the owners of beneficial interests in the global note other than
participants. The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the global note.
So long as DTC, or its nominee, is the registered holder and owner of the
global note, DTC or such nominee, as the case may be, will be considered the
sole legal owner and holder of the related notes for all purposes of such notes
and the notes indenture. Except as set forth below, owners of beneficial
interests in the global note will not be entitled to have the notes represented
by the global note registered in their names, will not receive or be entitled
to receive physical delivery of certificated notes in definitive form and will
not be considered to be the owners or holders of any notes under the global
note. WEC understands that under existing industry practice, in the event an
owner of a beneficial interest in the global note desires to take any action
that DTC, as the holder of the global note, is entitled to take, DTC would
authorize the participants to take such action, and that the participants would
authorize beneficial owners owning through such participants to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them.
Payment of principal of and interest on notes represented by the global note
registered in the name of and held by DTC or its nominee will be made to DTC or
its nominee, as the case may be, as the registered owner and holder of the
global note.
WEC expects that DTC or its nominee, upon receipt of any payment of
principal of or interest on the global note, will credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the global note as shown on the records of DTC or
its nominee. WEC also expects that payments by participants to owners of
beneficial interests in the global note held through such participants will be
governed by standing instructions and customary practices and will be the
responsibility of such participants. WEC will not have any responsibility or
liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the global note for any note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any other aspect of the relationship
between DTC and its participants or the relationship between such participants
and the owners of beneficial interests in the global note owning through such
participants.
Unless and until it is exchanged in whole or in part for certificated notes
in definitive form, the global note may not be transferred except as a whole by
DTC to a nominee or by a nominee to DTC or another nominee of DTC.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global note among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither WEC nor the trustee will
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Certificated Notes
Subject to certain conditions, the notes represented by the global note are
exchangeable for certificated notes in definitive form of like tenor as such
notes in denominations of U.S. $1,000 and integral multiples thereof if:
(1) DTC notifies WEC that it is unwilling or unable to continue as
depository for the global note or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act and a successor
depository is not appointed by WEC within 90 days;
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(2) WEC in its discretion at any time determines not to have all of the
notes represented by the global note; or
(3) an event of default has occurred and is continuing.
Any note that is exchangeable as above is exchangeable for certificated
notes issuable in authorized denominations and registered in such names as DTC
will direct. Subject to the foregoing, the global note is not exchangeable,
except for a global note of the same aggregate denomination to be registered in
the name of DTC or its nominee.
Same-Day Payment
The notes indenture requires WEC to make payments in respect of notes,
including principal, premium and interest, be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof
or, if no such account is specified, by mailing a check to each such holder's
registered address.
Change of Control
Upon the occurrence of any of the following events (each a "change of
control"), each holder will have the right to require WEC to repurchase such
holder's notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase, subject to the right of holders of record on the relevant record date
to receive interest due on the relevant interest payment date:
(1) Prior to the earlier to occur of (A) the first public offering of
common stock of Parent or (B) the first public offering of WEC's common
stock, the permitted holders cease to be the "beneficial owner," as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, directly or indirectly, of
at least 35% of the aggregate of the total voting power of WEC's voting
stock or that of Parent, whether as a result of issuance of WEC's
securities or that of Parent, WEC's merger, consolidation, liquidation or
dissolution or that of Parent, any direct or indirect transfer of
securities by Parent or otherwise. For purposes of this clause (1) and
clause (2) below, the permitted holders will be deemed to beneficially own
any voting stock of a corporation (the "specified corporation") held by any
other corporation (the "parent corporation") so long as the permitted
holders beneficially own (as so defined), directly or indirectly, in the
aggregate a majority of the voting power of the voting stock of the parent
corporation.
(2) Any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act, other than one or more permitted holders, is or becomes
the "beneficial owner," as defined in clause (1) above, except that for
purposes of this clause (2) such person will be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time, directly or indirectly, of more than 35% of the total voting power of
WEC's voting stock or that of Parent. The foregoing will only be deemed a
change of control if the permitted holders "beneficially own," as defined
in clause (1) above, directly or indirectly, in the aggregate a lesser
percentage of the total voting power of WEC's voting stock or that of
Parent than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of WEC's board of directors or that of Parent. For the purposes of
this clause (2), such other person will be deemed to beneficially own any
voting stock of a specified corporation held by a parent corporation, if
such other person is the "beneficial owner," as defined in this clause (2),
directly or indirectly, of more than 35% of the voting power of the voting
stock of such parent corporation and the permitted holders "beneficially
own" as defined in clause (1) above, directly or indirectly, in the
aggregate a lesser percentage of the voting power of the voting stock of
such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent corporation.
(3) During any period of two consecutive years, individuals who at the
beginning of such period constituted WEC's board of directors or that of
Parent, together with any new directors whose election by WEC's board of
directors or that of Parent or whose nomination for election by WEC's
shareholders or
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that of Parent, as applicable, was approved by a vote of a majority of
WEC's directors or that of Parent, as applicable, then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of WEC's board of directors or that of Parent, as
applicable, then in office.
(4) The adoption of a plan relating to WEC's liquidation or dissolution
or that of Parent.
(5) The merger or consolidation of WEC or Parent with or into another
person or the merger of another person with or into WEC or Parent, or the
sale of all or substantially all of WEC's assets or that of Parent to
another person, other than a Person that is controlled by the permitted
holders, and, in the case of any such merger or consolidation, WEC's
securities or that of Parent that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of WEC's
voting stock or that of Parent are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such securities
are changed into or exchanged for, in addition to any other consideration,
securities of the surviving corporation that represent immediately after
such transaction, at least a majority of the aggregate voting power of the
voting stock of the surviving corporation.
Within 30 days following any change of control, WEC will mail a notice to
each holder with a copy to the trustee stating:
(1) that a change of control has occurred and that such holder has the
right to require WEC to purchase such holder's notes at a purchase price in
cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase, subject to the right of holders
of record on the relevant record date to receive interest on the relevant
interest payment date;
(2) the circumstances and relevant facts regarding such change of
control, including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such change of
control);
(3) the repurchase date, which will be no earlier than 30 days nor later
than 60 days from the date such notice is mailed; and
(4) the instructions determined by WEC, consistent with the covenant
described hereunder, that a holder must follow in order to have its notes
purchased.
WEC will comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of notes pursuant to this covenant described
hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
WEC will comply with the applicable securities laws and regulations and will
not be deemed to have breached WEC's obligations under the covenant described
hereunder by virtue thereof.
The change of control purchase feature is a result of negotiations between
WEC and the initial purchaser. WEC's management has no present intention to
engage in a transaction involving a change of control, although it is possible
that WEC or Parent would decide to do so in the future. Subject to the
limitations discussed below, WEC or Parent could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a change of control under the
notes indenture, but that could increase the amount of indebtedness outstanding
at such time or otherwise affect WEC's capital structure or credit ratings.
Restrictions on WEC's ability to incur additional indebtedness are contained in
the covenant described under "--Certain Covenants--Limitation on Indebtedness."
Such restrictions can only be waived with the consent of the holders of a
majority in principal amount of the notes then outstanding. Except for the
limitations contained in such covenants, however, the notes indenture will not
contain any covenants or provisions that may afford holders of the notes
protection in the event of a highly leveraged transaction.
The senior credit facility restricts WEC from purchasing any notes prior to
September 30, 2007, and will also provide that the occurrence of certain change
of control events with respect to WEC would constitute a default thereunder. In
the event a change of control occurs at a time when WEC is prohibited from
purchasing
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notes, WEC could seek the consent of WEC's lenders to the purchase of notes or
could attempt to refinance the borrowings that contain such prohibition. If WEC
does not obtain such a consent or repay such borrowings, WEC will remain
prohibited from purchasing notes. In such case, WEC's failure to purchase
tendered notes would constitute an event of default under the notes indenture
which would, in turn, constitute a default under the senior credit facility.
Future indebtedness that WEC may incur may contain prohibitions on the
occurrence of certain events that would constitute a change of control or
require such indebtedness to be repurchased upon a change of control. Moreover,
the exercise by the holders of their right to require WEC to repurchase the
notes could cause a default under such indebtedness, even if the change of
control itself does not, due to the financial effect of such repurchase on WEC.
Finally, WEC's ability to pay cash to the holders of notes following the
occurrence of a change of control may be limited by WEC's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases.
Certain Covenants
The notes indenture contains covenants including, among others, the
following:
Limitation on Indebtedness. (a) WEC will not, and will not permit any of its
restricted subsidiaries to, Incur, directly or indirectly, any Indebtedness;
provided, however, that WEC may Incur Indebtedness if, on the date of such
incurrence and after giving effect thereto, the Consolidated Coverage Ratio
exceeds 2 to 1 if such indebtedness is incurred prior to July 31, 2001 or 2.25
to 1 if such indebtedness is incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), WEC and its restricted
subsidiaries may incur any or all of the following indebtedness:
(1) indebtedness Incurred pursuant to the senior credit facility;
provided, however, that, after giving effect to any such incurrence, the
aggregate principal amount of such indebtedness then outstanding does not
exceed $40 million less the sum of all principal payments with respect to
such indebtedness pursuant to paragraph (a)(2)(A) of the covenant described
under "--Limitation on Sales of Assets and Subsidiary Stock";
(2) indebtedness owed to and held by WEC or any of its restricted
subsidiaries; provided, however, that (x) any subsequent issuance or
transfer of any capital stock which results in any such restricted
subsidiary ceasing to be a subsidiary or any subsequent transfer of such
indebtedness (other than to WEC or any of its restricted subsidiaries) will
be deemed, in each case, to constitute the incurrence of such indebtedness
by the obligor thereon that is not permitted to be Incurred under this
clause (2) and (y) if WEC and/or a subsidiary guarantor is the obligor on
such indebtedness, such indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the note and/or
the subsidiary guaranty of such subsidiary guarantor, as the case may be;
(3) the notes (other than additional notes) and the exchange notes;
(4) indebtedness outstanding on July 28, 1999 other than indebtedness
described in clause (1), (2) or (3) of this covenant;
(5) indebtedness of a subsidiary incurred and outstanding on or prior to
the date on which such subsidiary was acquired by WEC, other than
indebtedness incurred in connection with, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such subsidiary became a
subsidiary or was acquired by WEC; provided, however, that on the date of
such acquisition and after giving effect thereto, WEC would have been able
to Incur at least $1.00 of additional indebtedness pursuant to clause (a);
(6) refinancing indebtedness in respect of indebtedness incurred
pursuant to paragraph (a) above or pursuant to clause (3), (4) or (5) above
or this clause (6); provided, however, that to the extent such refinancing
indebtedness directly or indirectly refinances indebtedness of a subsidiary
incurred pursuant to clause (5), such refinancing indebtedness will be
incurred only by such subsidiary;
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(7) hedging obligations or commodity agreements not entered into for
speculative purposes and directly related to indebtedness permitted to be
incurred by WEC or any of its restricted subsidiaries pursuant to the notes
indenture;
(8) the subsidiary guaranties of the subsidiary guarantors with respect
to the notes and the debentures;
(9) the incurrence by WEC or any of its restricted subsidiaries of
indebtedness represented by capital lease obligations, mortgage financings
or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of WEC or
such restricted subsidiaries, in an aggregate principal amount to not
exceed the greater of 5% of total assets as of the date of incurrence and
$2.5 million at any time outstanding;
(10) the guarantee by WEC or any of the subsidiary guarantors of WEC's
indebtedness or Indebtedness of a restricted subsidiary that was permitted
to be incurred by another provision of this covenant;
(11) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any indebtedness in the form of
additional indebtedness with the same terms, and the payment of dividends
on disqualified stock in the form of additional shares of the same class of
disqualified stock will not be deemed to be an incurrence of indebtedness
or an issuance of disqualified stock for purposes of this covenant;
provided, in each case, that the amount thereof is included in Consolidated
Interest Expense of WEC as accrued;
(12) indebtedness arising from agreements of WEC or a restricted
subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a subsidiary, other than
guarantees of indebtedness incurred by any person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided, however, that (a) such indebtedness
is not reflected on the balance sheet of WEC or any restricted subsidiary
(contingent obligations referred to in a footnote to financial statements
and not otherwise reflected on the balance sheet will not be deemed to be
reflected on such balance sheet for purposes of this clause (a)) and (b)
the maximum assumable liability in respect of all such indebtedness shall
at no time exceed the gross proceeds including noncash proceeds (the fair
market value of such noncash proceeds being measured at the time received
and without giving effect to any subsequent changes in value) actually
received by WEC and its restricted subsidiaries in connection with such
disposition;
(13) the incurrence of obligations in respect of performance and surety
bonds provided by WEC or any of its restricted subsidiaries in the ordinary
course of business;
(14) the incurrence of indebtedness consisting of guarantees of loans
made to management for the purpose of permitting management to purchase
equity interests of Parent, in an amount not to exceed $1.0 million at any
one time outstanding;
(15) indebtedness of WEC or any restricted subsidiary arising from the
honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business, provided that such indebtedness is satisfied within five business
days of incurrence;
(16) indebtedness of WEC issued to directors, employees, officers or
consultants of WEC or a restricted subsidiary in connection with the
redemption or purchase of capital stock of WEC or Parent that, by its
terms, is subordinated to the notes, is not secured by any assets of the
WEC or its restricted subsidiaries and does not require cash payments prior
to the stated maturity of the notes and refinancing indebtedness in respect
thereof, in an aggregate principal amount which, when added together with
the amount of indebtedness incurred pursuant to this clause (16) and then
outstanding, does not exceed $1.0 million; and
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(17) indebtedness in an aggregate principal amount which, together with
WEC's other indebtedness outstanding on the date of such incurrence (other
than indebtedness permitted by clauses (1) through (16) above or paragraph
(a)) does not exceed $10 million at any one time outstanding.
(c) Notwithstanding the foregoing, neither WEC nor any of its restricted
subsidiaries will incur any indebtedness pursuant to the foregoing paragraph
(b) if the proceeds thereof are used, directly or indirectly, to refinance any
of WEC's subordinated obligations unless such indebtedness will be subordinated
to the notes to at least the same extent as such subordinated obligations. No
subsidiary guarantor will incur any indebtedness pursuant to the foregoing
paragraph (b) if the proceeds thereof are used, directly or indirectly, to
refinance any subsidiary guarantor subordinated obligation of such subsidiary
guarantor unless such indebtedness will be subordinated to the obligations of
such subsidiary guarantor under the applicable subsidiary guaranty to at least
the same extent as such subsidiary guarantor subordinated obligation.
(d) For purposes of determining compliance with the foregoing covenant, (1)
in the event that an item of indebtedness meets the criteria of more than one
of the types of indebtedness described above, WEC, in its sole discretion, will
classify such item of indebtedness and only be required to include the amount
and type of such indebtedness in one of the above clauses and (2) an item of
Indebtedness may be divided and classified in more than one of the types of
indebtedness described above.
(e) WEC will not permit any unrestricted subsidiary to incur any
indebtedness other than non-recourse debt; provided, however, that if any such
indebtedness ceases to be non-recourse debt, such event will be deemed to
constitute an incurrence of indebtedness by WEC or any of its restricted
subsidiaries.
Limitation on Restricted Payments. (a) WEC will not, and will not permit any
restricted subsidiary, directly or indirectly, to make a restricted payment if
at the time WEC or such restricted subsidiary makes such restricted payment:
(1) a default will have occurred and be continuing or would result
therefrom;
(2) WEC is not able to incur an additional $1.00 of indebtedness
pursuant to paragraph (a) of the covenant described under "--Limitation on
Indebtedness"; or
(3) the aggregate amount of such restricted payment and all other
restricted payments since July 28, 1999 would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period,
treated as one accounting period, from July 3, 1999 to the end of the
most recent fiscal quarter ending at least 45 days prior to the date of
such restricted payment or, in case such Consolidated Net Income will
be a deficit, minus 100% of such deficit;
(B) 100% of the aggregate Net Cash Proceeds received by WEC from the
issuance or sale of WEC's capital stock, other than disqualified stock,
or an equity contribution from a holder of WEC's capital stock
subsequent to the issue date, other than an issuance or sale to any of
WEC's subsidiaries and other than an issuance or sale to an employee
stock ownership plan or to a trust established by WEC or any of its
subsidiaries for the benefit of their employees, or from the issue or
sale of convertible or exchangeable disqualified stock or convertible
or exchangeable debt securities of WEC that have been converted into or
exchanged for such equity interests, other that equity interests or
disqualified stock or debt securities sold to Parent or a subsidiary of
Parent or WEC, together with the net proceeds received by WEC upon such
conversion or exchange, if any, plus;
(C) an amount equal to the aggregate net proceeds, including the
fair market value as determined in good faith by a resolution of the
board of directors of WEC of property other than cash that would
constitute marketable securities or a Related Business so long as there
is no restriction on the sale of such property of any
(1) sale or other disposition of Investments made by WEC and its
restricted subsidiaries, or
(2) dividend from, or the sale of the stock of, an unrestricted
subsidiary;
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provided, however, that the foregoing amount shall not exceed the amount of
such Investment previously made, and treated as a restricted payment, by WEC or
any restricted subsidiary, and, in the case of any such clause (2), the amount
of Investments previously made, and treated as a restricted payment, by WEC or
any restricted subsidiary in such unrestricted subsidiary.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(1) any acquisition of any capital stock of WEC made out of the proceeds
of the substantially concurrent sale of, or made by exchange for, WEC's
capital stock other than disqualified stock and other than capital stock
issued or sold to any of WEC's subsidiaries or an employee stock ownership
plan or to a trust established by WEC or any of its subsidiaries for the
benefit of WEC or their employees; provided, however, that (A) such
acquisition of capital stock will be excluded in the calculation of the
amount of restricted payments and (B) the Net Cash Proceeds from such sale
will be excluded from the calculation of amounts under clause (3)(B) of
paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of subordinated obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, indebtedness of WEC which is permitted to be incurred pursuant to the
covenant described under "--Limitation on Indebtedness"; provided, however,
that such purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value will be excluded in the calculation of the amount
of restricted payments;
(3) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of disqualified stock made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
disqualified stock of WEC which is permitted to be issued pursuant to the
notes indenture; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value will be
excluded in the calculation of the amount of restricted payments;
(4) dividends paid or the consummation at any irrevocable redemption
within 60 days after the date of declaration or notice of redemption
thereof if at such date of declaration or notice such dividend or
redemption would have complied with this covenant; provided, however, that
such dividend will be included in the calculation of the amount of
restricted payments;
(5) so long as no default has occurred or will occur as a result of such
payment, the repurchase or other acquisition of shares of, or options to
purchase shares of, Parent's common stock or the common stock of any of
Parent's subsidiaries from employees, former employees, consultants,
directors or former directors of Parent's or any of Parent's subsidiaries,
or permitted transferees of such employees, former employees, directors or
former directors, pursuant to the terms of the agreements, including
employment agreements or plans or amendments thereto approved by WEC's
board of directors under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases and other
acquisitions will not exceed $2 million in any calendar year; provided
further, however, that such repurchases and other acquisitions will be
deducted in the calculation of the amount of restricted payments;
(6) repurchase of equity interests of WEC deemed to occur upon exercise
of stock options to the extent equity interests represent a portion of the
exercise price of such options;
(7) cash payments, advances, loans or expense reimbursements made to
Parent to permit Parent to pay its general operating expenses, franchise
tax obligations, accounting, legal, corporate reporting and administrative
expenses incurred in the ordinary course of its business in an amount not
to exceed $250,000 in the aggregate in any fiscal year;
(8) prepayments, repayments or purchases of indebtedness pursuant to
clause (2)(D) under "--Limitation on Asset Sales and Subsidiary Stocks";
provided, however, that such prepayment, repayment or purchase will be
included in the calculation of the amount of restricted payments;
(9) cash payments to Parent from and after October 15, 2004, to enable
Parent to make required interest payments on the debentures provided, in
each case, such cash payments are used for interest payments, as
applicable, within 30 days of such payment; provided, further, that (i) no
default or event of
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default shall have occurred and be continuing; (ii) that such payment will
be included in the calculation of the amount of restricted payments; and
(iii) that the Consolidated Coverage Ratio after giving effect to such
payments exceeds 2.5 to 1;
(10) so long as no default has occurred and is continuing or would be
caused thereby, other restricted payments in an aggregate amount not to
exceed $3 million since the date of the notes indenture.
The amount of all restricted payments, other than cash, shall be the fair
market value on the date of the restricted payment of the asset(s) or
securities proposed to be transferred or issued to or by WEC or such restricted
subsidiary, as the case may be, pursuant to the restricted payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined in good faith by the board of directors whose
resolution with respect thereto shall be conclusive. The board of directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million.
The board of directors of WEC may designate any restricted subsidiary to be
an unrestricted subsidiary if such designation would not cause a default. For
purposes of making such determination, all outstanding Investments by WEC and
its restricted subsidiaries except to the extent repaid in cash, in the
subsidiary so designated will be deemed to be restricted payments at the time
of such designation and will reduce the amount available for restricted
payments under clause (a) of this covenant. All such outstanding Investments
will be deemed to constitute Investments in an amount equal to the fair market
value of such Investments as the time of such designation. Such designation
will only be permitted if such restricted payment would be permitted at such
time and if such and if such restricted subsidiary otherwise meets the
definition of an unrestricted subsidiary.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. WEC will not, and will not permit any of WEC's restricted
subsidiaries to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or consensual restriction on the ability
of any restricted subsidiary to:
(1) pay dividends or make any other distributions on its capital stock
to WEC or any of its restricted subsidiaries or pay any indebtedness owed
to WEC,
(2) make any loans or advances to WEC or
(3) transfer any of its property or assets to WEC,
except:
(1) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on July 28, 1999, including restrictions under the notes
indenture, the notes, the debenture indenture, the debentures, and the
guarantees of the notes;
(2) any encumbrance or restriction with respect to a restricted
subsidiary pursuant to an agreement relating to any indebtedness incurred
by such restricted subsidiary on or prior to the date on which such
restricted subsidiary was acquired by WEC, other than indebtedness incurred
as consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by WEC, and outstanding on such date;
(3) any such encumbrance or restriction consisting of customary non-
assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder;
(4) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing indebtedness of a restricted subsidiary to
the extent such restrictions restrict the transfer of the property subject
to such security agreements or mortgages; provided that such security
agreements or mortgages constitute Permitted Liens and such indebtedness is
permitted to be Incurred under the notes indenture;
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(5) any restriction with respect to a restricted subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the capital stock or assets of such restricted subsidiary
pending the closing of such sale or disposition;
(6) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(7) restrictions on the transfer of assets subject to any Lien permitted
under the notes indenture imposed by the holder of such Lien;
(8) encumbrances or restrictions existing under or arising pursuant to
credit facilities entered into in accordance with the notes indenture;
provided that the encumbrances or restrictions in such credit facilities
are not materially more restrictive than those contained in the senior
credit agreement as in effect on the date hereof;
(9) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the first paragraph of this covenant;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(11) any agreement or instrument governing capital stock, other than
disqualified stock, of any person that is in effect on the date such person
is acquired by WEC or a restricted subsidiary; and
(12) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (11) above; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of
the board of directors of WEC, not materially more restrictive with respect
to such dividend and other payment restrictions than those contained in the
dividends or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
Limitation on Sales of Assets and Subsidiary Stock. (a) WEC will not, and
will not permit any of WEC's restricted subsidiaries to, directly or
indirectly, consummate any Asset Disposition unless:
(1) WEC or such restricted subsidiary receives consideration at the time
of such Asset Disposition at least equal to the fair market value,
including as to the value of all non-cash consideration, as determined in
good faith by WEC's board of directors, of the shares and assets subject to
such Asset Disposition and at least 75% of the consideration thereof
received by WEC or such restricted subsidiary is in the form of cash or
cash equivalents or marketable securities and
(2) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by WEC or such Restricted Subsidiary, as the case
may be;
(A) first, to the extent WEC elects or is required by the terms of
any indebtedness, to prepay, repay, redeem or purchase indebtedness
under the senior credit facility or indebtedness, other than any
disqualified stock, of a restricted subsidiary required to be repaid
upon such Asset Sale, in each case other than indebtedness owed to WEC
or any of its affiliates, within one year from the later of the date of
such Asset Disposition or the receipt of such Net Available Cash;
(B) second, to the extent of the balance of such Net Available Cash
after application in accordance with clause (A), to the extent WEC
elects, to acquire Additional Assets within one year from the later of
the date of such Asset Disposition or the receipt of such Net Available
Cash;
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an
offer to the holders of the Notes, and to holders of other indebtedness
that is pari passu with the notes designated by WEC, to purchase notes,
and such other pari passu Indebtedness, pursuant to and subject to the
conditions contained in the notes indenture; and
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(D) fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C) to (x)
the acquisition by WEC or any of its restricted subsidiaries of
Additional Assets or (y) the prepayment, repayment or purchase of WEC's
Indebtedness, other than any disqualified stock and other than
indebtedness owed to any of WEC's affiliates, or indebtedness of any
subsidiary, other than indebtedness owed to WEC or any of its
affiliates, in each case within one year from the later of the receipt
of such Net Available Cash and the date the offer described in clause
(b) below is consummated;
provided, however, that in connection with any prepayment, repayment or
purchase of indebtedness pursuant to clause (A), (C) or (D) above, WEC or any
such restricted subsidiary will permanently retire such indebtedness and will
cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this paragraph, WEC and its
restricted subsidiaries will not be required to apply any Net Available Cash
in accordance with this paragraph except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this paragraph exceeds $1.0 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash will be invested in
Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: any liabilities, as shown on WEC or such restricted
subsidiary's most recent balance sheet, of WEC's or any restricted subsidiary,
other than contingent liabilities and liabilities that are by their terms
subordinated to the notes or any subsidiary guarantee, that are assumed by the
transferee of any such assets; and any securities, notes or other obligations
received by WEC or any such restricted subsidiary from such transferee that
are converted, sold or exchanged by WEC or such restricted subsidiary into
cash within 30 days of the related Asset Sale to the extent of the cash
received in that conversation.
(b) In the event of an Asset Disposition that requires the purchase of the
notes, and other pari passu indebtedness, pursuant to clause (a)(2)(C) above,
WEC will be required to purchase notes tendered pursuant to an offer by WEC
for the notes, and other pari passu indebtedness, at a purchase price of 100%
of their principal amount, without premium, plus accrued but unpaid interest
or, in respect of such other pari passu Indebtedness, such lesser price, if
any, as may be provided for by the terms of such pari passu indebtedness, in
accordance with the procedures, including prorating in the event of
oversubscription, set forth in the notes indenture. If the aggregate purchase
price of notes, and any other pari passu indebtedness, tendered pursuant to
such offer is less than the Net Available Cash allotted to the purchase
thereof, WEC will be required to apply the remaining Net Available Cash in
accordance with clause (a)(2)(D) above. WEC will not be required to make such
an offer to purchase notes, and other pari passu indebtedness, pursuant to
this covenant if the Net Available Cash available therefor is less than $5.0
million, which lesser amount will be carried forward for purposes of
determining whether such an offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition.
(c) Notwithstanding paragraphs (a) and (b) above, WEC and its restricted
subsidiaries will be permitted to consummate an Asset Disposition with respect
to assets in any transaction or series of related transactions with a fair
market value of $2.0 million or less without complying with such paragraphs to
the extent (i) at least 75% of the consideration for such Asset Sale
constitutes cash, cash equivalents, marketable securities or Productive Assets
and (ii) such Asset Disposition is for fair market value as determined in good
faith by WEC's board of directors); provided that any consideration not
constituting Productive Assets received by WEC or any restricted subsidiary in
connection with an Asset Disposition permitted to be consummated under this
paragraph shall be subject to the provisions of paragraphs (a) and (b) above
and included in Net Available Cash.
(d) WEC will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, WEC will comply with the applicable securities
laws and regulations and will not be deemed to have breached WEC's obligations
under this clause by virtue thereof.
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Limitation on Affiliate Transactions. (a) WEC will not, and will not permit
any restricted subsidiary to, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property, employee
compensation arrangements or the rendering of any service) with any of WEC's
affiliates (an "affiliate transaction") unless the terms thereof:
(1) are no less favorable to WEC or such restricted subsidiary than
those that could be obtained at the time of such transaction in arm's-
length dealings with a person who is not such an affiliate,
(2) if such affiliate transaction involves an amount in excess of $1
million, (A) are set forth in writing and (B) have been approved by a
majority of the members of WEC's board of directors having no personal
stake in such affiliate transaction;
(3) if such affiliate transaction involves as amount in excess of $10
million, have been determined by nationally recognized investment banking
or accounting firm to be fair, from a financial standpoint, to WEC and its
restricted subsidiaries; and
(4) with respect to any transaction, management, consulting and advisory
fees and related expenses to Madison Dearborn Partners, LLC and its
affiliates, WEC would be able to incur $1.00 of indebtedness pursuant to
paragraph (a) of the covenant described under "Limitation on Indebtedness";
provided, however, for the purposes of this clause (4) only, the
Consolidated Coverage Ratio shall exceed 1.75 to 1 prior to July 31, 2001
or 2.25 to 1 thereafter.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(1) any restricted payment permitted to be paid pursuant to the covenant
described under "--Limitation on Restricted Payments,"
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by WEC's
board of directors,
(3) the grant of stock options or similar rights to WEC's employees and
directors pursuant to plans approved by WEC's board of directors,
(4) loans or advances to employees in the ordinary course of business in
accordance with WEC's past practices or past practices of WEC's restricted
subsidiaries, but in any event not to exceed $1 million in the aggregate
outstanding at any one time,
(5) the payment of reasonable fees to WEC's or Parent's directors and
directors of restricted subsidiaries who are not WEC's or Parent's
employees or employees of directors of restricted subsidiaries,
(6) any affiliate transaction between WEC and a restricted subsidiary or
between restricted subsidiaries,
(7) the issuance or sale of any capital stock of WEC other than
disqualified stock,
(8) any employment agreement with reasonable terms entered into by WEC
or any of its restricted subsidiaries in the ordinary course of business
and consistent with the past practice of WEC or such restricted subsidiary,
(9) transactions with a person that is an affiliate of WEC solely
because WEC owns an equity interest in such person, so long as no other
affiliate of WEC owns an interest in such person,
(10) the payment of transaction, management, consulting and advisory
fees and related expenses to Madison Dearborn Partners, LLC and its
affiliates; provided, that such fees shall not, in the aggregate, exceed:
(a) in the case of a management fee, $600,000 in any twelve-month
period, and
(b) in the case of a transaction fee, 1.0% of the total equity value
of, plus the indebtedness assumed from, the business acquired in
such transaction or series of related transactions.
(11) reasonable fees and expenses and compensation paid to, and
indemnity provided on behalf of, officers, directors or employees of WEC,
Parent or any subsidiary as determined in good faith by the board of
directors of WEC or senior management,
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(12) any agreement as in effect as of the issue date or any amendment
thereto so long as such amendment is not more disadvantageous to the
holders in any material respect, and
(13) payments made to Parent for the purpose of allowing to pay its
general operating expenses, franchise tax obligations, accounting, legal
corporate reporting and administrative expenses incurred in the ordinary
course of its business in an amount not to exceed $250,000 in the aggregate
in any fiscal year.
Limitation on Liens. WEC will not, and will not permit any restricted
subsidiary to, directly or indirectly, create or permit to exist any Lien on
any of its property or assets, including capital stock, whether owned on the
issue date or thereafter acquired, securing any obligation, other than
Permitted Liens, unless contemporaneously therewith effective provision is made
to secure the notes or such subsidiary guarantor's subsidiary guarantee, as
applicable, equally and ratably with or on a senior basis to, in the case of
subordinated obligations or subsidiary guarantor subordinated obligations, as
applicable, such obligation for so long as such obligation is so secured.
Limitation on the Sale or Issuance of Preferred Stock of Restricted
Subsidiaries. WEC will not sell or otherwise dispose of any preferred stock of
a restricted subsidiary, and will not permit any restricted subsidiary,
directly or indirectly, to issue or sell or otherwise dispose of any of its
preferred stock except to WEC or any of its wholly owned subsidiaries.
Future Guarantors. WEC will cause each domestic restricted subsidiary,
including each domestic restricted subsidiary created or acquired following the
issue date, to guarantee the notes pursuant to a subsidiary guaranty on the
terms and conditions set forth in the notes indenture.
Limitation on Issuances of Guarantees of and Pledges for Debt: Subsidiary
Guarantors. WEC will not permit any subsidiary that is not a subsidiary
guarantor, directly or indirectly, to secure the payment of, guarantee, assume
or in any manner become liable with respect to any indebtedness of WEC, Parent
or any other subsidiary of WEC ("subsidiary guaranteed debt") or pledge any
intercompany note representing obligations of any subsidiary that is not a
subsidiary guarantor to secure the payment of any subsidiary guaranteed debt
unless such subsidiary simultaneously executes and delivers a supplemental
indenture to the notes indenture providing for a guarantee of payment of the
notes by such subsidiary, and, if the subsidiary guaranteed debt is by its
terms expressly subordinated to the notes, the Parent guaranty or any
subsidiary guaranty, as applicable, any such assumption, guarantee or other
liability of such subsidiary with respect to such subsidiary guaranteed debt
will be subordinated to such subsidiary's assumption, guarantee or other
liability with respect to the subsidiary guaranty to the same extent as such
subsidiary guaranteed debt is subordinated to the notes, the Parent guaranty or
any subsidiary guaranty, as applicable.
Limitation on Sale/Leaseback Transactions. WEC will not, and will not permit
any restricted subsidiary to, enter into any Sale/Leaseback Transaction with
respect to any property unless
(1) WEC or such restricted subsidiary would be entitled to (A) incur
indebtedness in an amount equal to the Attributable Debt with respect to
such Sale/Leaseback Transaction pursuant to the covenant described under
"--Certain Covenants--Limitation on Indebtedness" and (B) create a Lien on
such property securing such Attributable Indebtedness without equally and
ratably securing the notes pursuant to the covenant described under "--
Certain Covenants--Limitation on Liens," and
(2) the transfer of such property is permitted by, and WEC or such
restricted subsidiary applies the proceeds of such transaction in
compliance with, the covenant described under "--Certain Covenants--
Limitation on Sales of Assets and Subsidiary Stock."
Merger and Consolidation. WEC will not consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all WEC's assets to, any person, unless:
(1) the resulting, surviving or transferee person (the "successor
company") will be a person organized and existing under the laws of the
United States of America, any State thereof or the District of
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Columbia and the successor company, if not WEC, will expressly assume, by
an indenture supplemental thereto, executed and delivered to the trustee,
in form satisfactory to the trustee, all WEC's obligations under the notes
and the notes indenture;
(2) immediately after giving effect to such transaction, and treating
any indebtedness which becomes an obligation of the successor company or
any subsidiary as a result of such transaction as having been incurred by
such successor company or such subsidiary at the time of such transaction,
no default will have occurred and be continuing;
(3) immediately after giving effect to such transaction, the successor
company would be able to incur an additional $1.00 of indebtedness pursuant
to paragraph (a) of the covenant described under "--Limitation on
Indebtedness";
(4) immediately after giving effect to such transaction, the successor
company will have Consolidated Net Worth in an amount that is not less than
the Consolidated Net Worth of WEC immediately prior to such transaction;
and
(5) WEC will have delivered to the trustee an officers' certificate and
an opinion of counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture, if any, comply with the notes
indenture.
WEC will not permit any subsidiary guarantor to consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any person, other than
in a transaction or transactions resulting in a release of such subsidiary
guarantor as described under "--Guaranties" above provided that WEC certifies
to the trustee that WEC will comply with the covenant described under "--
Limitation of Sales of Assets and Subsidiary Stock", unless:
(1) the resulting, surviving or transferee person, if not such
subsidiary, (the "successor guarantor") will be a person organized and
existing under the laws of the United States of America, or any State
thereof or the District of Columbia, and such person will expressly assume,
by a guaranty agreement, in form satisfactory to the trustee, all the
obligations of such subsidiary, if any, under its subsidiary guaranty;
(2) immediately after giving effect to such transaction, and treating
any indebtedness which becomes an obligation of the resulting, surviving or
transferee person as a result of such transaction as having been Incurred
by such Person at the time of such transaction, no default will have
occurred and be continuing; and
(3) WEC delivers to the trustee an officers' certificate and an opinion
of counsel addressed to the trustee with respect to the foregoing matters.
The successor company will be WEC's successor and will succeed to, and be
substituted for, and may exercise every right and power WEC has under the notes
indenture, but WEC's predecessor in the case of a conveyance, transfer or lease
will not be released from the obligation to pay the principal of and interest
on the notes. The successor guarantor will be the successor to such subsidiary
guarantor and will succeed to, and be substituted for, and may exercise every
right and power of, such subsidiary guarantor under the notes indenture, but
such predecessor subsidiary guarantor in the case of a conveyance, transfer or
lease will not be released from the obligation to pay the principal of and
interest on the notes.
SEC Reports. Notwithstanding that WEC may not be subject to the reporting
requirements of Section 13 or 15 (d) of the Exchange Act, WEC will file with
the SEC, to the extent the SEC will accept such filings, and provide the
trustee and noteholders with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections,
such information, documents and other reports to be so filed and provided at
the times specified for the filing of such information, documents and reports
under such Sections. The requirement under this paragraph will be satisfied by
filings made by Parent pursuant to the Exchange Act containing the required
information relating to WEC to the extent permitted by SAB 53.
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Limitations on Status as Investment Company. The notes indenture prohibits
Parent, WEC and its subsidiaries from becoming "investment companies" (as that
term is defined in the Investment Company Act of 1940, as amended), or from
otherwise becoming subject to regulation under the Investment Company Act.
Defaults
An event of default is defined in the notes indenture as:
(1) a default in the payment of interest on the notes when due,
continued for 30 days,
(2) a default in the payment of principal of any note when due at its
stated maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise,
(3) WEC's failure to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above,
(4) WEC's failure to comply for 30 days after notice with any of its
obligations in the covenants described above under "Change of Control,"
other than a failure to purchase notes, or under "--Certain Covenants"
under "--Limitation on Indebtedness," "--Limitation on Restricted
Payments," "--Limitation on Restrictions on Distributions from Restricted
Subsidiaries" or "--Limitation on Sales of Assets and Subsidiary Stock,"
other than a failure to purchase notes, "--Limitation on Affiliate
Transactions," "--Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries," "Future Guarantors" or "--SEC Reports,"
(5) WEC's failure to comply for 60 days after notice with its other
agreements contained in the notes indenture,
(6) Indebtedness of WEC or any of its significant subsidiaries is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5 million (the
"cross acceleration provision"),
(7) certain events of bankruptcy, insolvency or reorganization of WEC or
any of its significant subsidiaries (the "bankruptcy provisions"),
(8) any judgment or decree for the payment of money in excess of $5
million is entered against WEC or any of its significant subsidiaries,
remains outstanding for a period of 90 days following such judgment and is
not discharged, waived or stayed within 10 days after notice (the "judgment
default provision") or
(9) any subsidiary guaranty of a significant subsidiary ceases to be in
full force and effect, except as contemplated by the terms of the notes
indenture, or any subsidiary guarantor denies or disaffirms its obligations
under the notes indenture or its subsidiary guaranty and such default
continues for 10 days.
However, a default under clauses (4) , (5) and (8) will not constitute an
event of default until the trustee or the holders of 25% in principal amount of
the outstanding notes notify WEC of the default and WEC does not cure such
default within the time specified after receipt of such notice.
If an event of default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the outstanding notes may declare the
principal of and accrued but unpaid interest on all the notes to be due and
payable. Upon such a declaration, such principal and interest will be due and
payable immediately. If an event of default relating to certain events of
bankruptcy, insolvency or reorganization of WEC occurs and is continuing, the
principal of and interest on all the notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the trustee or any holders of the notes. Under certain circumstances, the
holders of a majority in principal amount of the outstanding notes may rescind
any such acceleration with respect to the notes and its consequences. Subject
to the provisions of the notes indenture relating to the duties of the trustee,
in case an event of default occurs and is continuing, the trustee will be under
no obligation to exercise any of the rights or powers under the notes indenture
at the request or direction of any of the holders of the notes unless such
holders have offered to the trustee reasonable indemnity or security against
any loss, liability or expense.
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Except to enforce the right to receive payment of principal, premium, if
any, or interest when due, no holder of a note may pursue any remedy with
respect to the notes indenture or the notes unless:
(1) such holder has previously given the trustee notice that an event of
default is continuing,
(2) holders of at least 25% in principal amount of the outstanding notes
have requested the trustee to pursue the remedy,
(3) such holders have offered the trustee reasonable security or
indemnity against any loss, liability or expense,
(4) the trustee has not complied with such request within 60 days after
the receipt thereof and the offer of security or indemnity and
(5) the holders of a majority in principal amount of the outstanding
notes have not given the trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the holders of
a majority in principal amount of the outstanding notes are given the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or of exercising any trust or power
conferred on the trustee. The trustee, however, may refuse to follow any
direction that conflicts with law or the notes indenture or that the
trustee determines is unduly prejudicial to the rights of any other holder
of a note or that would involve the trustee in personal liability.
The notes indenture provides that if a default occurs and is continuing and
is known to the trustee, the trustee must mail to each holder of the notes
notice of the default within 90 days after it occurs. Except in the case of a
default in the payment of principal of or interest on any note, the trustee may
withhold notice if and so long as a committee of its trust officers determines
that withholding notice is not opposed to the interest of the holders of the
notes. In addition, WEC is required to deliver to the trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any default that occurred during the previous year. WEC is also
required to deliver to the trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain defaults,
their status and what action WEC is taking or proposes to take in respect
thereof.
Amendments and Waivers
Subject to certain exceptions, the notes indenture may be amended with the
consent of the holders of a majority in principal amount of the notes then
outstanding, including consents obtained in connection with a tender offer or
exchange for the notes, and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the notes then outstanding. However, without the consent of each
holder of an outstanding note affected thereby, no amendment may, among other
things,
(1) reduce the amount of notes whose holders must consent to an
amendment,
(2) reduce the rate of or extend the time for payment of interest on any
note,
(3) reduce the principal of or extend the stated maturity of any note,
(4) reduce the amount payable upon the redemption of any note or change
the time at which any note may be redeemed as described under "--Optional
Redemption,"
(5) make any note payable in money other than that stated in the note,
(6) impair the right of any holder of the notes to receive payment of
principal of and interest on such holder's notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's notes,
(7) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions or
(8) make any change in any subsidiary guaranty that would adversely
affect the noteholders.
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Without the consent of any holder of the notes, WEC and the trustee may
amend the notes indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of
WEC's obligations under the notes indenture, to provide for uncertificated
notes in addition to or in place of certificated notes, provided that the
uncertificated notes are issued in registered form for purposes of Section
163(f) of the U.S. tax code, or in a manner such that the uncertificated notes
are described in Section 163(f)(2)(B) of the U.S. tax code, to add guarantees
with respect to the notes, to secure the notes, to add to WEC's covenants for
the benefit of the holders of the notes or to surrender any right or power
conferred upon WEC, to make any change that does not adversely affect the
rights of any holder of the notes or to comply with any requirement of the SEC
in connection with the qualification of the notes indenture under the Trust
Indenture Act.
The consent of the holders of the notes is not necessary under the notes
indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the notes indenture becomes effective, WEC is
required to mail to holders of the notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the
notes, or any defect therein, will not impair or affect the validity of the
amendment.
Transfer
The notes will be issued in registered form and will be transferable only
upon the surrender of the notes being transferred for registration of transfer.
WEC may require payment of a sum sufficient to cover any tax, assessment or
other governmental charge payable in connection with certain transfers and
exchanges.
Defeasance
At any time WEC may terminate all its obligations under the notes and the
notes indenture ("legal defeasance"), except for certain obligations, including
those respecting the defeasance trust and obligations to register the transfer
or exchange of the notes, to replace mutilated, destroyed, lost or stolen notes
and to maintain a registrar and paying agent in respect of the notes. At any
time WEC may terminate its obligations under "Change of Control" and under the
covenants described under "--Certain Covenants," other than the covenant
described under "--Merger and Consolidation," the operation of the cross
acceleration provision, the bankruptcy provisions with respect to significant
subsidiaries and the judgment default provision described under "--Defaults"
above and the limitations contained in clauses (3) and (4) under "--Certain
Covenants--Merger and Consolidation" above ("covenant defeasance").
WEC may exercise its legal defeasance option notwithstanding WEC's prior
exercise of its covenant defeasance option. If WEC exercises its legal
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default with respect thereto. If WEC exercises its covenant defeasance
option, payment of the Notes may not be accelerated because of an Event of
Default specified in clause (4), (6), (7) (with respect only to Significant
Subsidiaries), (8) or (9) under "--Defaults" above or because WEC failed to
comply with clause (3) or (4) under "--Certain Covenants--Merger and
Consolidation" above.
In order to exercise either defeasance option, WEC must irrevocably deposit
in trust (the "defeasance trust") with the trustee money or U.S. Government
Obligations for the payment of principal and interest on the notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the trustee of an opinion of counsel to the
effect that holders of the notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance
had not occurred and, in the case of legal defeasance only, such opinion of
counsel must be based on a ruling of the IRS or other change in applicable
Federal income tax law.
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No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of WEC or any
guarantor, as such, shall have any liability for any obligations of WEC or the
guarantors under the notes, the notes indenture, the guaranties or for any
claim based on, in respect of, or by reason of, such obligations or their
creations. Each holder of notes by accepting a note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the notes. The waiver may not be effective to waive liabilities
under the federal securities laws.
Concerning the Trustee
United States Trust Company of New York is the trustee under the notes
indenture and has been appointed by WEC as registrar and paying agent with
regard to the notes.
The notes indenture contains certain limitations on the rights of the
trustee, should it become a creditor of WEC, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The trustee will be permitted to engage in
other transactions; provided, however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
The holders of a majority in principal amount of the outstanding notes will
have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The notes indenture provides that if an event of default
occurs (and is not cured), the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the notes indenture at the request
of any holder of notes, unless such holder will have offered to the trustee
security and indemnity satisfactory to it against any loss, liability or
expense and then only to the extent required by the terms of the notes
indenture.
Governing Law
The notes indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
Certain Definitions
"Additional Assets" means
(1) any property or assets, other than indebtedness and capital stock,
in a Related Business;
(2) the capital stock of a person that becomes a restricted subsidiary
as a result of the acquisition of such capital stock by WEC or another
restricted subsidiary or
(3) Capital stock constituting a minority interest in any person that at
such time is a restricted subsidiary; provided, however, that any such
restricted subsidiary described in clauses (2) or (3) above is primarily
engaged in a Related Business.
"affiliate" of any specified person means any other person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants--Limitation on
Restricted Payments," "--Certain Covenants--Limitation on Affiliate
Transactions" and "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, "affiliate" will also mean any beneficial owner of
WEC's capital stock representing
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10% or more of the total voting power of the voting stock on a fully diluted
basis or of rights or warrants to purchase such capital stock, whether or not
currently exercisable, and any person who would be an affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition or
series of related sales, leases, transfers or dispositions by WEC or any
restricted subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of
(1) any shares of capital stock of a restricted subsidiary, other than
directors' qualifying shares or shares required by applicable law to be
held by a person other than WEC or a restricted subsidiary,
(2) all or substantially all the assets of any division or line of
business of WEC's or any restricted subsidiary or
(3) any other assets of WEC or any restricted subsidiary outside of
WEC's ordinary course of business or such restricted subsidiary.
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Dispositions:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(2) a transfer of assets between or among WEC and its wholly owned
subsidiaries,
(3) an issuance of equity interests by a wholly owned subsidiary to WEC
or to another wholly owned subsidiary;
(4) the sale, license or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business;
(5) the sale or other disposition of cash or cash equivalents or
marketable securities;
(6) a restricted payment that is permitted by the covenant described
above under the caption "--Certain Covenants--Restricted Payments."
"Attributable Debt" when used with respect to any Sale/Leaseback Transaction
means, as at the time of determination, the present value, discounted at the
interest rate borne by the notes, compounded annually, of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction, including any period for which
such lease has been extended.
"average life" means, as of the date of determination, with respect to any
indebtedness or preferred stock, the quotient obtained by dividing (1) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such indebtedness or
redemption or similar payment with respect to such preferred stock multiplied
by the amount of such payment by (2) the sum of all such payments.
"banks" has the meaning specified in the senior credit facility.
"bank indebtedness" means all obligations pursuant to the senior credit
facility.
"board of directors" means WEC's board of directors or that of Parent or any
committee thereof duly authorized to act on behalf of such board.
"business day" means each day which is not a legal holiday.
"capital lease obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of indebtedness represented by
such obligation will be the capitalized amount of such obligation determined in
accordance with GAAP; and the stated maturity thereof will be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
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"capital stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in, however designated, equity of such person, including any
preferred stock, but excluding any debt securities convertible into such
equity.
"cash equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guarantee or insured by the
Untied States government or any agency or instrumentality thereof, provided
that the full faith and credit of the United States is pledged in support
thereof, having maturities of no more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding twelve months and overnight bank deposits, in
each case, with any lender party to the credit agreement or with any
domestic commercial bank having capital and surplus in excess of $500.0
million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institutions meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within twelve months after the date of acquisition; and
(6) money marked funds at least 95% of the assets of which constitute
cash equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Code" means the Internal Revenue Code of 1986, as amended.
"commodity agreement" means in respect of a person, any commodity futures
contract, commodity option or other similar agreement or arrangement designed
to protect such person against fluctuations in the price of energy, commodities
and raw materials.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (1) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters prior to the date of such determination to (2)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that
(1) if WEC or any restricted subsidiary has incurred any indebtedness
since the beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an incurrence of indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period will be calculated after giving effect on
a pro forma basis to such Indebtedness as if such Indebtedness had been
Incurred on the first day of such period and the discharge of any other
indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period,
(2) if WEC or any restricted subsidiary has repaid, repurchased,
defeased or otherwise discharged any indebtedness since the beginning of
such period or if any indebtedness is to be repaid, repurchased, defeased
or otherwise discharged, in each case other than indebtedness incurred
under any revolving credit facility unless such indebtedness has been
permanently repaid and has not been replaced, on the date of the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio, EBITDA and Consolidated Interest Expense for such period will be
calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as WEC or such restricted subsidiary has not
earned the interest income actually earned during such period in respect of
cash or temporary cash investments used to repay, repurchase, defease or
otherwise discharge such indebtedness,
(3) if since the beginning of such period WEC or any restricted
subsidiary will have made any Asset Disposition, the EBITDA for such period
will be reduced by an amount equal to the EBITDA, if positive, directly
attributable to the assets which are the subject of such Asset Disposition
for such period, or
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increased by an amount equal to the EBITDA, if negative, directly
attributable thereto for such period and Consolidated Interest Expense for
such period will be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to WEC's indebtedness or any restricted
subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to WEC and its continuing restricted subsidiaries in connection
with such Asset Disposition for such period, or, if the capital stock of
any restricted subsidiary is sold, the Consolidated Interest Expense for
such period directly attributable to the indebtedness of such restricted
subsidiary to the extent WEC and its continuing restricted subsidiaries are
no longer liable for such Indebtedness after such sale,
(4) if since the beginning of such period WEC or any restricted
subsidiary, by merger or otherwise, will have made an Investment in any
restricted subsidiary, or any person which becomes a restricted subsidiary,
or an acquisition of assets, including any acquisition of assets occurring
in connection with a transaction requiring a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit
of a business, EBITDA and Consolidated Interest Expense for such period
will be calculated after giving pro forma effect thereto, including the
incurrence of any indebtedness or any cost saving permitted to be adjusted
in accordance with Article 11 of Regulation S-X, as if such Investment or
acquisition occurred on the first day of such period and
(5) if since the beginning of such period any person, that subsequently
became a restricted subsidiary or was merged with or into WEC or any
restricted subsidiary since the beginning of such period, will have made
any Asset Disposition, any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (3) or (4) above if made by
WEC or a restricted subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period will be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations will be determined
by WEC in good faith by a responsible financial or accounting officer. If any
indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such indebtedness will be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period, taking into account any interest rate agreement applicable to such
indebtedness if such interest rate agreement has a remaining term in excess of
12 months.
"Consolidated Interest Expense" means, for any period, WEC's total interest
expense and that of WEC's consolidated restricted subsidiaries, plus, to the
extent not included in such total interest expense, and to the extent incurred
by WEC or its restricted subsidiaries, without duplication,
(1) interest expense attributable to capital leases and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction,
(2) amortization of debt discount and debt issuance cost,
(3) capitalized interest,
(4) non-cash interest expenses,
(5) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing,
(6) net costs associated with hedging obligations (including
amortization of fees),
(7) preferred Stock dividends in respect of all preferred stock held by
persons other than WEC or a wholly owned subsidiary,
(8) interest incurred in connection with Investments in discontinued
operations,
(9) interest accruing on any indebtedness of any other person to the
extent such indebtedness is guaranteed by, or secured by the assets of, WEC
or any restricted subsidiary and
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(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any person, other than WEC, in connection
with indebtedness incurred by such plan or trust.
"Consolidated Net Income" means, for any period, WEC's net income and that
of WEC's consolidated subsidiaries; provided, however, that there will not be
included in such Consolidated Net Income:
(1) any net income of any person, other than WEC, if such person is not
a restricted subsidiary, except that
(A) subject to the exclusion contained in clause (4) below, WEC's
equity in the net income of any such person for such period will be
included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such person during such period to WEC or a
restricted subsidiary as a dividend or other distribution, subject, in
the case of a dividend or other distribution paid to a restricted
subsidiary, to the limitations contained in clause (3) below, and
(B) WEC's equity in a net loss of any such person for such period
will be included in determining such Consolidated Net Income;
(2) any net income, or loss, of any person acquired by WEC or a
subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income of any restricted subsidiary if such restricted
subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such restricted
subsidiary, directly or indirectly, to WEC, except that
(A) subject to the exclusion contained in clause (4) below, WEC's
equity in the net income of any such restricted subsidiary for such
period will be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such restricted
subsidiary during such period to WEC or another restricted subsidiary
as a dividend or other distribution, subject, in the case of a dividend
or other distribution paid to another restricted subsidiary, to the
limitation contained in this clause, and
(B) WEC's equity in a net loss of any such restricted subsidiary for
such period will be included in determining such Consolidated Net
Income;
(4) any gain, but not loss, realized upon the sale or other disposition
of any of WEC's assets, WEC's consolidated subsidiaries or any other
person, including pursuant to any sale-and-leaseback arrangement, which is
not sold or otherwise disposed of in the ordinary course of business and
any gain, but not loss, realized upon the sale or other disposition of any
capital stock of any person;
(5) extraordinary gains or losses; and
(6) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants--Limitation on Restricted Payments" only, there will be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from unrestricted subsidiaries to WEC or
a restricted subsidiary to the extent such dividends, repayments or transfers
increase the amount of restricted payments permitted under such covenant
pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on our balance
sheet and that of our consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP, as of the end of our most recent fiscal quarter
ending at least 45 days prior to the taking of any action for the purpose of
which the determination is being made, as
(1) the par or stated value of all our outstanding capital stock; plus
(2) paid-in capital or capital surplus relating to such capital stock;
plus
(3) any retained earnings or earned surplus less (A) any accumulated
deficit and (B) any amounts attributable to disqualified stock.
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"credit facilities" means, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing, including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables, working capital
loans, swing lines, advances or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced, restructured or refinanced in
whole or in part from time to time.
"currency agreement" means in respect of a person any foreign exchange
contract, currency swap agreement or other similar agreement designed to
protect such person against fluctuations in currency values.
"default" means any event which is, or after notice or passage of time or
both would be, an event of default.
"disqualified stock" means, with respect to any person, any capital stock
which by its terms, or by the terms of any security into which it is
convertible or for which it is exchangeable, or upon the happening of any event
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
(2) is convertible or exchangeable for indebtedness or disqualified
stock or
(3) is redeemable or must be purchased, upon the occurrence of certain
events or otherwise, by such person at the option of the holder thereof, in
whole or in part,
in each case on or prior to the first anniversary of the stated maturity of the
notes; provided, however, that any capital stock that would not constitute
disqualified stock but for provisions thereof giving holders thereof the right
to require such person to purchase or redeem such capital stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the stated maturity of the notes will not constitute
disqualified stock if (x) the "asset sale" or "change of control" provisions
applicable to such capital stock are not more favorable to the holders of such
capital stock than the terms applicable to the notes and described under "--
Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" and "--
Certain Covenants--Change of Control" and (y) any such requirement only becomes
operative after compliance with such terms applicable to the Notes, including
the purchase of any notes tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income:
(1) all WEC's income tax expense and that of WEC's consolidated
restricted subsidiaries,
(2) WEC's depreciation expense and that of WEC's consolidated restricted
subsidiaries,
(3) WEC's amortization expense and that of WEC's consolidated restricted
subsidiaries, excluding amortization expense attributable to a prepaid cash
item that was paid in a prior period,
(4) all WEC's other non-cash charges and those of WEC's consolidated
restricted subsidiaries, excluding any such non-cash charge to the extent
that it represents an accrual of or reserve for cash expenditures in any
future period, in each case for such period, and
(5) all one-time compensation payments made in connection with the
recapitalization.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
restricted subsidiary will be added to Consolidated Net Income to compute
EBITDA only to the extent, and in the same proportion, that the net income of
such restricted subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to WEC by such restricted subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such restricted subsidiary
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or its stockholders. If since the beginning of the relevant period, WEC or any
restricted subsidiary will have made an Investment in any restricted
subsidiary (or any person which becomes a restricted subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA for such period will be calculated after giving pro forma effect
thereto (including any cost saving permitted to be adjusted in accordance with
Article 11 of Regulation S-X).
"equity interest" means capital stock and all warrants, options or other
rights to acquire capital stock, but excluding any debt security that is
convertible into, or exchangeable for, capital stock.
"equity offering" means an offering of common stock of WEC or Parent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in
(1) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants,
(2) statements and pronouncements of the Financial Accounting Standards
Board,
(3) such other statements by such other entity as approved by a
significant segment of the accounting profession and
(4) the rules and regulations of the SEC governing the inclusion of
financial statements, including pro forma financial statements, in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any indebtedness of any person and any
obligation, direct or indirect, contingent or otherwise, of such person
(1) to purchase or pay or advance or supply funds for the purchase or
payment of such indebtedness or other obligation of such person, whether
arising by virtue of partnership arrangements, or by agreements to keep-
well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise, or
(2) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof, in whole or in part; provided,
however, that the term "guarantee" will not include endorsements for
collection or deposit in the ordinary course of business.
The term "guarantee" used as a verb has a corresponding meaning. The term
"guarantor" will mean any person guaranteeing any obligation.
"guaranty agreement" means a supplemental indenture, in a form satisfactory
to the trustee, pursuant to which Parent or a subsidiary guarantor guarantees
WEC's obligations with respect to the notes on the terms provided for in the
notes indenture.
"hedging obligations" of any person means the obligations of such person
pursuant to any interest rate agreement or currency agreement.
"holder" or "noteholder" means the person in whose name a note is
registered on the registrar's books.
"incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or capital stock of a person
existing at the time such person becomes WEC's subsidiary, whether by merger,
consolidation, acquisition or otherwise, will be deemed to be incurred by such
subsidiary at the time
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it becomes a subsidiary. The term "incurrence" when used as a noun will have a
correlative meaning. The accretion of principal of a non-interest bearing or
other discount security will be deemed the Incurrence of indebtedness.
"indebtedness" means, with respect to any person on any date of
determination, without duplication:
(1) the principal in respect of (A) indebtedness of such person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(2) all capital lease obligations of such person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such person;
(3) all obligations of such person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such person
and all obligations of such person under any title retention agreement, but
excluding trade accounts payable arising in the ordinary course of
business;
(4) all obligations of such person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction,
other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (1) through (3)
above) entered into in the ordinary course of business of such person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following payment on the letter of credit;
(5) the amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any disqualified stock or,
with respect to any subsidiary of such person, the liquidation preference
with respect to, any preferred stock, but excluding, in each case, any
accrued dividends;
(6) all obligations of the type referred to in clauses (1) through (5)
of other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
guarantee;
(7) all obligations of the type referred to in clauses (1) through (5)
of other persons secured by any Lien on any property or asset of such
person, whether or not such obligation is assumed by such person, the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, hedging
obligations of such person.
The amount of Indebtedness of any person at any date will be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date.
"interest rate agreement" means in respect of a person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed solely to protect such person against fluctuations in
interest rates.
"Investment" in any person means any direct or indirect advance, loan,
other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender, or other
extensions of credit, including by way of guarantee or similar arrangement, or
capital contribution to, by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others, or any purchase or acquisition of capital stock, indebtedness or other
similar instruments issued by such person. For purposes of the definition of
"unrestricted subsidiary," the definition of "restricted payment" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments,"
(1) "Investment" will include the portion, proportionate to WEC's equity
interest in such subsidiary, of the fair market value of the net assets of
any subsidiary of WEC at the time that such subsidiary is designated an
unrestricted subsidiary; provided, however, that upon a redesignation of
such subsidiary as a restricted subsidiary, WEC will be deemed to continue
to have a permanent "Investment" in an
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unrestricted subsidiary equal to an amount, if positive, equal to (x) WEC's
"Investment" in such subsidiary at the time of such redesignation less (y)
the portion, proportionate to WEC's equity interest in such subsidiary, of
the fair market value of the net assets of such subsidiary at the time of
such redesignation; and
(2) any property transferred to or from an unrestricted subsidiary will
be valued at its fair market value at the time of such transfer, in each
case as determined in good faith by the board of directors.
"issue date" means the date on which the notes are originally issued, which
was July 28, 1999.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including any conditional sale or other title retention
agreement or lease in the nature thereof.
"marketable securities" means publicly traded debt or equity securities that
are listed for trading on a national securities exchange and that were issued
by a corporation whose debt securities are rated in one of the three highest
categories by either Standard & Poor's Corporation or Moody's Investors
Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments, cash
equivalents and marketable securities received therefrom, including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or other
disposition of any securities received as consideration, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of indebtedness or other obligations
relating to such properties or assets or received in any other noncash form, in
each case net of
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition,
(2) all payments made on any indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien
upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to
such Asset Disposition, or by applicable law, be repaid out of the proceeds
from such Asset Disposition,
(3) all distributions and other payments required to be made to minority
interest holders in restricted subsidiaries as a result of such Asset
Disposition and
(4) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and
retained by WEC or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of capital stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"non-recourse debt" means indebtedness
(1) as to which neither WEC nor any restricted subsidiary
(A) provides any guarantee or credit support of any kind, including
any undertaking, guarantee, indemnity, agreement or instrument that
would constitute indebtedness, or
(B) is directly or indirectly liable as a guarantor or otherwise and
(2) no default with respect to which, including any rights that the
holders thereof may have to take enforcement action against an unrestricted
subsidiary, would permit upon notice, lapse of time or both any holder of
WEC's other indebtedness or that of any restricted subsidiary to declare a
default under such other indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
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"Parent guaranty" means the guarantee of the notes by Parent.
"Parent subordinated obligation" means any indebtedness of Parent, whether
outstanding on the issue date or thereafter incurred, which is subordinate or
junior in right of payment to the obligations of Parent under the Parent
guaranty pursuant to a written agreement.
"permitted holders" means Madison Dearborn Partners, Inc. and any affiliate
thereof.
"Permitted Investment" means an Investment by WEC or any restricted
subsidiary in
(1) WEC, a restricted subsidiary or a person that will, upon the making
of such Investment, become a restricted subsidiary; provided, however, that
the primary business of such restricted subsidiary is a Related Business;
(2) another person if as a result of such Investment such other person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, WEC or a restricted subsidiary; provided,
however, that such person's primary business is a Related Business;
(3) Investments in cash equivalents and marketable securities;
(4) receivables owing to WEC or any restricted subsidiary, including
negotiable interests held for deposit or collecting, if created or acquired
in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade
terms may include such concessionary trade terms as WEC or any such
restricted subsidiary deems reasonable under the circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees made in the ordinary course of
business consistent with WEC's past practices or that of such restricted
subsidiary;
(7) any person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under "--Certain Covenants--Limitation
on Sales of Assets and Subsidiary Stock;
(8) any acquisition of assets to the extent acquired in exchange for the
issuance of equity interests of WEC other than disqualified stock;
(9) hedging obligations permitted by clause (7) under the caption "--
Limitation on Indebtedness";
(10) an Investment existing on the date of the notes indenture;
(11) any Investment in securities of trade creditors or customers
received in compromise of obligations of such persons incurred in the
ordinary course of business, including pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers; and
(12) any Investments in any person having an aggregate fair market
value, measured on the date each such Investment was made and without
giving effect to subsequent changes in value, when taken together with all
other Investments made pursuant to this clause (12) that are at the time
outstanding, not to exceed the greater of $5.0 million or 5% of total
assets.
"Permitted Liens" means, with respect to any person,
(1) pledges or deposits by such person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of indebtedness) or leases to which such person is a party, or
deposits to secure public or statutory obligations of such person or
deposits or cash or United States government bonds to secure surety or
appeal bonds to which such person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
incurred in the ordinary course of business;
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(2) Liens imposed by law, such as carriers', warehousemen's and
mechanic's Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceeding or other Liens arising out of
judgments or awards against such person with respect to which such person
will then be proceeding with an appeal or other proceedings for review;
(3) Liens for property taxes not yet subject to penalties for non-
payment, which are being contested in good faith by appropriate proceedings
or with respect to which adequate reserves have been recorded in accordance
with GAAP;
(4) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such person in the
ordinary course of its business;
(5) survey exceptions, encumbrances, easements or reservations of, or
rights of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to use of real properties or liens incidental to the
conduct of the business of such Person or to the ownership of its
properties;
(6) Liens securing hedging obligations so long as the related
Indebtedness is, and is permitted to be under the notes indenture, secured
by a Lien on the same property securing such hedging obligations;
(7) leases and subleases of real property which do not interfere with
the ordinary conduct of WEC's business or that of any of WEC's restricted
subsidiaries, and which are made on customary and usual terms applicable to
similar properties;
(8) Liens existing as of the issue date and Liens created by the notes
indenture;
(9) Liens created solely for the purpose of securing the payment of all
or a part of the purchase price of assets or property acquired or
constructed in the ordinary course of business after the date on which the
notes are originally issued; provided, however, that
(A) the aggregate principal amount of Indebtedness secured by such
Liens will not exceed the lesser of cost or fair market value of the
assets or property so acquired or constructed,
(B) the indebtedness secured by such Liens will have otherwise been
permitted to be issued under the notes indenture and
(C) such Liens will not encumber any of WEC's other assets or
property or that of any of WEC's restricted subsidiaries and will attach
to such assets or property within 180 days of the construction or
acquisition of such assets or property;
(10) Liens on the assets or property of any of WEC's restricted
subsidiaries existing at the time such restricted subsidiary became a
subsidiary of WEC and not incurred as a result of or in connection with or
in anticipation of such restricted subsidiary becoming a subsidiary of WEC;
provided, however, that:
(A) any such Lien does not by its terms cover any property or assets
after the time such restricted subsidiary becomes a subsidiary which
were not covered immediately prior to such transaction,
(B) the incurrence of the indebtedness secured by such Lien will have
otherwise been permitted to be issued under the notes indenture, and
(C) such Liens do not extend to or cover any of WEC's other property
or assets or that of any of WEC's restricted subsidiaries;
(11) Liens to secure capitalized lease obligations permitted to be
incurred under the notes indenture;
(12) Liens securing indebtedness outstanding or committed under the
senior credit facility;
(13) Liens extending, renewing or replacing in whole or in part a Lien
permitted by the notes indenture; provided, however, that:
(A) such Liens do not extend beyond the property subject to the
existing Lien and improvements and construction on such property and
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(B) the indebtedness secured by the Lien may not exceed the
indebtedness secured at the time by the existing Lien;
(14) Liens on inventory deemed to arise by reason of the consignment of
inventory in WEC's ordinary course of business and that of WEC's restricted
subsidiaries;
(15) Liens on the assets or property of any of WEC's restricted
subsidiaries to secure indebtedness of such restricted subsidiary owing to
and held by WEC; and
(16) Liens incurred in the ordinary course of business with respect to
obligations that do not exceed $1.0 million at any one time outstanding.
"person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"preferred stock," as applied to the capital stock of any person, means
capital stock of any class or classes, however designated, which is preferred
as to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
person, over shares of capital stock of any other class of such person.
"principal" of a note means the principal of the note plus the premium, if
any, payable on the note which is due or overdue or is to become due at the
relevant time.
"Productive Assets" means assets, including capital stock, that are used or
useable by WEC and its Restricted Subsidiaries in a Related Business.
"public equity offering" means an underwritten primary public offering of
WEC's common stock or that of Parent pursuant to an effective registration
statement under the Securities Act.
"refinance" means, in respect of any indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
indebtedness in exchange or replacement for, such indebtedness. "refinanced"
and "refinancing" will have correlative meanings.
"refinancing indebtedness" means indebtedness that refinances any of WEC's
indebtedness or that of any restricted subsidiary referred to in clause (b)(6)
under the covenant "--Limitation on Indebtedness," including indebtedness that
refinances refinancing indebtedness; provided, however, that:
(1) such refinancing indebtedness has a stated maturity no earlier than
the stated maturity of the indebtedness being refinanced,
(2) such refinancing indebtedness has an average life at the time such
refinancing indebtedness is Incurred that is equal to or greater than the
average life of the indebtedness being refinanced and
(3) such refinancing indebtedness has an aggregate principal amount, or
if incurred with original issue discount, an aggregate issue price, that is
equal to or less than the aggregate principal amount, or if incurred with
original issue discount, the aggregate accreted value, then outstanding or
committed, plus fees and expenses, including any premium and defeasance
costs, under the indebtedness being refinanced; provided further, however,
that refinancing indebtedness will not include (x) indebtedness of a
subsidiary that refinances WEC's indebtedness, (y) WEC's indebtedness or
that of a restricted subsidiary that refinances indebtedness of an
unrestricted subsidiary or (z) WEC's indebtedness or that of a subsidiary
guarantor that refinances indebtedness of a restricted subsidiary that is
not a subsidiary guarantor.
"Related Business" means any business related, ancillary or complementary to
WEC's businesses and that of the restricted subsidiaries on the issue date.
"restricted payment" with respect to any person means
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its capital stock, including any
payment in connection with any merger or consolidation involving such
person, or similar payment to the direct or indirect holders of its capital
stock, other than dividends or
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distributions payable solely in its capital stock, other than disqualified
stock, and dividends or distributions payable solely to WEC or a restricted
subsidiary, and other than pro rata dividends or other distributions made
by a subsidiary that is not a wholly owned subsidiary to minority
stockholders, or owners of an equivalent interest in the case of a
subsidiary that is an entity other than a corporation,
(2) the purchase, redemption or other acquisition or retirement for
value of any capital stock of WEC held by any person or of any capital
stock of a restricted subsidiary held by any affiliate of WEC's, other than
a Restricted Subsidiary, including the exercise of any option to exchange
any capital stock, other than into WEC's capital stock that is not
disqualified stock,
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any subordinated
obligations, other than the purchase, repurchase or other acquisition of
subordinated obligations purchased in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition, or
(4) the making of any Investment in any person, other than a Permitted
Investment.
"restricted subsidiary" means any subsidiary of WEC that is not an
unrestricted subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby WEC or a restricted subsidiary transfers
such property to a person and WEC or a restricted subsidiary leases it from
such person.
"SEC" means the Securities and Exchange Commission.
"senior credit facility" means that certain credit agreement, dated on or
about July 28, 1999, among WEC, Parent, the subsidiaries named therein and the
lenders from time to time party thereto, including any collateral documents,
instruments and agreements executed in connection therewith, and the term
senior credit facility will also include any amendments, supplements,
modifications, extensions, renewals, restatements or refundings thereof and any
credit facilities that replace, refund or refinance any part of the loans,
other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility that increases the amount
borrowable thereunder or alters the maturity thereof.
"significant subsidiary" means any restricted subsidiary that would be a
"significant subsidiary" of WEC within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"stated maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision, but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred.
"subordinated obligation" means any of WEC's indebtedness, whether
outstanding on the issue date or thereafter incurred, which is subordinate or
junior in right of payment to the notes pursuant to a written agreement to that
effect, it being understood that any accrued but unpaid fees or expenses not
permitted to be paid to Madison Dearborn Partners LLC or its affiliates due to
the restriction under the covenant described under "Limitation on Affiliate
Transactions" shall be considered subordinated obligations.
"subsidiary" means, in respect of any person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of capital stock or other interests, including partnership
interests, entitled, without regard to the occurrence of any contingency, to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by:
(1) such person,
(2) such person and one or more subsidiaries of such person or
(3) one or more subsidiaries of such person.
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"subsidiary guarantor" means each subsidiary of WEC that is a subsidiary on
the issue date and any other subsidiary that guarantees WEC's obligations with
respect to the notes.
"subsidiary guarantor subordinated obligations" means, with respect to a
subsidiary guarantor, any indebtedness of such subsidiary guarantor, whether
outstanding on the issue date or thereafter incurred, which is subordinate or
junior in right of payment to the obligations of such subsidiary guarantor
under the subsidiary guaranty pursuant to a written agreement.
"subsidiary guaranty" means a guarantee by a subsidiary guarantor of WEC's
obligations with respect to the notes.
"temporary cash investments" means any of the following:
(1) any investment in direct obligations of the United States of America
or any agency thereof or obligations guaranteed by the United States of
America or any agency thereof,
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above,
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
affiliate of WEC's) organized and in existence under the laws of the United
States of America or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein is
made of "P-1" (or higher) according to Moody's Investors Service, Inc. or
"A-1" (or higher) according to Standard and Poor's Ratings Group, and
(5) investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"total assets" means the total consolidated assets of WEC and its restricted
subsidiaries as set forth on WEC's most recent balance sheet.
"unrestricted subsidiary" means
(1) any subsidiary of WEC that at the time of determination will be
designated an unrestricted subsidiary by the board of directors in the
manner provided below and
(2) any subsidiary of an unrestricted subsidiary.
WEC's board of directors may designate any of its subsidiaries, including
any newly acquired or newly formed subsidiary, to be an unrestricted subsidiary
unless such subsidiary or any of its subsidiaries owns any of WEC's capital
stock or indebtedness, or holds any Lien on WEC's property or that of any
subsidiary of WEC's that is not a subsidiary of the subsidiary to be so
designated; provided, however, that either (A) the subsidiary to be so
designated has total assets of $1,000 or less or (B) if such subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments."
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WEC's board of directors may designate any unrestricted subsidiary to be a
restricted subsidiary; provided, however, that immediately after giving effect
to such designation (x) WEC could incur $1.00 of additional indebtedness under
paragraph (a) of the covenant described under "--Certain Covenants--Limitation
on Indebtedness" and (y) no default will have occurred and be continuing. Any
such designation by WEC's board of directors will be evidenced to the trustee
by promptly filing with the trustee a copy of the resolution of the board of
directors giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations, or certificates
representing an ownership interest in such obligations, of the United States of
America, including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at WEC's option.
"voting stock" of a person means all classes of capital stock or other
interests, including partnership interests, of such person then outstanding and
normally entitled, without regard to the occurrence of any contingency, to vote
in the election of directors, managers or trustees thereof.
"wholly owned subsidiary" means a restricted subsidiary all the capital
stock of which, other than directors' qualifying shares, is owned by WEC or one
or more wholly owned subsidiaries.
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DESCRIPTION OF CAPITAL STOCK
The following summarizes certain provisions of Parent's restated certificate
of incorporation and bylaws. Such summaries do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all of the
provisions of the restated certificate of incorporation and the bylaws, which
have been filed as exhibits to the registration statement of which this
prospectus forms a part. See "Where You Can Find More Information."
General
The restated certificate of incorporation provides for, among other things,
the authorization of 5,000,000 shares of common stock, par value $.01 per
share, 100,000 shares of 8% cumulative redeemable preferred stock, par value
$.01 per share, and 500,000 shares of undesignated, serial preferred stock.
As of September 30, 1999, Parent had outstanding 1,065,996.46 shares of
common stock, 47,594.91 shares of redeemable preferred stock and no shares of
serial preferred stock.
Common Stock
All of the issued and outstanding shares of common stock is fully paid and
non-assessable. The common stock is entitled to one vote per share on all
matters to be voted on by stockholders of Parent. Subject to the rights of the
holders of preferred stock and the restrictions, if any, imposed by
indebtedness outstanding from time to time, the holders of common stock will be
entitled to dividends and other distributions, as and when declared or paid,
whether in cash, property or securities of Parent by the board of directors of
Parent out of assets legally available therefore. Holders of common stock will
be entitled to share in such dividends or distributions on a pro rata basis.
The holders of common stock will have no preemptive, subscription, redemption
or sinking fund rights under the terms of the restated certificate of
incorporation.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Parent, after satisfaction of all its liabilities and the payment of the
liquidation preference of any outstanding shares of preferred stock or other
capital stock, the holders of shares of common stock would be entitled to share
ratably in the distribution of all of Parent's assets remaining available for
distribution.
Preferred Stock
Redeemable Preferred Stock
The holders of shares of redeemable preferred stock are entitled to receive,
when and as declared by the Parent's board of directors, preferential dividends
in cash on each share of redeemable preferred stock outstanding at a rate of 8%
per annum on the sum of the liquidation value ($1,000.00 per share) of each
share plus all accumulated and unpaid dividends thereon. Parent is required to
redeem all outstanding shares of redeemable preferred stock on December 31,
2018 at a price per share equal to the liquidation value thereof plus all
accrued and unpaid dividends thereon. Parent may at any time make an offer to
redeem all, but not less than all, of the redeemable preferred stock, at a
price per share equal to the liquidation value thereof plus all accrued but
unpaid dividends thereon. In the event that Parent does not make a redemption
offer prior to December 31, 2006, then the dividend rate will be increased to
12% per annum until
. the date on which the liquidation value of such redeemable preferred
stock, plus all accrued and unpaid dividends thereon, is paid to the
holder thereof in connection with the liquidation of Parent or the
redemption of such redeemable preferred stock by Parent or
. the date on which such share is otherwise acquired by Parent.
In the event that Parent makes a redemption offer and a holder of redeemable
preferred stock elects not to have such redeemable preferred stock redeemed,
then
. the dividend rate with respect to such redeemable preferred stock will be
reduced to 5% per annum from the date after the redemption date and until
a repayment date and
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. at the option of Parent, dividends on such redeemable preferred stock may
be paid to such holder by the issuance of additional shares of redeemable
preferred stock until December 31, 2013.
The holders of redeemable preferred stock generally have no voting rights.
Serial Preferred Stock
The restated certificate of incorporation authorizes the board of directors
to create and issue one or more series of serial preferred stock and determine
the rights and preferences of each series, to the extent permitted by the
restated certificate and applicable law. Among other rights, the board of
directors may determine, without the further vote or action by Parent's
stockholders:
. the number of shares constituting the series and the distinctive
designation of the series;
. the dividend rate on the shares of the series, whether dividends will be
cumulative and, if so, from which date or dates, and the relative rights
of priority, if any, of payment of dividends on shares of the series;
. whether the series shall have voting rights, in addition to the voting
rights provided by law and, if so, the terms of such voting rights;
. whether the series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the board of
directors shall determine;
. whether or not the shares of that series shall be redeemable or
exchangeable and, if so, the terms and conditions of such redemption or
exchange, as the case may be, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at
different redemption dates;
. whether the series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms and amount of
such sinking fund; and
. the rights of the shares of the series in the event of voluntary or
involuntary liquidation, dissolution or winding up of Parent and the
relative rights or priority, if any, of payment of shares of the series.
Except for any difference so provided by the board of directors, the shares of
all series of serial preferred stock will rank on a parity with respect to the
payment of dividends and the distribution of assets upon liquidation.
Anti-Takeover Provisions of Restated Certificate and Bylaws
The rights of Parent's stockholders are governed by the Delaware General
Corporation Law, the restated certificate of incorporation and the bylaws.
Certain provisions of the restated certificate and bylaws, which are summarized
below, may discourage or make more difficult a takeover attempt that a
stockholder might consider in its best interest. Such provisions may also
adversely affect the prevailing market price for the common stock.
Serial Preferred Stock. The board of directors will have the authority,
without action by Parent's stockholders, to fix the rights, privileges and
preferences of, and to issue up to 500,000 shares of serial preferred stock.
The issuance of such serial preferred stock may have the effect of delaying,
deferring or preventing a change in control of Parent without further action by
the stockholders and may adversely affect the voting and other rights of the
holders of the common stock, including the loss of voting control to others.
Parent currently has no plans to issue any shares of serial preferred stock.
Advance Notice Requirements for Stockholder Proposals. The bylaws will
establish advance notice procedures with regard to stockholder proposals. These
procedures provide that the notice of stockholder proposals must be received by
Parent no later than
. with respect to an annual meeting of stockholders, 60 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders and
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<PAGE>
. with respect to a special meeting of stockholders, no later than the
close of business on the tenth day following the date on which notice of
such meeting is first sent or given to stockholders.
Each stockholder proposal must set forth certain information as specified in
the bylaws.
Securityholders Agreement
On July 28, 1999, Parent, MDP and the initial purchaser entered into a
registration rights and securityholders agreement relating to the common stock
sold in the units offering. Each holder of shares of Parent's common stock
included in the units offering, including all transferees of such holders (each
a "common holder"), is entitled to the benefits and subject to the obligations
arising under such securityholders agreement.
Pursuant to the securityholders agreement, each common holder will have
certain piggyback registration rights, as well as certain participation rights
with respect to certain third-party sales of common stock by MDP. With respect
to the piggyback registration rights, each common holder will have the right to
include its common stock in any registration of common stock, other than
pursuant to a registration statement on Form S-8 or S-4 or any similar form or
in connection with a registration the primary purpose of which is to register
debt securities. The amount of shares of common stock which may be registered
pursuant to an exercise of piggyback rights may be reduced, including a
reduction to zero, if the managing underwriters advise Parent that, in their
opinion, the aggregate number of shares of common stock which may be included
in such offering exceeds the number which can be sold in such offering without
adversely affecting the marketability of such offering.
The securityholders agreement grants each common holder participation
rights, which will provide that prior to any sale, transfer, assignment, pledge
or other disposal (a "transfer") by MDP of common stock by MDP, MDP shall
deliver a written notice to Parent and registered common holders specifying in
reasonable detail the identity of the prospective transferee(s) and the terms
and conditions of the transfer. Each common holder may elect to participate in
the contemplated transfer by delivering written notice to the transferring
securityholder within 10 business days after delivery of the sale notice. If
any common holder has elected to participate in such transfer, each such common
holder shall be entitled to sell in the contemplated Transfer, at the same
price and on the same terms, a number of shares equal to the product of (1) the
quotient determined by dividing the number of shares owned by such common
holder by the aggregate number of shares of common stock outstanding on a fully
diluted basis prior to giving effect to such transfer and (2) the aggregate
number of shares to be sold in the contemplated transfer. Each common holder
transferring shares in a transfer shall pay its pro rata share, based on the
number of shares to be sold, of the expenses incurred by the securityholders in
connection with such transfer.
Notwithstanding the foregoing, the participation rights described above do
not apply to any transfer of shares by MDP:
. among its affiliates, employees and consultants,
. to any employee, prospective employee, director or prospective director
of Parent, WEC or any of their affiliates,
. to any former or prospective employee, director or prospective director
of MDP or any affiliate of such affiliate or
. to any person in order to resolve certain regulatory issues.
In addition, these restrictions and obligations do not apply to a transfer or
transfers by MDP of shares representing an aggregate of up to 5% of Parent's
outstanding shares of common stock.
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In addition, the securityholders agreement confers upon each common holder
drag-along rights, which will provide that in the event of a sale of Parent to
an independent third party or group of independent third parties pursuant to
which such party or parties acquire
. capital stock of Parent possessing the voting power under normal
circumstances to elect a majority of Parent's board of directors, whether
by merger, consolidation, sale, transfer or exchange of Parent's capital
stock or
. all or substantially all of Parent's assets determined on a consolidated
basis approved by the board of directors of Parent and with respect to
which all holders of common stock receive or are generally offered the
same form and amount of per share consideration and, in any event, the
consideration shall be cash and/or securities registered under the
Securities Act and listed on a national securities exchange or authorized
for quotation on The Nasdaq Stock Market, Inc., then each common holder
shall sell all of the shares of common stock held by it.
In the event of a sale subject to these drag-along rights, each common holder
will be obligated to:
. consent to and raise no objections against the sale and rights, and
. waive any dissenter's rights and other similar rights, and
. take all reasonably necessary and desirable actions as directed by the
board in connection with the consummation of such sale, provided, that
each common holder shall only be required to make customary and
reasonable representations, warranties and indemnities regarding its
title to and ownership of its shares.
The obligations of the common holders with respect to sale shall be subject to
the receipt by Parent from a nationally recognized investment bank of a written
fairness opinion that the consideration received by the securityholders is fair
and adequate. Common holders shall be liable for their pro rata share of
expenses incurred in connection with a drag-along sale.
The drag-along and participation rights set forth in the securityholders
agreement will terminate upon the completion of (1) a sale subject to the drag-
along rights or (2) an underwritten registered public offering of shares of
common stock.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion, including the opinion of counsel described below,
is based upon current provisions of the Internal Revenue Code of 1986,
applicable Treasury regulations, judicial authority and administrative rulings
and practice. The Internal Revenue Service may take a contrary view, and no
ruling from the IRS has been or will be sought. Legislative, judicial or
administrative changes or interpretations could alter or modify the following
statements and conditions. Moreover, these changes or interpretations may or
may not be retroactive and could affect the tax consequences to you. If you are
an insurance company, tax-exempt organization, financial institution, broker-
dealer, foreign corporation or non-resident of the United States, you may be
subject to special rules not discussed below. We recommend that every holder
consult their own tax advisor as to the particular tax consequences of
exchanging their existing notes for exchange notes, of exchanging their
existing debentures for exchange debentures, and as to the applicability and
effect of any state, local or foreign tax laws in regard to the exchange
offers.
Acquisition of the Exchange Notes
Kirkland & Ellis, counsel to Woods, has advised us that in its opinion, the
exchange of the outstanding notes for exchange notes in the exchange offer will
not be treated as a taxable "exchange" for federal income tax purposes because
the exchange notes should not be considered to differ materially in kind or
extent from the outstanding notes. Rather, the exchange notes received by a
holder will be treated as a continuation of the outstanding notes in the hands
of that holder. As a result, there will be no federal income tax consequences
to you if you exchange outstanding notes for exchange notes in the exchange
offer.
Acquisition of the Exchange Debentures
Kirkland & Ellis, counsel to Woods, has advised us that in its opinion, the
exchange of the outstanding debentures for exchange debentures in the exchange
offer will not be treated as a taxable "exchange" for federal income tax
purposes because the exchange debentures should not be considered to differ
materially in kind or extent from the outstanding debentures. Rather, the
exchange debentures received by a holder will be treated as a continuation of
the outstanding debentures in the hands of that holder. As a result, there will
be no federal income tax consequences to you if you exchange outstanding
debentures for exchange debentures in the exchange offer.
PLAN OF DISTRIBUTION
Each participating broker-dealer that receives exchange securities for its
own account pursuant to the exchange offers must acknowledge that it will
deliver a prospectus in connection with any resale of such exchange securities.
This prospectus, as it may be amended or supplemented from time to time, may be
used by a participating broker-dealer in connection with resales of exchange
securities received in exchange for outstanding securities where such
outstanding securities were acquired as a result of market-making activities or
other trading activities. We have agreed that for a period of 180 days after
the expiration date of the exchange offers, we will make this prospectus, as
amended or supplemented, available to any participating broker-dealer for use
in connection with any such resale. In addition, until , 2000, all
dealers effecting transactions in the exchange securities may be required to
deliver a prospectus.
We will not receive any proceeds from any sales of the exchange securities
by participating broker-dealers. Exchange securities received by participating
broker-dealers for their own account pursuant to the exchange offers may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
exchange securities or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such participating broker-
dealer and/or the purchasers of any such exchange securities. Any participating
broker-dealer that resells the
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exchange securities that were received by it for its own account pursuant to
the exchange offers and any broker or dealer that participates in a
distribution of such exchange securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
exchange securities and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a participating broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date of the exchange offers,
we will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any participating broker-dealer that requests
such documents in the letter of transmittal. We have agreed to pay all expenses
incident to the exchange offers, including the expenses of one counsel for the
holders of the securities, other than commissions or concessions of any brokers
or dealers and will indemnify the holders of the securities, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act.
Prior to the exchange offers, there has not been any public market for the
outstanding securities. The outstanding securities have not been registered
under the Securities Act and will be subject to restrictions on transferability
to the extent that they are not exchanged for exchange securities by holders
who are entitled to participate in this exchange offers. The holders of
outstanding securities, other than any such holder that is an "affiliate" of
Woods within the meaning of Rule 405 under the Securities Act, who are not
eligible to participate in the exchange offers are entitled to certain
registration rights, and we are required to file a shelf registration statement
with respect to such outstanding securities. The exchange securities will
constitute a new issue of securities with no established trading market. We do
not intend to list the exchange securities on any national securities exchange
or to seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. We understand that the initial
purchaser intends to make a market in the exchange securities. However, it is
not obligated to do so, and any market-making activity with respect to the
exchange securities may be discontinued at any time. In addition, such market
making activity will be subject to the limits imposed by the Securities Act and
the Exchange Act and may be limited during the exchange offers and the pendency
of the shelf registration statements. Accordingly, no assurance can be given
that an active public or other market will develop for the exchange securities
or as to the liquidity of the trading market for the exchange securities. If a
trading market does not develop or is not maintained, holders of the exchange
securities may experience difficulty in reselling the exchange securities or
may be unable to sell them at all. If a market for the exchange securities
develops, any such market may be discontinued at any time.
LEGAL MATTERS
Certain legal matters with regard to the validity of the Securities will be
passed upon for Woods by Kirkland & Ellis, a partnership including professional
corporations, Chicago, Illinois.
EXPERTS
The consolidated financial statements of Woods Equipment Company as of
January 2, 1999 and December 27, 1997 and for each of the three fiscal years
ended January 2, 1999, December 27, 1997 and December 28, 1996 appearing in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report appearing elsewhere
herein and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of Tru-Part Manufacturing Corporation
as of November 28, 1998 and November 29, 1997 and for each of the fiscal years
ended November 28, 1998, November 29, 1997 and November 30, 1996 appearing in
this Prospectus and Registration Statement have been audited by Grant Thornton
LLP, independent auditors, as set forth in their report appearing elsewhere
herein and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
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The consolidated financial statements of Central Fabricators, Inc. as of
December 31, 1998 and 1997 and for each of the two years ended December 31,
1998 appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
appearing elsewhere herein and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
The financial statements of the Alitec Attachment Division as of and for the
years ended December 31, 1998 and 1997 appearing in this Prospectus and
Registration Statement have been audited by Greenwalt, Sponsel & Co., Inc.,
independent certified public accountants, as set forth in their report
appearing elsewhere herein and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Parent and WEC have filed with the SEC a registration statement on Form S-4
pursuant to the Securities Act and the rules and regulations promulgated
thereunder covering the exchange offers contemplated by this prospectus. This
prospectus does not contain all the information set forth in the registration
statement. For further information with respect to Parent, WEC and the exchange
offers, see the registration statement. The registration statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 (telephone number: 1-800-SEC-0330), at the Regional
Offices of the SEC at 7 World Trade Center, 13th Floor, New York, New York
10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The SEC maintains a website that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the SEC. The address of such site is
http://www.sec.gov.
We are not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. We have agreed that, whether or
not it is required to do so by the rules and regulations of the SEC, for so
long as any of the debentures or notes remain outstanding, we will furnish to
the holders of the debentures or notes and file with the SEC, copies of the
financial and other information that would be contained in the annual reports
and quarterly reports that we would be required to file with the SEC if we were
subject to such requirements of the Exchange Act. We will also make such
reports available to prospective purchasers of the exchange securities, and to
securities analysts and broker-dealers upon their request.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Woods Equipment Company--Consolidated Financial Statements
Report of Independent Auditors............................................ F- 3
Consolidated Balance Sheets as of January 2, 1999 and December 27, 1997... F- 4
Consolidated Statements of Operations for the fiscal years ended January
2, 1999, December 27, 1997 and December 28, 1996......................... F- 5
Consolidated Statements of Stockholders' Equity for the fiscal years ended
January 2, 1999, December 27, 1997 and December 28, 1996................. F- 6
Consolidated Statements of Cash Flows for the fiscal years ended January
2, 1999, December 27, 1997 and December 28, 1996......................... F- 7
Notes to Consolidated Financial Statements................................ F- 8
Condensed Consolidated Balance Sheet as of July 3, 1999 (unaudited)....... F-22
Condensed Consolidated Statements of Income for six months ended July 3,
1999 and June 27, 1998 (unaudited)....................................... F-23
Condensed Consolidated Statements of Cash Flow for six months ended July
3, 1999 and June 27, 1998 (unaudited).................................... F-24
Notes to Condensed Consolidated Financial Statements (unaudited).......... F-25
Tru-Part Manufacturing Corporation--Financial Statements
Report of Independent Certified Public Accountants........................ F-29
Balance Sheets as of November 28, 1998 and November 29, 1997.............. F-30
Statements of Earnings for the fifty-two weeks ended November 28, 1998 and
November 29, 1997 and the fifty-three weeks ended November 30, 1996...... F-31
Statements of Shareholders' Equity for the fifty-two weeks ended November
28, 1998 and November 29, 1997 and the fifty-three weeks ended November
30, 1996................................................................. F-32
Statements of Cash Flows for the fifty-two weeks ended November 28, 1998
and November 29, 1997 and the fifty-three weeks ended November 30, 1996.. F-33
Notes to Financial Statements............................................. F-35
Condensed Balance Sheet as of May 21, 1999 (unaudited).................... F-39
Condensed Statements of Earnings for the six months ended May 21, 1999 and
May 22, 1998 (unaudited)................................................. F-40
Condensed Statements of Cash Flows for the six months ended May 21, 1999
and May 22, 1998 (unaudited)............................................. F-41
Notes to Condensed Financial Statements (unaudited)....................... F-42
Central Fabricators, Inc.--Financial Statements
Report of Independent Auditors............................................ F-43
Balance Sheets as of December 31, 1998 and 1997........................... F-44
Statements of Income for the years ended December 31, 1998 and 1997....... F-45
Statements of Changes in Stockholders' Equity for the years ended December
31, 1998 and 1997........................................................ F-46
Statements of Cash Flows for the years ended December 31, 1998 and 1997... F-47
Notes to Financial Statements............................................. F-48
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Balance Sheet at June 30, 1999 (unaudited)...................... F-51
Condensed Statements of Income for the six months ended June 30, 1999 and
1998 (unaudited)......................................................... F-52
Condensed Statements of Cash Flow for the six months ended June 30, 1999
and 1998 (unaudited)..................................................... F-53
Notes to Condensed Financial Statements (unaudited)....................... F-54
Alitec Corporation--Attachments Division--Financial Statements
Independent Auditors' Report.............................................. F-55
Balance Sheets as of December 31, 1998 and 1997........................... F-56
Statements of Income and Accumulated Deficit for the years ended December
31, 1998 and 1997........................................................ F-57
Statements of Cash Flows for the years ended December 31, 1998 and 1997... F-58
Notes to Financial Statements............................................. F-60
Condensed Balance Sheet as of June 30, 1999 (unaudited)................... F-65
Condensed Statements of Income for the six months ended June 30, 1999 and
1998 (unaudited)......................................................... F-66
Condensed Statements of Cash Flows for the six months ended June 30, 1999
and 1998 (unaudited)..................................................... F-67
Notes to Condensed Financial Statements (unaudited)....................... F-69
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Woods Equipment Company
We have audited the accompanying consolidated balance sheets of Woods
Equipment Company as of January 2, 1999 and December 27, 1997, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the three fiscal years in the period ended January 2,
1999. Our audits also included the financial statement schedule listed in the
index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Woods
Equipment Company at January 2, 1999 and December 27, 1997, and the
consolidated results of its operations and its cash flows for each of the three
fiscal years in the period ended January 2, 1999, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Chicago, Illinois
February 19, 1999, except for Note
15, as to which the date is July 23,
1999
F-3
<PAGE>
WOODS EQUIPMENT COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares Information)
<TABLE>
<CAPTION>
January
2 December 27
ASSETS 1999 1997
------ -------- -----------
<S> <C> <C>
Current assets:
Cash................................................... $ 1,352 $ 2,716
Trade accounts receivable, less allowance of $120...... 24,160 21,252
Inventories, net....................................... 21,362 20,486
Deferred income taxes.................................. 3,083 1,844
Prepaid expenses and other current assets.............. 2,309 2,503
-------- --------
Total current assets................................. 52,266 48,801
Property, plant, and equipment:
Land................................................... 882 882
Buildings.............................................. 9,535 9,291
Machinery and equipment................................ 23,062 21,200
Office furniture, fixtures, and equipment.............. 5,545 4,561
-------- --------
39,024 35,934
Less: Accumulated depreciation......................... 13,079 9,564
-------- --------
25,945 26,370
Excess of cost over fair value of net assets acquired,
less accumulated amortization of $3,158 and $1,831,
respectively............................................ 23,817 24,717
Other assets, net........................................ 6,637 5,552
-------- --------
$108,665 $105,440
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term obligations............ $ 2,128 $ 2,722
Accounts payable....................................... 4,938 5,643
Accrued expenses....................................... 5,521 4,832
-------- --------
Total current liabilities............................ 12,587 13,197
Long-term obligations, less current maturities........... 117,033 79,645
Deferred income taxes.................................... 3,083 2,977
Other long-term liabilities.............................. 76 107
Redeemable preferred stock and accrued dividends......... 30,110 6,658
Common stockholders' equity (deficit):
Common stock, $.01 par value; authorized--15,000,000
shares; issued and outstanding--657,963 shares and
3,804,375 shares, respectively........................ 6 38
Additional paid-in capital............................. 14,897 2,412
Retained earnings (accumulated deficit)................ (68,546) 567
Treasury stock, at cost................................ -- (56)
Notes receivable from stockholders..................... (581) (105)
-------- --------
(54,224) 2,856
-------- --------
$108,665 $105,440
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE>
WOODS EQUIPMENT COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
Fiscal year ended
---------------------------------
January December 27 December 28
2 1999 1997 1996
-------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................... $154,734 $137,924 $129,427
Cost of sales................................ 113,205 104,983 97,025
-------- -------- --------
Gross profit................................. 41,529 32,941 32,402
Operating expenses:
Selling.................................... 14,590 12,614 10,744
General and administrative................. 8,713 6,749 5,777
Noncash stock option compensation charge
(see Note 1) 4,310 -- --
Engineering................................ 3,766 3,443 2,643
Management fee paid to affiliate........... 203 366 368
Amortization............................... 2,596 1,358 906
Other operating (income) expenses, net..... (169) (9) 15
-------- -------- --------
34,009 24,521 20,453
-------- -------- --------
Operating income............................. 7,520 8,420 11,949
Interest expense, including amortization of
deferred financing costs.................... 10,261 7,831 7,326
-------- -------- --------
Income (loss) before income tax provision
(benefit) and extraordinary loss............ (2,741) 589 4,623
Income tax provision (benefit)............... (438) 494 1,971
-------- -------- --------
Income (loss) before extraordinary loss...... (2,303) 95 2,652
Extraordinary loss: Early extinguishment of
debt (net of income tax benefit of $588 and
$214, respectively)......................... 795 290 --
-------- -------- --------
Net (loss) income............................ $ (3,098) $ (195) $ 2,652
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE>
WOODS EQUIPMENT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
Number of Retained Note
Shares of Additional Earnings Receivable
Common Common Paid-In (Accumulated Treasury From
Stock Stock Capital Deficit) Stock Stockholders Total
---------- ------ ---------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 30,
1995................... 3,777,500 $ 38 $ 2,336 $ (1,232) $(64) $(133) $ 945
Sale of common stock.... 31,625 -- 76 -- 72 (148) --
Purchase of common
stock.................. (4,750) -- -- -- (64) 28 (36)
Net income.............. -- -- -- 2,652 -- -- 2,652
Preferred stock
dividends.............. -- -- -- (182) -- -- (182)
---------- ---- ------- -------- ---- ----- --------
Balance at December 28,
1996................... 3,804,375 38 2,412 1,238 (56) (253) 3,379
Payments by
stockholders........... -- -- -- -- -- 148 148
Net loss................ -- -- -- (195) -- -- (195)
Preferred stock
dividends.............. -- -- -- (476) -- -- (476)
---------- ---- ------- -------- ---- ----- --------
Balance at December 27,
1997................... 3,804,375 38 2,412 567 (56) (105) 2,856
Recapitalization:
Exercise of stock
options.............. 329,780 3 436 -- -- -- 439
Purchase of common
stock................ (4,069,888) (41) (1,706) (64,735) 66 105 (66,311)
Sale of common stock.. 593,696 6 9,445 -- (10) (880) 8,561
Payments by
stockholders........... -- -- -- -- -- 299 299
Noncash stock option
compensation charge.... -- -- 4,310 -- -- -- 4,310
Net loss................ -- -- -- (3,098) -- -- (3,098)
Preferred stock
dividends paid and
accrued................ -- -- -- (1,280) -- -- (1,280)
---------- ---- ------- -------- ---- ----- --------
Balance at January 2,
1999................... 657,963 $ 6 $14,897 $(68,546) $-- $(581) $(54,224)
========== ==== ======= ======== ==== ===== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-6
<PAGE>
WOODS EQUIPMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Fiscal year ended
----------------------------------
January 2 December 27 December 28
1999 1997 1996
--------- ----------- -----------
<S> <C> <C> <C>
Operating activities
Income (loss) before extraordinary items... $ (2,303) $ 95 $ 2,652
Adjustments to reconcile income (loss)
before extraordinary items to net cash
provided by operating activities:
Depreciation.............................. 3,600 3,054 2,503
Amortization.............................. 2,916 1,566 1,343
Noncash stock option compensation charge.. 4,310 -- --
Bad debt write-offs (recoveries), net..... 28 80 (60)
Deferred income taxes..................... (1,133) 595 1,239
Loss on sale of property, plant, and
equipment................................ 7 117 60
Gain on sale of assets to joint venture... -- -- (95)
Equity in income of joint venture......... (161) (195) (29)
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Trade accounts receivable............... (2,936) 7,082 (3,735)
Inventories............................. (876) (1,818) 8,280
Prepaid expenses and other assets....... 357 (2,323) (375)
Accounts payable........................ (705) (2,145) (394)
Other liabilities....................... 658 892 (163)
-------- -------- -------
Net cash provided by operating activities.. 3,762 7,000 11,226
Investing activities
Acquisition of Wain Roy, net of cash
acquired of $321.......................... -- (19,165) --
Acquisition of Baerts...................... -- (2,175) --
Purchases of equipment..................... (3,212) (4,678) (4,662)
Proceeds from sale of property, plant, and
equipment................................. 30 498 17
Proceeds from sale of assets to joint
venture................................... -- -- 2,215
Acquisition of product line................ -- -- (236)
Proceeds from disposition of product line.. -- -- 794
-------- -------- -------
Net cash used in investing activities...... (3,182) (25,520) (1,872)
Financing activities
Payments for deferred financing costs...... (3,898) (1,553) (40)
Proceeds from issuance of old term loans... -- 54,683 1,429
Net payments on old revolving loan......... (20,700) (3,290) (3,035)
Payments on old term loans and other notes. (51,026) (28,829) (7,495)
Proceeds from new term loans............... 85,000 -- --
Payments on new term loan.................. (150) -- --
Proceeds from new revolver, net............ 3,750 -- --
Issuance of subordinated loan to
controlling stockholder................... 25,000 -- --
Proceeds from exercise of stock options.... 439 -- --
Proceeds from sale of common stock......... 8,561 -- --
Proceeds from sale of preferred stock...... 27,179 -- --
Payment of promissory note to old
controlling stockholder................... (5,080) -- --
Preferred stock dividends.................. (992) -- --
Redemption of common stock................. (66,311) -- (36)
Redemption of preferred stock.............. (4,015) -- --
Net change in notes receivable from
stockholders.............................. 299 148 (120)
-------- -------- -------
Net cash provided by (used in) financing
activities................................ (1,944) 21,159 (9,297)
-------- -------- -------
Net increase (decrease) in cash............ (1,364) 2,639 57
Cash at beginning of year.................. 2,716 77 20
-------- -------- -------
Cash at end of year........................ $ 1,352 $ 2,716 $ 77
======== ======== =======
Supplemental disclosure of noncash
investing and financing activities
Debt payable to sellers incurred in
connection with acquisitions.............. $ -- $ 700 $ 325
Notes receivable received in connection
with sale of stock........................ -- -- 148
Supplemental cash flow information
Cash paid for interest..................... $ 9,294 $ 6,254 $ 6,580
Cash paid for income taxes................. 1,357 728 687
</TABLE>
See accompanying notes to the consolidated financial statements.
F-7
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares Information)
Each of the three fiscal years ended January 2, 1999
1. Description of Business, Recapitalization, and Acquisitions
Woods Equipment Company (Woods or the Company) is a leading manufacturer of
attachments for a variety of mowing, cutting, clearing, construction, material
handling, landscaping, and grounds maintenance applications. The Company's
products include mowing attachments, front end loaders, backhoes, coupler
systems, buckets, scrapers, and other implements, in addition to a full line of
replacement parts. The average lifespan of the products range from one to five
years due to the severe and wearing nature of the applications for which they
are used. The Company's products are sold through approximately 3,900 dealers
throughout the United States, with no one dealer accounting for more than 2% of
total company sales.
On August 7, 1998, the Company completed a recapitalization of its equity
structure, pursuant to which, among other things, Madison Dearborn Capital
Partners Fund II (MDCPII or new controlling stockholder) and Woods' senior
management acquired substantially all of the outstanding capital stock of the
Company, referred to as the Recapitalization. The Recapitalization was financed
through: (i) borrowings of $85,000 under a new $110,000 multitranche senior
secured credit facility; (ii) borrowings of $25,000 under a subordinated bridge
loan provided by MDCPII; (iii) an equity investment in the Company of
approximately $37,500 by MDCPII, senior management, and certain other
investors; and (iv) cash on hand of approximately $1,700. In connection with
securing financing, the Company paid the new controlling stockholder $1,000 for
related services. This amount was classified as interest expense.
With these funds, the Company retired $65,051 bank debt, including $15,400
for a revolving loan, $48,825 for term loans, and $826 for accrued interest.
The Company also used $6,576 to retire subordinated promissory notes held by
Code, Hennessy, and Simmons, LLC (old controlling stockholder), including
$6,156 of principal and $420 of accrued interest. In addition, $422 was used to
retire seller debt, consisting of $417 of principal and $5 of accrued interest.
The Company used $70,879 of Recapitalization proceeds to repurchase
4,069,888 shares of common stock and 4,015 shares of preferred stock for
$65,872 and $5,007, respectively. The repurchase of preferred stock included
$4,015 for the stocks' face value and $992 for accrued dividends. The proceeds
were dispersed to the old controlling stockholder and management. Issuance of
593,696 shares of common stock and 27,179 shares of preferred stock yielded
consideration of $36,620, including notes receivables from management of $880.
Prior to the Recapitalization, employees exercised options to purchase
329,780 shares of common stock. In the Recapitalization, 287,233 of such shares
were redeemed by the Company at $16.10 per share. When options are exercised
and repurchased by the Company without being held by the employee for a period
of at least six months, generally accepted accounting principles require that a
compensation change be recorded for the excess of the redemption amount over
the exercise price. The charge recorded by the Company was $4,310.
During October 1997, the Company acquired Wain-Roy, Inc. (Wain-Roy) for cash
of approximately $19,165. During April 1997, the Company acquired Baerts Metal
Products (Baerts) for an aggregate cost of $2,875, consisting of cash of $2,175
and issuance of a note payable of $700. The aggregate excess of cost over the
fair value of the net assets acquired was $16,351 for the Baerts and Wain-Roy
acquisitions. The acquisitions have been accounted for using the purchase
method of accounting and, accordingly, the results of operations of the
acquired businesses have been included in the accompanying financial statements
since their dates of acquisition.
F-8
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
The following unaudited proforma results of operations assumes that the
Wain-Roy and Baerts acquisitions occurred as of the beginning of the fiscal
year ended December 27, 1997:
<TABLE>
<S> <C>
Net sales....................................................... $149,598
Operating income................................................ 10,722
Income before extraordinary loss................................ 1,236
</TABLE>
2. Summary of Significant Accounting Policies
Basis of Presentation
The Company operates on a fifty-two/fifty-three weeks year. As such,
financial statements included herein reflect information for the fifty-three
weeks ended January 2, 1999 (1998) and for the fifty-two weeks ended December
27, 1997 (1997) and December 28, 1996 (1996).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, WEC Company. All significant intercompany
balances and transactions have been eliminated. The Company's investment in a
50%-owned joint venture is accounted for under the equity method and is
included in "Other Assets."
Revenue Recognition
Sales are recognized upon shipment of the related equipment and replacement
parts. The Company offers preseason, early-order programs, whereby customers
may order and take delivery of products prior to the spring and summer selling
season, to end-users. These preseason sales programs are shipped beginning in
the late summer, carry descending cash discounts in conjunction with delayed
payment terms, and have no right of return. Revenue on sales is recorded net of
anticipated discounts.
Financial Instruments
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. Credit
risks with respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base. The Company performs ongoing
credit evaluations of its customers and maintains allowances for potential
credit losses which, when incurred, have been within the range of management
expectations.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the last in, first out (LIFO) method for materials costs and the first in,
first out (FIFO) method for all other cost components. Approximately 75% of
total inventories at January 2, 1999 and approximately 70% of total inventories
at December 27, 1997 were accounted for using LIFO.
During 1996, the Company reduced certain inventory quantities, which were
valued at lower LIFO costs prevailing in prior fiscal years. The effect of
these reductions was to increase 1996 income before income taxes by $465.
F-9
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation thereon is
computed using principally the straight-line method over estimated useful lives
of the respective assets as follows:
<TABLE>
<S> <C>
Buildings................................................... 30 years
Machinery and equipment..................................... 7 to 10 years
Office furniture, fixtures, and equipment................... 3 to 8 years
</TABLE>
Intangible Assets
The excess of cost over fair value of net assets of acquired businesses is
being amortized on the straight-line basis over 20 years. Other intangible
assets consist primarily of covenants not to compete, which are being amortized
on a straight-line basis over the terms of the related agreements ranging from
3 years to 5 years.
Impairment of Long-Lived Assets
The Company continually reviews the carrying value of its long-lived assets.
The Company assesses recoverability from future operations using income from
operations of the related business as a measure. Under this approach, the
carrying value would be reduced if it becomes probable that the Company's best
estimate for expected future cash flows of the related business would be less
than the net carrying amount of the long-lived assets over the remaining useful
life period. For the three fiscal year periods ended January 2, 1999, there
were no adjustments to the carrying amounts of long-lived assets resulting from
these evaluations. However, if future operations do not perform as expected, or
if the Company's strategic plans for its business were to change, a reduction
in the carrying value of these assets may be required.
Deferred Finance Costs
Deferred finance costs are being amortized using both the straight-line
basis, which approximates the interest method, and the interest method over the
terms of the related debt agreements.
Warranty Obligations
The Company's products are generally under limited warranty for a period of
one year. The estimated cost of warranty obligations is recognized at the time
of sale.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax return
purposes, and are measured using the enacted tax rates at which the resulting
taxes are expected to be paid.
Stock Options
The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). In accordance with APB 25, compensation expense is
recognized based on the excess of the fair value, as determined by the
Company's Board of Directors, over the exercise price of the underlying stock
on the measurement date. The measurement date is the date at which both the
exercise price and number of shares to be issued are known.
F-10
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
Advertising Costs
The Company expenses the costs of advertising when incurred. Advertising
expense was $1,591 in 1998, $1,677 in 1997, and $1,224 in 1996.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes standards for
expanded disclosures on derivative financial instruments and the exposure to
market risks. The Company does not engage in hedging or other market structure
derivative trading activities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
January 2 December 27
1999 1997
--------- -----------
<S> <C> <C>
Raw materials....................................... $ 3,870 $ 3,355
Work in process..................................... 2,323 2,029
Finished goods...................................... 16,651 16,269
------- -------
Total inventories at FIFO........................... 22,844 21,653
LIFO adjustment..................................... (1,482) (1,167)
------- -------
Total inventories at LIFO........................... $21,362 $20,486
======= =======
</TABLE>
4. Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
January 2 December 27
1999 1997
--------- -----------
<S> <C> <C>
Covenants not to compete............................ $3,749 $3,749
Deferred financing costs............................ 5,230 2,911
Patents............................................. 776 704
Organizational costs................................ 67 67
------ ------
9,822 7,431
Less: Accumulated amortization...................... 4,565 3,101
------ ------
5,257 4,330
Investment in joint venture......................... 1,380 1,222
------ ------
$6,637 $5,552
====== ======
</TABLE>
F-11
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
5. Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
January 2 December 27
1999 1997
--------- -----------
<S> <C> <C>
Salaries, wages, and employee benefits.............. $2,696 $1,932
Interest............................................ 1,073 1,425
Warranty............................................ 730 648
Restructuring costs................................. 445 330
Property, payroll, and other taxes.................. 125 212
Other............................................... 452 285
------ ------
$5,521 $4,832
====== ======
</TABLE>
6. Revolving Loan and Other Long-Term Obligations
In connection with the recapitalization (see Note 1), the Company entered
into a bank loan agreement which provides for a revolving credit facility and
three term loans. Total borrowings under the revolving credit facility were
$3,750 at January 2, 1999, and are not to exceed $25,000, including outstanding
letters of credits. The Company is subject to a fee of .50% per annum applied
to the amount of unused borrowings available on the revolving credit facility.
The revolving credit facility expires on September 30, 2003. Interest on the
revolving credit facility and term loans is payable quarterly either at a
specified bank base rate plus margins ranging from .50% to 2.50, or at a
Eurodollar rate plus Eurodollar margins ranging from 1.50% to 3.50% (2.25% at
January 2, 1999). Additional borrowing capacity under the revolving credit
facility was $20,850 at January 2, 1999. Letters of credit of $400 were
outstanding at January 2, 1999.
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
January 2 December 27
Rates 1999 1997
------------- --------- -----------
<S> <C> <C> <C>
Revolving loans:
New revolver....................... 9.0% $ 3,750 $ --
Old revolver....................... 8.7% -- 20,700
Bank term loans:
New term loans..................... 7.5% to 8.5% 84,850 --
Old term loans..................... 8.7% to 9.2% -- 50,000
Seller promissory note............... 7.5% to 8.0% 4,768 5,177
Subordinated promissory notes:
New controlling stockholder........ 10.5% 25,000 --
Old controlling stockholder........ 8.0% to 25.0% -- 5,080
Other obligations.................... 7.5% to 8.0% 793 1,410
-------- -------
119,161 82,367
Less: Current maturities............. (2,128) (2,722)
-------- -------
Total long-term obligations.......... $117,033 $79,645
======== =======
</TABLE>
The new term loans are payable in quarterly installments which began at $150
and increase to an average of $1,712, $8,266, and $5,797 in 2004, 2005, and
2006, respectively, as the term notes mature. The final installment of the
remaining outstanding principal balance is due on September 30, 2006.
F-12
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Shares Information)
The Company's term loan is subject to restrictive covenants, including
minimum levels of net earnings and limitations on capital expenditures and
dividends. Borrowings under the bank loan agreement are guaranteed by the
Company's controlling stockholder.
The seller promissory note was issued in connection with an acquisition.
The note is payable in monthly installments of principal and interest of $35,
with final payment due in July 2009, and bears annual interest at 7.5%.
The subordinated promissory note to the new controlling stockholder is due
on October 1, 2007, and initially bore an interest rate of 10%, which is
increased by 0.5% at the end of each successive three month period from the
August 7, 1998 date of issuance.
Included in other obligations are three noncompete agreements and
consulting agreements with key members of the management of acquired entities.
At January 2, 1999, the noncompete agreements require total remaining payments
of $604, excluding imputed interest, over one- to two-year periods, and bear
interest at an 8% rate or have been discounted to their net present value
using an interest rate of 7.50%. The consulting agreement requires total
remaining payments of $127, excluding imputed interest, at January 2, 1999,
over a remaining two-year period. The Company has discounted these consulting
agreement to its net present value using an interest rate of 7.5%.
At points in time during 1998, 1997, and 1996, the Company was briefly in
default of certain restrictive covenants and obtained appropriate waivers or
amendments to the respective debt agreements.
Substantially all assets of the Company are collateralized by the above
debt. The carrying amount of long-term debt, most of which bear interest at
floating rates, approximate their fair values.
Future annual maturities of other long-term obligations, subsequent to
January 2, 1999, are as follows:
<TABLE>
<S> <C>
1999............................................................. $ 2,128
2000............................................................. 3,246
2001............................................................. 4,673
2002............................................................. 5,679
2003............................................................. 7,185
Thereafter....................................................... 92,500
--------
$115,411
========
</TABLE>
7. Stockholders' Equity
Preferred Stock
The Preferred Stock of the Company consists of 50,000 shares of 8%
Cumulative Redeemable Preferred Stock, par value $.01 per share (the Preferred
Stock). As of January 2, 1999, there were 29,164.22 shares of preferred stock
outstanding.
When and as declared by the Company's Board of Directors, to the extent
permitted by law, the holders of shares of Preferred Stock are entitled to
receive preferential dividends in cash on each share of Preferred Stock
outstanding at a rate of 8% per annum on the sum of the liquidation value of
such share, plus all accumulated and unpaid dividends thereon. The liquidation
value of each share of Preferred Stock is $1,000 per share. To the extent not
paid on March 31, June 30, September 30, and December 31 of each year,
dividends which shall have
F-13
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Shares Information)
accrued on each outstanding share of Preferred Stock shall accumulate, and
shall remain accumulated until paid. The shares of Preferred Stock are not
convertible into any other class of capital stock of the Company, and the
holders thereof have no preemptive or subscription rights to purchase any
securities of the Company.
The Company is required to redeem all outstanding shares of Preferred Stock
on December 31, 2018, at a price per share equal to the liquidation value
thereof, plus all accrued but unpaid dividends thereon. In the event that the
Company does not make a Redemption Offer prior to December 31, 2006, then the
Dividend Rate will increase to 12% per annum until (i) the date on which the
Liquidation Value of such Preferred Stock (plus all accrued and unpaid
dividends thereon) is paid to the holder thereof in connection with the
liquidation of the Company or the redemption of such Preferred Stock by the
Company or (ii) the date on which such Preferred Stock is otherwise acquired
by the Company (each a Repayment Date). In the event that the Company makes a
Redemption Offer and a holder of Preferred Stock elects not to have such
Preferred Stock redeemed, then (i) the Dividend Rate with respect to such
Preferred Stock will be reduced to 5% per annum from the date after the
Redemption Date and until a Repayment Date and (ii) at the option of the
Company, dividends on such Preferred Stock may be paid to such holder by the
issuance of additional shares of Preferred Stock until December 31, 2013.
The holders of Preferred Stock have no voting rights unless the Company
fails to make a redemption payment, with respect to the Preferred Stock, which
it is required to make pursuant to an Event of Noncompliance. If an Event of
Noncompliance has occurred, the number of directors constituting the Company's
board of directors shall, at the request of the holders of a majority of the
Preferred Stock then outstanding, be increased by one director, and the
holders of Preferred Stock shall have the special right, voting separately as
a single class (with each share being entitled to one vote) and to the
exclusion of the Common Stock holders, to elect one individual to fill such
newly created directorship, to remove any individuals elected to such
directorship, and to fill any vacancies in such directorship. Such special
right shall continue until such time as there is no longer an Event of
Noncompliance in existence, at which time such special right shall terminate,
subject to revesting upon the occurrence and continuation of any Event of
Noncompliance which gives rise to such special right. Each holder of Preferred
Stock shall, regardless of the existence of an Event of Noncompliance, be
entitled to notice of all stockholder meetings at the same time and in the
same manner as notice is given to all stockholders entitled to vote at such
meetings.
Warrants
Pursuant to the terms of the Recapitalization Agreement, the Company issued
a Contingent Stock Purchase Warrant (the Warrant) to the old controlling
stockholder. Such Warrant provides for the purchase, upon exercise of the
Warrant, of approximately 3% of the fully diluted shares of the Common Stock
at a nominal price. The Warrant is exercisable in whole at any time, and from
time to time after the closing of a particular acquisition (Acquisition), and
prior to the earlier of (i) August 7, 2008, (ii) an underwritten public
offering registered under the Securities Act of shares of Common Stock, or
(iii) the sale of the Company to an independent third-party. As the
Acquisition was not consummated, no value was ascribed to the warrants as of
January 2, 1999.
Management Stock Options
The Company adopted its 1994 Incentive Stock Plan (the 1994 Plan) which
permits the granting of options to certain key administrative, managerial, and
executive employees of the Company and directors of the Company to purchase
shares of the Company's common stock. Options shall expire at such time as
designated by the administering committee provided, however, that no option
shall be exercisable later than the tenth anniversary date of its grant.
F-14
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Shares Information)
In connection with the Recapitalization, all stock options outstanding
immediately vested and were exercised. The 1994 Plan was terminated thereafter.
The following table summarizes the stock option activity:
<TABLE>
<S> <C>
Outstanding at December 30, 1995................................ 289,280
Granted....................................................... 34,000
Exercised..................................................... --
Canceled...................................................... --
--------
Outstanding at December 28, 1996................................ 323,280
Granted....................................................... --
Exercised..................................................... --
Canceled...................................................... --
--------
Outstanding at December 27, 1997................................ 323,280
Granted....................................................... 6,500
Exercised..................................................... (329,780)
Canceled...................................................... --
--------
Outstanding at January 2, 1999.................................. --
========
Average option price per share:
1996.......................................................... $1.33
1997.......................................................... $1.33
1998.......................................................... N/A
Options exercisable:
1996.......................................................... --
1997.......................................................... 289,280
1998.......................................................... N/A
Average price of options exercised:
1996.......................................................... N/A
1997.......................................................... N/A
1998.......................................................... $1.33
</TABLE>
Disclosure of pro forma information regarding net income (loss) is required
by SFAS No. 123, "Accounting for Stock-Based Compensation", as if the Company
had accounted for its stock options granted subsequent to December 31, 1994,
using the fair value method of SFAS No. 123. The fair values of the Company's
stock options granted subsequent to December 31, 1994, were estimated at the
dates of grant using the minimum value method for nonpublic companies. The
following assumptions were utilized in the valuation:
<TABLE>
<CAPTION>
Fiscal year ended
---------------------------------
January 2 December 27 December 28
1999 1997 1996
--------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rate................. 5.20% N/A 4.98%
Expected dividend yield................. N/A N/A N/A
Expected life of options................ 5 years N/A 5 years
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option vesting period. Had
compensation cost for stock options granted subsequent to December 31, 1994
F-15
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
been determined based on their fair value at the dates of grant, the Company's
net income (loss) would have been changed to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
Fiscal year ended
---------------------------------
January 2 December 27 December 28
1999 1997 1996
--------- ----------- -----------
<S> <C> <C> <C>
As reported............................. $(3,098) $(195) $2,652
Pro forma............................... (3,111) (215) 2,636
</TABLE>
The pro forma effect for 1998, 1997, and 1996 is not representative of the
pro forma effect in future years, as the pro forma disclosures reflect only
the fair value of stock options granted in 1998, 1997, and 1996 and do not
reflect the fair value of outstanding options granted prior to 1995.
8. Income Taxes
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
January 2 December 27
1999 1997
--------- -----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable allowances................... $ 410 $ 338
Inventory capitalization and allowances.......... 243 261
Accrued expenses................................. 593 473
Net operating loss carryforward.................. 2,552 865
Alternative minimum tax credit carryforward...... 898 800
Other............................................ 533 408
------ -------
5,229 3,145
Less: Valuation allowance.......................... (602) --
------ -------
Total net deferred tax assets...................... 4,627 3,145
Deferred tax liabilities:
Book basis over tax basis of property, plant, and
equipment....................................... 4,065 3,821
Other............................................ 562 457
------ -------
Total net deferred tax liabilities................. 4,627 4,278
------ -------
Net deferred tax asset (liabilities)............... $ -- $(1,133)
====== =======
</TABLE>
Significant components of the income tax provision (benefit) are as
follows:
<TABLE>
<CAPTION>
Fiscal year ended
----------------------------------
January 2 December 27 December 28
1999 1997 1996
--------- ----------- -----------
<S> <C> <C> <C>
Deferred:
Federal............................... $ (989) $ 475 $ 877
State................................. (144) 120 362
-------- ----- ------
(1,133) 595 1,239
Current:
Federal............................... 93 (248) 732
State................................. 14 (67) --
-------- ----- ------
107 (315) 732
-------- ----- ------
$(1,026) $ 280 $1,971
======== ===== ======
</TABLE>
F-16
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
A reconciliation of the income tax provision (benefit) computed at a federal
statutory tax rate to the reported income tax provision (benefit), inclusive of
the benefit resulting from the early extinguishment of debt, is as follows:
<TABLE>
<CAPTION>
Fiscal year ended
---------------------------------
January 2 December 27 December 28
1999 1997 1996
--------- ----------- -----------
<S> <C> <C> <C>
Tax provision (benefit) at statutory
rates................................. $(1,402) $29 $1,572
State income tax provision, net of
federal tax effect ................... (86) 35 240
Excess of cost over fair value of net
assets acquired....................... 485 196 117
Other permanent differences............ (23) 20 42
------- ---- ------
$(1,026) $280 $1,971
======= ==== ======
</TABLE>
At January 2, 1999, the Company has net operating loss (NOL) carryforwards
of approximately $6.5 million for federal income tax purposes expiring in years
through 2018, and alternative minimum tax credit carryforwards of approximately
$898, which is available indefinitely. The NOL carryforwards resulted from the
exercise of stock options which produced additional deductions for income tax
purposes. For financial reporting purposes, a valuation allowance of $602 has
been recognized to offset deferred tax assets related to those NOL
carryforwards. When realized, the tax benefit for those items will be
principally applied to increase additional paid-in capital.
9. Employee Benefit Plan
The Company maintains a defined-contribution and 401(k) plan covering
substantially all employees. The plan provides for a Company matching
contribution of 50% of the employee's contribution up to 6% of the employee's
eligible compensation. In addition, the plan has a discretionary contribution
provision. Total Company contributions during 1998, 1997, and 1996 were
approximately $663, $528, and $497, respectively.
10. Lease Commitments
The Company leases certain facilities, computer equipment, and
transportation equipment under various noncancelable operating lease
agreements. The transportation equipment leases incorporate variable rates
based on mileage. Future minimum lease payments under noncancelable operating
leases with initial or remaining lease terms in excess of one year at January
2, 1999, are as follows:
<TABLE>
<S> <C>
1999............................................................... $1,695
2000............................................................... 1,361
2001............................................................... 998
2002............................................................... 872
2003............................................................... 654
Thereafter......................................................... 1,352
------
$6,932
======
</TABLE>
Total rent expense under all operating leases for 1998, 1997, and 1996 was
approximately $2,110, $1,566, and $1,199, respectively.
F-17
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
11. Segment and Related Information
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This Statement required the Company to
change the way it reports information about its operations. Information for
1997 and 1996 has been restated to conform to the 1998 presentation of
operating segment information.
The Company's products are sold primarily by construction, commercial,
agricultural, and outdoor power equipment dealers that sell prime movers and
other equipment produced by the major OEMs. The Company distribution network
includes dealers that have affiliations with all of the principal OEMs of prime
movers, such as New Holland, Deere, Case, AGCO (manufacturer of the Massey
Furguson brand of prime mover), Ingersoll (manufacturer of the Bobcat brand of
prime mover), Caterpillar, and Kubota. The Company also sells its products
through a substantial number of independent dealers that are not affiliated
with the major prime mover OEMs. Most dealers offer tractor and prime mover
attachments from independent manufacturers which complement or compete with
attachments sold by the major tractor and prime mover manufacturers.
Business units represent market segments in which they share certain
characteristics, such as technology, marketing, and product application, that
create long-term synergies. The principal activities of the Company's operating
segments are as follows:
Grounds Maintenance
This product category includes attachments used to maintain the grounds
surrounding industrial and office parks, large estates, resort complexes,
universities, golf courses, and individual homes. In general, the demand for
these products is dependent upon a variety of conditions, including general
economic conditions, consumer spending patterns, weather conditions, as well as
state and municipal government spending.
Construction
The end-users in this product category generally include construction
companies and utility contractors. Demand for these products is closely
correlated to the overall demand for construction equipment, which is driven by
several factors, including general economic conditions, interest rates, weather
conditions, and government spending.
Other
The end-users in this product category are farmers and ranchers, who use
these products principally in the planting, cultivating, and harvesting of
their crops. The demand for these products closely correlates to the demand for
agricultural equipment in general, which is influenced by a number of factors,
including total farm cash receipts, acreage under crop or livestock, crop
yields, government programs, general economic conditions, interest rates,
weather, and technological trends in agriculture.
Net sales by operating segment reflects sales of products and services to
external customers, as reported in the Company's consolidated statements of
operations. The Company evaluates performance based on operating income of the
respective segment. Operating income includes all revenues, costs, and expenses
directly related to the segment involved. In determining operating income,
neither corporate nor interest expenses are included. Operating segment
depreciation expense, identifiable assets, and capital expenditures relate to
those assets that are utilized by the respective operating segment. Corporate
assets consist principally of cash, other receivables, and fixed assets.
F-18
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
The accounting policies of each operating segment are the same as those
described in the summary of significant accounting policies.
A summary of the Company's operations by segment for the three-year period
ended January 2, 1999, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales
Grounds maintenance........................ $114,567 $110,477 $107,564
Construction............................... 36,137 22,072 16,883
Other...................................... 4,030 5,375 4,980
-------- -------- --------
Total net sales............................ $154,734 $137,924 $129,427
======== ======== ========
Operating income (loss)
Grounds maintenance........................ $ 15,237 $ 12,111 $ 13,404
Construction............................... 4,639 988 3,158
Other...................................... 390 449 400
Corporate.................................. (12,746) (5,128) (5,013)
-------- -------- --------
Total operating income..................... 7,520 8,420 11,949
Interest expense........................... 10,261 7,831 7,326
-------- -------- --------
Income (loss) before income taxes and
extraordinary loss........................ $ (2,741) $ 589 $ 4,623
======== ======== ========
</TABLE>
In connection with the Recapitalization (see Note 1), the Company incurred a
noncash stock option compensation charge of $4,310 in 1998. Also, in connection
with the Acquisition, the Company incurred a charge of $562 for the write-off
of related acquisition costs during 1998.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Depreciation and amortization
Grounds maintenance............................ $ 3,442 $ 3,090 $ 2,838
Construction................................... 1,781 863 738
Other.......................................... 27 18 33
Corporate...................................... 1,266 649 237
-------- -------- -------
Total depreciation and amortization............ $ 6,516 $ 4,620 $ 3,846
======== ======== =======
Assets
Grounds maintenance............................ $ 47,655 $ 47,788 $49,691
Construction................................... 18,030 13,976 12,620
Other.......................................... 3,808 3,311 3,531
Corporate...................................... 39,172 40,365 15,786
-------- -------- -------
Total assets................................... $108,665 $105,440 $81,628
======== ======== =======
</TABLE>
F-19
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
The investment in joint venture is included in the other segment for all
years presented.
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Additions to long-lived assets
Grounds maintenance................................. $2,602 $3,548 $3,784
Construction........................................ 435 919 872
Other............................................... -- 14 6
Corporate........................................... 175 197 --
------ ------ ------
Total additions to long-lived assets................ $3,212 $4,678 $4,662
====== ====== ======
</TABLE>
The Company had no significant amounts of sales to or any long-lived assets
in an individual country outside of the United States.
12. Extraordinary Item
The extraordinary items of $795 and $290, net of income tax benefits of $588
and $214, represents the write-off of unamortized deferred financing costs
related to notes which were early extinguished in 1998 and 1997, respectively.
13. Legal Proceedings
The Company is subject to various claims, including product liability
claims, arising in the ordinary course of business, and is party to various
legal proceedings which are ordinary, routine, and incidental to the Company's
business. In the opinion of management, all such matters are either adequately
covered by insurance or are not expected to have a material adverse effect on
the Company.
14. Related Party Transactions
The Company purchases manufactured finished goods at cost from its joint
venture investment which amounted to $7,979, $8,032, and $4,064 in fiscal years
1998, 1997, and 1996, respectively.
15. WEC Condensed Financial Information
Summary balance sheet information for WEC Company is as follows:
<TABLE>
<CAPTION>
January 2 December 27
1999 1997
--------- -----------
<S> <C> <C>
Current assets...................................... $ 52,266 $ 48,801
Noncurrent assets................................... 56,399 56,639
Total assets........................................ 108,665 105,440
Current liabilities................................. 12,868 17,430
Noncurrent liabilities.............................. 120,192 77,649
Total liabilities................................... 133,060 95,079
</TABLE>
F-20
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
Summary results of operations for WEC Company is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------
January 2 December 27 December 28
1999 1997 1996
--------- ----------- -----------
<S> <C> <C> <C>
Net sales.............................. $154,734 $137,924 $129,427
Gross profit........................... 41,529 32,941 32,402
Operating income....................... 7,520 8,420 11,949
Income (loss) before income tax
provision (benefit) and extraordinary
loss.................................. (2,021) 1,540 5,060
Net (loss) income...................... (2,659) 385 2,919
</TABLE>
WEC Company is a wholly owned subsidiary of Woods Equipment Company. Woods
Equipment Company has fully and unconditionally guaranteed the 12.0% Senior
Notes. Complete financial statements and other disclosures concerning WEC
Company are not presented because management has determined they are not
meaningful to investors.
F-21
<PAGE>
WOODS EQUIPMENT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
July 3, 1999
(In Thousands, Except Shares Information)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Current Assets:
Trade accounts receivable, less allowance of $51................... $ 29,736
Inventories, net................................................... 18,510
Deferred income taxes.............................................. 3,083
Prepaid expenses and other current assets.......................... 2,100
--------
Total current assets............................................. 53,429
Property, plant, and equipment, net.................................. 26,588
Intangibles, net..................................................... 4,402
Excess of cost over fair value of net assets acquired, net........... 23,266
Other assets, net.................................................... 1,481
--------
$109,166
========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
Current liabilities:
Current maturities of long-term debt............................... $ 3,153
Accounts payable................................................... 6,085
Accrued expenses................................................... 7,322
--------
Total current liabilities........................................ 16,560
Long-term obligations, less current maturities....................... 111,685
Deferred income taxes................................................ 3,083
Other long-term liabilities.......................................... 77
--------
131,405
Redeemable preferred stock and accrued dividends..................... 31,274
Common stockholders' equity (deficit):
Common Stock $0.01 par value; authorized--15,000,000 shares issued
and outstanding--658,363 shares................................... 6
Additional paid-in capital......................................... 14,937
Treasury stock, at cost............................................ (96)
Notes receivable from stockholders................................. (578)
Accumulated deficit................................................ (67,782)
--------
(53,513)
--------
$109,166
========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-22
<PAGE>
WOODS EQUIPMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Shares Information)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended,
------------------
July 3, June 27,
1999 1998
-------- ---------
<S> <C> <C>
Net sales.................................................... $ 85,797 $ 83,694
Cost of sales................................................ 61,588 59,674
-------- --------
Gross profit................................................. 24,209 24,020
Selling, general, and administrative expenses................ 14,876 13,785
-------- --------
Operating income............................................. 9,333 10,235
Interest expense, including amortization of deferred
financing costs............................................. 5,585 3,964
-------- --------
Income before income tax provision........................... 3,748 6,271
Income tax provision......................................... 1,826 2,662
-------- --------
Net income................................................... $ 1,922 $ 3,609
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-23
<PAGE>
WOODS EQUIPMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended,
--------------------
July 3, June 27,
1999 1998
--------- ---------
<S> <C> <C>
Operating activities
Net income.............................................. $ 1,922 $ 3,609
Adjustments to reconcile net income to net cash and cash
equivalents used in operating activities
Depreciation............................................ 1,997 1,726
Amortization............................................ 1,548 1,385
Bad debt expense........................................ 19 --
Equity in income of joint venture....................... (101) (220)
(Gain) loss on sale of property, plant and equipment.... (20) 14
Changes in operating assets and liabilities:
Trade accounts receivables............................ (5,595) (6,970)
Inventories........................................... 2,852 (1,023)
Prepaid expenses and other assets..................... 74 1,352
Accounts payable and accrued liabilities.............. 2,948 3,431
--------- --------
Net cash provided by operating activities........... 5,644 3,304
Investing activities
Purchases of equipment, net............................. (2,620) (1,227)
--------- --------
Net cash used in investing activities............... (2,620) (1,227)
Financing activities
Payments on old term loans and other notes.............. (273) (941)
Net proceeds on old revolving loan...................... -- (3,800)
Payments on new term loans.............................. (300) --
Net borrowings on new revolving loan.................... (3,750) --
Proceeds from sale of common stock...................... 40 102
Redemption of common stock.............................. (67) (10)
Redemption of preferred stock........................... (29) --
Net change in notes receivable from stockholders........ 3 (144)
--------- --------
Net cash used in financing activities............... (4,376) (4,793)
--------- --------
Net decrease in cash.................................... (1,352) (2,716)
Cash at beginning of period............................. 1,352 2,716
--------- --------
Cash at end of period................................... $ -- $ --
========= ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-24
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 3, 1999 and June 27, 1998
(In Thousands)
(Unaudited)
1. Formation and Basis of Presentation
Woods Equipment Company (Woods or the Company) is a leading manufacturer of
attachments for a variety of mowing, cutting, clearing, construction, material
handling, landscaping, and grounds maintenance applications. The Company's
products include mowing attachments, front end loaders, backhoes, coupler
systems, buckets, scrapers, and other implements, in addition to a full line of
replacement parts. The average life-span of the products range from one to five
years due to the severe and wearing nature of the application for which they
are used. The Company's products are sold through approximately 3,900 dealers
throughout the United States, with no one dealer accounting for more than 2% of
total company sales.
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instruction to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month periods ended July 3, 1999
and June 27, 1998 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1999. These financial
statements should be read in conjunction with the financial statements,
including the notes thereto, for the fiscal year ended January 2, 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Related Party Expenses
The Company purchases manufactured finished goods at cost from its joint
venture investment, which amounted to $2,984 and $4,699 for the six month
periods ended July 3, 1999 and June 27, 1998, respectively.
3. Segment and Related Information
The Company's products are sold primarily by construction, commercial,
agricultural, and outdoor power equipment dealers that sell prime movers and
other equipment produced by the major OEMs. The Company distribution network
includes dealers that have affiliations with all of the principal OEMs of prime
movers, such as New Holland, Deere, Case, AGCO (manufacturer of the Massey
Furguson brand of prime mover), Ingersoll (manufacturer of the Bobcat brand of
prime mover), Caterpillar, and Kubota. The Company also sells its products
through a substantial number of independent dealers that are not affiliated
with the major prime mover OEMs. Most dealers offer tractor and prime mover
attachments from independent manufacturers which complement or compete with
attachments sold by the major tractor and prime mover manufacturers.
Business units represent market segments in which they share certain
characteristics, such as technology, marketing, and product application, that
create long-term synergies. The principal activities of the Company's operating
segments are as follows:
Grounds Maintenance
This product category includes attachments used to maintain the grounds
surrounding industrial and office parks, large estates, resort complexes,
universities, golf courses, and individual homes. In general, the demand
F-25
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
(Unaudited)
for these products is dependent upon a variety of conditions, including general
economic conditions, consumer spending patterns, weather conditions, as well as
state and municipal government spending.
Construction
The end-users in this product category generally include construction
companies and utility contractors. Demand for these products is closely
correlated to the overall demand for construction equipment, which is driven by
several factors, including general economic conditions, interest rates, weather
conditions, and government spending.
Other
The end-users in this product category are farmers and ranchers, who use
these products principally in the planting, cultivating, and harvesting of
their crops. The demand for these products closely correlates to the demand for
agricultural equipment in general, which is influenced by a number of factors,
including total farm cash receipts, acreage under crop or livestock, crop
yields, government programs, general economic conditions, interest rates,
weather, and technological trends in agriculture.
Net sales by operating segment reflects sales of products and services to
external customers, as reported in the Company's statements of operations. The
Company evaluates performance based on operating income of the respective
segment. Operating income includes all revenues, costs, and expenses directly
related to the segment involved. In determining operating income, neither
corporate nor interest expenses are included. Operating segment depreciation
expense, identifiable assets, and capital expenditures relate to those assets
that are utilized by the respective operating segment. Corporate assets consist
principally of cash, other receivables, and fixed assets.
A summary of the Company's operations by segment for the six month periods
ended July 3, 1999 and June 27, 1998, is as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Net sales
Grounds maintenance........................................ $64,949 $59,804
Construction............................................... 17,751 18,560
Other...................................................... 3,097 5,330
------- -------
Total net sales............................................ $85,797 $83,694
======= =======
Operating income (loss)
Grounds maintenance........................................ $11,110 $10,955
Construction............................................... 2,639 3,039
Other...................................................... 295 516
Corporate.................................................. (4,711) (4,275)
------- -------
Total operating income..................................... 9,333 10,235
Interest expense........................................... 5,585 3,964
------- -------
Income before income taxes................................. $ 3,748 $ 6,271
======= =======
</TABLE>
F-26
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
July
3, 1999
--------
<S> <C>
Assets
Grounds maintenance.............................................. $ 50,732
Construction..................................................... 17,167
Other............................................................ 3,625
Corporate........................................................ 37,642
--------
Total assets..................................................... $109,166
========
</TABLE>
The investment in joint venture is included in the other segment for all
periods presented.
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Additions to long-lived assets
Grounds maintenance........................................... $2,178 $1,003
Construction.................................................. 364 168
Corporate..................................................... 147 84
------ ------
Total additions to long-lived assets.......................... $2,689 $1,255
====== ======
</TABLE>
The Company had no significant amounts of sales to or any long-lived assets
in an individual country outside of the United States.
4. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
July 3,
1999
-------
<S> <C>
Raw materials.................................................... $ 3,685
Work in process.................................................. 1,942
Finished goods................................................... 14,365
-------
Total inventories at FIFO........................................ 19,992
LIFO adjustment.................................................. (1,482)
-------
Total inventories at LIFO........................................ $18,510
=======
</TABLE>
5. WEC Condensed Financial Information
Summary balance sheet information for WEC Company is as follows:
<TABLE>
<CAPTION>
July 3,
1999
--------
<S> <C>
Current assets................................................... $ 53,429
Noncurrent assets................................................ 55,737
Total assets..................................................... 109,166
Current liabilities.............................................. 16,560
Noncurrent liabilities........................................... 114,845
Total liabilities................................................ 131,405
</TABLE>
F-27
<PAGE>
WOODS EQUIPMENT COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)
(In Thousands)
(Unaudited)
Summary results of operations for WEC Company is as follows:
<TABLE>
<CAPTION>
Six Months Ended
----------------
July 3, June 27,
1999 1998
------- --------
<S> <C> <C>
Net sales................................................ $85,797 $83,694
Gross profit............................................. 24,209 24,020
Operating income......................................... 9,333 10,235
Income before income tax provision....................... 3,748 6,847
Net income............................................... 1,922 3,960
</TABLE>
WEC Company is a wholly owned subsidiary of Woods Equipment Company. Woods
Equipment Company has fully and unconditionally guaranteed the 12.0% Senior
Notes. Complete financial statements and other disclosures concerning WEC
Company are not presented because management has determined they are not
meaningful to investors.
F-28
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Tru-Part Manufacturing Corporation
We have audited the accompanying balance sheets of Tru-Part Manufacturing
Corporation (a Minnesota corporation) as of November 28, 1998 and November 29,
1997, and the related statements of earnings, shareholders' equity, and cash
flows for the fifty-two week periods ended November 28, 1998 and November 29,
1997 and fifty-three week period ended November 30, 1996. These financial
statements are the responsibility of Tru-Part Manufacturing Corporation'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 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 Tru-Part Manufacturing
Corporation at November 28, 1998 and November 29, 1997, and the results of its
operations and its cash flows for the fifty-two week periods ended November 28,
1998 and November 29, 1997 and fifty-three week period ended November 30, 1996
in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Minneapolis, Minnesota
December 17, 1998
F-29
<PAGE>
TRU-PART MANUFACTURING CORPORATION
BALANCE SHEETS
November 28, 1998 and November 29, 1997
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................................... $ 7,460 $ 6,999
Accounts receivable.......................................... 6,341 6,144
Merchandise inventories...................................... 7,049 6,690
Other........................................................ 144 170
------- -------
Total current assets....................................... 20,994 20,003
Plant and equipment--at cost:
Equipment, furniture and fixtures............................ 6,222 5,850
Leasehold improvements....................................... 2,098 2,038
------- -------
8,320 7,888
Less accumulated depreciation and amortization............... 7,200 6,602
------- -------
1,120 1,286
Other Assets:
Notes receivable............................................. 1,693 1,797
Cash surrender value of life insurance....................... 1,359 1,266
Other........................................................ 317 43
------- -------
3,369 3,106
------- -------
Total assets............................................... $25,483 $24,395
======= =======
Current liabilities:
Notes payable to officers and shareholders................... $11,965 $12,051
Undistributed taxable earnings............................... 2,368 2,311
Accounts payable............................................. 2,564 1,829
Accrued liabilities.......................................... 2,375 2,257
------- -------
Total current liabilities.................................. 19,272 18,448
Commitments and contingencies.................................. -- --
Shareholders' equity
6% cumulative preferred shares, Class A--authorized, 1,000
shares of $100 par value; none issued....................... -- --
Preferred shares, Class B--authorized, 3,000 shares of $100
par value; none issued...................................... -- --
Class A voting common stock--authorized, 50,000 shares of
$.10 par value; issued and outstanding 21,106 shares........ 2 2
Class B non-voting common stock--authorized, 250,000 shares
of $.10 par value; issued and outstanding 189,954 shares.... 19 19
Retained earnings............................................ 6,190 5,926
------- -------
6,211 5,947
------- -------
Total liabilities and shareholders' equity................. $25,483 $24,395
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-30
<PAGE>
TRU-PART MANUFACTURING CORPORATION
STATEMENTS OF EARNINGS
Fifty-two weeks ended November 28, 1998,
November 29, 1997 and fifty-three weeks ended November 30, 1996
(In Thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net sales............................................ $65,610 $66,366 $65,771
Cost of sales
Inventory at beginning of year..................... 6,690 6,227 8,803
Purchases.......................................... 40,003 40,826 37,301
Freight-in......................................... 1,293 1,203 1,046
------- ------- -------
47,986 48,256 47,150
Less inventory at end of year........................ 7,049 6,690 6,227
------- ------- -------
40,937 41,566 40,923
------- ------- -------
Gross profit..................................... 24,673 24,800 24,848
Commissions.......................................... 4,841 4,910 4,920
------- ------- -------
Gross profit after commissions................... 19,832 19,890 19,928
Operating expenses
Warehouse.......................................... 6,858 6,578 6,784
Selling............................................ 3,646 3,733 3,572
Administration..................................... 4,810 5,158 5,264
Shipping........................................... 1,386 1,344 995
------- ------- -------
16,700 16,813 16,615
------- ------- -------
Operating profit................................. 3,132 3,077 3,313
Other income (expense)
Interest expense................................... (991) (950) (1,174)
Interest income.................................... 557 514 425
Miscellaneous...................................... (66) (74) (32)
------- ------- -------
(500) (510) (781)
------- ------- -------
Net earnings..................................... $ 2,632 $ 2,567 $ 2,532
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-31
<PAGE>
TRU-PART MANUFACTURING CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
Fifty-two weeks ended November 28, 1998,
November 29, 1997 and fifty-three weeks ended November 30, 1996
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
Class A voting Class B non-voting
common stock common stock
------------------ ------------------
Number of Number of
shares shares Retained
outstanding Amount outstanding Amount earnings Total
----------- ------ ----------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 25,
1995................... 21,106 $ 2 189,954 $ 19 $ 6,611 $ 6,632
Net earnings.......... -- -- -- -- 2,532 2,532
Distributions to
shareholders......... -- -- -- -- (2,967) (2,967)
------ ---- ------- ---- ------- -------
Balance at November 30,
1996................... 21,106 2 189,954 19 6,176 6,197
Net earnings.......... -- -- -- -- 2,567 2,567
Distributions to
shareholders......... -- -- -- -- (2,817) (2,817)
------ ---- ------- ---- ------- -------
Balance at November 29,
1997................... 21,106 2 189,954 19 5,926 5,947
Net earnings.......... -- -- -- -- 2,632 2,632
Distributions to
shareholders......... -- -- -- -- (2,368) (2,368)
------ ---- ------- ---- ------- -------
Balance at November 28,
1998................... 21,106 $ 2 189,954 $ 19 $ 6,190 $ 6,211
====== ==== ======= ==== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-32
<PAGE>
TRU-PART MANUFACTURING CORPORATION
STATEMENTS OF CASH FLOWS
Fifty-two weeks ended November 28, 1998,
November 29, 1997 and fifty-three weeks ended November 30, 1996
(In Thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings...................................... $ 2,632 $ 2,567 $ 2,532
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization................... 641 980 1,002
Changes in operating assets and liabilities:
Accounts receivable........................... (197) (532) (960)
Merchandise inventories....................... (359) (462) 2,575
Other current assets.......................... 34 (35) 42
Accounts payable.............................. 735 (492) 24
Accrued liabilities........................... 118 133 31
Other assets.................................. -- (27) --
------- ------- -------
Net cash provided by operating activities... 3,604 2,132 5,246
Cash flows from investing activities:
Proceeds from sale of held-to-maturity securities. -- -- 1,978
Purchases of plant and equipment.................. (432) (296) (283)
Payments received on notes receivable............. 96 90 81
Increase in cash surrender value of life
insurance........................................ (93) (97) (93)
Purchase of other assets.......................... (317) -- --
------- ------- -------
Net cash provided by (used in) investing
activities................................. (746) (303) 1,683
Cash flows from financing activities:
Proceeds on notes payable to officers and
shareholders..................................... 1,586 -- --
Payments on notes payable to officers and
shareholders..................................... (1,672) (2,917) (503)
Undistributed taxable earnings.................... (2,311) -- --
Distributions to shareholders..................... -- -- (469)
Principal payments on long-term obligations....... -- -- (2,200)
------- ------- -------
Net cash used in financing activities....... (2,397) (2,917) (3,172)
------- ------- -------
Net increase (decrease) in cash and cash
equivalents........................................ 461 (1,088) 3,757
Cash and cash equivalents at beginning of period.... 6,999 8,087 4,330
------- ------- -------
Cash and cash equivalents at end of period.......... $ 7,460 $ 6,999 $ 8,087
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-33
<PAGE>
Supplemental disclosures of cash flow information:
Cash paid for interest was $991, $949 and $1,177 for the periods ended
November 28, 1998, November 29, 1997 and November 30, 1996.
Supplemental disclosure of noncash financing activities:
For the periods ended November 28, 1998, November 29, 1997 and November
30, 1996, the Company recorded undistributed taxable earnings in the amount
of $2,368, $2,311 and $2,026.
For the period ended November 29, 1997 and November 30, 1996,
undistributed taxable earnings in the amount of $2,532 and $472, were
transferred to notes payable to officers and shareholders.
F-34
<PAGE>
TRU-PART MANUFACTURING CORPORATION
NOTES TO FINANCIAL STATEMENTS
November 28, 1998, November 29, 1997 and November 30, 1996
(In Thousands)
Note A--Summary of Significant Accounting Policies
The company is a distributor of farm machinery replacement parts with
warehouses located in St. Paul, Minnesota; Sacramento, California; Dallas,
Texas; Nashville, Tennessee and Richmond, Virginia. Its customers are primarily
farm implement dealers operating throughout the United States. A summary of
significant accounting policies consistently applied in the preparation of the
accompanying financial statements follows:
Cash and Cash Equivalents
The company considers highly liquid temporary investments purchased with an
original maturity of three months or less to be cash equivalents. Substantially
all cash and cash equivalents are held in a money market fund at one financial
institution located in Minnesota.
Accounts Receivable
The company grants credit to its customers in the normal course of business,
but generally does not require collateral or any other security to support
amounts due. The company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is provided. If amounts become
uncollectible, they are charged to operations when that determination is made.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost (determined by the
last-in, first-out method) or market.
Depreciation and Amortization
Depreciation and amortization are provided in amounts sufficient to relate
the cost of assets to operations over their estimated service lives using both
straight-line and accelerated methods.
Use of Estimates
Preparation of the company's financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and related revenues and expenses. Actual results could differ from
these estimates.
Fiscal Year
The company is on a fifty-two, fifty-three week year which ends on the last
Saturday in November. Fiscal 1998 and 1997 each consisted of fifty-two weeks.
Fiscal 1996 consisted of fifty-three weeks.
Note B--Merchandise Inventories
If the first-in, first-out method of inventory accounting had been used by
the company, merchandise inventories would have been approximately $6,512 and
$6,474 higher than that reported at November 28, 1998 and November 29, 1997.
F-35
<PAGE>
TRU-PART MANUFACTURING CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
November 28, 1998, November 29, 1997 and November 30, 1996
(In Thousands)
Note C--Notes Receivable
Notes receivable consist of the following:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Note receivable from a partnership related through common
ownership, interest at 8%, due in monthly installments of
principal and interest through February 2013,
collateralized by a building leased by the company (see
note H)................................................... $1,120 $1,161
Note receivable from a partnership related through common
ownership, interest at the Company's borrowing rate
(effective rates of 7.6% as of November 28, 1998 and
November 29, 1997), due in monthly installments of
principal and interest through November 2001,
collateralized by land and building leased by the company
(see note H).............................................. 647 675
Note receivable from a partnership related through common
ownership, interest at the Company's borrowing rate
(effective rates of 7.6% as of November 28, 1998 and
November 29, 1997), due in monthly installments of
principal and interest through April 2000,
uncollateralized.......................................... 30 57
------ ------
1,797 1,893
Less current portion....................................... (104) (96)
------ ------
$1,693 $1,797
====== ======
</TABLE>
Interest income received from related parties was approximately $145, $151
and $149 for the periods ended November 28, 1998, November 29, 1997 and
November 30, 1996.
Note D--Credit Agreement
At November 28, 1998 and November 29, 1997, the company had a $1,000
revolving line of credit available under a credit agreement with a bank. The
availability under the line varies during the year based on the requirements of
the company. During the year ended November 28, 1998, the largest balance
outstanding under the line at any time was $4,500. The company can choose one
of three interest rate options as follows: 1) prime rate, 2) reserve adjusted
CD rate plus 2.0%, or 3) LIBOR rate plus 2.0%. The line expires on January 31,
1999, at which time management expects to renew this line at substantially the
same terms and conditions. There were no balances outstanding under this
agreement at November 28, 1998 and November 29, 1997.
The credit agreement is collateralized by substantially all assets and
contains certain restrictive covenants which require the company to maintain,
among other things, specified levels of debt service coverage and subordinated
debt to officers and shareholders (note E). At November 28, 1998, the company
was in compliance with all covenants.
Note E--Notes Payable to Officers and Shareholders
Notes payable to officers and shareholders are payable upon demand and bear
interest at the company's borrowing rate (effective rates of 7.6% as of
November 28, 1998 and November 29, 1997). Interest expense on these notes was
approximately $924, $910 and $925 for the periods ended November 28, 1998,
November 29, 1997 and November 30, 1996.
Note F--Income Taxes
Income taxes on net earnings of the company are payable personally by its
shareholders pursuant to an election under Subchapter S of the Internal Revenue
Code not to have the company taxed as a corporation. Accordingly, no provision
has been made for income taxes. If this election had not been made, income tax
expense would have been approximately $1,085, $1,061 and $970 for the periods
ended November 28, 1998, November 29, 1997 and November 30, 1996.
F-36
<PAGE>
TRU-PART MANUFACTURING CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
November 28, 1998, November 29, 1997 and November 30, 1996
(In Thousands)
Note G--Employee Benefit Plans
The company has a discretionary profit sharing trust for the benefit of all
non-commissioned and non-union employees who have completed at least one year
of service, as defined in the trust. Employer contributions for profit sharing
for the periods ended November 28, 1998, November 29, 1997 and November 30,
1996, were approximately $827, $835 and $807.
The company has a thrift plan for commissioned employees whereby the company
matches employee contributions up to specified limitations. The company's
contributions for the periods ended November 28, 1998, November 29, 1997 and
November 30, 1996 were approximately $123, $133 and $131.
The company has a target benefit retirement plan for all hourly employees
covered by a bargaining agreement with a union. The company makes an annual
contribution to the plan equal to an amount required to fully fund the plan.
The contributions to the plan for each of the periods ended November 28, 1998,
November 29, 1997 and November 30, 1996 were approximately $38, $38 and $43.
Note H--Commitments and Contingencies
Repurchase Agreement
The company has an agreement with a major shareholder under which, upon the
death of the shareholder and upon written request, the company must purchase
the stock owned by the shareholder and his immediate family, unless prohibited
by law. The purchase price will be the fair market value of the stock, as
determined by an independent appraisal. The company carries approximately
$2,000 of life insurance coverage on the shareholder and the insurance proceeds
are to be used to help fund the purchase price with the balance to be paid in
cash in accordance with the terms specified in the agreement. In fiscal year
1998, the company did not have an appraisal performed on the fair market value
of the company. Management believes the company has adequate resources
available to fund the purchase price.
Leases
The company leases office and warehouse facilities under various operating
leases which expire in 2001 - 2003. Substantially all of these facilities are
owned by business entities whose principal shareholders are also shareholders
of Tru-Part Manufacturing Corporation. In addition to rent, the leases require
the company to pay all operating expenses, including insurance, real estate
taxes, maintenance, and utilities. The company has the option to renew all
leases for an additional five years.
Future minimum rental payments under these operating leases are as follows:
<TABLE>
<CAPTION>
Fiscal year ending the last Saturday in November
------------------------------------------------
<S> <C>
1999............................................................. $ 845
2000............................................................. 845
2001............................................................. 835
2002............................................................. 727
2003............................................................. 83
------
$3,335
======
</TABLE>
F-37
<PAGE>
TRU-PART MANUFACTURING CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
November 28, 1998, November 29, 1997 and November 30, 1996
(In Thousands)
Rent expense under all operating leases, substantially all of which was paid
to related parties, was approximately $762, $613 and $614 for the periods ended
November 28, 1998, November 29, 1997 and November, 1996.
Note I--Risks and Uncertainties
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the company and its business
partners will not be fully determinable until the year 2000 and thereafter. If
Year 2000 modifications are not properly completed either by the company or
entities with whom the company conducts business the company's revenues and
financial condition could be adversely impacted.
F-38
<PAGE>
TRU-PART MANUFACTURING CORPORATION
CONDENSED BALANCE SHEET
May 21, 1999
(In Thousands, Except Share Information)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Current assets:
Accounts receivable.................................................. $14,202
Merchandise inventories.............................................. 7,326
Other current assets................................................. 201
-------
Total current assets............................................... 21,729
Property, plant, and equipment, net.................................... 964
Other assets........................................................... 3,515
-------
$26,208
=======
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C>
Current liabilities:
Notes payable to officers and shareholders........................... $12,419
Accounts payable and checks written in excess of bank balance........ 3,042
Accrued expenses..................................................... 2,667
Current maturities of long-term debt................................. 200
-------
Total current liabilities.......................................... 18,328
Stockholders' equity:
Class A voting common stock of $0.10 par value; authorized--50,000
shares; issued and outstanding--21,106 shares....................... 2
Class B non-voting common stock of $0.10 par value; authorized--
250,000 shares; issued and outstanding--189,954 shares.............. 19
Retained earnings.................................................... 7,859
-------
7,880
-------
$26,208
=======
</TABLE>
See accompanying notes to the condensed financial statements.
F-39
<PAGE>
TRU-PART MANUFACTURING CORPORATION
CONDENSED STATEMENTS OF EARNINGS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended,
---------------
May 21, May 22,
1999 1998
------- -------
<S> <C> <C>
Net sales...................................................... $34,331 $34,985
Cost of sales.................................................. 21,450 22,008
------- -------
Gross profit................................................... 12,881 12,977
Selling, general, and administrative expenses.................. 10,990 10,780
------- -------
Income from operations......................................... 1,891 2,197
Interest and other expense, net................................ 222 292
------- -------
Net earnings................................................... $ 1,669 $ 1,905
======= =======
</TABLE>
See accompanying notes to the condensed financial statements.
F-40
<PAGE>
TRU-PART MANUFACTURING CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended,
----------------
May 21, May 22,
1999 1998
------- -------
<S> <C> <C>
Operating Activities
Net income.................................................... $1,669 $1,905
Adjustments to reconcile net income to net cash and cash
equivalents used in operating activities:
Depreciation and amortization................................. 225 354
Changes in operating assets and liabilities:
Accounts receivable......................................... (7,861) (9,053)
Merchandise inventories..................................... (277) (26)
Other assets................................................ (57) 35
Accounts payable and accrued expenses....................... 770 942
------ ------
Net cash and cash equivalents used in operating
activities............................................... (5,531) (5,843)
------ ------
Investing activities
Purchase of equipment, net.................................... (51) (123)
Payments received on notes receivable......................... 39 47
Increase in other assets...................................... (202) (89)
------ ------
Net cash and cash equivalents used in investing
activities............................................... (214) (165)
------ ------
Financing activities
(Payments) proceeds from notes payable to officers and
shareholders................................................. (1,915) 400
Net proceeds on bank line of credit........................... 200 3,500
Undistributed taxable earnings................................ -- (2,311)
------ ------
Net cash and cash equivalents (used in) provided by financing
activities................................................... (1,715) 1,589
------ ------
Net decrease in cash and cash equivalents..................... (7,460) (4,419)
Cash and cash equivalents, at beginning of period............. 7,460 6,999
------ ------
Cash and cash equivalents, at end of period................... $ -- $2,580
====== ======
</TABLE>
See accompanying notes to the condensed financial statements.
F-41
<PAGE>
TRU-PART MANUFACTURING CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
May 21, 1999 and May 22, 1998
(In Thousands)
(Unaudited)
1. Formation and Basis of Presentation
Tru-Part Manufacturing Corporation (the Company) is a distributor of farm
machinery replacement parts with warehouses located in St. Paul, Minnesota;
Sacramento, California; Dallas, Texas; Nashville, Tennessee and Richmond,
Virginia. Its customers are primarily farm implement dealers operating
throughout the United States.
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instruction to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month periods ended May 21, 1999
and May 22, 1998 are not necessarily indicative of the results that may be
expected for the fiscal year ending November 30, 1999. These financial
statements should be read in conjunction with the financial statements,
including the notes thereto, for the fiscal year ended November 28, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
2. Notes Payable to Officers and Shareholders
Notes payable to officers and shareholders are payable upon demand and bear
interest at the Company's borrowing rate (rates vary from 6.4% to 8.0% for the
unaudited twenty-five week periods ended May 21, 1999 and 7.5% to 8.0% for the
unaudited twenty-five week periods ended May 22, 1998). Interest expense on
these notes was approximately $385 and $470 for the twenty-five week periods
ended May 21, 1999 and May 22, 1998.
3. Risks and Uncertainties
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company and its business
partners will not be fully determinable until the year 2000 and thereafter. If
Year 2000 modifications are not properly completed either by the Company or
entities with whom the Company conducts business, the Company's revenues and
financial condition could be adversely impacted.
F-42
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Wood's Board of Directors
Woods Equipment Company
We have audited the accompanying balance sheets of Central Fabricators, Inc.
as of December 31, 1998 and 1997, and the related statements of income, changes
in stockholders' equity and cash flows for the years 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 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 Central Fabricators, Inc.
at December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Chicago, Illinois
June 18, 1999
F-43
<PAGE>
CENTRAL FABRICATORS, INC.
BALANCE SHEETS
(In Thousands, Except Shares Information)
<TABLE>
<CAPTION>
December 31
----------------
1998 1997
------- -------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 604 $ 603
Trade accounts receivable.................................. 1,714 1,532
Inventories................................................ 2,421 1,923
Prepaid expenses and other current assets.................. 50 1
------- -------
Total current assets..................................... 4,789 4,059
Property, plant, and equipment:
Land....................................................... 7 7
Buildings and improvements................................. 215 186
Machinery and equipment.................................... 1,948 1,854
Office furniture, fixtures, and equipment.................. 294 247
------- -------
2,464 2,294
Less: Accumulated depreciation............................. (1,599) (1,346)
------- -------
865 948
------- -------
$5,654 $ 5,007
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt....................... $ 302 $ 134
Note payable--Stockholders................................. 1,665 1,600
Accounts payable........................................... 648 652
Accrued expenses........................................... 445 416
------- -------
Total current liabilities................................ 3,060 2,802
Long-term debt, less current maturities...................... 17 19
Stockholders' equity:
Common stock, no par value; authorized--2,000 shares;
issued--1,000 shares...................................... -- --
Additional paid-in capital................................. 31 31
Retained earnings.......................................... 2,546 2,155
------- -------
2,577 2,186
------- -------
$ 5,654 $ 5,007
======= =======
</TABLE>
See accompanying notes to the financial statements.
F-44
<PAGE>
CENTRAL FABRICATORS, INC.
STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year ended
December 31
----------------
1998 1997
------- -------
<S> <C> <C>
Net sales..................................................... $22,901 $18,629
Cost of sales................................................. 16,628 13,216
------- -------
Gross profit.................................................. 6,273 5,413
Operating expenses:
Selling..................................................... 546 674
General and administrative.................................. 2,319 1,928
Engineering................................................. 577 516
Other operating (income) expenses, net...................... (3) (2)
------- -------
3,439 3,116
------- -------
Operating income.............................................. 2,834 2,297
Other income (expense):
Interest expense............................................ (178) (118)
Interest income............................................. 25 26
------- -------
(153) (92)
------- -------
Net income.................................................... $ 2,681 $ 2,205
======= =======
</TABLE>
See accompanying notes to the financial statements.
F-45
<PAGE>
CENTRAL FABRICATORS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Shares Information)
<TABLE>
<CAPTION>
Number of
Shares of Additional
Common Common Paid-In Retained
Stock Stock Capital Earnings Total
--------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997........ 1,000 $-- $ 31 $ 2,115 $ 2,146
Stockholders' distributions....... -- -- -- (2,165) (2,165)
Net income........................ -- -- -- 2,205 2,205
----- ---- ---- ------- -------
Balance at December 31, 1997...... 1,000 -- 31 2,155 2,186
Stockholders' distributions....... -- -- -- (2,290) (2,290)
Net income........................ -- -- -- 2,681 2,681
----- ---- ---- ------- -------
Balance at December 31, 1998...... 1,000 $-- $ 31 $ 2,546 $ 2,577
===== ==== ==== ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-46
<PAGE>
CENTRAL FABRICATORS, INC.
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year ended
December 31
--------------
1998 1997
------ ------
<S> <C> <C>
Operating activities
Net income.................................................... $2,681 $2,205
Adjustments to reconcile net income to net cash and cash
equivalents provided by operating activities:
Depreciation................................................ 298 243
Changes in operating assets and liabilities:
Trade accounts receivable................................... (182) (441)
Inventories................................................. (498) (138)
Prepaid expenses and other current assets................... (49) 33
Accounts payable............................................ (4) 153
Accrued expenses............................................ 29 103
------ ------
Net cash and cash equivalents provided by operating
activities............................................... 2,275 2,158
Investing activities
Purchases of equipment, net................................... (215) (493)
------ ------
Net cash and cash equivalents used in investing
activities............................................... (215) (493)
Financing activities
Payments on long-term debt.................................... (134) (28)
Proceeds from long-term debt.................................. 300 130
Distributions to stockholders................................. (1,260) (1,180)
Payments on notes payable-stockholders........................ (965) (685)
------ ------
Net cash and cash equivalents used in financing
activities............................................... (2,059) (1,763)
------ ------
Net increase (decrease) in cash and cash equivalents.......... 1 (98)
Cash and cash equivalents at beginning of year................ 603 701
------ ------
Cash and cash equivalents at end of year...................... $ 604 $ 603
====== ======
Supplemental cash flow information
Cash paid for interest........................................ $ 218 $ 78
====== ======
Noncash activities
Distributions declared in exchange for notes.................. $1,030 $ 986
====== ======
</TABLE>
See accompanying notes to the financial statements.
F-47
<PAGE>
CENTRAL FABRICATORS, INC.
NOTES TO FINANCIAL STATEMENTS
(In Thousands)
December 31, 1998 and 1997
1. Description of Business
Central Fabricators, Inc. (the Company) designs, manufactures and sells
heavy duty attachments for equipment, utilized principally in the construction
market. The Company sells its products through two channels, OEMs (original
equipment manufacturers) and dealerships. The Company manufactures between 150
and 200 items in a number of product lines including buckets, latches, clamps
and hammer brackets. The average lifespan of the products range from one to
five years due to the nature of the applications for which they are used.
2. Summary of Significant Accounting Policies
Revenue Recognition
Sales are generally recognized upon shipment of the related equipment and
replacement parts. Revenue on sales is recorded net of anticipated discounts.
Financial Instruments
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. Credit
risks with respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base. The Company performs ongoing
credit evaluations of its customers. The Company does not have an allowance for
doubtful accounts and for the years ended December 31, 1998 and 1997, there
have been no provisions for doubtful accounts.
The Company maintains cash balances in banks in excess of amounts insured by
the Federal Deposit Insurance Corporation. At December 31, 1998 and 1997,
uninsured cash balances totaled $406 and $464, respectively.
Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market, determined by the
first in, first out (FIFO) method.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation thereon is
computed using principally accelerated methods over estimated useful lives of
the respective assets as follows:
<TABLE>
<S> <C>
Buildings and improvements............................... 31.5 to 39 years
Machinery and equipment.................................. 5 to 10 years
Office furniture, fixtures, and equipment................ 5 to 7 years
</TABLE>
Warranty Obligations
The Company's products are generally under limited warranty for a period
ranging from ninety days to one year. The estimated cost of warranty
obligations is recognized at the time of sale.
F-48
<PAGE>
CENTRAL FABRICATORS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In Thousands)
Income Taxes
The Company has elected by unanimous consent of its stockholders to be taxed
under the provisions of Subchapter S of the Internal Revenue Code. Under those
provisions, the Company does not pay federal and state corporate income taxes
on its taxable income. Instead, the stockholders are liable for individual
income taxes on their respective shares of the Company's taxable income.
Advertising Costs
The Company expenses the costs of advertising when incurred. Advertising
expense was $51 and $53 in 1998 and 1997, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31
-------------
1998 1997
------ ------
<S> <C> <C>
Raw materials............................................... $1,363 $ 816
Work in process............................................. 697 664
Finished goods.............................................. 361 443
------ ------
Total inventories........................................... $2,421 $1,923
====== ======
</TABLE>
4. Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December
31
---------
1998 1997
---- ----
<S> <C> <C>
Salaries, wages, and employee benefits......................... $320 $247
Interest....................................................... -- 40
Property, payroll, and other taxes............................. 83 82
Other.......................................................... 42 47
---- ----
$445 $416
==== ====
</TABLE>
5. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31
-----------
1998 1997
----- -----
<S> <C> <C>
Note payable to a municipality in monthly payments,
including interest at 4.25%, though June 17, 2006.......... $ 19 $ 21
Note payable to a bank paid in 1998......................... -- 2
Note payable to a bank paid in 1998......................... -- 130
Note payable to a bank due May 20, 1999, including interest
at 7.50%................................................... 300 --
----- -----
319 153
Less: Current maturities.................................... 302 134
----- -----
$ 17 $ 19
===== =====
</TABLE>
F-49
<PAGE>
CENTRAL FABRICATORS, INC.
NOTES TO FINANCIAL STATEMENTS--(Concluded)
(In Thousands)
Future maturities of long-term debt, subsequent to December 31, 1998 are as
follows:
<TABLE>
<S> <C>
1999................................................................. $302
2000................................................................. 2
2001................................................................. 2
2002................................................................. 3
2003................................................................. 3
Thereafter........................................................... 7
----
$319
====
</TABLE>
6. Employee Benefit Plan
The Company maintains a defined-contribution and 401(k) plan covering
substantially all employees. The plan provides for a matching contribution by
the Company of 50% of the employee's contribution up to 4% of the employee's
eligible compensation. Total Company contributions during 1998 and 1997 and
were approximately $62 and 49, respectively.
7. Lease Commitments
The Company leases certain facilities, office equipment, and transportation
equipment under various noncancelable operating lease agreements. Future
minimum lease payments under noncancelable operating leases with initial or
remaining lease terms in excess of one year at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
Unrelated Related
Parties Parties Total
--------- ------- ------
<S> <C> <C> <C>
1999............................................. $30 $ 469 $ 499
2000............................................. 20 482 502
2001............................................. 8 496 504
2002............................................. -- 510 510
2003............................................. -- 524 524
Thereafter....................................... -- 1,140 1,140
--- ------ ------
$58 $3,621 $3,679
=== ====== ======
</TABLE>
Total rent expense under all operating leases for 1998 and 1997 was
approximately $484 and $455, respectively, of which $452 and $438,
respectively, was with related parties.
8. Other Related Party Transactions
The following transactions occurred between the Company and certain related
parties:
Note payable to stockholders as of December 31, 1998 and 1997 for $1,665 and
$1,600, respectively. The notes are due on demand and incur interest at
approximately 8.5% per annum.
The Company also incurred general and administrative expenses associated
with certain related parties totaling approximately $111 and $100 in 1998 and
1997, respectively.
9. Major Customers
The Company conducts business with two major OEM customers that each
comprised approximately 19% and 17% of net sales for 1998 (approximately 19%
and 14% in 1997). The accounts receivable balance for each of these two
customers at both December 31, 1998 and 1997, was approximately 16% and 12%,
respectively.
The Company also conducts business with one major dealership that comprised
approximately 11% and 10% of net sales for 1998 and 1997, respectively.
F-50
<PAGE>
CENTRAL FABRICATORS, INC.
CONDENSED BALANCE SHEET
June 30, 1999
(In Thousands, Except Shares Information)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Current assets:
Cash and cash equivalents............................................. $ 136
Trade accounts receivable............................................. 3,087
Inventories........................................................... 2,310
Prepaid expenses and other current assets............................. 1
------
Total current assets................................................ 5,534
Property, plant, and equipment, net..................................... 766
------
$6,300
======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C>
Current liabilities:
Current maturities of long-term debt.................................. $ 300
Note payable--Stockholders............................................ 2,800
Accounts payable...................................................... 993
Accrued expenses...................................................... 493
------
Total current liabilities........................................... 4,586
Long-term debt, less current maturities................................. 18
Stockholders' equity:
Common stock, no par value; authorized--2,000 shares; issued--1,000
shares............................................................... --
Additional paid-in capital............................................ 31
Retained earnings..................................................... 1,665
------
1,696
------
$6,300
======
</TABLE>
See accompanying notes to the condensed financial statements
F-51
<PAGE>
CENTRAL FABRICATORS, INC.
CONDENSED STATEMENTS OF INCOME
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1999 1998
-------- --------
<S> <C> <C>
Net sales.................................................... $ 11,910 $ 12,388
Cost of sales................................................ 8,494 8,882
-------- --------
Gross profit................................................. 3,416 3,506
Selling, general, and administrative expenses................ 1,852 1,703
-------- --------
Income from operations....................................... 1,564 1,803
Interest and other expense, net.............................. 92 74
-------- --------
Net income................................................... $ 1,472 $ 1,729
======== ========
</TABLE>
See accompanying notes to the condensed financial statements
F-52
<PAGE>
CENTRAL FABRICATORS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1999 1998
-------- --------
<S> <C> <C>
Operating activities
Net income................................................ $ 1,472 $ 1,729
Adjustments to reconcile net income to net cash and cash
equivalents provided by operating activities
Depreciation............................................ 142 134
Changes in operating assets and liabilities:
Trade accounts receivables............................ (1,373) (1,437)
Inventories........................................... 111 26
Prepaid expenses and other current assets............. 49 (5)
Accounts payable and accrued expenses................. 393 532
-------- --------
Net cash and cash equivalents provided by operating
activities........................................... 794 979
Investing activities
Purchases of equipment, net............................... (43) (9)
-------- --------
Net cash and cash equivalents used in investing
activities............................................... (43) (9)
Financing activities
Payment on long-term debt................................. (1) (133)
Payment on shareholder distributions...................... (1,218) (1,017)
-------- --------
Net cash and cash equivalents used in financing
activities........................................... (1,219) (1,150)
-------- --------
Net decrease in cash and cash equivalents................. (468) (180)
Cash and cash equivalents, at beginning of period......... 604 603
-------- --------
Cash and cash equivalents, at end of period............... $ 136 $ 423
======== ========
</TABLE>
See accompanying notes to the condensed financial statements
F-53
<PAGE>
CENTRAL FABRICATORS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(In Thousands)
(Unaudited)
1. Formation and Basis of Presentation
Central Fabricators, Inc. (the Company) designs, manufactures and sells
heavy duty attachments for equipment, utilized principally in the construction
market. The Company sells its products through two channels, OEMs (original
equipment manufacturers) and dealerships. The Company manufactures between 150
and 200 items across a number of product lines including buckets, latches,
clamps, and hammer brackets. The average life-span of the products range from
one to five years due to the nature of the applications for which they are
used.
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instruction to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1999. These financial statements should be read
in conjunction with the financial statements, including the notes thereto, for
the year ended December 31, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Related Party Expenses
<TABLE>
<CAPTION>
Six Months Ended June
30,
-----------------------
1999 1998
----------- -----------
(Dollars in Thousands)
<S> <C> <C>
Note payable to stockholders, due on demand and
incur interest @ approximately 8.5% per annum.. $ 2,800 $ 2,169
General and Administrative expenses............. 54 50
</TABLE>
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1999
--------
<S> <C>
Raw materials.................................................... $1,067
Work in process.................................................. 823
Finished goods................................................... 420
------
Total inventories................................................ $2,310
======
</TABLE>
F-54
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Alitec Corporation:
We have audited the accompanying balance sheet of Alitec Corporation--
Attachments Division as of December 31, 1998 and 1997, and the related
statements of income and accumulate deficit and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the 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 Alitec Corporation--
Attachments Division as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
August 31, 1999
5342 West Vermont Street . Indianapolis, Indiana 46224 . (317) 241-2999
Member Firm of CPA Associates International, Inc.
F-55
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
BALANCE SHEETS
December 31, 1998 and 1997
(In Thousands, Except Shares Information)
<TABLE>
<CAPTION>
ASSETS 1998 1997
------ ------ ------
<S> <C> <C>
Current Assets
Cash.......................................................... $ -- $ 1
Trade accounts receivable..................................... 684 999
Other receivables............................................. -- --
Inventories................................................... 1,651 1,121
Prepayments................................................... 1 5
Refundable income taxes....................................... 256 --
Deferred tax asset............................................ 30 --
------ ------
Total current assets........................................ 2,622 2,126
------ ------
Property and Equipment.........................................
Leasehold improvements........................................ 83 83
Plant equipment............................................... 746 891
Office furniture and equipment................................ 208 167
Vehicles...................................................... 12 12
Construction in process....................................... 5 --
------ ------
1,054 1,153
Accumulated depreciation and amortization..................... (470) (394)
------ ------
Net property and equipment.................................. 584 759
------ ------
Other Assets
Goodwill, net of accumulated amortization of $262 and $209 in
1998 and 1997, respectively.................................. 538 591
Patents, product licenses and agreements, net of accumulated
amortization of $79 and $61 in 1998 and 1997, respectively... 32 50
Deferred tax assets........................................... 46 --
------ ------
Total other assets.......................................... 616 641
------ ------
$3,822 $3,526
====== ======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
<S> <C> <C>
Current Liabilities
Checks issued in excess of bank balance....................... $ 166 $ 150
Bank line of credit........................................... 2,925 1,987
Current portion of notes payable.............................. 196 207
Current portion of capital lease obligations.................. 11 10
Trade accounts payable........................................ 608 608
Accrued payroll and related benefits.......................... 76 84
Accrued property taxes........................................ 61 41
Accrued warranties............................................ 20 39
Other accruals................................................ 20 19
------ ------
Total current liabilities................................... 4,083 3,145
------ ------
Long-Term Liabilities
Notes payable, net of current portion......................... 717 644
Capital lease obligations, net of current portion............. 10 20
------ ------
Total long-term liabilities................................... 727 664
------ ------
Total liabilities........................................... 4,810 3,809
------ ------
Commitments and Contingencies (Notes 8, 10 and 11)
Shareholders' Deficit
Common stock, no par value, 2,800 shares authorized, 1,263
shares issued and outstanding................................ 49 49
Additional paid-in capital.................................... 43 43
Accumulated deficit........................................... (1,080) (375)
------ ------
Total shareholders' deficit................................. (988) (283)
------ ------
$3,822 $3,526
====== ======
</TABLE>
See independent auditors' report and the accompanying notes to financial
statements.
F-56
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
For the Years Ended December 31, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Net Sales..................................................... $ 9,157 $ 7,740
Cost of Goods Sold............................................ 5,652 5,054
------- -------
Gross Profit.................................................. 3,505 2,686
Gross Profit Percentage....................................... 38.3% 34.7%
------- -------
Selling, General, and Administrative Expenses................. 1,970 1,561
------- -------
Operating Income.............................................. 1,535 1,125
------- -------
Other Income (Expense)
Interest expense............................................ (237) (184)
Interest income............................................. 2 3
Gain on sale of assets...................................... -- 172
Miscellaneous income........................................ 100 6
------- -------
Total other income (expense).............................. (135) (3)
------- -------
Income Before Income Taxes.................................... 1,400 1,122
------- -------
Income Tax Expense (Benefit)
Current..................................................... 563 --
Deferred.................................................... (76) --
------- -------
Total income tax expense (benefit)........................ 487 --
------- -------
Net Income.................................................... 913 1,122
Retained Earnings (Accumulated Deficit), Beginning of Year.... (375) 130
Shareholder Distributions..................................... (325) (75)
Intracompany Advances......................................... (1,293) (1,552)
------- -------
Accumulated Deficit, End of Year.............................. $(1,080) $ (375)
======= =======
</TABLE>
See independent auditior' report and accompanying notes to financial
statements.
F-57
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997
(In Thousands)
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Cash received from customers................................ $ 9,472 $ 7,603
Cash paid to suppliers and employees........................ (7,964) (6,251)
Interest paid............................................... (235) (166)
Interest received........................................... 2 3
Income taxes paid........................................... (256) --
Other cash received......................................... 99 6
------- -------
Net cash provided by operating activities................. 1,118 1,195
------- -------
Cash Flows from Investing Activities
Proceeds from sale of property and equipment................ 182 11
Capital expenditures........................................ (110) (102)
Cost of patents............................................. -- (4)
------- -------
Net cash provided by (used in) investing activities....... 72 (95)
------- -------
Cash Flows from Financing Activities
Net borrowings on lines of credit........................... 938 593
Proceeds from long term debt................................ -- 300
Principal payments on long term debt........................ (428) (346)
Principal payments on capital lease obligations............. (9) (20)
Intracompany advances....................................... (1,367) (1,552)
Shareholder distributions................................... (325) (75)
------- -------
Net cash used in financing activities..................... (1,191) (1,100)
------- -------
Net Decrease in Cash.......................................... (1) --
Cash, Beginning of Year....................................... 1 1
------- -------
Cash, End of Year............................................. $ -- $ 1
======= =======
</TABLE>
See independent auditors' report and the accompanying notes to financial
statements.
F-58
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
STATEMENTS OF CASH FLOWS, CONTINUED
For the Years Ended December 31, 1998 and 1997
(In Thousands)
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Net Income...................................................... $ 913 $1,122
------ ------
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities
Depreciation and amortization................................. 175 191
Gain on sale of fixed assets.................................. -- (172)
Noncash rent expense.......................................... -- 20
Noncash tax expense........................................... 563 --
(Increase) decrease in operating assets:
Trade accounts receivable................................... 314 (137)
Other receivables........................................... -- 1
Inventory................................................... (530) (170)
Prepayments................................................. 5 19
Refundable income taxes..................................... (256) --
Deferred tax asset.......................................... (76) --
Increase (decrease) in operating liabilities:
Checks issued in excess of bank balance..................... 16 147
Trade accounts payable...................................... 1 80
Accrued payroll and related benefits........................ (8) 47
Accrued property taxes...................................... 20 22
Accrued warranties.......................................... (19) 6
Other accruals.............................................. -- 19
------ ------
Total adjustments......................................... 205 73
------ ------
Net Cash Provided By Operating Activities....................... $1,118 $1,195
====== ======
</TABLE>
See independent auditors' report and the accompanying notes to financial
statements.
F-59
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
1. Summary of Significant Accounting Policies
Nature of Business
Alitec Corporation (the Company) is an Indiana corporation that manufactures
construction equipment and implements. The Company's products are sold
throughout the world. The majority of the sales are in North America.
Basis of Presentation
These financial statements represent the activities of the Attachments
Division of Alitec Corporation. The Company maintains separate records for the
activities of the division.
The accompanying financial statements have been prepared on the accrual
basis of accounting. 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 reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. There were no cash equivalents as of December 31,
1998 and 1997.
Inventory
Inventory is carried at the lower of cost or market. Cost on finished goods
inventory is determined by specific identification and cost on parts and
materials inventory is determined on a weighted average method.
Property and Equipment
Property and equipment is recorded at cost and depreciation is provided over
the estimated useful lives of the assets using accelerated and straight-line
methods. Repairs and maintenance are charged against expense as incurred.
Goodwill
Goodwill is amortized on the straight-line basis over fifteen years.
Patents, Product Licenses and Agreements
The costs incurred to develop and defend patents are capitalized and are
amortized on a straight-line basis over estimated useful lives which range from
five to fifteen years.
The Company has purchased the production and sales rights for various
products. These costs have been capitalized and are being amortized on a
straight-line basis over estimated useful lives which range from five to six
years.
F-60
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
Warranty Costs
The Company sells the majority of its products with repair warranties. The
December 31, 1998 and 1997 balance sheets include estimated liabilities for
product warranties of $20 and $39, respectively. The liabilities are based on
estimates of future costs associated with fulfilling the warranty obligations.
The estimates are derived from historical cost experience.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risks consist principally of accounts receivable. The
majority of the Company's sales are to construction and utility equipment
dealers and manufacturers. The Company performs credit evaluations of
customers' financial condition and historically has not incurred significant
credit related losses.
Noncash Transactions
For purposes of the statement of cash flows, the following noncash
transactions occurred in 1997 and 1998:
1) 1997 - $500, when a related company purchased land and buildings and
assumed the mortgage payable
2) 1997 - $24, when the Company entered into a capital lease obligation to
acquire equipment
3) 1998 - $563, when a tax provision is calculated on the Company's
Attachments Division. at a corporate level, the divisions' results
combine to produce no taxable income. However, when the Attachments
Division is analyzed individually, it produces taxable income and
current tax expense.
2. Inventories
Inventories at December 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Finished goods.............................................. $ 217 $ 231
Parts and materials......................................... 1,434 890
------ ------
$1,651 $1,121
====== ======
</TABLE>
3. Bank Lines of Credit
The Company has a line of credit arrangement with a bank that matures in
June 1999 and bears interest at .25% above the bank's prime rate (a total of
8.0% at December 31, 1998). The maximum amount available under this line is
$3,200. At December 31, 1998, $2,925 was outstanding on the line. The Company
had two lines of credit at December 31, 1997 that were limited to a total of
$2,100 and had an outstanding balance of $1,987 at December 31, 1997.
At December 31, 1998, the line of credit and term notes payable to the bank
are secured by a security agreement covering substantially all assets of the
Company, a mortgage lien on the building owned by an entity related through
common ownership, and personal guarantee of $1,000 from each of two
shareholders. The debt agreement includes certain restrictive covenants, which
have been met or waived as of December 31, 1998.
F-61
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
4. Notes Payable
Notes payable consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Note payable to bank, bearing interest at 7.25%, payable in
monthly installments of $22 including interest through
January 2003, secured by all business assets................ $913 $--
Note payable to bank, bearing interest at 7.60%, payable in
monthly installments of $3 including interest through
December 1998, refinanced during 1998....................... -- 99
Note payable to bank, bearing interest at 8.15%, payable in
monthly installments of $8, refinanced during 1998.......... -- 326
Note payable to bank, bearing interest at 7.98%, payable in
monthly installments of $5, refinanced during 1998.......... -- 154
Note payable to bank, bearing interest at 9.09%, payable in
monthly installments of $6, refinanced during 1998.......... -- 272
---- ----
913 851
Less current portion........................................ (196) (207)
---- ----
Long-term portion........................................... $717 $644
==== ====
</TABLE>
Aggregate maturities of note payable for the years ending December 31 are
follows:
<TABLE>
<S> <C>
1999................................................................. $196
2000................................................................. 215
2001................................................................. 231
2002................................................................. 249
2003................................................................. 22
----
$913
====
</TABLE>
5. Capital Lease Obligations
The Company has entered into capital lease obligations for the purchase of
equipment with a total acquisition cost of $44 as of December 31, 1998 and,
1997. The terms of the capital lease agreements provide for aggregate monthly
lease payments of $1. Accumulated amortization on the related equipment was $13
and $6 as of December 31, 1998 and 1997, respectively.
Future minimum lease payments for the years ended December 31 are as
follows:
<TABLE>
<S> <C>
1999................................................................ $ 11
2000................................................................ 10
2000................................................................ 1
----
22
Less amount representing interest from 5.90% to 7.37%............... (1)
----
Present value of net minimum capital lease payments................. 21
Less current portion................................................ (11)
----
Long-term portion................................................... $10
====
</TABLE>
F-62
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
6. Income Taxes and Change in Tax Status
Prior to 1998, the Company's shareholders elected, under provisions of the
Internal Revenue Code, to have the Company's income taxed directly to them.
Accordingly, no federal and state income taxes have been included in the 1997
financial statements.
In 1998, the Company elected to revoke its S-Corporation status for tax
purposes effective January 1, 1998. Effective with the change, income taxes are
provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes related to
timing differences between financial statement earnings and taxable income.
These book and tax differences relate to deprecation and amortization methods,
other accrued expenses.
Income taxes are as follows for the year ended December 31, 1998:
<TABLE>
<S> <C>
Federal............................................. $445
State............................................... 118
----
563
Deferred............................................ (76)
----
$487
====
</TABLE>
7. Profit Sharing Plan
The Company established a defined contribution 401(k) profit sharing plan.
All employees who are at least 21 years old and have one year of service are
eligible to participate in the plan. The plan provides for increased vesting
each year with full vesting after six years of participation. The plan provides
for employee contributions and discretionary employer contributions. Employer
contributions for the years ended December 31, 1998 and 1997 were $27 and $19,
respectively.
8. Operating Leases
The Company leases facilities, office equipment and vehicles under operating
leases with terms extending through June 2002. Annual rent expense under such
operating leases was $113 and $67 for the years ended December 31, 1998 and
1997, respectively.
The future minimum payments for the leases are as follows for the years
ending December 31:
<TABLE>
<S> <C>
1999................................................ $105
2000................................................ 95
2001................................................ 90
2002................................................ 45
----
$335
====
</TABLE>
9. Related Party Transactions
The Company leases its facility under an operating lease from an entity
related through common ownership. The lease extends through October 2001 and
requires annual rental payments totaling $90. Rent expense under the operating
lease was $92 and $49 for the years ending December 31, 1998 and 1997,
respectively. The future minimum payments and the rent expense related to these
leases have been included in the information reported in Note 8.
F-63
<PAGE>
ALITEC CORPORATION--ATTACHMENTS DIVISION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
The Company previously owned land and buildings in Brownsburg, Indiana.
These facilities serve as the Company's manufacturing plant and offices. During
1997, the Company sold these facilities for $500 to an entity related through
common ownership. The Company now leases the facilities from the related party
under an operating lease.
Intracompany advances and payments have been reflected in retained earnings
(accumulated deficit). The beginning balance of accumulated deficit reflects a
reduction for intracompany receivables at December 31, 1996.
10. Major Customers
During the years ended December 31, 1998 and 1997, the Company had one and
two major customers, respectively, with sales exceeding 10% of the Company's
total sales. Sales to these customers totaled $3,183 and $4,038 for the years
ended December 31, 1998 and 1997, respectively.
11. Subsequent Event
Effective July 1999, the shareholders of the Company sold the shares of the
Company to another entity. The Company's line of credit agreement and note
payable agreement have subsequently been paid in full.
F-64
<PAGE>
ALITEC CORPORATION
ATTACHMENTS DIVISION
CONDENSED BALANCE SHEET
June 30, 1999
(In Thousands, Except Share Information)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Current assets:
Cash and cash equivalents........................................... $ 5
Trade accounts receivable........................................... 1,684
Inventories......................................................... 1,645
Prepaid expenses and other current assets........................... 77
-------
Total current assets.............................................. 3,411
Property, plant, and equipment, net................................... 685
Other assets.......................................................... 559
-------
4,655
=======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C>
Current liabilities:
Current maturities of long-term debt................................ 4,028
Accounts payable.................................................... 1,104
Accrued expenses.................................................... 434
-------
Total current liabilities......................................... 5,566
Long-term debt, less current maturities............................... 5
Deferred tax liability................................................ 68
Shareholders' equity:
Common stock, no par value; authorized--2,800 shares; issued--
1,263 shares....................................................... 49
Additional paid-in capital.......................................... 43
Retained earnings................................................... (1,076)
-------
(984)
-------
$ 4,655
=======
</TABLE>
See accompanying notes to the condensed financial statements.
F-65
<PAGE>
ALITEC CORPORATION
ATTACHMENTS DIVISION
CONDENSED STATEMENTS OF INCOME
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June
30,
-------------
1999 1998
------ ------
<S> <C> <C>
Net sales........................................................ $5,028 $5,197
Cost of sales.................................................... 3,300 3,450
------ ------
Gross profit..................................................... 1,728 1,747
Selling, general and administrative expenses..................... 910 870
------ ------
Income from operations........................................... 818 877
Interest and other expense, net.................................. 109 60
------ ------
Income before income taxes....................................... 709 817
Income taxes..................................................... 551 370
------ ------
Net income....................................................... $ 158 $ 447
====== ======
</TABLE>
See accompanying notes to the condensed financial statements.
F-66
<PAGE>
ALITEC CORPORATION
ATTACHMENTS DIVISION
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
---------------- ---
1999 1998
------- -------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers............................ $ 3,940 $ 4,792
Cash paid to suppliers and employees.................... (3,758) (4,819)
Interest paid........................................... (142) (115)
Interest received....................................... -- 2
Income taxes............................................ -- (169)
Other cash received..................................... 34 54
------- -------
Net cash provided by (used in) operating activities... 74 (255)
------- -------
Cash Flows from Investing Activities:
Construction in process................................. (48) --
Increase in intangible.................................. (29) --
Capital expenditures.................................... (106) (45)
------- -------
Net cash used in investing activities................. (183) (45)
------- -------
Cash Flows from Financing Activities:
Net borrowings on bank line of credit................... 275 905
Proceeds on issuance of notes payable................... -- 762
Principal payments on notes payable..................... (95) (392)
Principal payments on capital lease obligations......... (5) (5)
Intracompany advances................................... (61) (646)
Shareholder distributions............................... -- (325)
------- -------
Net cash provided by financing activities............. 114 299
------- -------
Net Increase (Decrease) in Cash........................... 5 (1)
Cash, Beginning of Period................................. -- 1
------- -------
Cash, End of Period....................................... $ 5 $ --
======= =======
</TABLE>
See accompanying notes to the condensed financial statements.
F-67
<PAGE>
ALITEC CORPORATION
ATTACHMENTS DIVISION
CONDENSED STATEMENTS OF CASH FLOWS--(Continued)
(In Thousands)
(Unaudited)
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
<TABLE>
<CAPTION>
Six Months
Ended June
30,
--------------
1999 1998
------- -----
<S> <C> <C>
Net Income.................................................... $ 158 $ 447
------- -----
Adjustments to Reconcile Net Income to Net Cash Provided by
(Used In) Operating Activities:
Depreciation and amortization .............................. 89 71
(Increase) decrease in operating assets:
Trade accounts receivable................................. (1,035) (406)
Inventory................................................. 6 (391)
Prepayments............................................... (35) (35)
Refundable income taxes................................... 255 --
Deferred tax asset........................................ 29 (33)
Increase (decrease) in operating liabilities:
Checks issued in excess of bank balance................... (166) (142)
Trade accounts payable.................................... 495 575
Intercompany payables..................................... -- (552)
Accrued payroll and related benefits...................... 4 (26)
Accrued property taxes.................................... (11) 16
Accrued warranties........................................ 9 (4)
Other accruals............................................ 10 (9)
Accrued income taxes...................................... 247 184
Deferred tax liability.................................... 19 50
------- -----
Total adjustments....................................... (84) (702)
------- -----
Net Cash Provided by (Used In) Operating Activities........... $ 74 $(255)
======= =====
</TABLE>
See accompanying notes to the condensed financial statements.
F-68
<PAGE>
ALITEC CORPORATION
ATTACHMENTS DIVISION
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(In Thousands)
(Unaudited)
1. Formation and Basis of Presentation
Nature of Business
Alitec Corporation Attachments Division (the Company) is an Indiana
corporation that manufactures construction equipment and implements. The
Company's products are sold throughout the world.
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instruction to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1999. These financial statements should be read
in conjunction with the financial statements, including the notes thereto, for
the year ended December 31, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Related Party Expenses
The Company leases facilities under operating leases from an entity related
through common ownership. The leases extend through October 2001 and June 2002
and require annual rental payments totaling $90.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1999
--------
<S> <C>
Parts and materials.............................................. $ 176
Finished goods................................................... 1,469
------
Total inventories............................................ $1,645
======
</TABLE>
F-69
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[WOODS LOGO]
Woods Equipment Company
Exchange Offer for
$51,927,000 at Maturity of
15.0% Senior Discount Debentures due 2011
WEC Company
Exchange Offer for
$130,000,000 of
12.0% Senior Notes due 2009
----------------
PROSPECTUS
----------------
, 2000
You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, these securities only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus.
Dealer Prospectus Delivery Obligation
Until , 2000, all dealers that buy, sell or trade in the
exchange securities may be required to deliver a prospectus. This is in
addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20: Indemnification of Directors and Officers.
Woods and WEC are each incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware ("DGCL")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties 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 such corporation), by reason of the
fact that such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, or are threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reason of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests except that no indemnification
is permitted without judicial approval if the officer or director is adjudged
to be liable to the corporation. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
Article EIGHT of Restated Certificate of Incorporation of Woods and Article
EIGHTH of the Certificate of Incorporation of WEC provides that, to the fullest
extent permitted by the DGCL as the same exists or may hereafter be amended, a
director of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a director.
Any repeal or modification of such provision shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification.
Article VII of the by-laws of Woods and WEC each provide that the
corporation shall indemnify (a) any person who was 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 corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director, officer, employee or agent of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit, and
(b) any person who 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 corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or who is or was serving at the
request of the corporation 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 actually and reasonably incurred by him in connection with any such
action, suit or proceeding, in each case to the fullest extent permissible
under Section 145 of the DGCL, or the indemnification provisions of any
successor statute.
In addition, the by-laws provide that directors of the corporation shall be
liable to the corporation or its stockholder for monetary damages for breach of
fiduciary duty as a director, in the manner and to the fullest extent provided
in the certificate of incorporation of the corporation and in Section 102 of
the DGCL, as the same now exists or may hereafter be amended. No amendment to
or repeal of this provision shall apply to or
II-1
<PAGE>
have any effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
The by-laws provide that the foregoing provisions shall be deemed to be a
contract between the corporation and each director and officer who serves in
such capacity at any time while such by-law is in effect, any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts. The foregoing rights of indemnification shall not
be deemed exclusive of any other rights to which any director or officer may be
entitled apart from the provisions of Article VII. The board of directors in
its discretion shall have power on behalf of the corporation to indemnify any
person, other than a director or officer, made a party to any action, suit or
proceeding by reason of the fact that he, his testator or intestate is or was
an employee of the corporation.
Item 21. Exhibits.
(a) The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
2.1 Stock Purchase Agreement, dated July 6, 1999, among WEC
Company and the stockholders of Central Fabricators, Inc.
named therein.
2.2 Amendment to Stock Purchase Agreement, dated July 28,
1999, among WEC Company and the stockholders of Central
Fabricators, Inc. named therein.
2.3 Asset Purchase Agreement, dated July 1, 1999, among WEC
Company and Tru-Part Manufacturing Corporation, CAL
Properties and the shareholders of Tru-Part Manufacturing
Corporation named therein.
2.4 Amendment to Asset Purchase Agreement, dated July 28,
1999, among WEC Company and Tru-Part Manufacturing
Corporation, CAL Properties and the shareholders of Tru-
Part Manufacturing Corporation named therein.
2.5 Stock Purchase Agreement, dated July 30, 1999, among WEC
Company, the shareholders of Alitec Corporation named
therein and Zanetis Enterprises, LLC.
2.6 Recapitalization Agreement, dated as of July 28, 1998, by
and among Woods Equipment Company, Madison Dearborn
Capital Partners II, L.P., the stockholders of Woods
Equipment Company and Brian P. Simmons, as sellers'
representative.
3.1 Restated Certificate of Incorporation of Woods Equipment
Company, as amended.
3.2 Amended and Restated By-laws of Woods Equipment Company,
as amended.
3.3 Certificate of Incorporation of WEC Company.
3.4 By-laws of WEC Company.
4.1 Stockholders Agreement, dated as of August 7, 1998, among
Woods Equipment Company, Madison Dearborn Capital Partners
II, L.P., Code Hennessy & Simmons L.L.C., as trustee for
certain persons named in a Trust Agreement, and the other
stockholders named therein.
4.2 Securityholders Agreement, dated July 28, 1999, among
Woods Equipment Company, Madison Dearborn Capital Partners
II, L.P. and Credit Suisse First Boston Corporation.
4.3 Registration Rights Agreement, dated July 28, 1999,
between Credit Suisse First Boston Corporation, Woods
Equipment Company and WEC Company.
4.4 Indenture, dated July 28, 1999, between Woods Equipment
Company, and United States Trust Company of Texas, N.A.,
as trustee, relating to the Senior Discount Debentures.
4.5 Indenture, dated July 28, 1999, between Woods Equipment
Company, WEC Company and United States Trust Company of
New York, as trustee, relating to the Senior Notes.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
4.6 Amended and Restated Credit Agreement, dated as of July
28, 1999, among Woods Equipment Company, as parent
guarantor, WEC Company and Credit Suisse First Boston, New
York Branch, as administrative agent, and the other
financial institutions named therein.
4.7 Contingent Stock Purchase Warrant, dated August 7, 1998,
issued by Woods Equipment Company to Code, Hennessy &
Simmons L.L.C., as trustee for certain persons named in a
Trust Agreement.
5.1 Opinion of Kirkland & Ellis regarding the validity of the
securities offered hereby.
*8.1 Opinion of Kirkland & Ellis regarding federal income tax
consequences of the exchange offers.
10.1 1999 Key Employee Stock Option Plan.
10.2 Form of Stock Option Grant to Key Employees.
10.3 Purchase Agreement, dated July 23, 1999, among Woods
Equipment Company, WEC Company and Credit Suisse First
Boston Corporation.
10.4 Form of Executive Stock Agreement, dated August 7, 1998,
between Woods Equipment Company and certain employees
thereof.
*10.5 Form of Promissory Note, dated August 7, 1998, issued by
certain employees of Woods Equipment Company to Woods
Equipment Company.
10.6 Management Services Agreement, dated August 7, 1998,
between Woods Equipment Company and Madison Dearborn
Partners, Inc.
12.1 Statement re Computation of Ratios.
21.1 Subsidiaries of Woods Equipment Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Greenwalt, Sponsel & Co., Inc.
23.4 Consents of Kirkland & Ellis (included in Exhibits 5.1 and
8.1).
24.1 Powers of Attorney re Signature on Registration Statement
(included on pages II-6 through II-8 of Part II).
25.1 Statement of Eligibility of Trustee on Form T-1 under the
Trust Indenture Act of 1939 of United States Trust Company
of Texas, N.A.
25.2 Statement of Eligibility of Trustee on Form T-1 under the
Trust Indenture Act of 1939 of United States Trust Company
of New York.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal for the Senior Discount
Debentures.
*99.2 Form of Letter of Transmittal for the Senior Notes.
*99.3 Form of Notice of Guaranteed Delivery for the Senior
Discount Debentures.
*99.4 Form of Notice of Guaranteed Delivery for the Senior
Notes.
*99.5 Form of Tender Instructions for the Senior Discount
Debentures.
*99.6 Form of Tender Instructions for the Senior Notes.
</TABLE>
- --------
* To be filed by amendment.
II-3
<PAGE>
(b) No financial statement schedules are required to be filed herewith
pursuant to this Item except as listed below:
Schedule II-Reserves
Item 22. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
WEC and Woods pursuant to the provisions of their respective certificates of
incorporation, by-laws, or otherwise, WEC and Woods have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by WEC or Woods of expenses incurred
or paid by a directors, officer or controlling person of WEC or Woods 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, WEC and/or Woods, as the case may be, will, unless in the opinion
of their 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 of 1933 and will be governed by the final adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that are incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrants hereby undertake:
(1) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
became effective.
(2) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the exchange offer.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Woods Equipment
Company duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rockford,
State of Illinois, on the 7th day of October, 1999.
Woods Equipment Company
/s/ Thomas J. Laird
By___________________________________
Thomas J. Laird
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas J. Laird, Michael S. Carney or D. Stephen
Crider, and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any or
all amendments (including post-effective amendments) to this registration
statement (any registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, for the offerings which this Registration
Statement relates), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their,
or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated on the 7th day of October,
1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Paul R. Wood Chairman
___________________________________________
Paul R. Wood
/s/ Thomas J. Laird President, Chief Executive Officer
___________________________________________ (principal executive officer) and
Thomas J. Laird Director
/s/ Michael S. Carney Chief Operating Officer and Director
___________________________________________
Michael S. Carney
/s/ Timothy M. Hurd Director
___________________________________________
Timothy M. Hurd
___________________________________________ Director
Paul R. Lederer
/s/ Thomas R. Reusche Director
___________________________________________
Thomas R. Reusche
/s/ D. Stephen Crider Vice President and Chief Financial Officer
___________________________________________ (principal financial and accounting
D. Stephen Crider officer)
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, WEC Company duly
caused this Registration Statement on Form S-4 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Rockford, State of
Illinois, on the 7th day of October, 1999.
Wec Company
/s/ Thomas J. Laird
By: _________________________________
Thomas J. Laird
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas J. Laird, Michael S. Carney or D. Stephen
Crider, and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any or
all amendments (including post-effective amendments) to this registration
statement (any registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, for the offerings which this Registration
Statement relates), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their,
or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated on the 7th day of October,
1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Paul R. Wood Director
___________________________________________
Paul R. Wood
/s/ Thomas J. Laird President, Chief Executive Officer
___________________________________________ (principal executive officer)
Thomas J. Laird
/s/ D. Stephen Crider Vice President and Chief Financial Officer
___________________________________________ (principal financial and accounting
D. Stephen Crider officer)
</TABLE>
II-6
<PAGE>
Woods Equipment Company
Valuation and Qualifying Accounts
(Dollars in thousands)
Schedule II--Reserves
<TABLE>
<CAPTION>
Additions Uncollectible
Balance Charged Balances Balance
at to Costs Written Off at end
Beginning and Net of of
of Period Expenses Recoveries Other Period
--------- --------- ------------- ----- -------
<S> <C> <C> <C> <C> <C>
Year Ended December 28, 1996:
Reserves and allowances
deducted from asset accounts:
Bad debt reserve............ $ 300 $(240) $ 60 $-- $ 120
Deferred tax asset reserve.. -- -- -- -- --
Inventory reserves.......... 781 -- (334) -- 447
LIFO reserve................ 1,143 (407) -- -- 736
Year Ended December 27, 1997:
Bad debt reserve............ 120 80 (80) -- 120
Deferred tax asset reserve.. -- -- -- -- --
Inventory reserves.......... 447 225 -- -- 672
LIFO reserve................ 736 431 -- -- 1,167
Year Ended January 2, 1999:
Bad debt reserve............ 120 28 (28) -- 120
Deferred tax asset reserve.. -- -- -- 602 602
Inventory reserves.......... 672 157 (202) 143 770
LIFO reserve................ 1,167 315 -- -- 1,482
</TABLE>
S-1
<PAGE>
EXHIBIT 2.1
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
WEC COMPANY
("BUYER"),
RICHARD MILANOWSKI
AND
GLORIA MILANOWSKI
("SHAREHOLDERS")
DATED AS OF JULY 6, 1999
================================================================================
<PAGE>
<TABLE>
<S> <C>
ARTICLE I PURCHASE AND SALE........................................................ 1
1.01 Purchase and Sale of Shares............................................. 1
1.02 Excluded Assets......................................................... 1
ARTICLE II PURCHASE PRICE - PAYMENT................................................ 1
2.01 Purchase Price.......................................................... 1
2.02 Payment of Purchase Price............................................... 2
2.03 Determination of Working Capital Value and Indebtedness Amount.......... 3
2.04 Section 338(h)(10) Election............................................. 5
2.05 Allocation of Purchase Price............................................ 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS......................... 6
3.01 Corporate............................................................... 6
3.02 No Violation............................................................ 7
3.03 Financial Statements.................................................... 7
3.04 Shareholders............................................................ 7
3.05 Capitalization.......................................................... 8
3.06 Tax Matters............................................................. 8
3.07 Accounts Receivable..................................................... 9
3.08 Inventory............................................................... 9
3.09 Absence of Certain Changes.............................................. 10
3.10 Absence of Undisclosed Liabilities...................................... 11
3.11 No Litigation........................................................... 11
3.12 Compliance With Laws and Orders......................................... 11
3.13 Title to and Condition of Properties.................................... 14
3.14 Insurance............................................................... 15
3.15 Contracts and Commitments............................................... 15
3.16 Labor Matters........................................................... 17
3.17 Employee Benefits Plans................................................. 17
3.18 Employment Compensation................................................. 20
3.19 Proprietary Rights...................................................... 20
3.20 Major Customers and Suppliers........................................... 21
3.21 Product Warranty and Product Liability.................................. 22
3.22 Affiliates' Relationships to Company.................................... 22
3.23 Assets Necessary to Business............................................ 22
3.24 Copies of Certain Documents............................................. 22
3.25 Underlying Documents.................................................... 23
3.26 Business of Company..................................................... 23
3.27 Disclosure of Material Facts............................................ 23
3.28 No Brokers or Finders................................................... 23
3.29 Disclaimer of Other Representations and Warranties...................... 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER................................. 24
4.01 Corporate............................................................... 24
4.02 Authority............................................................... 24
4.03 No Brokers or Finders................................................... 24
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
4.04 Investment Purpose...................................................... 24
ARTICLE V OTHER MATTERS............................................................ 25
5.01 Title Insurance......................................................... 25
5.02 Surveys................................................................. 25
5.03 Environmental and Health and Safety Audits.............................. 25
5.04 Non-competition; Confidentiality........................................ 25
5.05 General Releases........................................................ 27
5.06 HSR Act Filings......................................................... 27
5.07 Customer and Supplier Information....................................... 27
5.08 Post-Closing Cooperation................................................ 27
5.09 Information Regarding Denric Tool Property and/or Off-Site Properties... 28
ARTICLE VI COVENANTS OF SHAREHOLDERS AND BUYER..................................... 29
6.01 Access to Information and Records....................................... 29
6.02 Bank Accounts........................................................... 29
6.03 Conduct of Business Pending the Closing................................. 29
6.04 Consents................................................................ 30
6.05 Other Action............................................................ 30
6.06 Updating of Schedules................................................... 30
6.07 No-Shop................................................................. 31
ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS............................ 31
7.01 Representations and Warranties True on the Closing Date................. 31
7.02 Compliance With Agreement............................................... 31
7.03 Absence of Litigation................................................... 31
7.04 Consents and Approvals.................................................. 31
7.05 Title Insurance......................................................... 31
7.06 HSR Waiting Period...................................................... 31
7.07 Lease Agreements........................................................ 32
7.08 Existing Lease Agreements............................................... 32
7.09 Environmental and Health and Safety Audit............................... 33
7.10 Due Diligence........................................................... 33
7.11 Transfer of Denric Tool Property........................................ 33
7.12 Assignment of Patent.................................................... 33
7.13 Condition Regarding Section 338(h)(10) Election......................... 33
7.14 Condition Regarding Lease Agreements.................................... 33
7.15 Delivery of Schofield Loan Documents.................................... 33
7.16 Delivery of Additional Environmental Materials.......................... 34
ARTICLE VIII CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS..................... 34
8.01 Representations and Warranties True on the Closing Date................. 34
8.02 Compliance With Agreement............................................... 34
8.03 Absence of Litigation................................................... 34
8.04 HSR Waiting Period...................................................... 34
8.05 Assignment of Schofield Loan............................................ 34
8.06 Condition Regarding Section 338(h)(10) Election......................... 34
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
8.07 Condition Regarding Lease Agreements.................................... 35
ARTICLE IX INDEMNIFICATION ........................................................ 35
9.01 By Shareholders......................................................... 35
9.02 By Shareholders - Denric Tool and Environmental Matters................. 35
9.03 By Buyer................................................................ 36
9.04 By Buyer - Product Liability Issues..................................... 36
9.05 Indemnification of Third-Party Claims................................... 37
9.06 Payment................................................................. 38
9.07 Limitations on Indemnification.......................................... 38
9.08 Determination of Amount of Claims....................................... 39
9.09 Exclusive Remedy........................................................ 40
ARTICLE X CLOSING.................................................................. 40
10.01 Shareholders' Closing Deliveries....................................... 40
10.02 Buyer's Closing Deliveries............................................. 41
ARTICLE XI TERMINATION............................................................. 42
11.01 Right of Termination Without Breach.................................... 42
11.02 Termination for Breach................................................. 43
ARTICLE XII MISCELLANEOUS.......................................................... 44
12.01 Schedules.............................................................. 44
12.02 Further Assurance...................................................... 44
12.03 Disclosures and Announcements.......................................... 44
12.04 Assignment; Parties in Interest........................................ 44
12.05 Law Governing Agreement................................................ 45
12.06 Amendment and Modification............................................. 45
12.07 Notice................................................................. 45
12.08 Expenses............................................................... 46
12.09 Entire Agreement....................................................... 47
12.10 Counterparts........................................................... 48
12.11 Headings............................................................... 48
12.12 Glossary of Terms...................................................... 48
</TABLE>
-iii-
<PAGE>
Disclosure Schedules
Schedule 1.02 Excluded Assets
Schedule 2.03 12/31/99 GAAP-Adjusted Balance Sheet
Schedule 2.05 Allocation of Purchase Price
Schedule 3.01 Qualification
Schedule 3.02 No Violation
Schedule 3.03 Financial Statements
Schedule 3.05 Capitalization
Schedule 3.06 Tax Matters
Schedule 3.07 Accounts Receivable
Schedule 3.08 Inventory
Schedule 3.09 Absence of Certain Changes
Schedule 3.10 Absence of Undisclosed Liabilities
Schedule 3.11 Litigation
Schedule 3.12 Compliance with Laws and Orders
Schedule 3.13 Title to and Condition of Properties
Schedule 3.14 Insurance
Schedule 3.15 Contracts and Commitments
Schedule 3.16 Labor Matters
Schedule 3.17 Employee Benefit Plans
Schedule 3.18 Employment Compensation
Schedule 3.19 Proprietary Rights
Schedule 3.21 Product Warranty and Product Liability
Schedule 3.22 Affiliates' Relationships to Company
Schedule 3.24 Disclosure Documents
Schedule 3.25 Underlying Documents
Schedule 5.07 Major Customers and Suppliers
Schedule 7.04 Consents and Approvals
Schedule 7.07 Lease Agreements
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated July 6, 1999, by and
among WEC COMPANY d/b/a Woods Equipment Company, a Delaware corporation
("Buyer"), Richard Milanowski and Gloria Milanowski (each individually,
"Shareholder," and together, "Shareholders").
RECITALS
Central Fabricators, Inc., a Wisconsin corporation ("Company"), is engaged
in the manufacture and sale of buckets and other material handling attachments
for construction equipment (the "Business"). Shareholders own all of the issued
and outstanding shares (the "Shares") of capital stock of Company.
Company's facilities consist of three individual manufacturing facilities
located in Schofield, Wisconsin (the "Facilities").
Buyer desires to purchase the Shares from Shareholders and Shareholders
desire to sell to Buyer the Shares, upon the terms and conditions set forth
herein.
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, on the Closing Date (as defined herein) Buyer agrees to purchase
from Shareholders and Shareholders agree to sell to Buyer all of the Shares.
1.02 Excluded Assets. Anything herein to the contrary notwithstanding,
prior to the Closing Date, Shareholders shall cause the assets listed in
Schedule 1.02 (including the Denric Tool Property) (the "Excluded Assets") to be
transferred from the ownership of Company.
ARTICLE II
PURCHASE PRICE - PAYMENT
2.01 Purchase Price. The purchase price (the "Purchase Price") for the
Shares shall be equal to:
(a) Twenty-Seven Million Seven Hundred Thousand Dollars
($27,700,000); plus
(b) the Gross Up Amount, if any; plus
<PAGE>
(c) the amount of cash and cash equivalents (including marketable
securities and investments) in Company's checking and other deposit and
investment accounts (collectively, "Cash and Cash Equivalents") as of the
Closing Date, as reflected on the Final Closing Balance Sheet; plus
(d) the amount, if any, by which the Working Capital Value as of the
Closing Date exceeds Three Million Forty-Two Thousand Dollars
($3,042,000); minus
(e) the amount, if any, by which Three Million Forty-Two Thousand
Dollars ($3,042,000) exceeds the Working Capital Value as of the Closing
Date; minus
(f) the Indebtedness Amount, as of the Closing Date.
2.02 Payment of Purchase Price. The Purchase Price shall be paid by Buyer
as follows:
(a) Cash to Escrow Agent. At the Closing, Buyer shall deliver to the
--------------------
Escrow Agent, under the Escrow Agreement, the sum of Five Hundred Thousand
Dollars ($500,000) (the "Escrow Amount").
(b) Cash to Shareholders. At the Closing, Buyer shall deliver to
--------------------
Shareholders or their designee the Purchase Price, calculated pursuant to
the Estimated Closing Balance Sheet, less the Escrow Amount.
(c) Post-Closing Adjustment. On or before the fifth business day
-----------------------
following the final determination of the Final Closing Balance Sheet
("Settlement Date"), the parties shall make the following adjustments:
(i) Shareholders shall pay to Buyer the amount, if any, by
which the Working Capital Value as reflected on the Estimated
Closing Balance Sheet exceeds the Working Capital Value as reflected
on the Final Closing Balance Sheet, or Buyer shall pay to
Shareholders the amount, if any, by which the Working Capital Value
as reflected on the Estimated Closing Balance Sheet is less than the
Working Capital Value as reflected on the Final Closing Balance
Sheet; and
(ii) Shareholders shall pay to Buyer the amount, if any, by
which the Indebtedness Amount as reflected on the Estimated Closing
Balance Sheet is less than the Indebtedness Amount on the Final
Closing Balance Sheet, or Buyer shall pay to Shareholders the
amount, if any, by which the Indebtedness Amount as reflected on the
Final Closing Balance Sheet is less than the Indebtedness Amount on
the Estimated Closing Balance Sheet.
Any Settlement Date payments shall be made together with interest on
the amount being paid from the Closing Date to the date of payment
at a rate per annum equal to the prime rate of interest on the
Settlement Date, as stated in The Wall Street Journal.
-----------------------
-2-
<PAGE>
(d) Method of Payment. All payments under this Section 2.02 shall be
-----------------
made by wire transfer of immediately available funds to an account
designated by the recipient not less than forty-eight (48) hours prior to
the time for payment specified herein.
2.03 Determination of Working Capital Value and Indebtedness Amount.
(a) Definition of Working Capital Value. The term "Working Capital
-----------------------------------
Value" shall mean the dollar amount by which the inventory and accounts
receivable of Company exceeds Company's accounts payable and accruals,
both as reflected in the Estimated Closing Balance Sheet or Final Closing
Balance Sheet, as applicable.
(b) Definition of Indebtedness Amount. The term "Indebtedness Amount"
---------------------------------
shall mean all indebtedness for borrowed money owed to unaffiliated third
parties (other than accounts payable) and all indebtedness for borrowed
money owed to any Shareholder or Shareholder Affiliate, all as outstanding
as of the Closing Date as reflected in the Estimated Closing Balance Sheet
or Final Closing Balance Sheet, as applicable. As used in this Agreement,
the term "Affiliate" shall mean and include all shareholders, directors,
and officers of Buyer or Company, the spouse of any such person, any
person who would be the heir or descendant of any such person if he or she
were not living and any entity in which any of the foregoing has a direct
or indirect interest, except through ownership of less than five percent
(5%) of the outstanding shares of any entity whose securities are listed
on a national securities exchange or traded in the national over-the-
counter market.
(c) Estimated Closing Balance Sheet. For purposes of determining the
-------------------------------
amount to be paid by Buyer at the Closing, (i) not less than fifteen (15)
days prior to the Closing Date, Buyer and Shareholders shall agree on a
restated version of the Recent Balance Sheet, such restated balance sheet
to be in form and detail identical to, and in its accounting principles
and policies consistent in every respect with, the December 31, 1998
adjusted balance sheet of Company, together with the journal entries and
working capital adjustment worksheet related thereto, all as prepared by
Ernst & Young and attached as Schedule 2.03 so that it has been prepared
on a basis consistent with the Recent Balance Sheet but in accordance with
generally accepted accounting principles and policies (the "GAAP-Adjusted
Recent Balance Sheet"), and (ii) not less than ten (10) business days
prior to the Closing Date, Shareholders, in consultation with Buyer, shall
prepare and deliver to Buyer a balance sheet of Company as of the close of
business on the business day immediately prior to the Closing Date
(hereinafter the "Effective Time") which shall represent Shareholders'
reasonable estimate of the Final Closing Balance Sheet; such balance sheet
to be in form and detail identical to, and in its accounting principles
and policies consistent in every respect with, the GAAP-Adjusted Recent
Balance Sheet. Such balance sheet shall be accompanied by schedules
setting forth in reasonable detail all assets and liabilities included
therein. The estimated balance sheet or the accompanying schedules shall
contain sufficient detail for the determination of Working Capital Value,
and Indebtedness Amount. In the event Buyer shall object to any of the
information set forth on the estimated balance sheet or accompanying
schedules as presented by Shareholders, the parties shall
-3-
<PAGE>
negotiate in good faith and agree on appropriate adjustments to the end
that such balance sheet and accompanying schedules reflect a reasonable
estimate of the Final Closing Balance Sheet, Working Capital Value and
Indebtedness Amount (the estimated balance sheet as finally determined by
the parties pursuant to this subsection is herein referred to as the
"Estimated Closing Balance Sheet"). In connection with the determination
of the Estimated Closing Balance Sheet, Shareholders shall provide to
Buyer such information and detail as Buyer shall reasonably request.
Copies of the GAAP-Adjusted Recent Balance Sheet and the Estimated Closing
Balance Sheet shall be attached to Schedule 2.03 once they have been
prepared and agreed upon by Buyer and Shareholders.
(d) Final Closing Balance Sheet. The Final Closing Balance Sheet
---------------------------
of Company shall be prepared as follows:
(i) During a period of thirty (30) days following the Closing
Date, Shareholders, in consultation with Buyer, shall prepare and
deliver to Buyer a balance sheet of Company as of the Effective
Time, prepared in accordance with generally accepted accounting
principles from the books and records of Company (except, in the
case of unaudited financial statements, for the absence of footnote
disclosure), on a basis consistent with the generally accepted
accounting principles followed in the preparation of the GAAP-
Adjusted Recent Balance Sheet, and fairly presenting the financial
position of Company as of the Effective Time. The balance sheet
shall be accompanied by detailed schedules and by a report (1)
setting forth the amount of Working Capital Value and Indebtedness
Amount (as defined above) reflected in the balance sheet, and (2)
setting forth the amount of any adjustment to the Purchase Price to
be paid and by whom pursuant to Section 2.02(c) hereof.
(ii) If, thirty (30) days after the Closing Date, Buyer and
Shareholders have not agreed on the balance sheet and report
described in (i) above, then Buyer's independent accountants
("Buyer's Accountants") shall prepare such balance sheet and report
and deliver it to Shareholders no later than forty-five (45) days
after the Closing Date.
(iii) Within thirty (30) days following the delivery of the
balance sheet referred to in (ii) above, Shareholders or their
independent accountants ("Shareholders' Accountants") may object to
any of the information contained in said balance sheet or
accompanying schedules or reports which could affect the necessity
or amount of any payment by Buyer or Shareholders pursuant to
Section 2.02 hereof. Any such objection shall be made in writing and
shall state Shareholders' determination of the amount of the Working
Capital Value and Indebtedness Amount.
(iv) In the event of a dispute or disagreement relating to the
balance sheet or schedules which Buyer and Shareholders are unable
to resolve, either party may elect to have all such disputes or
disagreements resolved by an accounting firm of nationally
recognized standing (the "Third Accounting
-4-
<PAGE>
Firm") to be mutually selected by Shareholders and Buyer or, if no
agreement is reached, by Shareholders' Accountants and Buyer's
Accountants. The Third Accounting Firm shall make a resolution of the
balance sheet of Company as of the Effective Time and the calculations
of Working Capital Value and Indebtedness Amount, which shall be final
and binding for purposes of this Article II. The Third Accounting Firm
shall be instructed to use every reasonable effort to perform its
services within fifteen (15) days of submission of the balance sheet
to it and, in any case, as soon as practicable after such submission.
The fees and expenses for the services of the Third Accounting Firm
shall be shared by Buyer and Shareholders as follows:
Shareholders shall pay a percentage of such fees and expenses equal to
A/(A+B) and Buyer shall pay a percentage of such fees and expenses
equal to B/(A+B), where A is equal to the absolute value of the
difference (in dollars) between Working Capital Value and Indebtedness
Amount as finally determined by the Third Accounting Firm and Working
Capital Value and Indebtedness Amount as reflected in the objection
prepared and delivered by Shareholders in accordance with Section
2.03(d)(ii), and B is equal to the absolute value of the difference
(in dollars) between Working Capital Value and Indebtedness Amount as
finally determined by the Third Accounting Firm and Working Capital
Value and Indebtedness Amount as reflected in the report prepared and
delivered by Buyer in accordance with Section 2.03(d)(i). As used in
this Agreement, the term "Final Closing Balance Sheet" shall mean the
balance sheet of Company as of the Effective Time as finally
determined for purposes of this Article II, whether by negotiation and
agreement of the parties in accordance with Section 2.03(d)(i),
acquiescence of Shareholders in the figures supplied by Buyer in
accordance with Section 2.03(d)(ii), or by the Third Accounting Firm
in accordance with Section 2.03(d)(iv).
(v) After the Closing Date, Buyer agrees to permit Shareholders,
Shareholders' Accountants, and their respective representatives,
during normal business hours, to have reasonable access to, and to
examine any pre-Closing books and records of Company, which documents
and access are necessary to review any one or more of the balance
sheets to be prepared pursuant to this Section 2.03.
2.04 Section 338(h)(10) Election. At Buyer's request and at its sole
option, each Shareholder will join with Buyer in making an election under
Section 338(h)(10) of the Code and any corresponding elections under state,
local, or foreign tax law (the "338 Election"). Buyer will reimburse
Shareholders on an after-tax basis for any increase in federal, state, or
other taxes incurred by either Shareholder solely by reason of making the 338
Election over the amount of such taxes otherwise payable by such Shareholder
in connection with the transactions contemplated hereby as if the 338 Election
had not been made (such excess being referred to as the "Gross Up Amount").
If, however, the actual amount of reimbursement payable to Shareholders would
exceed $750,000, Shareholders may, in lieu of full reimbursement hereunder,
accept a Gross-Up Amount equal to $750,000. If, on the other hand,
Shareholders do not accept a Gross Up Amount equal to $750,000 in lieu of full
reimbursement hereunder and
-5-
<PAGE>
Buyer elects to abandon the 338 Election, Buyer and Shareholders will
negotiate in good faith in an attempt to determine a mutually acceptable
adjustment to the Purchase Price. The computation of the taxes otherwise
payable by each Shareholder as if the 338 Election had not been made shall
include the taxes payable as the result of the distribution of the Excluded
Assets pursuant to Section 1.02.
2.05 Allocation of Purchase Price. If the 338 Election is made, the
aggregate Purchase Price for the deemed sale and purchase of assets shall be
allocated among Company's assets for tax purposes in accordance with Schedule
2.05, which shall be jointly prepared by Buyer and Shareholders. Schedule 2.05
shall be agreed upon by the parties not less than five (5) business days prior
to the Closing. Shareholders and Buyer will follow and use such allocation in
all tax returns, filings or other related reports made by them to any
governmental agencies. To the extent that disclosures of this allocation or of
any related information are required to be made by the parties to the Internal
Revenue Service ("IRS") under the provisions of Section 338(b)(5) of the
Internal Revenue Code of 1986, as amended (the "Code"), or any regulations
thereunder, Buyer and Shareholders will disclose such reports to the other
prior to filing with the IRS.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders, jointly and severally, make the following representations
and warranties to Buyer, each of which is true and correct on the date hereof,
shall remain true and correct to and including the Closing Date, shall be
unaffected by any investigation heretofore or hereafter made by Buyer, or any
knowledge of Buyer other than as specifically disclosed in the disclosure
schedules which are attached hereto and incorporated herein by reference (the
"Schedules"), and shall survive the Closing of the transactions provided for
herein. As used herein, the term "Management's Knowledge" shall mean the
actual collective knowledge, without additional investigation, of Shareholders
and Dennis T. George.
3.01 Corporate.
(a) Organization. Company is a corporation duly organized and
------------
validly existing under the laws of the State of Wisconsin. Company has
filed its most recent required annual report with, has not filed articles
of dissolution with, and has not been administratively dissolved by, the
Department of Financial Institutions of the State of Wisconsin. No grounds
exist for the administrative dissolution of Company by the Wisconsin
Department of Financial Institutions.
(b) Corporate Power. Company has all requisite corporate power and
---------------
authority to own, operate, and lease its properties and to carry on the
Business as and where such is now being conducted.
(c) Qualification. Company is duly licensed or qualified to do
-------------
business as a foreign corporation, and is in good standing, in each
jurisdiction where the character of the properties owned or leased by it,
or the nature of the Business, makes such licensing or qualification
necessary. The states in which Company is licensed or qualified to do
business are listed in Schedule 3.01.
-6-
<PAGE>
(d) No Subsidiaries. Company does not own any interest in any
---------------
corporation, partnership or other entity.
3.02 No Violation. Except as set forth on Schedule 3.02, neither the
execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Shareholders pursuant hereto, nor
the consummation by Shareholders of the transactions contemplated hereby and
thereby (a) will, to Management's Knowledge, violate any applicable statute,
law, ordinance, rule, or regulation (collectively, "Laws") and any order,
writ, injunction, judgment, plan, or decree (collectively, "Orders"), (b)
subject to obtaining the approvals, consents, and waivers referred to in
Schedule 7.04, except for applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), will, to Management's
Knowledge, require any authorization, consent, approval, exemption, or other
action by or notice to any government entity (including, without limitation,
under any "plant closing" or similar law), or (c) subject to obtaining the
approvals, consents, and waivers referred to in Schedule 7.04, will violate or
conflict with, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or will result in
the termination of, or accelerate the performance required by, or result in
the creation of any Lien (as defined in Section 3.13(a)) upon any of the
assets of Company or the Shares under any term or provision of the Articles of
Incorporation or By-laws of Company or, to Management's Knowledge, of any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Company is a party or by which Company or
either Shareholder or any of its assets or properties, or Shareholders, or any
of their assets or properties, may be bound or affected, except where such
violation or failure to obtain any such authorization, consent, approval,
exemption, or other action or to give such notice would not, individually or
in the aggregate, have a material adverse effect on the financial condition of
Company or on the ability of Buyer and Shareholders to consummate the
transactions contemplated by this Agreement.
3.03 Financial Statements. Included as Schedule 3.03 are true and complete
copies of the unaudited financial statements of Company consisting of (i)
unaudited balance sheets of Company as of December 31, 1998, December 31, 1997
and December 31, 1996, and the related unaudited statements of income for the
years then ended (including the notes and schedules, if any, contained therein
or annexed thereto), which financial statements have been compiled by Krause
Howard & Co., accountants for Company for such years, and (ii) an unaudited
balance sheet of Company as of May 31, 1999 (the "Recent Balance Sheet"), and
the related unaudited statement of income for the five (5) months then ended
and for the corresponding period of the prior year (including the notes and
schedules, if any, contained therein or annexed thereto). All of such
financial statements (including all notes and schedules, if any, contained
therein or annexed thereto) have been prepared in accordance with the books
and records of Company, and, to Management's Knowledge, present, in a year-to-
year consistent manner, subject to normal year-end adjustments to the Recent
Balance Sheet, the assets, liabilities, financial position, and the results of
operations of Company as of the dates and for the years and periods indicated.
3.04 Shareholders.
(a) Power. Each Shareholder has full power, legal right, and
-----
authority to enter into, execute, and deliver this Agreement and the other
documents and instruments to be executed and delivered by Shareholders
(such other documents sometimes
-7-
<PAGE>
referred to herein as "Ancillary Documents") and to carry out the
transaction contemplated hereby and thereby.
(b) Validity. This Agreement and the Ancillary Documents (i) have
--------
been (or, when executed and delivered, will be) duly and validly executed
and delivered by each Shareholder, and (ii) are, or, when executed and
delivered, will be the legal, valid, and binding obligations of such
Shareholder, enforceable in accordance with their respective terms, except
as such may be limited by bankruptcy, insolvency, reorganization, and
other laws affecting creditors' rights generally, and by general equitable
principles.
(c) Title. Except as set forth on Schedule 3.05, each Shareholder
-----
has, and at Closing Buyer will receive, good and marketable title to the
Shares, free and clear of all Liens including, without limitation, voting
trusts or agreements, proxies, marital or community property interests.
3.05 Capitalization. Schedule 3.05 sets forth a complete list of all the
authorized capital stock of Company. No shares of such capital stock are
issued or outstanding except for the Shares, which are owned of record and
beneficially by Shareholders in the respective numbers set forth in Schedule
3.05. Other than as set forth in this Agreement or as set forth on Schedule
3.05, there are no (a) securities convertible into or exchangeable for any of
Company's capital stock or other securities, (b) options, warrants, or other
rights to purchase or subscribe to capital stock or other securities of
Company or securities which are convertible into or exchangeable for capital
stock or other securities of Company, or (c) contracts, commitments,
agreements, understandings, or arrangements of any kind relating to the
issuance, sale, or transfer of any capital stock or other equity securities of
Company, and any such convertible or exchangeable securities or any such
options, warrants, or other rights.
3.06 Tax Matters.
(a) Provision For Taxes. To Management's Knowledge, the provision
-------------------
made for taxes on the Recent Balance Sheet is sufficient for the payment
of all unpaid federal, state, foreign, county, local, and other income, ad
valorem, excise, profits, franchise, occupation, property, payroll, sales,
use, gross receipts, and other taxes (and any interest and penalties)
through the date of the Recent Balance Sheet, and all assessments payable
by Company as of the date of the Recent Balance Sheet, whether or not
disputed at the date of the Recent Balance Sheet, and for all years and
periods prior thereto as to which the applicable period of limitations has
not expired. Since the date of the Recent Balance Sheet, Company has not
incurred any taxes other than taxes incurred in the ordinary course of the
Business consistent in type and amount with past practices of Company.
(b) Tax Returns Filed. Except as set forth on Schedule 3.06, all
-----------------
federal, state, foreign, county, local, and other tax returns required to
be filed by or on behalf of Company have been timely filed and, when
filed, were true and correct in all material respects, and the taxes shown
as due thereon were paid or adequately accrued. Except as set forth on
Schedule 3.06, Company has duly withheld and paid when due all taxes
-8-
<PAGE>
which it is required to withhold and pay relating to salaries and other
compensation heretofore paid to the employees of Company.
(c) Tax Audits. The federal and state income tax returns of Company
----------
have been audited by the IRS and appropriate state taxing authorities for
the periods and as set forth in Schedule 3.06, and, since January 1, 1987,
Company has not received from the IRS or from the tax authorities of any
state, county, local, or other jurisdiction any notice of underpayment of
taxes or other deficiency which has not been paid nor any objection to any
return or report filed by Company. There are outstanding no agreements or
waivers extending the statutory period of limitations applicable to any
tax return or report.
(d) Consolidated Group. Schedule 3.06 lists every year Company was a
------------------
member of an affiliated group of corporations that filed a consolidated
tax return on which the statute of limitations does not bar a federal tax
assessment, and each corporation that has been part of such group.
(e) S Corporation Election. Company has, since January 1, 1987,
----------------------
continuously maintained its status and classification as an S corporation
pursuant to section 1362 of the Code.
(f) Agreements, Elections, and Payments. Except as set forth in
-----------------------------------
Schedule 3.06, since January 1, 1995, Company has not (i) filed any
consent or agreement under Section 341(f) of the Code, (ii) applied for
any tax ruling, (iii) entered into or been subject to a closing agreement
with any taxing authority, (iv) filed an election under Section 338(g) or
Section 338(h)(10) of the Code (nor has a deemed election under Section
338(e) of the Code occurred), (v) made any payments, or been a party to an
agreement (including this Agreement) that under any circumstances could
obligate it to make payments that will not be deductible because of
Section 280G of the Code, or (vi) been a party to any tax allocation or
tax sharing agreement.
(g) Basis. Schedule 3.06 contains accurate and complete
-----
descriptions of the following items as of the Closing Date:
(i) Company's basis in its assets, as of December 31, 1998; and
(ii) The Shareholders' basis in their Shares, as of December 31,
1998.
3.07 Accounts Receivable. All accounts receivable of Company reflected on
the Recent Balance Sheet, and incurred since the date thereof, represent arm's
length sales actually made in the ordinary course of the Business and, to
Management's Knowledge, are subject to no counterclaim or setoff and are not
in dispute. Schedule 3.07 contains an aged schedule of accounts receivable
included in the Recent Balance Sheet. All accounts receivable of Company
reflected on the Final Closing Balance Sheet will represent arm's length sales
actually made in the ordinary course of the Business.
3.08 Inventory. To Management's Knowledge, all inventory of Company
reflected on the Recent Balance Sheet consists of a quality and quantity
usable and saleable in the ordinary
-9-
<PAGE>
course of the Business, had a commercial value at least equal to the value
shown on such balance sheet and is valued at the lower of cost (on a FIFO
basis) or market. To Management's Knowledge, all inventory purchased since the
date of such balance sheet consists of a quality and quantity usable and
saleable in the ordinary course of the Business. Except as set forth in
Schedule 3.08, all inventory of Company is located on premises owned or leased
by Company as reflected in this Agreement. All work-in-process contained in
inventory constitutes items in process of production pursuant to contracts or
open orders taken in the ordinary course of the Business.
3.09 Absence of Certain Changes. Since May 31, 1999, unless otherwise
described in Schedule 3.09 or consented to in writing by Buyer, Company has
conducted the Business only in the ordinary and usual course consistent with
past practice and, without limiting the generality of the foregoing, there has
not been:
(a) Adverse Change. Any adverse change in the financial condition,
--------------
assets, liabilities or operations of Company;
(b) Damage. Any loss, damage or destruction in excess of $25,000,
------
whether covered by insurance or not, affecting the Business, Facilities,
or properties of Company;
(c) Increase in Compensation. Any increase in excess of $5,000 per
------------------------
individual per year or $50,000 for all employees in the aggregate in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company (including, without limitation, any increase
or change pursuant to any bonus, pension, profit sharing, retirement or
other plan or commitment), or any bonus or other employee benefit granted,
made or accrued;
(d) Labor Disputes. Any labor dispute or disturbance, other than
--------------
routine individual grievances which are not material to the Business,
financial condition or results of operations of Company;
(e) Commitments. Any commitment or transaction by Company
-----------
(including, without limitation, any borrowing or capital expenditure)
other than in the ordinary course of the Business consistent with past
practice;
(f) Dividends. Any declaration, setting aside, or payment of any
---------
dividend or any other distribution in respect of Company's capital stock,
any redemption, purchase or other acquisition by Company of any capital
stock of Company, or any security relating thereto, or any other payment
to any Shareholder in such person's capacity as a shareholder; provided,
---------
however, that Company may continue to make cash distributions to
-------
Shareholders for purposes of satisfying Shareholders' tax liabilities
arising by reason of Company's operations;
(g) Disposition of Property. Any sale, lease, or other transfer or
-----------------------
disposition of any properties or assets of Company, other than Excluded
Assets, in excess of $25,000,
-10-
<PAGE>
except for the sale or disposition of inventory items in the ordinary
course of the Business;
(h) Indebtedness. Any indebtedness for borrowed money incurred,
------------
assumed, or guaranteed by Company;
(i) Liens. Any liens (statutory or otherwise), security interests,
-----
claims, pledges, licenses, equities, options, conditional sales contracts,
assessments, levies, easements, covenants, reservations, restrictions,
rights-of-way, exceptions, limitations, charges, or encumbrances of any
nature whatsoever (collectively, "Liens") made on any of the properties or
assets of Company;
(j) Amendment of Contracts. Any entering into, amendment or
----------------------
termination by Company of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of the Business;
(k) Loans and Advances. Any loan or advance (other than advances to
------------------
employees in the ordinary course of the Business for travel and
entertainment in accordance with past practice) to any person including,
but not limited to, any officer, director or employee of Company, or any
Shareholder or Affiliate;
(l) Credit. Any grant of credit to any customer or distributor on
------
terms or in amounts more favorable than those which have been extended to
such customer or distributor in the past, any other change in the terms of
any credit heretofore extended, or any other change of Company's policies
or practices with respect to the granting of credit; or
(m) Unusual Events. Any other event or condition not in the ordinary
--------------
course of the Business.
3.10 Absence of Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Recent Balance Sheet or as set forth in Schedule
3.10, to Management's Knowledge, Company does not have any liabilities other
than commercial liabilities and obligations incurred since the date of the
Recent Balance Sheet in the ordinary course of the Business and consistent with
past practice and none of which has or will have a material adverse effect on
the Business, financial condition or operations of Company.
3.11 No Litigation. Except as set forth in Schedule 3.11, there is no
action, suit, arbitration, proceeding, investigation, or inquiry, whether civil,
criminal, or administrative ("Litigation"), pending, or, to Management's
Knowledge, threatened against Company, its directors (in such capacity), the
Business, or any of its assets. Schedule 3.11 also identifies all Litigation
(other than any Litigation related to the Denric Tool Property or the Off-Site
Properties) to which Company or any of its directors have been parties since
January 1, 1996. Prior to Closing, Shareholders will supplement Schedule 3.11 to
reflect all such Litigation since January 1, 1994. Except as set forth in
Schedule 3.11, to Management's Knowledge, none of Company, the Business, or
Company's assets is subject to any Order of any government entity.
3.12 Compliance With Laws and Orders.
-11-
<PAGE>
(a) Compliance. Except as set forth in Schedule 3.12, Company
----------
(including each and all of its operations, practices, properties and
assets) is in compliance with all applicable Laws (excluding Environmental
Laws which are addressed only in Section 3.12(c)) and Orders, including,
without limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, competition and pricing,
product warranties, zoning, building and sanitation, employment,
retirement and labor relations, and product advertising, except where the
failure to so comply would not have a material adverse effect on the
financial condition of Company. To Management's Knowledge, except as set
forth in Schedule 3.12, Company has not received notice of any violation
or alleged violation of any Laws (excluding Environmental Laws which are
addressed only in Section 3.12(c)) or Orders. To Management's Knowledge,
except as set forth in Schedule 3.12, all reports and returns required to
be filed by Company with any government entity (other than reports and
returns that relate to Environmental Laws, which are addressed only in
Section 3.12(c)) have been filed, and were accurate and complete when
filed. To Management's Knowledge:
(i) Neither Company nor any Shareholder has received any
written notice of any claim to the effect that the operation of the
Business, as it is now conducted, or any condition existing at any of
the Facilities, in any manner constitutes a nuisance or other tortious
interference with the rights of any person or persons.
(ii) Company has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such
accounts and each of such accounts has a positive balance.
(iii) The deficiencies, if any, noted on any report of Company
required in any of the past five (5) years under the federal
Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety laws and regulations, have been
corrected, and Company has delivered to Buyer copies of all such
reports.
(b) Permits and Licenses. Company has all material permits, licenses,
--------------------
approvals, authorizations, and consents of all government entities and all
certification organizations required for the conduct of the Business (as
presently conducted) and operation of the Facilities and all such licenses,
permits, approvals, authorizations and consents are described in Schedule
3.12 and are, and following the Closing, will continue to be, in full force
and effect except as otherwise noted on Schedule 3.12. To Management's
Knowledge, except as set forth in Schedule 3.12, Company (including its
operations, properties, and assets) is currently in material compliance
with all such permits and licenses, approvals, authorizations, and
consents.
(c) Environmental Matters. (i) The applicable Laws relating to
---------------------
pollution or protection of the environment, including Laws in effect on the
date of this Agreement relating to emissions, discharges, generation,
storage, releases, or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic, hazardous, or petroleum or
-12-
<PAGE>
petroleum-based substances or wastes ("Waste") into the environment
(including, without limitation, ambient air, surface water, ground water,
land surface, or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Waste including, without limitation, the Clean
Water Act, the Clean Air Act, the Resource Conservation and Recovery Act,
the Toxic Substances Control Act, and the Comprehensive Environmental
Response Compensation Liability Act ("CERCLA"), as amended, and their state
and local counterparts are herein collectively referred to as the
"Environmental Laws." To Management's Knowledge, except as set forth in
Schedule 3.12 and except for the Denric Tool Property and the Off-Site
Properties, Company is in compliance with all material limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in the Environmental Laws
or contained in any code, Order, notice or demand letter issued, entered,
promulgated, or approved thereunder. To Management's Knowledge, except as
set forth in Schedule 3.12 and except for the Denric Tool Property and the
Off-Site Properties, there is no Litigation nor any demand, claim, hearing,
or notice of violation pending or threatened against Company relating in
any way to the Environmental Laws or any Order issued, entered,
promulgated, or approved thereunder. To Management's Knowledge, except as
set forth in Schedule 3.12 and except for the Denric Tool Property and the
Off-Site Properties, there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions, omissions, or
plans which may interfere with or prevent compliance or continued
compliance with the Environmental Laws or with any Order issued, entered,
promulgated, or approved thereunder, or which may give rise to any
liability, including, without limitation, material liability under CERCLA
or similar state or local Laws, or otherwise form the basis of any
Litigation, hearing, notice of violation, study, or investigation, based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge,
release or threatened release into the environment of, any Waste.
(ii) To Management's Knowledge, Shareholders and Company have
disclosed and made available to Buyer all written studies, analyses and
test results and copies of correspondence with any governmental entity or
any other third party since January 1, 1989 (except for any of such
information regarding the Denric Tool Property and the Off-Site
Properties), in the possession, custody or control of Company or any
Shareholder relating to (A) the environmental conditions on, under, about
or from any real property owned by Company, the Leased Real Property (as
defined in Section 3.13) or any predecessor in interest to Company at the
present time or in the past, and (B) any Hazardous Materials (as defined
below) used, managed, handled, transported, treated, generated, stored or
released by Company or any other person on, under, about or from the
Leased Real Property or in connection with the operation of Company.
Prior to Closing, Shareholders will provide to Buyer all information
described in the preceding paragraph for years prior to 1989. The term
"Hazardous Materials" shall mean (I) any petroleum, hazardous or toxic
petroleum-derived substances or petroleum products, flammable or explosive
materials, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (II) any chemicals or other materials or
substances which are now regulated,
-13-
<PAGE>
classified or defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutant" or "contaminant" or any other similar
denomination intended to classify substances by reason of toxicity,
carcinogenicity, ignitability, corrosivity or reactivity under any
Environmental Law; and (III) any other chemical or other material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority under any Environmental Law.
(iii) To Management's Knowledge, except as set forth in Schedule
3.12, all reports and returns required to be filed by Company with any
government entity as a result of the Environmental Laws, have been filed,
and were accurate and complete when filed.
3.13 Title to and Condition of Properties.
(a) Marketable Title. Company has good and marketable title to all
----------------
Company's assets, free and clear of all mortgages and Liens, except those
described in Schedule 3.13. Except as set forth on Schedule 7.04, none of
Company's assets are subject to any restrictions with respect to the
transferability thereof.
(b) Condition. To Management's Knowledge, except as described in
---------
Schedule 3.13, all tangible assets constituting Company's assets hereunder
are in good operating condition and repair (subject to normal wear and
tear), free from any defects (except such minor defects as do not
interfere with the use thereof in the conduct of the normal operations of
Company), and have been maintained consistent with the standards generally
followed by Company.
(c) Leased Real Property. Other than the Denric Tool Property and
--------------------
as set forth in Schedule 3.13, Company does not own or occupy any real
property. Schedule 3.13 lists the leases currently in effect with respect
to the real property used or occupied by Company other than the Denric
Tool Property (the "Leased Real Property"). Schedule 3.13 also sets forth,
with respect to each parcel of Leased Real Property leased pursuant to any
oral lease arrangement, the material terms of each such oral lease. To
Management's Knowledge, there are now in full force and effect duly issued
certificates of occupancy permitting the Leased Real Property and
improvements located thereon to be legally used and occupied as the same
are now constituted. To Management's Knowledge, there is no claim of
adverse possession or prescriptive rights involving any of the Leased Real
Property and no basis exists for any such claim. No public improvements
have been commenced and, to Management's Knowledge, none are planned which
in either case may result in special assessments against or otherwise
materially adversely affect any Leased Real Property. Except as set forth
on Schedule 3.12, to Management's Knowledge, no portion of any of the
Leased Real Property has been used as a landfill or for storage or
landfill of Hazardous Materials (other than Hazardous Materials which are
used in the ordinary course of the Business in accordance with the
Environmental Laws). To Management's Knowledge, there is no (i) Order
requiring repair, alteration, or correction of any existing condition
affecting
-14-
<PAGE>
any Leased Real Property or the systems or improvements thereat,
(ii) condition or defect which could give rise to an Order of the sort
referred to in "(i)" above, or (iii) underground storage tanks, or any
structural, mechanical, or other defects of material significance
affecting any Leased Real Property or the systems or improvements thereat
(including, but not limited to, inadequacy for normal use of mechanical
systems or disposal or water systems at or serving the Leased Real
Property).
(d) No Condemnation or Expropriation. To Management's Knowledge,
--------------------------------
neither the whole nor any portion of the property or any other assets of
Company is subject to any Order to be sold or is being condemned,
expropriated, or otherwise taken by any government entity with or without
payment of compensation therefor, nor has any such condemnation,
expropriation or taking been proposed.
3.14 Insurance. Set forth in Schedule 3.14 is a complete and accurate list
of all policies of property and casualty, commercial general liability, workers
compensation, and other forms of insurance presently in effect with respect to
the Business and properties of Company. All such policies are valid,
outstanding, and enforceable policies and provide insurance coverage for the
properties, assets, and operations of Company, of the kinds, in the amounts, and
against the risks described therein and no such policy provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement, or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. No notice of
cancellation or termination has been received with respect to any such policy.
Company has not been refused any insurance with respect to any aspect of the
operations of the Business nor has its coverage been limited by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the last three (3) years. Company has duly and timely made all
claims it has been entitled to make under each policy of insurance. Since
December 31, 1997, all commercial general liability and general liability
policies maintained by or for the benefit of Company have been "occurrence"
policies and not "claims made" policies. To Management's Knowledge, except as
set forth in Schedule 3.14, there is no claim by Company pending under any such
policies as to which coverage has been questioned, denied, or disputed by the
underwriters of such policies, there is no basis for denial of any claim under
any such policy.
3.15 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in Schedule 3.15,
--------------------
Company has no leases of real property.
(b) Personal Property Leases. Except as set forth in Schedule 3.15,
------------------------
Company has no individual lease of personal property involving
consideration or other expenditure in excess of $5,000 or involving
performance over a period of more than 12 (twelve) months.
(c) Purchase Commitments. Except as set forth in Schedule 3.15, to
--------------------
Management's Knowledge, Company has no purchase commitments for inventory
items or supplies that, together with amounts on hand, constitute in
excess of six (6) months normal usage, or which are at an excessive price.
-15-
<PAGE>
(d) Sales Commitments. Company has no sales contracts or commitments
-----------------
to customers or distributors (collectively, "Sales Commitments") except
those made in the ordinary course of the Business, at arm's length and, to
Management's Knowledge, none of such Sales Commitments is for a sales
price which would result in a loss to Company.
(e) Contracts With Affiliates and Certain Others. Except as set forth
--------------------------------------------
in Schedule 3.15, to Management's Knowledge, Company has no agreement,
understanding, contract, or commitment (written or oral) with any
Affiliate or any other officer, employee, agent, consultant, distributor,
dealer, or franchisee that is not cancelable by Company on notice of not
longer than thirty (30) days without liability, penalty, or premium of any
nature or kind whatsoever.
(f) Powers of Attorney. Except as set forth in Schedule 3.15, Company
------------------
has not given a power of attorney, which is currently in effect, to any
person, firm, or corporation for any purpose whatsoever.
(g) Collective Bargaining Agreements. Company is not a party to any
--------------------------------
collective bargaining agreements with any unions, guilds, shop committees
or other collective bargaining groups.
(h) Loan Agreements. Except as set forth in Schedule 3.15, Company is
---------------
not obligated under any loan agreement, promissory note, letter of credit,
or other evidence of indebtedness as a signatory, guarantor or otherwise.
(i) Guarantees. Except as disclosed on Schedule 3.15, Company has not
----------
guaranteed the payment or performance of any person, firm, or corporation,
agreed to indemnify any person or act as a surety, or otherwise agreed to
be contingently or secondarily liable for the obligations of any person.
(j) Contracts Subject to Renegotiation. Company is not a party to any
----------------------------------
contract with any government entity body which is subject to
renegotiation.
(k) Restrictive Agreements. To Management's Knowledge, Company is not
----------------------
a party to nor is it bound by any agreement prohibiting or restricting
Company from competing in any business or geographical area or soliciting
customers or otherwise restricting it from carrying on the Business
anywhere in the world.
(l) Other Material Contracts. To Management's Knowledge, Company has
------------------------
no lease, license, contract, or commitment of any nature (other than the
Sales Commitments) involving consideration or other expenditure in excess
of $50,000 or involving performance over a period of more than six (6)
months, or which is otherwise individually material to the operations of
Company, except as explicitly described in Schedule 3.15 or in any other
Schedule.
(m) No Default. To Management's Knowledge, Company is not in default
----------
under any lease, contract or commitment, nor has any event or omission
occurred which through the passage of time or the giving of notice, or
both, would constitute a default
-16-
<PAGE>
thereunder or cause the acceleration of any of Company's obligations or
result in the creation of any Lien on the Facilities or any of the assets
owned, used, or occupied by Company. To Management's Knowledge, no third
party is in default under any lease, contract, or commitment to which
Company is a party, nor has any event or omission occurred which, through
the passage of time or the giving of notice, or both, would constitute a
default thereunder or give rise to an automatic termination, or the right
of discretionary termination, thereof.
3.16 Labor Matters. Except as set forth in Schedule 3.16, within the last
five (5) years Company has not experienced any labor disputes, union
organization attempts, or any work stoppage due to labor disagreements in
connection with the Business. Except to the extent set forth in Schedule 3.16,
(a) to Management's Knowledge, Company is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice;
(b) there is no unfair labor practice charge or complaint against Company
pending or threatened; (c) there is no labor strike, dispute, request for
representation, slowdown, or stoppage actually pending or, to Management's
Knowledge, threatened against or affecting Company nor any secondary boycott
with respect to products of Company; (d) no question concerning representation
has been raised or is threatened respecting the employees of Company; (e) there
are no administrative charges or court complaints against Company concerning
alleged employment discrimination or other employment related matters pending
or, to Management's Knowledge, threatened before the U.S. Equal Employment
Opportunity Commission or any government entity or before any federal or state
court; and (f) there are no investigations, complaints, citations or other
proceedings pending or, to Management's Knowledge, threatened against Company by
the U.S. Occupational, Safety and Health Administration or any state agency
concerning any health or safety matters.
3.17 Employee Benefits Plans.
(a) Disclosure. Schedule 3.17 sets forth all pension, thrift,
----------
savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, cafeteria plan (as defined in Section 125 of
the Code), reimbursement plans for medical expenses or dependent care,
qualified transportation or parking benefit program, adoption or education
assistance program, stock purchase, stock option, stock appreciation,
stock bonus, executive or deferred compensation, hospitalization, and
other similar fringe or employee benefit plans, programs, and
arrangements, and any employment or consulting contracts, "golden
parachutes," collective bargaining agreements, severance agreements or
plans, vacation and sick leave plans, programs, arrangements, and
policies, including, without limitation, all "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), all employee manuals, and, to Management's
Knowledge, all written or binding oral statements of policies, practices,
or understandings relating to employment, which are provided to, for the
benefit of, or relate to, any persons employed by Company. The items
described in the foregoing sentence are hereinafter sometimes referred to
collectively as "Employee Plans/Agreements." True and correct copies of
all the Employee Plans/Agreements, including all amendments thereto, have
heretofore
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<PAGE>
been provided to Buyer. Each of the Employee Plans/Agreements is
identified on Schedule 3.17, to the extent applicable, as one or more of
the following: an "employee pension benefit plan" (as defined in Section
3(2) of ERISA), a "defined benefit plan" (as defined in Section 414 of the
Code), an "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and/or as a plan intended to be qualified under Section 401 of the
Code. No Employee Plan/Agreement is a "multi-employer plan" (as defined in
Section 4001 of ERISA), and Company has never contributed or been
obligated to contribute to any such multi-employer plan.
(b) No Employee Benefit Plans Subject to Title IV of ERISA. Neither
-------------------------------------------------------
Company nor any affiliate of Company (within the meaning of Section 414(b)
or (c) of the Code) has ever sponsored, maintained, or contributed to an
employee benefit plan subject to the provisions of Title IV of ERISA.
(c) Prohibited Transactions, etc. To Management's Knowledge, there
----------------------------
have been no "prohibited transactions" within the meaning of Section 406
or 407 of ERISA or Section 4975 of the Code for which a statutory or
administrative exemption does not exist with respect to any Employee
Plan/Agreement and no event or omission has occurred in connection with
which Company or any of its assets or any Employee Plan/Agreement,
directly or indirectly, could be subject to any liability under ERISA, the
Code, or any other Law or Order applicable to any Employee Plan/Agreement,
or under any agreement, instrument, Law, or Order pursuant to or under
which Company has agreed to indemnify or is required to indemnify any
person against liability incurred under any such Law or Order.
(d) Full Funding. The funds available under each Employee
------------
Plan/Agreement which is intended to be a funded plan exceed the amounts
required to be paid, or which would be required to be paid if such
Employee Plan/Agreement were terminated, on account of rights vested or
accrued as of the Closing Date (using the actuarial methods and
assumptions then used by Company's actuaries in connection with the
funding of such Employee Plan/Agreement).
(e) Controlled Group; Affiliated Service Group; Leased Employees.
------------------------------------------
Company is not currently a member of a controlled group of corporations as
defined in Section 414(b) of the Code or in common control with any
unincorporated trade or business as determined under Section 414(c) of the
Code. For the 1990 through 1993 tax years of Company, Company was a member
of a controlled group of corporations which included Denric Tool, Inc.
Company has never been a member of an "affiliated service group" within
the meaning of Section 414(m) of the Code. Except as set forth in Schedule
3.17, there are not and never have been any leased employees within the
meaning of Section 414(n) of the Code who perform services for Company and
no individuals are expected to become leased employees with the passage of
time.
(f) Payments and Compliance. With respect to each Employee
-----------------------
Plan/Agreement, to Management's Knowledge, except as set forth in Schedule
3.17, (i) all payments due from Company to date have been made and all
amounts properly accrued to date as liabilities of Company which have not
been paid have been properly
-18-
<PAGE>
recorded on the books of Company and are reflected in Company's balance
sheets; (ii) Company has complied in all material respects with, and each
such Employee Plan/Agreement materially conforms in form and operation to,
all applicable laws and regulations, including but not limited to ERISA
and the Code, in all respects and all reports and information relating to
such Employee Plan/Agreement required to be filed with any governmental
entity have been timely filed; (iii) each Employee Plan/Agreement which is
a "group health plan" (as defined in Section 5000(b) of the Code) has been
operated in all material respects in accordance with the group health plan
continuation coverage requirements and portability requirements of the
Code and ERISA; (iv) all reports and information relating to each such
Employee Plan/Agreement required by applicable Laws and regulations to be
disclosed or provided to participants or their beneficiaries have been
timely disclosed or provided; (v) each such Employee Plan/Agreement which
is intended to qualify under Section 401 of the Code has received a
favorable determination letter from the Internal Revenue Service with
respect to such qualification, its related trust has been determined to be
exempt from taxation under Section 501(a) of the Code, and, to
Management's Knowledge, nothing has occurred since the date of such letter
that has or is likely to adversely affect such qualification or exemption;
(vi) there are no actions, suits, or claims pending (other than routine
claims for benefits) or, to Management's Knowledge, threatened with
respect to such Employee Plan/Agreement or against the assets of such
Employee Plan/Agreement; (vii) no investigation, review, or audit of any
Employee Plan/Agreement by the IRS, United States Department of Labor, or
other government entity is in progress, pending, scheduled, or noticed;
and (viii) no Employee Plan/Agreement is a plan which is established and
maintained outside the United States primarily for the benefit of
individuals substantially all of whom are nonresident aliens.
(g) Post-Retirement Benefits. Except as set forth in Schedule 3.17,
------------------------
no Employee Plan/Agreement provides benefits, including, without
limitation, death or medical benefits (whether or not insured) with
respect to current or former Company's employees beyond their retirement
or other termination of service other than (i) coverage mandated by
applicable law, (ii) death or retirement benefits under any Employee
Plan/Agreement that is an employee pension benefit plan, (iii) deferred
compensation benefits accrued as liabilities on the books of Company
(including the Recent Balance Sheet), (iv) disability benefits under any
Employee Plan/Agreement that is an employee welfare benefit plan and which
have been fully provided for by insurance or otherwise, or (v) benefits in
the nature of severance pay.
(h) No Triggering of Obligations. Except as set forth in Schedule
----------------------------
3.17, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee of Company to
severance pay, unemployment compensation, or any other payment, except as
expressly provided in this Agreement, (ii) accelerate the time of payment
or vesting, or increase the amount of compensation due to any such
employee or former employee, or (iii) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
-19-
<PAGE>
(i) Delivery of Documents. There has been delivered to Buyer, with
---------------------
respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required under ERISA, with
respect to each such Employee Plan/Agreement for the last two (2) years;
(ii) a copy of the summary plan description, together with each
summary of material modifications, required under ERISA with respect
to such Employee Plan/Agreement, all material employee communications
relating to such Employee Plan/Agreement, and, unless the Employee
Plan/Agreement is embodied entirely in an insurance policy to which
Company is a party, a true and complete copy of such Employee
Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded through a trust or
any third party funding vehicle (other than an insurance policy), a
copy of the trust or other funding agreement and the latest financial
statements thereof;
(iv) the most recent determination letter received from the IRS
with respect to each Employee Plan/Agreement that is intended to be a
"qualified plan" under Section 401 of the Code; and
(v) a copy of any investment management agreement which
delegates authority for investment of the assets of any Employee
Plan/Agreement.
(j) Annual Reports. With respect to each Employee Plan/Agreement for
--------------
which an annual report has been filed and delivered to Buyer pursuant to
Section 3.17(i), hereof, no material adverse change has occurred with
respect to the matters covered by the latest such annual report since the
date thereof.
(k) Future Commitments. Company has not announced any plan or legally
------------------
binding commitment to create any additional Employee Plans/Agreements or
to amend or modify any existing Employee Plan/Agreement.
3.18 Employment Compensation. Schedule 3.18 contains a true and correct
list of all employees to whom Company is paying compensation, including bonuses
and incentives, at an annual rate in excess of Fifty Thousand Dollars ($50,000)
for services rendered or otherwise, and such list identifies the 1998 annual and
January 1 - May 13, 1999 rates of compensation and bonuses for each such
employee.
3.19 Proprietary Rights.
(a) Schedule 3.19 constitutes a full and complete list of all
trademarks, trade names, service marks, copyrights, and patents, or
applications therefor, owned or used by Company. Company owns or
possesses licenses or other rights to use all patents, patent
applications, trademarks, trademark registrations, applications for
trademark registrations, trade secrets, service marks, service mark
registrations, applications for service mark registrations, trade names,
labels, slogans, claims of copyright, copyright registrations,
applications for copyright registrations, copyrights, drawings, designs,
-20-
<PAGE>
proprietary know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the Business
or operation of Company. Except as set forth in Schedule 3.19, to
Management's Knowledge, the current operations of Company do not conflict
with or infringe, and no one has asserted to Company or any Shareholder
that such operations conflict with or infringe, any Proprietary Rights
owned, possessed, or used by any third party. To Management's Knowledge,
there are no third parties whose operations conflict with or infringe, nor
has anyone asserted that such operations conflict with or infringe, any
Proprietary Rights owned, possessed, or used by Company.
(b) Except as set forth in Schedule 3.19, to Management's Knowledge,
Company's internal systems and Company's major suppliers and vendors and
all Products and services marketed by Company are fully Year 2000
Compliant. To be "Year 2000 Compliant" an internal system or a Product or
service must, at all times before, during, and after January 1, 2000,
accurately process and handle date and time data (including, but not
limited to calculating, comparing, and sequencing) from, into, and between
the twentieth and twenty-first centuries, and the years 1999 and 2000,
including leap year calculations, to the extent that other information
technology used in combination with such internal systems and such
Products and services properly exchange date/time data with it. To the
extent any such internal systems and such Products and services must
perform as a system with other internal systems of Company or with other
Products or services marketed by Company, such internal systems and such
Products and services used in combination with such other internal systems
and such other Products and services, respectively, must properly exchange
date/time data with them in accordance with the foregoing warranty. There
are no pending, or, to Management's Knowledge, threatened, claims against
Company relating to whether the Products and services marketed by Company
are Year 2000 Compliant.
3.20 Major Customers and Suppliers.
(a) Major Customers. To Management's Knowledge, all customers will,
---------------
in the ordinary course of business, continue to be customers of Company
after the Closing at substantially the same level of purchases as
heretofore; provided, however, that Shareholders make no representation as
-------- -------
to the effect the transactions contemplated hereby may have on any such
customer.
(b) Major Suppliers. To Management's Knowledge, all suppliers will,
---------------
in the ordinary course of business, continue to be suppliers to Company
after the Closing and will continue to supply Company with substantially
the same quantity and quality of goods at competitive prices; provided,
---------
however, that Shareholders make no representation as to the effect the
-------
transactions contemplated hereby may have on any such supplier.
(c) Dealers and Distributors. Company does not utilize or hire any
------------------------
sales representatives, dealers, distributors or franchisees.
-21-
<PAGE>
3.21 Product Warranty and Product Liability. Schedule 3.21 contains a true,
correct, and complete copy of Company's standard warranty or warranties for
sales of Products (as defined below) and, except as stated in Schedule 3.21,
there are no warranties, commitments, or obligations with respect to the return,
repair, or replacement of Products. Schedule 3.21 sets forth the aggregate
annual cost to Company of performing warranty obligations for customers for each
of the three (3) preceding fiscal years and the current fiscal year to the date
of the Recent Balance Sheet. Schedule 3.21 contains a description of all product
liability claims and similar Litigation relating to Products manufactured or
sold, or services rendered which are presently pending, or, to Management's
Knowledge, threatened, or which have been asserted or commenced against Company
within the last ten (10) years, in which a party thereto either requests
injunctive relief or alleges damages in excess of $50,000 (whether or not
covered by insurance). Except as set forth in Schedule 3.21, to Management's
Knowledge, there are no defects in design, construction, or manufacture of
Products which would adversely affect performance or create an unusual risk of
injury to persons or property. Except as set forth in Schedule 3.21, none of the
Products has been the subject of any replacement, field fix, retrofit, or recall
campaign and, to Management's Knowledge, no facts or conditions exist which
could reasonably be expected to result in such a recall campaign. To
Management's Knowledge, the Products have been designed, manufactured, and
labelled so as to meet and comply with all governmental standards and
specifications currently in effect, and have received all governmental approvals
necessary to allow their sale and use. The term "Products" means any and all
products currently or at any time previously manufactured, distributed, or sold
by Company, or by any predecessor of Company, under any brand name or mark under
which products are or have been manufactured, distributed, or sold by Company.
3.22 Affiliates' Relationships to Company.
(a) Contracts With Affiliates. All material leases, contracts,
-------------------------
agreements, or other arrangements between Company and any Affiliate are
described on Schedule 3.22.
(b) No Adverse Interests. Except as set forth in Schedule 3.22, none
--------------------
of the Affiliates has any direct or indirect interest in (i) any entity
which does business with Company or is competitive with the Business, or
(ii) any property, asset, or right which is used by Company in the conduct
of the Business.
(c) Obligations. All material obligations of any Affiliate, and all
-----------
material obligations of Company to any Affiliate, are listed on Schedule
3.22.
3.23 Assets Necessary to Business. To Management's Knowledge, Company owns
all property and assets, tangible and intangible, and all leases, licenses, and
other agreements, which are necessary for the conduct of the Business as
presently conducted.
3.24 Copies of Certain Documents. Shareholders have heretofore caused, or
will cause, within ten (10) days hereof, Company to deliver to Buyer true and
complete copies of those documents which are listed on Schedule 3.24
(collectively, the "Disclosure Documents"). Shareholders shall deliver to Buyer
supplemental and/or updated Disclosure Documents as such disclosure may be
required prior to the Closing, and, in such case, Shareholders shall revise
-22-
<PAGE>
Schedule 3.24 accordingly. Shareholders have determined, in their sole
discretion, what information they have made available to Buyer and Shareholders
have made no representation or warranty (express or implied) concerning the
completeness or accuracy of the Disclosure Documents, except pursuant to the
representations and warranties contained in this Article III and then expressly
subject to the limitations and restrictions specified in this Article III. Buyer
agrees that the determination by Buyer to engage and enter into this Agreement
is based solely on the representations and warranties contained in this Article
III, subject to the limitations and restrictions specified in this Article III,
and on Buyer's own investigation, analysis, and assessment of the Business.
Company or Shareholders may have, from time to time, disclosed other documents
or information to Buyer or to Buyer's attorneys, accountants, environmental
consultants, or other representatives or agents which are not part of the
Disclosure Documents (collectively, the "Other Information") and Shareholders
make no representation or warranty (express or implied) whatsoever concerning
the completeness or accuracy of the Other Information.
3.25 Underlying Documents. Any underlying documents listed or described in
the Schedules referred to in this Agreement have heretofore been furnished to
Buyer or its representatives. Except as set forth in Schedule 3.25, all such
documents furnished to Buyer are true and complete copies and there are no
amendments or modifications thereto, except as expressly noted in the Schedules
in which such documents are incorporated. Except as set forth in Schedule 3.25,
the minute books of Company contain full, complete, and accurate records of all
meetings and other corporate actions taken by the directors and Shareholders of
Company.
3.26 Business of Company. To Management's Knowledge, there are no
conditions existing with respect to the markets, Products, Facilities, or
personnel of Company which would reasonably be expected to materially and
adversely affect the Business of Company, other than such conditions as may
affect the industry in which Company participates or the economy in general.
3.27 Disclosure of Material Facts. To Management's Knowledge, Shareholders
have disclosed to Buyer all material facts relating to the existing condition
(financial or otherwise) of the Business, assets, liabilities, and operations of
Company. The representations and warranties contained in Article III of this
Agreement and in the Schedules hereto, and any other documents or information
furnished to Buyer by any Shareholder, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained herein or therein not misleading.
3.28 No Brokers or Finders. Neither Company nor any of its directors,
officers, employees, Shareholders, or agents have retained, employed, or used
any broker or finder in connection with the transaction provided for herein or
in connection with the negotiation thereof.
3.29 Disclaimer of Other Representations and Warranties. EXCEPT AS
EXPRESSLY SET FORTH IN THIS ARTICLE III, SHAREHOLDERS MAKE NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO THE SHARES,
THE BUSINESS, COMPANY, OR ANY OF THE ASSETS, LIABILITIES, OR OPERATIONS OF
COMPANY, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR
FITNESS FOR ANY
-23-
<PAGE>
PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED. NOTWITHSTANDING ANY PROVISION OF THIS ARTICLE III TO THE
CONTRARY, NO REPRESENTATION OR WARRANTY CONTAINED IN THIS ARTICLE III SHALL BE
DEEMED TO IN ANY WAY RELATE TO OR CONSTITUTE A REPRESENTATION OR WARRANTY WITH
RESPECT TO ANY ONE OR MORE OF THE EXCLUDED ASSETS, INCLUDING WITHOUT LIMITATION
THE DENRIC TOOL PROPERTY.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Shareholders,
each of which is true and correct on the date hereof, shall remain true and
correct to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by Shareholders or any notice to
Shareholders, and shall survive the Closing of the transactions provided for
herein.
4.01 Corporate.
(a) Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware.
(b) Corporate Power. Buyer has all requisite corporate power to enter
---------------
into this Agreement and the other documents and instruments to be executed
and delivered by Buyer and to carry out the transactions contemplated
hereby and thereby.
4.02 Authority. The execution and delivery of this Agreement and the
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by the Board of Directors of Buyer. No
other corporate act or proceeding on the part of Buyer is necessary to authorize
this Agreement or the Ancillary Documents or the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes and the
Ancillary Documents (a) have been or, when executed and delivered, will be, duly
and validly executed and delivered by Buyer and (b) are or, when executed and
delivered, will be, the legal, valid and binding obligations of Buyer,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and by general equitable principles.
4.03 No Brokers or Finders. Except for Madison Dearborn Partners, Inc.,
neither Buyer nor any of its directors, officers, employees, or agents have
retained, employed, or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation thereof.
4.04 Investment Purpose. Buyer is not acquiring the Shares with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act of 1933, as amended.
-24-
<PAGE>
ARTICLE V
OTHER MATTERS
5.01 Title Insurance. Not less than fifteen (15) days prior to the Closing,
Buyer shall obtain leasehold title insurance commitments, issued by a title
insurance company or companies reasonably satisfactory to Buyer, agreeing to
issue to Buyer standard form lessee's policies of title insurance with respect
to all Leased Real Property, together with a copy of each document to which
reference is made in such commitments. Such policies shall be upon standard ALTA
Form 1992 leasehold owner's policies and in such amounts as shall be reasonably
acceptable to Buyer. All policies shall insure title in full accordance with the
representations and warranties set forth herein and shall be subject only to
such conditions and exceptions as shall be reasonably acceptable to Buyer, and
shall contain such endorsements as Buyer shall reasonably request (including,
but not limited to, an endorsement over rights of creditors, if requested by
Buyer or Buyer's lender).
5.02 Surveys. Not less than fifteen (15) days prior to the Closing, Buyer
shall obtain surveys of all Leased Real Property prepared in accordance with
ALTA/ASCM standards, each dated no more than ninety (90) days prior to the
Closing and each detailing the legal description, the perimeter boundaries, all
improvements located thereon, all easements and encroachments affecting each
such parcel of Leased Real Property, and such other matters as may be reasonably
requested by Buyer or the title insurance companies, each containing a surveyor
certificate reasonably acceptable to Buyer and the title insurance companies,
and each prepared by a registered land surveyor satisfactory to Buyer.
5.03 Environmental and Health and Safety Audits. Shareholders shall permit
Buyer, its representatives, or an environmental engineering firm retained by
Buyer to conduct environmental and health and safety audits of Company's
operations and Leased Real Property, as Buyer in its discretion shall consider
necessary or appropriate; provided, however, that Buyer shall not conduct
invasive testing or sampling of the Leased Real Property without the prior
written consent of Company, subject to such terms and conditions as Company may
reasonably request.
5.04 Non-competition; Confidentiality. Subject to the Closing, and as an
inducement to Buyer to execute this Agreement and complete the transactions
contemplated hereby, and in order to preserve the goodwill associated with the
Business being acquired pursuant to this Agreement, each Shareholder hereby
covenants and agrees as follows:
(a) Covenant Not to Compete. Subject to the provisions of (a)(v)
-----------------------
below, for a period of five (5) years from the Closing Date, no
Shareholder will, directly or indirectly:
(i) engage in, continue in, or carry on any business which
competes with the Business or is substantially similar thereto,
including owning or controlling any financial interest in any
corporation, partnership, firm, or other form of business organization
which is so engaged;
-25-
<PAGE>
(ii) consult with, advise, or assist in any way, whether or not
for consideration, any corporation, partnership, firm, or other
business organization which is now or becomes a competitor of Buyer in
any aspect with respect to the Business including, but not limited to,
advertising or otherwise endorsing the products of any such
competitor, soliciting customers or otherwise serving as an
intermediary for any such competitor, loaning money or rendering any
other form of financial assistance to, or engaging in any form of
business transaction on other than an arm's length basis with any such
competitor;
(iii) offer employment to any employee of Buyer, without the
prior written consent of Buyer, except that Shareholders may offer
employment to Mark Milanowski, Christine Milanowski, Paula Milanowski,
Dennis T. George, and/or any Company employee whose employment Buyer
or Company terminates after the Closing; or
(iv) engage in any practice the purpose of which is to evade the
provisions of this covenant not to compete or to commit any act which
materially and adversely affects the Business; provided, however, that
the foregoing shall not prohibit the ownership of securities of
corporations which are listed on a national securities exchange or
traded in the national over-the-counter market in an amount which
shall not exceed five percent (5%) of the outstanding shares of any
such corporation. The parties agree that the geographic scope of this
covenant not to compete shall extend throughout North America and
South America, and Shareholders acknowledge that such territory is
reasonable in light of the Business. The parties agree that Buyer may
sell, assign, or otherwise transfer this covenant not to compete, in
whole or in part, to any person, corporation, firm, or entity that
purchases all or part of the Business or the Shares. In the event a
court of competent jurisdiction determines that the provisions of this
covenant not to compete are excessively broad as to duration,
geographical scope, or activity, it is expressly agreed that this
covenant not to compete shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and
effect, and any such over broad provisions shall be deemed, without
further action on the part of any person, to be modified, amended,
and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
(v) The parties agree that this Section 5.04 shall not prohibit
Shareholders' ownership of a franchised dealer, provided such dealer
does not engage in the design, design control or manufacture of
buckets or other demolition or material handling attachments for
construction equipment and provided further that such dealer is not a
"master dealer" or otherwise engaged in the sale and/or distribution
of buckets or other demolition or material handling attachments for
construction equipment to other dealers or otherwise in an expanded
trade area.
(b) Covenant of Confidentiality. No Shareholder shall at any time
---------------------------
subsequent to the Closing, except as explicitly requested by Buyer, (i) use
for any purpose, (ii)
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<PAGE>
disclose to any person, or (iii) keep or make copies of documents, tapes,
discs, or programs containing, any confidential information concerning
Company. For purposes hereof, "confidential information" shall mean and
include, without limitation, all Proprietary Rights in which Company has an
interest, all customer lists and customer information, and all other
information concerning Company's processes, apparatus, equipment,
packaging, products, and marketing and distribution methods not already in
the public domain.
(c) Equitable Relief for Violations. Each Shareholder agrees that the
-------------------------------
provisions and restrictions contained in this Section 5.04 are necessary to
protect the legitimate continuing interests of Buyer in acquiring Company,
and that any violation or breach of these provisions will result in
irreparable injury to Buyer for which a remedy at law would be inadequate
and that, in addition to any relief at law which may be available to Buyer
for such violation or breach and regardless of any other provision
contained in this Agreement, Buyer shall be entitled to injunctive and
other equitable relief as a court may grant after considering the intent of
this Section 5.04.
5.05 General Releases. At the Closing, each Shareholder and Dennis T.
George shall deliver general releases to Buyer, in form and substance reasonably
satisfactory to Buyer, Shareholders, and Dennis T. George, releasing Company
from all liabilities to the Closing Date.
5.06 HSR Act Filings. To the extent such filings have not been completed
prior to the execution of this Agreement, Shareholders and Buyer shall, each in
cooperation with the other, file any reports or notifications that may be
required to be filed by it under the HSR Act with the Federal Trade Commission
and the Antitrust Division of the Department of Justice and shall furnish to the
other all such information in its possession as may be necessary for the
completion of the reports or notifications to be filed by the other. Prior to
making any communication, written or oral, with the Federal Trade Commission,
the Antitrust Division of the Federal Department of Justice, or any other
government entity or authority or members of their respective staffs with
respect to this Agreement or the transactions contemplated hereby, Shareholders
shall consult with Buyer.
5.07 Customer and Supplier Information. Not less than five (5) business
days prior to the Closing Date, Shareholders shall deliver to Buyer: (a)
Schedule 5.07, which shall contain a list of (i) the ten (10) largest customers
of Company for each of the two (2) most recent fiscal years (determined on the
basis of the total dollar amount of net sales) showing the total dollar amount
of net sales to each such customer during each such year, and (ii) the ten (10)
largest suppliers to Company for each of the two most recent fiscal years
(determined on the basis of the total dollar amount of purchases) showing the
total dollar amount of purchases from each such supplier during each such year;
and (b) a written representation of Shareholders that Schedule 5.07 is true,
correct and complete as of the Closing Date.
5.08 Post-Closing Cooperation. Shareholders and Buyer shall cooperate with
each other following the Closing, so that the parties may prepare the Final
Closing Balance Sheet and final tax return of Company. In connection therewith,
Buyer shall provide Shareholders access to the books and records of Company,
and, for a period of forty-five (45) days following the Closing, shall provide
Shareholder Gloria Milanowski with access to her former office and
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computer at Company and access to Company employees to whom she may reasonably
need to have access for such purpose.
5.09 Information Regarding Denric Tool Property and/or Off-Site Properties.
(a) Buyer shall not initiate or cause to be initiated, directly or
indirectly, any communication with or voluntarily offer to provide any
information of any type or nature to any federal, state, or local
governmental entity, agency, or other regulatory or quasi-governmental
authority or to any other person or entity with respect to the Denric Tool
Property and Off-Site Properties or any one or more of them.
(b) Buyer shall promptly notify Shareholders of any request for
information or other communication of any type or nature, whether written
or oral, and provide Shareholders with a written copy of any written
materials received with respect thereto, which Buyer receives from any such
governmental entity, agency, or other regulatory or quasi-governmental
authority or from any other person or entity with respect to the Denric
Tool Property and Off-Site Properties or any one or more of them.
(c) Except as may be otherwise required under applicable law, Buyer
shall not respond to any request for information or other communication
described in Section 5.09(b) until Shareholders have had a reasonable
opportunity to review such request for information or other communication
and formulate a response thereto.
(d) Without in any way limiting Shareholders' indemnification
obligations under Section 9.02, or the procedures for indemnification
contained in Article IX, Buyer acknowledges and agrees that, after the
Closing Date, Shareholders or an entity formed by them shall be the owners
of the Denric Tool Property and shall have the sole and exclusive
responsibility and authority to:
(i) respond to any request for information or other
communication described in Section 5.09(b) and to otherwise contact,
notify, and negotiate with any such governmental entity, agency, or
other regulatory or quasi-governmental authority and all other
interested parties with respect to the Denric Tool Property and Off-
Site Properties or any one or more of them and all allegations,
complaints, proceedings (whether formal or informal), and findings
pertaining to any alleged violation of Environmental Laws or
regulations related thereto,
(ii) appeal or contest any finding of a violation of such
Environmental Laws or regulations or any order or requirement with
respect to the remediation thereof, and
(iii) effect the correction and remediation of any such violation
of such Environmental Laws and regulations.
(e) Buyer shall cooperate with Shareholders, and Shareholders'
employees, agents, invitees, contractors, consultants, and other parties as
Shareholders may reasonably determine, with respect to (i) the formulation
of a response by Shareholders
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to any request for information or other communication described in Section
5.09(b) and (ii) any actions which Shareholders may elect to take as
described in Section 5.09(d).
ARTICLE VI
COVENANTS OF SHAREHOLDERS AND BUYER
Shareholders and Buyer covenant and agree as follows:
6.01 Access to Information and Records. During the period prior to the
Closing, Shareholders shall give Buyer, its counsel, accountants, and other
representatives: (a) access during normal business hours to all of the
properties, books, records, contracts, and documents of Company for the purpose
of such inspection, investigation, and testing as Buyer deems appropriate (and
Shareholders shall furnish or cause to be furnished to Buyer and its
representatives all information with respect to the business and affairs of
Company as Buyer may reasonably request); (b) access to employees, agents, and
representatives for the purposes of such meetings and communications as Buyer
reasonably desires; and (c) with the prior consent of Shareholders in each
instance (which consent shall not be unreasonably withheld), access to vendors,
customers, manufacturers of its machinery and equipment, and others having
business dealings with Company.
6.02 Bank Accounts. Not less than ten (10) days prior to the Closing,
Shareholders shall provide to Buyer a list of each bank in which Company has an
account or safe deposit box, the name and number of each such account or box,
and the names of all persons authorized to draw thereon or who have access
thereto, with the amounts they are authorized to draw.
6.03 Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing by Buyer:
(a) No Changes. Company will carry on the Business diligently and in
----------
the same manner as heretofore and will not make or institute any material
changes in its methods of purchase, sale, management, accounting, or
operation.
(b) Maintain Organization. Company will take such action as may be
---------------------
necessary to maintain, preserve, renew, and keep in favor and effect the
existence, rights, and franchises of Company and will use its reasonable
best efforts to preserve the business organization of Company intact, to
keep available to Buyer the present officers and employees, and to
preserve for Buyer its present relationships with suppliers and customers
and others having business relationships with Company.
(c) No Breach. Shareholders will not do or omit any act, which may
---------
cause a breach of any material contract, commitment, or obligation, or any
breach of any representation, warranty, covenant, or agreement made by
Shareholders herein, or which would have required disclosure had it
occurred after the date of the Recent Balance Sheet and prior to the date
of this Agreement.
(d) No Material Contracts. No contract or commitment will be entered
---------------------
into, and no purchase of raw materials or supplies and no sale of goods or
services (real,
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personal, or mixed, tangible or intangible) will be made, by or on behalf
of Company, except contracts, commitments, purchases, or sales which are
in the ordinary course of the Business and consistent with past practice,
or are not material to Company (individually or in the aggregate) and
would not have been required to be disclosed in the Schedules had they
been in existence on the date of this Agreement.
(e) No Corporate Changes. Shareholders shall not amend Company's
--------------------
Articles of Incorporation or By-laws, make any changes in authorized or
issued capital stock, or grant options or other forms of derivative
securities.
(f) Maintenance of Insurance. Shareholders shall maintain all of the
------------------------
insurance in effect as of the date hereof.
(g) Maintenance of Property. Company shall use, operate, maintain,
-----------------------
and repair all property of Company in a normal business manner.
(h) Interim Financials. Shareholders will provide Buyer with interim
------------------
monthly financial statements and other management reports as and when they
are available.
6.04 Consents. Shareholders will use their reasonable best efforts prior to
Closing to obtain all approvals, consents, and waivers listed on Schedule 7.04
which are necessary for the consummation of the transactions contemplated
hereby; provided, however, that neither Shareholders nor Company shall be
-------- -------
obligated to pay money or other compensation to any third party to obtain any
such approval, consent, or waiver.
6.05 Other Action. Shareholders and Buyer will use their respective
reasonable best efforts to cause the fulfillment at the earliest practicable
date of all of the conditions to the parties' obligations to consummate the
transactions contemplated in this Agreement. Without limiting the foregoing,
Shareholders agree to take all actions reasonably necessary to cause Company to
perform its obligations under this Agreement and to conduct the Business as
provided in Section 6.03.
6.06 Updating of Schedules. From the date hereof until the Closing Date,
Shareholders shall periodically update all of the Schedules and shall promptly
notify Buyer of any material changes or additions or events which may, after the
lapse of time, cause any change in any of such Schedules, other than changes to
such Schedules due to the consummation of the transactions contemplated hereby.
If an updated Schedule reveals a change which Buyer, in the exercise of Buyer's
reasonable discretion, determines has or will result in a material adverse
effect on the financial condition of Company, Buyer may notify Shareholders
within five (5) business days after receipt of such an updated Schedule that the
updated Schedule is not acceptable and that Buyer is terminating this Agreement
pursuant to Section 11.01(c). If Buyer does not exercise such right to terminate
this Agreement within a period of five (5) business days after receipt of such
an updated Schedule, the updated Schedule will be deemed to have been accepted
by Buyer, to have qualified the representations and warranties contained in
Article III of this Agreement, and to have cured any misrepresentation or breach
of warranty that otherwise might have existed hereunder by reason of the change.
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6.07 No-Shop. During the period prior to the Closing or any earlier
termination of this Agreement, neither Company nor Shareholders shall, directly
or indirectly, through any officer, director, agent or otherwise, (i) entertain,
solicit, initiate or encourage submission of inquiries, proposals or offers from
any potential buyer other than Buyer relating to the disposition of any
ownership interest in Company or any material portion of its assets, or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person other than Buyer (and its attorneys, accountants, and representatives)
information with respect to, the disposition of any ownership interest in
Company or any material portion of its assets.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction or waiver by Buyer prior to or at the
Closing of each of the following conditions:
7.01 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Shareholders in this Agreement, and the
statements contained in the Schedules or in any instrument, list, certificate,
or writing delivered by Shareholders pursuant to this Agreement, shall be true
and correct in all material respects when made and shall be true and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date,
except for any changes permitted by the terms of this Agreement or consented to
in writing by Buyer.
7.02 Compliance With Agreement. Shareholders shall have in all material
respects performed and complied with all of their agreements and obligations
under this Agreement which are to be performed or complied with by them prior to
or on the Closing Date, including the delivery of the closing documents
specified in Section 10.01.
7.03 Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any government entity shall have been
commenced, against Buyer, Company, or any of the Affiliates, officers, or
directors of any of them, with respect to the transactions contemplated hereby.
7.04 Consents and Approvals. All approvals, consents, and waivers that are
required to effect the transactions contemplated hereby, as listed on Schedule
7.04, shall have been received, and executed counterparts thereof shall have
been delivered to Buyer not less than two (2) business days prior to the
Closing.
7.05 Title Insurance. Buyer shall have obtained good and valid leasehold
title insurance policies or, in final form, irrevocable leasehold title
insurance binders, dated as of the Effective Time, conforming to the
specifications set forth in Section 5.01 hereof.
7.06 HSR Waiting Period. All applicable waiting periods related to the HSR
Act shall have expired.
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7.07 Lease Agreements. Buyer shall have entered into lease agreements
(collectively, the "Lease Agreements") with Shareholders for the properties
described in Schedule 7.07 (the "Post-Closing Leased Properties"). The Lease
Agreements shall (a) provide for, in the aggregate, total annual rent payments
of Three Hundred Fifty-Three Thousand Two Hundred and Sixteen Dollars
($353,216), and (b) be for, in the aggregate, 59,034 square feet of
manufacturing space at Four Dollars ($4.00) per square foot annual cost and
11,708 square feet of office space at Ten Dollars ($10.00) per square foot
annual cost. Each Lease Agreement: (a) shall be a seven (7) year triple net
lease; (b) shall provide for a seven (7) year renewal, at Buyer's option; (c)
shall contain a two percent (2%) annual escalation clause in Year 2 through Year
7 of the lease; (d) shall provide that, if Buyer proposes to exercise its
renewal option, the parties will agree to cause an independent analysis to be
performed on the applicable property for the purpose of determining prevailing
market rental rates (including escalation clauses) on like properties, and the
lease rental rate (and, if applicable, the escalation clause) shall be
accordingly adjusted for the renewal term; provided, however, that in no event
-------- -------
shall the lease rental rate during the renewal term be less than the lease
rental rate in effect as of the end of Year 7 of the lease as increased pursuant
to a two percent (2%) annual escalation clause in Year 8 through Year 14 of the
lease as so renewed; and (e) shall contain such other terms and conditions as
are mutually acceptable to Buyer and Shareholders. Notwithstanding the
foregoing, the parties acknowledge that if prior to Closing it is established by
Shareholders to the satisfaction of Buyer that current actual market rates for
the Post-Closing Leased Properties exceed the rental terms set forth above, the
parties will negotiate in good faith in an attempt to determine rental terms
more reflective of market rates. At the termination of each such Lease
Agreement, Buyer shall, at Shareholders' request, be obligated to cause to be
performed, at Buyer's expense, a Phase II environmental survey of the Post-
Closing Leased Properties. Buyer shall conduct, at Buyer's expense, any
remediation of environmental contamination caused directly or indirectly, by the
actions of Buyer, any Buyer Affiliate, or any person (other than any Shareholder
or Shareholder Affiliate) allowed access to the Post-Closing Leased Properties
by Buyer. The foregoing remediation shall be made only to the extent that it is
required by federal or state regulatory agencies, and, in such a case, to the
satisfaction of the appropriate federal or state regulatory agency with primary
jurisdiction over the environmental conditions. In the event of any dispute
regarding the cause or source of any environmental contamination the Lease
Agreements shall further provide that the parties shall negotiate in an attempt
to determine such cause or source, and if the parties are unable to reach
agreement, the parties will submit to alternative dispute resolution procedures
as specified in the Lease Agreements in order to resolve such dispute, and in
such event the party who is ultimately determined to be responsible shall bear
the costs of such alternative dispute resolution procedures, or, if the parties
are found to be jointly responsible, such costs, as well as the costs of
remediation, shall be shared in proportion to the respective level of
responsibility of each party.
7.08 Existing Lease Agreements. Company and/or Shareholders, as applicable,
shall have terminated (i) the existing shareholder agreement in place by and
between Company and Shareholders, (ii) all existing agreements in place between
Company and Shareholders and any Shareholder Affiliate, whether written or oral,
including but not limited to all existing lease agreements between Company and
Shareholders or any Shareholder Affiliate. In addition, the Company shall have
assigned to the Shareholders or a Shareholder Affiliate all of the Company's
rights and obligations under the existing lease agreement relating to the Denric
Tool Property between Company and the lessee thereof.
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7.09 Environmental and Health and Safety Audit. The results of the
environmental and health and safety audit conducted pursuant to Section 5.03
shall not have disclosed any present condition, process, or practice with
respect to Company, any Facility, or any property owned, occupied, or operated
by Company which is not in material compliance with all applicable Environmental
Laws and other Laws regarding occupational safety and health.
7.10 Due Diligence. Buyer shall have concluded its due diligence
investigation of Company and the results of such due diligence investigation
shall not have disclosed any item which, individually or in the aggregate, has
had or would have a material adverse effect on the financial condition of
Company.
7.11 Transfer of Denric Tool Property. Company shall have transferred the
Denric Tool Property to Shareholders or any Shareholder Affiliate pursuant to
documentation that contains no indemnification, representation, warranty or
post-closing covenant on the part of Company, nor any other terms which,
individually or in the aggregate, has had or would have a material adverse
effect on the financial condition of Company. Without in any way limiting the
previous sentence: (a) such documentation shall be in the form of a quitclaim
deed; (b) Buyer shall have approved of the form of such quitclaim deed (and all
other necessary transfer documents, if any) prior to its execution; (c) such
quitclaim deed shall be accompanied by a title commitment showing that Company,
as grantor under the quitclaim deed, is the true owner of the transferred
property; and (d) Shareholders shall have delivered to Buyer a properly
recorded, file-stamped copy of such quitclaim deed prior to the Closing Date.
7.12 Assignment of Patent. The patent, United States Patent Number
4,871,292, granted to Richard Milanowski on October 3, 1989, for a system for
attaching and locking material handling tools to a dipper boom, shall have been
validly assigned to Company.
7.13 Condition Regarding Section 338(h)(10) Election. In the event that,
pursuant to Section 2.04, Shareholders do not accept a Gross Up Amount equal to
$750,000 and Buyer and Shareholders are required to negotiate in good faith in
an attempt to determine a mutually acceptable adjustment to the Purchase Price,
Buyer and Shareholders shall have agreed upon a mutually acceptable adjustment
to the Purchase Price.
7.14 Condition Regarding Lease Agreements. In the event that, pursuant to
Section 7.07, Shareholders present independent evidence that current actual
market rates for the Post-Closing Leased Properties exceed the rental rates set
forth in Section 7.07 and such independent evidence is mutually acceptable to
Buyer and Shareholders as evidence of current actual market rates, and Buyer and
Shareholders are required to negotiate in good faith in an attempt to determine
rental rates more reflective of market rates, Buyer and Shareholder shall have
agreed upon a mutually acceptable adjustment to such rental rates.
7.15 Delivery of Schofield Loan Documents. At least five (5) days prior to
Closing, Shareholders shall have delivered to Buyer all loan documents between
the City of Schofield, Wisconsin and Shareholders or Company pertaining to that
certain mortgage dated May 29, 1986 relating to the property located at 351
Alderson Street, Schofield, Wisconsin (such mortgage and loan documents, the
"Schofield Loan Documents").
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(b) The Schofield Loan Documents shall not contain any unusual or
onerous terms and shall otherwise be satisfactory to Buyer in its
reasonable discretion.
7.16 Delivery of Additional Environmental Materials. Shareholders and
Company shall have disclosed and made available to Buyer, to Management's
Knowledge, all written studies, analyses and test results and copies of
correspondence with any governmental entity or any other third party prior to
January 1, 1989 (except for any of such information regarding the Denric Tool
Property and the Off-Site Properties), in the possession, custody or control of
Company or any Shareholder relating to (A) the environmental conditions on,
under, about or from any real property owned by Company, the Leased Real
Property or any predecessor in interest to Company at the present time or in the
past, and (B) any Hazardous Materials used, managed, handled, transported,
treated, generated, stored or released by Company or any other person on, under,
about or from the Leased Real Property or in connection with the operation of
Company.
ARTICLE VIII
CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Each and every obligation of Shareholders to be performed on the Closing
Date shall be subject to the satisfaction or waiver by Shareholders prior to or
at the Closing of the following conditions:
8.01 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made or given on and as of the Closing Date.
8.02 Compliance With Agreement. Buyer shall have in all material respects
performed and complied with all of Buyer's agreements and obligations under this
Agreement which are to be performed or complied with by Buyer prior to or on the
Closing Date, including the delivery of the closing documents specified in
Section 10.02.
8.03 Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any government entity shall have been
commenced, against Buyer with respect to the transactions contemplated hereby.
8.04 HSR Waiting Period. All applicable waiting periods related to the HSR
Act shall have expired. 8.05 Assignment of Schofield Loan. Subject to Buyer's
review of the Schofield Loan Documents pursuant to Section 7.15, the Schofield
Loan Documents shall have been validly assigned to and assumed by Company, and
such assignment shall have been consented to by the City of Schofield,
Wisconsin.
8.06 Condition Regarding Section 338(h)(10) Election. In the event that,
pursuant to Section 2.04, Shareholders do not accept a Gross Up Amount equal to
$750,000 and
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Buyer and Shareholders are required to negotiate in good faith in an attempt to
determine a mutually acceptable adjustment to the Purchase Price, Buyer and
Shareholders shall have agreed upon a mutually acceptable adjustment to the
Purchase Price.
8.07 Condition Regarding Lease Agreements. In the event that, pursuant to
Section 7.07, Shareholders present independent evidence that current actual
market rates for the Post-Closing Leased Properties exceed the rental rates set
forth in Section 7.07 and such independent evidence is mutually acceptable to
Buyer and Shareholders as evidence of current actual market rates, and Buyer and
Shareholders are required to negotiate in good faith in an attempt to determine
rental rates more reflective of market rates, Buyer and Shareholder shall have
agreed upon a mutually acceptable adjustment to such rental rates.
ARTICLE IX
INDEMNIFICATION
9.01 By Shareholders. Subject to the terms and conditions of this Article
IX, each Shareholder, jointly and severally, hereby agrees to indemnify, defend,
and hold harmless Buyer, and its directors, officers, employees, and controlled
and controlling persons (hereinafter "Buyer's Affiliates"), from and against all
Claims asserted against, resulting to, imposed upon, or incurred by Buyer,
Buyer's Affiliates, Company, or the Business, directly or indirectly, by reason
of, arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of any Shareholder contained in or made pursuant to
this Agreement (regardless of whether such breach is deemed "material"); (b) the
breach of any covenant of any Shareholder contained in this Agreement
(regardless of whether such breach is deemed "material"); or (c) obligations and
liabilities existing or arising from events occurring prior to the Closing Date
which are not reflected, or which exceed amounts reserved, on the Recent Balance
Sheet. As used in this Article IX, the term "Claim" shall include (i) all
liabilities; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, settlements, costs, and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and reasonable attorneys' fees and
expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings, and assessments, whether or not
ultimately determined to be valid.
9.02 By Shareholders - Denric Tool and Environmental Matters.
(a) The Denric Tool Property and Other Environmental Matters. Subject
--------------------------------------------------------
to the terms and conditions of this Article IX, except as set forth
herein, and without limiting the generality of the foregoing, each
Shareholder, jointly and severally, hereby agrees to indemnify, defend,
and hold harmless Buyer and Buyer's Affiliates from and against all Claims
asserted against, resulting to, imposed upon, or incurred by Buyer,
Buyer's Affiliates, Company or the Business, directly or indirectly, by
reason of, arising out of or in any way related to any liabilities
associated with the property located at 9303 Business Highway 51 in
Rothschild, Wisconsin (the "Denric Tool Property"), and any violation of
Laws with respect to activities conducted on the Denric Tool Property,
including without limitation Claims arising out of environmental
contamination, pollution, spills, releases or discharges at, on, under or
from the Denric
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Tool Property, including without limitation Claims by any third party or
governmental authority arising out of or in any way related to: (i) the
information gathering, investigation, removal, remediation, clean-up or
closure of or related to any environmental condition at, on, under or from
the Denric Tool Property or at, on, under or from any other property
impacted by contamination, pollution, spills, releases or discharges at,
on, under or from the Denric Tool Property (hereinafter, "Off-Site
Properties"), pursuant to CERCLA, the Resource Conservation and Recovery
Act, or any other Environmental Laws, or under any federal or state common
law theory of liability; (ii) damage or diminution in value to the Denric
Tool Property or Off-Site Properties; (iii) bodily injury or death to any
person; or (iv) natural resource damages at the Denric Tool Property or
Off-Site Properties.
(b) Other Environmental Issues. Subject to the terms and conditions
--------------------------
of this Article IX, except as set forth herein, and without limiting the
generality of the foregoing, each Shareholder, jointly and severally,
hereby agrees to indemnify, defend, and hold harmless Buyer and Buyer's
Affiliates from and against all Claims asserted against, resulting to,
imposed upon, or incurred by Buyer, Buyer's Affiliates, Company, the
Business, any third party, or any governmental authority, directly or
indirectly, by reason of, arising out of or in any way related to any of
the following: (i) the transport of hazardous wastes from Denric Tool to
the Facilities and the disposal of such hazardous wastes without required
permits for such activity, as referenced on Schedule 3.12(c)(1); (ii)
Company's management, transportation, treatment, storage or disposal of
spent paint filters; and (iii) Company's failure to meet its Form R
reporting obligations for the years 1987 through 1998 relative to
Company's welding, grinding, polishing and painting operations; ((i), (ii)
and (iii), collectively, the "Other Environmental Issues"). In the event
that the matters described in any one or more of (i), (ii), or (iii) above
is resolved to Buyer's satisfaction (in its sole discretion) prior to
Closing, the corresponding obligation of Shareholders to provide
indemnification pursuant to this Section 9.02 with respect to such matter
shall terminate.
9.03 By Buyer. Subject to the terms and conditions of this Article IX,
Buyer hereby agrees to indemnify, defend, and hold harmless each Shareholder
from and against all Claims asserted against, resulting to, imposed upon or
incurred by any such Shareholder, directly or indirectly, by reason of, arising
out of, or resulting from (a) the inaccuracy or breach of any representation or
warranty of Buyer contained in or made pursuant to this Agreement (regardless of
whether such breach is deemed "material"); (b) the breach of any covenant of
Buyer contained in this Agreement (regardless of whether such breach is deemed
"material"); or (c) obligations and liabilities existing or arising from events
occurring on or after the Closing Date.
9.04 By Buyer - Product Liability Issues.
(a) Indemnification for Product Liability Claims. Subject to the
--------------------------------------------
terms and conditions of this Article IX, Buyer hereby agrees to indemnify,
defend, and hold harmless each Shareholder from and against all product
liability Claims and similar Litigation relating to Products manufactured
or sold, or Product warranty services rendered by Company at any time,
whether prior to or after the Closing Date (collectively, "Product
Liability Claims").
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(b) Product Liability Claims During Escrow Term. Nothing in this
-------------------------------------------
Section 9.04 shall be deemed to limit Buyer's right to make claims against
the Escrow Amount during the term of the Escrow Agreement (the "Escrow
Term") pursuant to Section 9.01(c) for any Pre-Closing Product Liability
Claims which exceed the amounts reserved for such claims on the Recent
Balance Sheet. The parties acknowledge and agree that if any Shareholder
makes a Claim against Buyer with respect to any Pre-Closing Product
Liability Claim during the Escrow Term, Buyer shall be entitled to
reimbursement from the Escrow Amount for any amounts paid in satisfaction
of its obligations under this Section 9.04. As used in this Section 9.04, a
"Pre-Closing Product Liability Claim" is any Product Liability Claim
arising out of finished goods Products manufactured or sold prior to the
Closing Date (the date of manufacture being determined by reference to the
Products' serial numbers) or Product warranty services rendered, by Company
(or its predecessors) at any time prior to the Closing Date.
(c) Waiver for Failure to Notify. The parties agree that it would
----------------------------
not serve their intentions if Shareholders failed to reveal a known actual
or potential Pre-Closing Product Liability Claim until after conclusion of
the Escrow Term. Accordingly, to the extent that either Shareholder has
actual knowledge of any pending or threatened Pre-Closing Product Liability
Claim on any date prior to the conclusion of the Escrow Term, and the
Shareholders do not provide Buyer with written notice of such Pre-Closing
Product Liability Claim prior to the conclusion of the Escrow Term and
final disbursement of any Escrow Amount to the Shareholders, then the
Shareholders shall be deemed to have irrevocably waived their rights to
indemnification under this Section 9.04 as to that Pre-Closing Product
Liability Claim.
9.05 Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article IX with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
(a) Notice and Defense. The party or parties to be indemnified
------------------
(whether one or more, the "Indemnified Party") will give the party from
whom indemnification is sought (the "Indemnifying Party") prompt written
notice of any such Claim, and the Indemnifying Party will undertake the
defense thereof by representatives chosen by it. Failure to give such
notice shall not affect the Indemnifying Party's duty or obligations under
this Article IX, except to the extent the Indemnifying Party is prejudiced
thereby. So long as the Indemnifying Party is defending any such Claim
actively and in good faith, the Indemnified Party shall not settle such
Claim. The Indemnified Party shall make available to the Indemnifying Party
or its representatives all records and other materials reasonably required
by them and in the possession or under the control of the Indemnified Party
for the use of the Indemnifying Party and its representatives in defending
any such Claim and shall in other respects give reasonable cooperation in
such defense.
(b) Failure to Defend. If the Indemnifying Party, within a
-----------------
reasonable time after notice of any such Claim, fails to defend such Claim
actively and in good faith, the Indemnified Party will (upon further
notice) have the right to undertake the defense, compromise or settlement
of such Claim; provided, however, that the Indemnified Party
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shall not enter into any settlement or compromise of any Claim or consent
to the entry of a judgment with respect to such Claim, on behalf of and for
the account and risk of the Indemnifying Party without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(c) Indemnified Party's Rights. Anything in this Article IX to the
--------------------------
contrary notwithstanding, (i) if there is a reasonable probability that a
Claim may materially and adversely affect the Indemnified Party other than
as a result of money damages or other money payments, the Indemnified Party
shall have the right to defend, compromise, or settle such Claim, and (ii)
the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry
of any judgment which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Claim.
9.06 Payment.
(a) Time for Payment. Upon judgment, determination, settlement, or
----------------
compromise of any third-party Claim, the Indemnifying Party shall pay
promptly on behalf of the Indemnified Party, and/or to the Indemnified
Party in reimbursement of any amount theretofore required to be paid by it,
the amount so determined by judgment, determination, settlement, or
compromise and all other Claims of the Indemnified Party with respect
thereto unless, in the case of a judgment, an appeal is made from the
judgment. If the Indemnifying Party desires to appeal from an adverse
judgment, then the Indemnifying Party shall post and pay the cost of the
security or bond, if any, to stay execution of the judgment pending appeal.
(b) Effect of Payment. Upon the payment in full by the Indemnifying
-----------------
Party of such amounts, the Indemnifying Party shall succeed to the rights
of such Indemnified Party, to the extent not waived in settlement, against
the third party who made such third-party Claim.
9.07 Limitations on Indemnification.
(a) Time Limitation. No Claim shall be brought under this Article
---------------
IX after the lapse of one (1) year following the Closing. Regardless of the
foregoing, however, or any other provision of this Agreement:
(i) There shall be no time limitation on claims or actions
brought for breach of any representation or warranty made by
Shareholders in Sections 3.04 and 3.05, and Shareholders hereby
waive all applicable statutory limitation periods with respect
thereto.
(ii) No Claim shall be brought under this Article IX for
intentional concealment or misrepresentation of a material fact with
intent to cause injury to Buyer in connection with the sale of the
Shares to Buyer by Shareholders after the lapse of seven (7) years
following the Closing.
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(iii) There shall be no time limitation (A) on any Claims
relating in any to the Denric Tool Property or the Off-Site
Properties, as described in Section 9.02, (B) on any Claims relating
in any way to any of the Other Environmental Issues, or (C) on
Claims brought by Shareholders pursuant to Section 9.04.
(iv) If any act, omission, disclosure, or failure to disclosure
shall form the basis for a claim for breach of more than one
representation or warranty and such claims have different periods of
survival hereunder, the termination of the survival period of one
claim shall not affect a party's right to make a claim based on the
breach of representation or warranty still surviving.
(b) Amount Limitation.
-----------------
(i) Except as provided for in Subsections 9.07(b)(ii) and
(iii), Shareholders shall have liability to Buyer and Buyer's
Affiliates only to the extent of the Escrow Amount.
(ii) Shareholders shall have liability to Buyer and Buyer's
Affiliates for Claims relating to indemnification under Subsections
9.07(a)(i) and (ii), and Buyer shall have liability to Shareholders
for Claims under Section 9.03, only to the extent such liability
does not exceed the Purchase Price.
(iii) Shareholders shall have liability to Buyer and Buyer's
Affiliates for Claims relating to indemnification under Section
9.07(a)(iii), and Buyer shall have liability to Shareholders for
Claims relating to indemnification under Section 9.04, to the full
extent of such liability.
(iv) Notwithstanding any provision of this Article IX to the
contrary, no claim for indemnification shall be deemed to arise
unless and until the aggregate Claims of a party shall exceed Fifty
Thousand Dollars ($50,000); but, in such event, the Indemnified
Party shall be entitled to indemnification in full for all Claims.
(c) No Waiver. The closing of the transactions contemplated by this
---------
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, unless the party seeking indemnification knew or
had reason to know of the breach, violation, or failure of condition
constituting the basis of the Claim at or before the Closing.
9.08 Determination of Amount of Claims. The parties shall make appropriate
---------------------------------
adjustments for tax benefits and insurance coverage and shall take into account
the time cost of money (using as the discount rate the prime rate of interest as
announced from time to time in The Wall Street Journal) in determining the
amount of any Claim for purposes of this Article IX. All indemnification
payments under this Article IX shall be deemed adjustments to the Purchase
Price, and shall be increased, as appropriate, to compensate Buyer and Company
for the reduction in tax benefits resulting from the reduction in the Purchase
Price.
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9.09 Exclusive Remedy. Buyer and Shareholders acknowledge and agree that
the foregoing indemnification provisions in this Article IX shall be the sole
and exclusive remedy of Buyer and Buyer's Affiliates and assignees pursuant to
Section 12.04 and Shareholders with respect to the Shares, the Business, Company
or any of the assets, liabilities, or operations of Company, and the
transactions contemplated by this Agreement.
ARTICLE X
CLOSING
The closing of this transaction (the "Closing") shall take place at the
offices of Foley & Lardner at such date and time as the parties hereto shall
agree upon. Such date is referred to in this Agreement as the "Closing Date."
10.01 Shareholders' Closing Deliveries. At the Closing, Shareholders
shall deliver to Buyer the following documents, in each case duly executed or
otherwise in proper form:
(a) Stock Certificates. Stock certificates representing the
------------------
Shares, duly endorsed for transfer or with duly executed stock powers
attached.
(b) Compliance Certificate. A certificate signed by Shareholders
----------------------
that each of the representations and warranties made by Company and
Shareholders in this Agreement is true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the
Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer), and that Shareholders have
performed and complied with all of Shareholders' obligations under this
Agreement which are to be performed or complied with on or prior to the
Closing Date.
(c) Opinion of Counsel. A written opinion of Ruder, Ware &
------------------
Michler, A Limited Liability S.C., counsel to Shareholders, dated as of
the Closing Date, addressed to Buyer and to Credit Suisse First Boston
("CSFB"), in form and substance mutually satisfactory to the parties.
(d) Resignations. The resignations of the officers and directors
------------
of Company, effective as of the Closing Date and in form and substance
reasonably satisfactory to Buyer.
(e) Non-competition Agreement. A non-competition agreement duly
-------------------------
executed by Dennis T. George, in form and substance reasonably
satisfactory to Mr. George and Buyer, which non-competition agreement
shall contain the following terms:
(i) Buyer shall pay to Mr. George an aggregate amount of
$50,000 per quarter for twelve (12) quarters ($600,000 in total)
commencing on the 15/th/ day of the first month after the Closing.
(ii) Buyer shall contribute toward the cost of health care and
dental care coverage obtained by Mr. George on behalf of himself and his
wife and
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current dependents, the aggregate sum of $97,200, which amount
shall be paid in equal periodic installments to the applicable
insurance provider or providers, during a period that begins on
the Closing Date and ends on Mr. George's 65/th/ birthday, or the
date that would have been Mr. George's 65/th/ birthday, in the
event of his death prior to that date. To the extent of the
actual cost of the health and dental care coverage obtained by
Mr. George and his wife and current dependents during any taxable
year of Mr. George, any payments by Buyer as provided for herein
during such taxable year shall be treated by Buyer and Mr. George
as employer-provided coverage under an accident or health plan
eligible for the exclusion from gross income under Section 106 of
the Code. Within 15 days of the close of his taxable year, Mr.
George shall provide to Buyer documentation of the actual cost of
the health care and dental care coverage obtained by Mr. George,
his wife and current dependents, for such taxable year. Buyer's
contributions hereunder shall lin no way abrogate the rights of
Mr. George and/or his spouse and eligible dependents to
continuation coverage under any Employee Plan/Agreement which is
a "group health plan" (as defined in Section 5000(b) of the
Code).
(f) Lease Agreements. The Lease Agreements, duly executed by
----------------
Shareholders.
(g) Escrow Agreement. The escrow agreement duly executed by
----------------
Shareholders and the Escrow Agent, in form and substance reasonably
satisfactory to the Escrow Agent, Buyer and Shareholders (the "Escrow
Agreement").
(h) Articles; By-laws. A copy of the By-laws of Company certified
-----------------
by the secretary of Company and a copy of the Articles of Incorporation of
Company certified by the Department of Financial Institutions of the State
of Wisconsin.
(i) General Releases. The general releases referred to in Section
----------------
5.05, duly executed by the persons referred to in such section.
(j) Other Documents. All other documents, instruments, or writings
---------------
reasonably required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Buyer may reasonably request.
10.02 Buyer's Closing Deliveries. At the Closing, Buyer shall deliver to
Shareholders the following documents, in each case duly executed or otherwise in
proper form:
(a) Estimated Purchase Price. To Shareholders the estimated
------------------------
Purchase Price as required by Section 2.02(b), and to the Escrow Agent the
Escrow Amount as required by Section 2.02(a).
(b) Compliance Certificate. A certificate signed by an executive
----------------------
officer of Buyer that the representations and warranties made by Buyer in
this Agreement are true and correct on and as of the Closing Date with the
same effect as though such
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representations and warranties had been made or given on and as of the
Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Shareholders), and that Buyer has
performed and complied with all of Buyer's obligations under this Agreement
which are to be performed or complied with on or prior to the Closing Date.
(c) Opinion of Counsel. A written opinion of Foley & Lardner, counsel
------------------
to Buyer, dated as of the Closing Date, addressed to Shareholders, in form
and substance mutually satisfactory to the parties.
(d) Certified Resolutions. A certified copy of the resolutions of the
---------------------
Board of Directors of Buyer authorizing and approving this Agreement and
the consummation of the transactions contemplated by this Agreement.
(e) Non-Competition Agreement. The non-competition agreement referred
-------------------------
to in Section 10.01(e), duly executed by Buyer.
(f) Lease Agreements. The Lease Agreements, duly executed by Buyer.
----------------
(g) Escrow Agreement. The Escrow Agreement, duly executed by Buyer and
----------------
the Escrow Agent.
(h) Incumbency Certificate. Incumbency certificates relating to each
----------------------
person executing any document executed and delivered to Shareholders by
Buyer pursuant to the terms hereof.
(i) Other Documents. All other documents, instruments, or writings
---------------
reasonably required to be delivered to Shareholders at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Shareholders may reasonably request.
ARTICLE XI
TERMINATION
11.01 Right of Termination Without Breach. This Agreement may be terminated
without further liability of any party at any time prior to the Closing:
(a) by mutual written agreement of Buyer and Shareholders, or
(b) by Buyer in the event that, pursuant to Section 6.06 hereof, Buyer
determines that a new Schedule or an updated Schedule reveals a change which
Buyer, in the exercise of Buyer's reasonable discretion, determines has
resulted or will result in a material adverse effect on the financial
condition of Company and Buyer has notified Shareholders that the relevant
Schedule is not acceptable and Buyer is terminating this Agreement, or
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(c) by Buyer, in the event of a failure of either or both of the
conditions set forth in Sections 7.13 or 7.14, or a failure to arrive at a
mutually acceptable non-competition agreement pursuant to Section 10.01(e),
or Shareholders, in the event of a failure of either or both of the
conditions set forth in Sections 8.06 or 8.07, or a failure of Mr. George to
arrive at an acceptable non-competition agreement pursuant to Section
10.01(e).
11.02 Termination for Breach.
(a) Termination by Buyer. If (i) there has been a material violation
--------------------
or breach by Shareholders of any of the agreements, representations, or
warranties contained in this Agreement which has not been waived in writing by
Buyer, or (ii) there has been a failure of satisfaction of a condition to the
obligations of Buyer (other than those conditions described in Section
11.01(c), as to which 11.01(c) shall form the basis for termination) which
Buyer has not waived in writing, or (iii) Shareholders shall have attempted to
terminate this Agreement under this Article XI or otherwise without grounds to
do so, then Buyer shall give written notice to Shareholders at any time prior
to the Closing that such violation, breach, failure, or wrongful termination
attempt is continuing and, if such violation, breach, failure, or wrongful
termination is not cured by Shareholders within ten (10) days after the date of
such notice, Buyer may terminate this Agreement with the effect set forth in
Section 11.02(d) hereof.
(b) Termination by Shareholders. If (i) there has been a material
---------------------------
violation or breach by Buyer of any of the agreements, representations, or
warranties contained in this Agreement which has not been waived in writing by
Shareholders, or (ii) there has been a failure of satisfaction of a condition
to the obligations of Shareholders (other than those conditions described in
Section 11.01(c), as to which 11.01(c) shall form the basis for termination)
which Shareholders have not waived in writing, or (iii) Buyer shall have
attempted to terminate this Agreement under this Article XI or otherwise
without grounds to do so, then Shareholders shall give written notice to Buyer
at any time prior to the Closing that such violation, breach, failure, or
wrongful termination attempt is continuing and, if such violation, breach,
failure, or wrongful termination is not cured by Buyer within ten (10) days
after the date of such notice, Shareholders may terminate this Agreement with
the effect set forth in Section 11.02(d) hereof.
(c) Drop-Dead Date. If the Closing shall not have occurred on or
--------------
before August 15, 1999, this Agreement shall terminate and, provided
Shareholders have not, through breach of a representation, warranty, or
covenant, prevented the Closing from occurring on or before such date, Buyer
shall be required to pay to Shareholders an amount equal to Five Hundred
Thousand Dollars ($500,000), which payment shall be the sole and exclusive
remedy of Shareholders for Buyer's failure to close.
(d) Effect of Termination. Termination of this Agreement pursuant to
---------------------
this Section 11.02 shall not in any way terminate, limit, or restrict the
rights and remedies of any party hereto against any other party which has
violated, breached, or failed to satisfy any of the representations,
warranties, covenants, agreements, conditions, or other provisions of this
Agreement prior to termination hereof. In addition to the right
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of any party under common law to redress for any such breach or violation,
each party whose breach or violation has occurred prior to termination
shall jointly and severally indemnify each other party for whose benefit
such representation, warranty, covenant, agreement, or other provision was
made from and against all losses, damages (including, without limitation,
consequential damages), costs, and expenses (including, without limitation,
interest (including prejudgment interest in any litigated matter),
penalties, court costs, and reasonable attorneys' fees and expenses)
asserted against, resulting to, imposed upon, or incurred by the
indemnified party, directly or indirectly, by reason of, arising out of, or
resulting from such breach or violation. Subject to the foregoing, the
parties' obligations under Section 12.08 of this Agreement shall survive
termination. Notwithstanding any provision of this Section 11.02 to the
contrary, (i) in no event shall the total amount payable pursuant to this
Section 11.02 by Shareholders in the event of a breach by Shareholders of
Section 6.07 exceed the Purchase Price, and (ii) in no event shall the
total amount payable pursuant to this Section 11.02 for any other reason
exceed Five Hundred Thousand Dollars ($500,000).
ARTICLE XII
MISCELLANEOUS
12.01 Schedules. Except as specifically provided for herein, the Schedules
shall not vary, change, or alter the language of the representations and
warranties contained in this Agreement and, to the extent the language in the
Schedules does not conform in every respect to the language of such
representations and warranties, such language shall be disregarded and be of no
force or effect. Disclosure of documents, events, conditions, or other
information pursuant to any Schedule shall be deemed to be a disclosure to and
for the purposes of other Schedules if and only if the correlative disclosure is
obvious from the language and context of the Schedule in which such disclosure
occurs.
12.02 Further Assurance. From time to time, at Buyer's request and without
further consideration, Shareholders, at Buyer's expense, will execute and
deliver to Buyer such documents and take such other action as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated hereby and to vest in Buyer good, valid and marketable title to the
Shares.
12.03 Disclosures and Announcements. Both the timing and the content of
all disclosure to third parties and public announcements concerning the
transactions provided for in this Agreement by either Shareholders or Buyer
shall be subject to the approval of the other in all essential respects.
12.04 Assignment; Parties in Interest.
(a) Assignment. Except as expressly provided herein, the rights and
----------
obligations of a party hereunder may not be assigned, transferred, or
encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, (i) Buyer may, without consent of any other
party, cause one or more subsidiaries of Buyer to carry out all or part of
the transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any
such
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subsidiary, to Shareholders hereunder; and (ii) Buyer may assign its
interest in this Agreement to CSFB, as agent, as additional security for
Buyer's obligations to such lender and Shareholders agree to execute
acknowledgements of such assignments as reasonably may be required by such
lender.
(b) Parties in Interest. This Agreement shall be binding upon,
-------------------
inure to the benefit of, and be enforceable by the respective successors
and permitted assigns of the parties hereto. Nothing contained herein
shall be deemed to confer upon any other person any right or remedy under
or by reason of this Agreement.
12.05 Law Governing Agreement. This Agreement shall be construed and
interpreted according to the internal laws of the State of Illinois, excluding
any choice of law rules that may direct the application of the laws of another
jurisdiction.
12.06 Amendment and Modification. This Agreement may not be modified or
terminated orally. Buyer and Shareholders may amend, modify, and supplement this
Agreement in such manner as may be agreed upon by them in writing.
12.07 Notice. All notices, requests, demands, and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission, or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, requests, demands, or
other communications are as follows:
(a) If to Buyer, to:
Woods Equipment Company
6944 Newburg Road
Rockford, IL 61108
Attention: Thomas J. Laird
Facsimile: (815) 732-7580
(with a copy, which copy shall not constitute notice,
to)
Madison Dearborn Partners, Inc.
Three First National Plaza
Suite 3800
Chicago, IL 60602
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<PAGE>
Attention: Paul R. Wood
Facsimile: (312) 895-1156
(and to)
Foley & Lardner
One IBM Plaza, Suite 3300
Chicago, Illinois 60611
Attention: Stephen M. Slavin
Facsimile: (312) 755-1925
or to such other person or address as Buyer shall furnish to Shareholders in
writing.
(b) If to Shareholders, to:
Richard and Gloria Milanowski
3105 Martin Road
Mosinee, Wisconsin 54455
Facsimile: (715) 355-8778
(with a copy, which copy shall not constitute notice,
to)
Ruder, Ware & Michler, A Limited Liability S.C.
500 Third Street, Suite 700
P.O. Box 8050
Wausau, Wisconsin 54402-8050
Attention: William R. Tehan
Facsimile: (715) 845-2718
or to such other person or address as Shareholders shall furnish to Buyer in
writing.
If personally delivered or sent by overnight courier, such communication
shall be deemed delivered upon actual receipt; if electronically transmitted
pursuant to this section, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof of
delivery); and if sent by U.S. mail pursuant to this section, such communication
shall be deemed delivered as of the date of delivery indicated on the receipt
issued by the relevant postal service or, if the addressee fails or refuses to
accept delivery, as of the date of such failure or refusal. Any party to this
Agreement may change its address for the purposes of this Agreement by giving
notice thereof in accordance with this Section.
12.08 Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
(a) Brokerage. Except as to Madison Dearborn Partners, Inc., who
---------
shall be compensated by Buyer, Shareholders and Buyer each represent and
warrant to each other that there is no broker involved or in any way
connected with the transfer provided for herein. Buyer agrees to hold
Shareholders harmless from and against all
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claims for brokerage commissions or finder's fees incurred through
any act of Buyer in connection with the execution of this Agreement
or the transactions provided for herein. Shareholders, jointly and
severally, agree to hold Buyer harmless from and against all claims
for brokerage commissions or finder's fees incurred through any act
of any Shareholder in connection with the execution of this Agreement
or the transactions provided for herein.
(b) Expenses to be Paid by Shareholders. Shareholders agree
-----------------------------------
that they shall pay out of Company's Cash and Cash Equivalents all of
their costs and expenses (including their legal fees and expenses)
incurred in connection with this Agreement and the transactions
contemplated hereby. For purposes of the Purchase Price calculation
set forth in Section 2.01, Cash and Cash Equivalents shall be reduced
by any and all transaction expenses of Shareholders (including,
without limitation, any transfer taxes related to the transfer of the
Excluded Assets) that have not been paid as of the Closing.
(c) Expenses to be Paid by Buyer. Buyer shall pay, and shall
----------------------------
indemnify, defend and hold Shareholders harmless from and against,
each of the following:
(i) Environmental and Health and Safety Audit. The fees
-----------------------------------------
and other expenses relating to the environmental and health
and safety audit performed pursuant to Section 5.03 hereof.
(ii) HSR Related Filings. The filing fees relating to the
-------------------
applicable requirements of the HSR Act.
(iii) Transfer Taxes. Any sales, use, excise, transfer, or other
--------------
or other similar tax imposed with respect to the transactions
provided for in this Agreement and any interest and survey costs or
penalties related thereto; provided, however, that any such expenses
arising out of the transfer of the Excluded Assets shall be the
exclusive responsibility of Shareholders.
(iv) Title Insurance and Surveys. All premiums for the
---------------------------
issuance of the title insurance policies issued pursuant to Section
5.01 hereof and the cost of surveys performed pursuant to Section
5.02.
(d) Other. Except as otherwise provided herein, each of the parties
-----
shall bear its own expenses and the expenses of its counsel and other
agents in connection with the transactions contemplated hereby.
12.09 Entire Agreement. This Agreement, together with the Schedules,
Exhibits, and Ancillary Documents referred to herein, all of which are hereby
incorporated herein by reference, embody the entire agreement between the
parties hereto with respect to the transactions contemplated herein and there
have been and are no agreements, representations, or warranties between the
parties other than those set forth or provided for herein.
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12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.11 Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
12.12 Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Affiliate" - Section 2.03(b)
"Agreement" -- Preamble
"Ancillary Documents" - Section 3.04(a)
"Business" - Recitals
"Buyer" -- Preamble
"Buyer's Accountants" - Section 2.03(d)(ii)
"Buyer's Affiliates" - Section 9.01
"Cash and Cash Equivalents" - Section 2.01
"CERCLA" - Section 3.12(c)
"Claim" - Section 9.01
"Closing" - Preamble to Article X
"Closing Date" - Preamble to Article X
"Code" - Section 2.05
"Company" - Recitals
"CSFB" - Section 10.01(c)
"Customer Information" - Section 5.07
"Denric Tool Property" - Section 9.02(a)
"Disclosure Documents" - Section 3.24
"Effective Time" - Section 2.03(c)
"Employee Plans/Agreements" - Section 3.17(a)
"Environmental Laws" - Section 3.12(c)
"ERISA" - Section 3.17(a)
"Escrow Agreement" - Section 10.01(g)
"Escrow Amount" - Section 2.02(a)
"Escrow Term" - Section 9.04(a)
"Estimated Closing Balance Sheet" - Section 2.03(c)
"Excluded Assets" - Section 1.02
"Facilities" - Recitals
"Final Closing Balance Sheet" - Section 2.03(d)(iv)
"GAAP-Adjusted Recent Balance Sheet" - Section 2.03(c)
"Gross Up Amount" - Section 2.04
"Hazardous Materials" - Section 3.12(c)(ii)
"Health and Dental Care Coverage" - Section 10.01(e)
"HSR Act" - Section 3.02
"IRS" - Section 2.05
"Indebtedness Amount" - Section 2.03(b)
"Indemnified Party" - Section 9.03(a)
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"Indemnifying Party" - Section 9.03(a)
"Laws" - Section 3.02
"Lease Agreements" - Section 7.07
"Leased Real Property" - Section 3.13(c)
"Liens" - Section 3.09(i)
"Litigation" - Section 3.11
"Management's Knowledge" - Preamble to Article III
"Off-Site Properties" - Section 9.02(a)
"Orders" - Section 3.02
"Other Information" - Section 3.24
"Other Environmental Issues" - Section 9.02(b)
"Pre-Closing Product Liability Claim" - Section 9.04(a)
"Post-Closing Leased Properties" - Section 7.07
"Product Liability Claims" - Section 9.04(a)
"Products" - Section 3.21
"Proprietary Rights" - Section 3.19(a)
"Purchase Price" - Section 2.01(a)
"Recent Balance Sheet" - Section 3.03
"Schedules" - Preamble to Article III
"Schofield Loan Documents" - Section 7.15
"Settlement Date" - Section 2.02(c)
"Shareholder" and "Shareholders" -- Preamble
"Shareholders' Accountants" - Section 2.03(d)(iii)
"Shares" - Recitals
"Third Accounting Firm" - Section 2.03(d)(iv)
"Waste" - Section 3.12(c)
"Working Capital Value" - Section 2.03(a)
"Year 2000 Compliant" - Section 3.19(b)
"338 Election" - Section 2.04
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
[*** The next page is the signature page. ***]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
WEC COMPANY
By: /s/ Steven M. Vandemore
-------------------------------------------------
Its: Vice President
/s/ Richard Milanowski
-------------------------------------------------
Richard Milanowski
/s/ Gloria Milanowski
-------------------------------------------------
Gloria Milanowski
<PAGE>
EXHIBIT 2.2
AMENDMENT
TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT is entered into as of the 28/th/ day of July, 1999, by and
among Wec Company ("Buyer"), Richard Milanowski and Gloria Milanowski
(collectively the "Shareholders"), and amends that certain Stock Purchase
Agreement dated as of July 6, 1999 (the "Purchase Agreement") by and among the
parties.
1. Amendment to Section 3.19: There is hereby added to Section 3.19 of
-------------------------
the Purchase Agreement the following clause (c):
(c) None of the Products manufactured or sold by Company, either
alone or in combination with any other device, at any time currently or in
the past, use or are based on the designs designated as CLW-B and CLW-C,
which designs are described and illustrated in Schedule 3.19(c).
2. Amendment to Section 9.02(b): Section 9.02(B) of the Purchase
----------------------------
Agreement is hereby amended and restated in its entirety as follows:
(b) Other Environmental Issues. Subject to the terms and conditions
--------------------------
of this Article IX, except as set forth herein, and without limiting the
generality of the foregoing, each Shareholder, jointly and severally,
hereby agrees to indemnify, defend, and hold harmless Buyer and Buyer's
Affiliates from and against all Claims asserted against, resulting to,
imposed upon, or incurred by Buyer, Buyer's Affiliates, Company, the
Business, any third party, or any governmental authority, directly or
indirectly, by reason of, arising out of or in any way related to any of
the following: (i) the transport of hazardous wastes from Denric Tool to
the Facilities and the disposal of such hazardous wastes without required
permits for such activity, as referenced on Schedule 3.12(c)(1); and (ii)
Company's failure to meet its Form R reporting obligations for the years
1987 through 1998 relative to Company's welding, grinding, polishing and
painting operations; ((i) and (ii), collectively, the "Other Environmental
Issues").
3. Amendment to Section 9.03: There is hereby added to Section 9.03(d)
-------------------------
of the Purchase Agreement a new clause (d) as follows:
, or (d) if Buyer and Shareholders make the 338 Election, any
additional tax liability (including, without limitation, taxes,
penalties, interest and other additions to the tax) incurred by such
Shareholders as a result of any adjustment made by federal or state
taxing authorities to the parties' allocation of the Purchase Price;
provided, however, that the Shareholders shall not be indemnified for
any claim under this Section 9.03(d) to the extent that the Gross-Up
Amount compensates them for such Claim.
-1-
<PAGE>
4. Certain Payments by Shareholders. The parties acknowledge that
--------------------------------
Shareholders intend to provide certain transaction-based compensation to Dennis
T. George in connection with the closing of the transactions contemplated by the
Purchase Agreement, and Buyer agrees that provided such payments are made by
Shareholders from the purchase price proceeds, such intention of, and payment
by, Shareholders shall not be deemed to constitute a breach of the
representation and warranty contained in Section 3.28 of the Purchase Agreement.
5. Remainder of Agreement Unaffected. All other provisions of the
---------------------------------
Purchase Agreement are unchanged by this Amendment.
(The next page is the signature page.)
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first written above.
Buyer:
WEC Company
/s/ Steven M. Vandemore
-------------------------------------
Steven M. Vandemore, Vice President
Shareholders:
/s/ Richard Milanowski
-------------------------------------
Richard Milanowski
/s/ Gloria Milanowski
-------------------------------------
Gloria Milanowski
-3-
<PAGE>
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BY AND AMONG
WEC COMPANY
("BUYER"),
TRU-PART MANUFACTURING CORPORATION
("COMPANY"),
CAL PROPERTIES
("CAL PROPERTIES"),
AND
to Section 15.11 only
Benjamin B. Calmenson, Calvin B. Calmenson
Robert L. Calmenson AND Buddy Howell
("SHAREHOLDERS")
July 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE
1. Purchase and Sale of Assets ........................................ 2
1.1. Assets to be Transferred....................................... 2
1.2. Excluded Assets................................................ 4
2. Assumption of Liabilities........................................... 5
2.1. Liabilities to be Assumed...................................... 5
2.2. Liabilities Not to be Assumed.................................. 6
3. Purchase Price - Payment............................................ 6
3.1. Purchase Price................................................. 6
3.2. Payment of Purchase Price...................................... 6
3.3. Determination of Company Purchase Price........................ 7
3.4. Prorations..................................................... 10
3.5. Other Payments and Adjustments................................. 10
3.6. Allocation of Purchase Price................................... 11
4. Representations and Warranties of Company and Shareholders.......... 11
4.1. Corporate...................................................... 11
4.2. Authority...................................................... 12
4.3. No Violation................................................... 12
4.4. Financial Statements........................................... 13
4.5. Tax Matters.................................................... 13
4.6. Accounts Receivable............................................ 14
4.7. Inventory...................................................... 14
4.8. Absence of Certain Changes..................................... 14
4.9. Absence of Undisclosed Liabilities............................. 16
4.10. No Litigation................................................. 16
4.11. Compliance With Laws and Orders............................... 16
4.12. Title to and Condition of Properties.......................... 18
4.13. Insurance..................................................... 21
4.14. Contracts and Commitments..................................... 21
4.15. Labor Matters................................................. 23
4.16. Employee Benefit Plans........................................ 24
4.17. Employment Compensation....................................... 25
4.18. Trade Rights.................................................. 25
4.19. Major Customers and Suppliers................................. 26
4.20. Product Warranty and Product Liability........................ 27
4.21. Affiliates' Relationships to Company.......................... 27
4.22. Assets Necessary to Business.................................. 27
4.23. No Brokers or Finders......................................... 27
4.24. Copies of Certain Documents................................... 28
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.25. Underlying Documents.......................................... 28
4.26. Business of Company........................................... 28
4.27. Disclosure of Material Facts.................................. 28
5. Representations and Warranties of CAL Properties.................... 28
5.1. Partnership.................................................... 29
5.2. Authority...................................................... 29
5.3. No Violation................................................... 29
5.4. Compliance With Laws and Orders................................ 30
5.5. Title to and Condition of Properties........................... 31
6. Representations and Warranties of Buyer............................. 33
6.1. Corporate...................................................... 33
6.2. Authority...................................................... 33
6.3. No Brokers or Finders.......................................... 34
6.4. No Violation................................................... 34
6.5. Disclosure..................................................... 34
7. Employees - Employee Benefits....................................... 34
7.1. Transferred Employees.......................................... 34
7.2. Payroll Tax.................................................... 34
7.3. Severance Pay.................................................. 35
7.4. Participation in Buyer Plans................................... 35
7.5. COBRA.......................................................... 35
7.6. Termination of Qualified Plans................................. 36
8. Other Matters....................................................... 36
8.1. Title Commitment............................................... 36
8.2. Environmental and Health and Safety Audits..................... 37
8.3. Noncompetition; Confidentiality................................ 37
8.4. Product Liability Matters...................................... 38
8.5. Use of Company's Name.......................................... 38
8.6. Unemployment Compensation...................................... 39
8.7. Property Leases................................................ 39
8.8. Delivery of Schedules.......................................... 39
9. Further Covenants of Company........................................ 39
9.1. Access to Information and Records.............................. 39
9.2. Conduct of Business Pending the Closing........................ 40
9.3. Change of Corporate Name....................................... 41
9.4. No Negotiations................................................ 41
9.5. Consents....................................................... 41
9.6. Other Action................................................... 41
9.7. Disclosure..................................................... 41
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
10. Conditions Precedent to Buyer's Obligations......................... 41
10.1. Representations and Warranties True on the Closing Date....... 41
10.2. Compliance With Agreement..................................... 41
10.3. Absence of Litigation......................................... 42
10.4. Consents and Approvals........................................ 42
10.5. Title Insurance............................................... 42
10.6. Hart-Scott-Rodino Waiting Period.............................. 42
10.7. Environmental and Health and Safety Audit..................... 42
10.8. Due Diligence................................................. 42
10.9. Employment Agreement.......................................... 42
10.10. Escrow Agreement............................................. 42
10.11. Lease Agreements............................................. 42
10.12. Noncompetition Agreements.................................... 42
11. Conditions Precedent to Obligations of Sellers...................... 43
11.1. Representations and Warranties True on the Closing Date....... 43
11.2. Compliance With Agreement..................................... 43
11.3. Absence of Litigation......................................... 43
11.4. Hart-Scott-Rodino Waiting Period.............................. 43
11.5. Escrow Agreement.............................................. 43
11.6. Lease Agreements.............................................. 43
12. Indemnification..................................................... 43
12.1. By Company and CAL Properties................................. 43
12.2. By Buyer...................................................... 44
12.3. Indemnification of Third Party Claims......................... 44
12.4. Payment....................................................... 45
12.5. Limitations on Indemnification................................ 45
13. Closing............................................................. 47
13.1. Documents to be Delivered by Company and CAL Properties....... 47
13.2. Documents to be Delivered by Buyer............................ 48
14. Termination......................................................... 49
14.1. Right of Termination Without Breach........................... 49
14.2. Termination by Buyer.......................................... 49
14.3. Termination by Sellers........................................ 49
14.4. Effect of Termination......................................... 50
15. Miscellaneous....................................................... 50
15.1. Further Assurance............................................. 50
15.2. Disclosures and Announcements................................. 50
15.3. Assignment; Parties in Interest............................... 50
15.4. Amendment and Modification.................................... 51
15.5. Notice........................................................ 51
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
15.6. Expenses...................................................... 53
15.7. Entire Agreement.............................................. 53
15.8. Counterparts.................................................. 53
15.9. Headings...................................................... 54
15.10. Governing Law................................................ 54
15.11. Shareholder Guarantee........................................ 54
15.12. Glossary of Terms............................................ 54
</TABLE>
iv
<PAGE>
Disclosure Schedule
1.1(a) Owned Real Property
1.1(d) Personal Property Leases
1.2(d) Notes Receivable
1.2(i) Excluded Contracts
2.1(c) Other Liabilities
3.2(e) Purchase Price Adjustment
3.6 Allocation of Purchase Price
4.1(c) Qualification to do Business
4.1(d) No Subsidiaries
4.3 No Violation
4.4 Financial Statements
4.5(b) Tax Returns Filed
4.5(c) Tax Audits
4.5(d) Consolidated Group
4.5(e) Other Tax Matters
4.6 Accounts Receivable
4.7 Inventory
4.8 Absence of Certain Changes
4.9 Absence of Undisclosed Liabilities
4.10 No Litigation
4.11(a) Compliance
4.11(b) Permits and Licenses
4.11(c) Environmental Matters
4.12(a) Marketable Title
4.12(c) Real Property
4.12(f) Company Further Covenants
4.13 Insurance
4.14(a) Real Property Leases
4.14(b) Personal Property Leases
4.14(c) Purchase Commitments
4.14(d) Sales Commitments
4.14(e) Contracts with Affiliates
4.14(g) Collective Bargaining Agreements
4.14(h) Loan Agreements
4.14(i) Guarantees
4.14(k) Burdensome on Restrictive Agreements
4.14(l) Other Material Contracts
4.14(m) No Default
4.15 Labor Matters
4.16(a) Disclosure and Delivery of Documents
4.16(b) Title IV of ERISA
4.16(c) Multiemployer Plans
v
<PAGE>
4.16(d) Controlled Group Status
4.16(e) Severance and Post-Retirement Benefits
4.16(f) Payments and Compliance
4.17 Employment Compensation
4.18(a) Trade Rights
4.18(b) Year 2000 Compliant
4.19(a) Major Customers
4.19(b) Major Suppliers
4.19(c) Dealers and Distributors
4.20 Product Warranty and Product Liability
4.21(a) Contracts with Affiliates
4.21(b) Affiliate Adverse Interests
4.21(c) Affiliate Obligations
4.26 Business of Company
5.1(c) CAL Properties Qualifications to do Business
5.4(a) CAL Properties Compliance
5.4(b) CAL Properties Permits and Licenses
5.4(c) CAL Properties Environmental Matters
5.5(a) CAL Properties Marketable Title
5.5(f) CAL Properties Further Covenants
7.1 Transferred Employees
7.5 COBRA
8.7 Property Leases
vi
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement") dated July 1, 1999, by and
among WEC COMPANY, a Delaware corporation ("Buyer"), TRU-PART MANUFACTURING
CORPORATION, a Minnesota corporation ("Company"), CAL PROPERTIES a (Minnesota)
general partnership ("CAL Properties") and as to Section 15.11 only, Benjamin B.
Calmenson, Calvin B. Calmenson, Robert L. Calmenson and Buddy Howell
("Shareholders.").
RECITALS
A. Company is engaged in the distribution of agricultural equipment parts
including but not limited to products marketed under the brand name "TISCO" (the
"Business").
B. Company's facilities consist of Company headquarters in West Saint
Paul, Minnesota, which is leased from CAL Properties, and warehouses located in
West Saint Paul, Minnesota; Sacramento, California; Nashville, Tennessee;
Dallas, Texas; and Richmond, Virginia (collectively, the "Facilities").
C. Buyer desires to purchase from Company and Company desires to sell to
Buyer the Business and substantially all of the property and assets of Company.
D. Buyer desires to purchase from CAL Properties and CAL Properties
desires to sell to Buyer the Owned Real Property.
E. A Glossary of Defined Terms is set forth in Section 15.12 of this
Agreement.
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
ARTICLE
1.
PURCHASE AND SALE OF ASSETS
1.1. Assets to be Transferred. Subject to the terms and conditions of this
Agreement, on the Closing Date: (a) CAL Properties shall sell, transfer, convey,
assign and deliver to Buyer or an affiliate of Buyer, the Owned Real Property
and (b) Company shall sell, transfer, convey, assign, and deliver to Buyer or an
affiliate of Buyer, all of the business, rights, claims and assets (of every
kind, nature, character and description, whether real, personal or mixed,
whether tangible or intangible, whether accrued, contingent or otherwise, and
wherever situated) of Company, together with all rights and privileges
associated with such assets and with the business of the Company, other than the
Excluded Assets (the "Company Assets," and together with the Owned Real
Property, the "Purchased Assets"). Company and CAL Properties are sometimes
herein referred to collectively as "Sellers." The Purchased Assets shall
include, but not be limited to, the following:
<PAGE>
(a) Owned Real Property. All of the real property, including land,
-------------------
buildings, fixtures, improvements, and all appurtenant rights owned by CAL
Properties, described on Schedule 1.1(a) (the "Owned Real Property").
(b) Personal Property. All machinery, equipment, vehicles, tools,
-----------------
supplies, spare parts, furniture and all other personal property (other
than personal property leased pursuant to Personal Property Leases) owned,
utilized or held for use by Company on the Closing Date.
(c) Inventory. All inventories of raw materials, work-in-process and
---------
finished goods and parts (including all such in transit or at remote
locations) of Company on the Closing Date, together with related packaging
materials (collectively the "Inventory").
(d) Personal Property Leases. All leases of machinery, equipment,
------------------------
vehicles, furniture and other personal property leased by Company,
including all such leases (the "Personal Property Leases") described in
Schedule 1.1(d).
(e) Trade Rights. All of the Company's interest in any Trade Rights.
------------
As used herein, the term "Trade Rights" shall mean and include: (i) all
trademark rights, business identifiers, trade dress, service marks, trade
names, and brand names associated with the Company's business, including
without limitation the "TISCO" name and associated marks, all registrations
thereof and applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of authorship; (iii) all patents and patent applications
and all international proprietary rights associated therewith; (iv) all
contracts or agreements granting any right, title, license or privilege
under the intellectual property rights of any third party; (v) all
inventions, mask works and mask work registrations, knowhow, discoveries,
improvements, designs, trade secrets, shop and royalty rights, employee
covenants and agreements respecting intellectual property and
noncompetition and all other types of intellectual property; and (vi) all
claims for infringement or breach of any of the foregoing.
(f) Contracts. All of the Company's rights in, to and under all
---------
contracts, purchase orders and sales orders (the "Contracts") of Company
other than Excluded Contracts. To the extent that any Contract for which
assignment to Buyer is provided herein is not assignable without the
consent of another party, this Agreement shall not constitute an assignment
or an attempted assignment thereof if such assignment or attempted
assignment would constitute a breach thereof. Company and Buyer agree to
use their reasonable best efforts (without any requirement on the part of
Buyer or Company or CAL Properties to pay any money or agree to any change
in the terms of any such Contract) to obtain the consent of such other
party to the assignment of any such Contract to Buyer in all cases in which
such consent is or may be required for such assignment. If any such consent
shall not be obtained, Company agrees to cooperate with Buyer in any
reasonable arrangement designed to provide for Buyer the benefits intended
to be assigned to Buyer under the relevant Contract, including enforcement
at the cost
3
<PAGE>
and for the account of Buyer of any and all rights of Company against the
other party thereto arising out of the breach or cancellation thereof by
such other party or otherwise. If and to the extent that such arrangement
cannot be made, Buyer, upon notice to Company, shall have no obligation
pursuant to Section 1.1(f) or otherwise with respect to any such Contract
and any such Contract shall not be deemed to be a Purchased Asset
hereunder.
(g) Computer Software. All computer source codes, programs and other
-----------------
software of Company, including all machine readable code, printed listings
of code, documentation and related property and information of Company.
(h) Literature. All sales literature, promotional literature,
----------
catalogs and similar materials of Company.
(i) Records and Files. All records, files, invoices, customer lists,
-----------------
blueprints, specifications, designs, drawings, accounting records, business
records, operating data and other data of Company related to the Purchased
Assets.
(j) Notes and Accounts Receivable. All notes, drafts and accounts
-----------------------------
receivable of Company, except for those described in Sections 1.2(d),
1.2(e) and 1.2(g) hereof.
(k) Licenses; Permits. All licenses, permits and approvals of
--------
Company.
(l) Business Names. The business name "TISCO", and all rights to use
--------------
or allow others to use such name, and the corporate name "Tru-Part
Manufacturing Corporation" or proximate variations thereof.
(m) General Intangibles. All prepaid items, all causes of action
-------------------
arising out of occurrences before or after the Closing, and other
intangible rights and assets.
1.2. Excluded Assets. The provisions of Section 1.1 notwithstanding,
Company and CAL Properties shall not sell, transfer, assign, convey or deliver
to Buyer, and Buyer shall not purchase or accept the following assets of Company
and CAL Properties (collectively the "Excluded Assets"):
(a) Consideration. The consideration delivered by Buyer to Company
-------------
and CAL Properties pursuant to this Agreement.
(b) Tax Credits and Records. Federal, state and local income and
-----------------------
franchise tax credits and tax refund claims and associated returns and
records. Buyer shall have reasonable access to such returns and records and
may make excerpts therefrom and copies thereof.
(c) Corporate Franchise. Company's franchise to be a corporation, its
-------------------
certificate of incorporation, corporate seal, stock books, minute books and
other corporate records having exclusively to do with the corporate
organization and capitalization of
4
<PAGE>
Company; provided, however, that Company shall change its corporate name as
provided in Section 9.4, below. Buyer shall have reasonable access to such
books and records and may make excerpts therefrom and copies thereof.
(d) Notes Receivable. Notes receivable owed to Company from CAL
----------------
Properties as described in Schedule 1.2(d).
(e) Obligations of Affiliates. Notes, drafts, accounts receivable or
-------------------------
other obligations for the payment of money, made or owed by any Affiliate.
For purposes of this Agreement, the term "Affiliate" shall mean and include
all shareholders, directors and officers of Company.
(f) Life Insurance Policies. Life insurance policies insuring the
-----------------------
lives of Benjamin B. Calmenson and Calvin B. Calmenson, including the cash
surrender value thereof.
(g) N-Complete. Company's investment in N-Complete as reflected on
----------
the Recent Balance Sheet (including the note receivable from N-Complete in
the principal amount of $70,000).
(h) Cash and Cash Equivalents. All cash and cash equivalents of
-------------------------
Company, whether on hand, in banks or other depository institutions,
including petty cash balances at Company's various places of business.
(i) Excluded Contracts. The contracts described in Schedule 1.2(i)
------------------
(the "Excluded Contracts")
ARTICLE
2.
ASSUMPTION OF LIABILITIES
2.1. Liabilities to be Assumed. As used in this Agreement, the term
"Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or contingent, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured. Subject to the
terms and conditions of this Agreement, on the Closing Date, Buyer shall assume
and agree to perform and discharge the following, and only the following,
Liabilities of Company (collectively, the "Assumed Liabilities"):
(a) Final Closing Balance Sheet Liabilities. The Liabilities
---------------------------------------
reflected or reserved against on the Final Closing Balance Sheet, but only
in the aggregate amounts so reflected or reserved against.
(b) Employee Obligations. Those liabilities referred to in Sections
--------------------
7.3 and 7.5.
5
<PAGE>
(c) Other Liabilities. Those liabilities disclosed on Schedule
-----------------
2.1(c).
2.2. Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, Buyer is not assuming any Liabilities of
Sellers and all such Liabilities shall be and remain the responsibility of
Company or CAL Properties, as the case may be. Notwithstanding the generality of
the provisions of Section 2.1, Buyer is not assuming the following Liabilities
of Sellers:
(a) Indebtedness. Any indebtedness to any shareholder or to Wells
------------
Fargo, formerly known Norwest Bank Minnesota, N.A.
(b) N-Complete Liabilities. Any Liabilities relating to Company's
----------------------
investment in N-Complete.
ARTICLE
3.
PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The consideration to be paid for the Company Assets
("Company Purchase Price") shall be provided by payment of the Cash Amount and
Buyer's assumption of the Assumed Liabilities.
(a) The "Cash Amount" shall be equal to:
(i) Thirty-Nine Million Five Hundred Thousand Dollars
($39,500,000); minus
(ii) the book value of the assets described in Sections 1.2(d),
(e), (f) and (g) as of the Closing Date; plus or minus, as the case
may be,
(iii) the Purchase Price Adjustment.
(b) The purchase price for the Owned Real Property ("Owned Property
Purchase Price") shall be One Million Two Hundred Fifty Eight Thousand
Dollars ($1,258,000), plus or minus the Prorations.
3.2. Payment of Purchase Price. The Company Purchase Price and the Owned
Property Purchase Price shall be paid by Buyer as follows:
(a) Assumption of Liabilities. At the Closing, Buyer shall deliver to
-------------------------
Company such documents and instruments as are reasonably required to
evidence Buyer's assumption of the Assumed Liabilities.
(b) Cash to Escrow Agent. At the Closing, Buyer shall deliver to the
--------------------
escrow agent pursuant to an escrow agreement in a form mutually
satisfactory to each of the Sellers and the Buyer (the "Escrow Agreement"),
the sum of One Million Five Hundred Thousand Dollars ($1,500,000) (the
"Escrow Amount").
6
<PAGE>
(c) Cash to Company. At the Closing, Buyer shall deliver to Company
---------------
the estimated Cash Amount, as calculated pursuant to the Estimated Closing
Balance Sheet, less the Escrow Amount.
(d) Cash to CAL Properties. At the Closing, Buyer shall deliver to
----------------------
CAL Properties the Owned Property Purchase Price.
(e) Purchase Price Adjustment. The Company Purchase Price shall be
-------------------------
adjusted (the "Purchase Price Adjustment") upward or downward, on a dollar-
for-dollar basis (with interest at a rate equal to the Wall Street
Journal's "prime rate" as in effect on the Closing Date, calculated from
the Closing Date until the date of payment), by the amount that the
Company's Average Working Capital as reflected in the Final Closing Balance
Sheet is greater or less than $12,996,771. For purposes hereof, the term
"Average Working Capital" shall mean the difference (whether positive or
negative) obtained when the sum of the Company's Average Accounts Payable
and Average Accrued Expenses is subtracted from the sum of the Company's
Average Inventories and Average Accounts Receivable. For purposes of this
Agreement the terms Average Accounts Payable, Average Accrued Expenses,
Average Inventories and Average Accounts Receivable shall mean the
arithmetic average of each such account over the twelve full calendar
months immediately preceding the month in which the Closing occurs. For
illustration purposes, attached hereto as Schedule 3.2(e) are such account
balances for the calendar months of June 1998 through May 1999. The parties
acknowledge that such balances are correct for purposes of calculating the
Average Working Capital. The parties acknowledge that in calculating the
Average Working Capital, there shall be excluded the following amounts: (i)
the balance, if any, on the Company's line of credit, (ii) any accrual of
interest with respect to notes to shareholders, and (iii) the amount, if
any, by which the outstanding checks written by the Company, together with
any cash withdrawals from Company accounts, exceeds the cash balance of the
Company. On or before the fifth business day following the final
determination of the Final Closing Balance Sheet (the "Settlement Date"),
either Company shall pay to Buyer or Buyer shall pay to Company the
Purchase Price Adjustment.
(f) Method of Payment. All payments under this Section 3.2 shall be
-----------------
made by wire transfer of immediately available funds to an account
designated by the recipient not less than 48 hours prior to the time for
payment specified herein.
3.3. Determination of Company Purchase Price.
(a) Estimated Closing Balance Sheet. For purposes of determining the
-------------------------------
estimated Company Purchase Price payable by the Buyer at the Closing, not
less than ten (10) business days prior to the Closing Date, Company shall,
in consultation with the Buyer, prepare and deliver to Buyer a balance
sheet of Company as of the close of business on the business day
immediately prior to the Closing Date which shall represent Company's
reasonable estimate of the Final Closing Balance Sheet. Such balance sheet
shall be in form and detail identical to, and in its accounting principles
and policies
7
<PAGE>
consistent in every respect with, the Recent Balance Sheet, and shall be
accompanied by schedules setting forth in reasonable detail all assets and
liabilities included therein. Such balance sheet or the accompanying
schedules shall contain sufficient detail as to Company Assets and Assumed
Liabilities for the determination of estimated Average Working Capital. In
the event Buyer shall object to any of the information set forth on the
Estimated Closing Balance Sheet or accompanying schedules as presented by
Company, the parties shall negotiate in good faith and agree on appropriate
adjustments to the end that such balance sheet and accompanying schedules
reflect a reasonable estimate of the Final Closing Balance Sheet and
estimated Average Working Capital (the Estimated Balance Sheet as
determined by the parties pursuant to this subsection is herein referred to
as the "Estimated Closing Balance Sheet"). In connection with the
determination of the Estimated Closing Balance Sheet, Company shall provide
to Buyer such information and detail as Buyer shall reasonably request.
(b) Final Closing Balance Sheet. The balance sheet of Company
---------------------------
prepared as of the Closing Date and certified, at Buyer's sole expense, by
Buyer's independent accountants ("Buyer's Accountants") shall be prepared
as follows:
(i) Within 45 days after the Closing Date, Buyer shall deliver
to Company a balance sheet of Company as of the Closing Date, prepared
in accordance with generally accepted accounting principles from the
books and records of Company, on a basis consistent with the
accounting principles theretofore followed by Company in the
preparation of the Recent Balance Sheet and the Estimated Closing
Balance Sheet, and fairly presenting the financial position of Company
as of the Closing Date. For purposes of preparing the Final Closing
Balance Sheet the parties agree that the reserve for obsolete
inventory, the reserve for bad debt and the credit memo accrual will
reflect a balance which is no greater than the balance for each such
account on the Recent Balance Sheet. The balance sheet shall be
accompanied by detailed schedules of Company Assets and Assumed
Liabilities and by a report of Buyer's Accountants (1) setting forth
the amount of accounts payable, accrued expenses, inventories and
accounts receivable reflected in the balance sheet, (2) stating that
(a) the examination of the balance sheet has been made in accordance
with generally accepted auditing standards and (b) the balance sheet
has been prepared in accordance with generally accepted accounting
principles, on a basis consistent with the accounting principles
theretofore followed by Company, except as otherwise provided in this
Section 3.3, and (3) setting forth the amount of the Purchase Price
Adjustment and by whom to be paid pursuant to Section 3.2 hereof.
(ii) Within 30 days following the delivery of the balance sheet
referred to in (i) above, Company or its independent accountants
("Company's Accountants") may object to any of the information
contained in said balance sheet or accompanying schedules which could
affect the necessity or amount of any payment by Buyer or Company
pursuant to Section 3.2 hereof. Any such
8
<PAGE>
such objection shall be made in writing and shall state Company's
determination of the amount of Average Working Capital.
(iii) In the event of a dispute or disagreement relating to the
balance sheet, schedules, or Purchase Price Adjustment which Buyer and
Company are unable to resolve by good faith discussions, either Buyer
or Company may elect to have all such disputes or disagreements
resolved by an accounting firm of nationally recognized standing (the
"Third Accounting Firm") to be mutually selected by Company and Buyer
or, if no agreement is reached, by Company's Accountants and Buyer's
Accountants. The Third Accounting Firm shall make a resolution of the
balance sheet of Company as of the Closing Date including a
calculation of Average Working Capital as of the Closing Date and a
determination of the Purchase Price Adjustment which shall be final,
binding and enforceable as an arbitration award for all purposes. The
Third Accounting Firm shall be instructed to use every reasonable
effort to perform its services within 15 days of submission of the
balance sheet to it and, in any case, as soon as practicable after
such submission. The fees and expenses for the services of the Third
Accounting Firm shall be shared by Buyer and Company as follows:
Company shall pay a percentage of such fees and expenses equal to
A/(A+B) and Buyer shall pay a percentage of such fees and expenses
equal to B/(A+B), where A is equal to the absolute value of the
difference (in dollars) between the Purchase Price Adjustment as
finally determined by the Third Accounting Firm and the Purchase Price
Adjustment as reflected in the objection prepared and delivered by
Company in accordance with Section 3.2(c)(ii), and B is equal to the
absolute value of the difference (in dollars) between the Purchase
Price Adjustment as finally determined by the Third Accounting Firm
and Purchase Price Adjustment as reflected in the report prepared and
delivered by Buyer in accordance with Section 3.2(c)(i), provided that
if the Purchase Price Adjustment as reflected in the Company's
objection is less than that determined by the Third Accounting Firm,
Buyer shall pay one hundred percent (100%) of such fees and expenses;
provided further that if the Purchase Price Adjustment is as
determined by the Third Accounting Firm is less than the amount shown
in the report delivered by the Buyer, Sellers shall pay one hundred
percent (100%) of such fees and expenses. As used in this Agreement,
the term "Final Closing Balance Sheet" shall mean the balance sheet of
Company as of the Closing Date as finally determined for purposes of
this Article 3, whether by acquiescence of Company in the figures
supplied by Buyer in accordance with Section 3.2(b)(i), by negotiation
and agreement of the parties, or by the Third Accounting Firm in
accordance with Section 3.2(b)(iii).
(iv) Buyer agrees to permit Company and Company's Accountants,
during normal business hours, to have reasonable access to, and to
examine and make copies of, all books and records of Company,
including but not limited to the books, records, schedules, work
papers and audit programs of Buyer and
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<PAGE>
Buyer's Accountants and access to representatives of Buyer's
Accountants, which documents and access are necessary to review the
balance sheet delivered by Buyer in accordance with Section 3.2. In
addition, Company's Accountants shall have the opportunity to observe
the taking of the inventory in connection with the preparation of such
balance sheet. Company similarly agrees to permit Buyer's Accountants
and their respective representatives, during normal business hours, to
have reasonable access to any books and records of Company which do
not constitute Purchased Assets, in order to enable them to prepare
such balance sheet.
3.4. Prorations. The following prorations (the "Prorations") relating to
the Purchased Assets shall be made as of the Closing Date, with Company or CAL
Properties, as the case may be, liable to the extent such items relate to any
time period up to the Closing Date (if not already taken into account on the
Final Closing Balance Sheet) and Buyer liable to the extent such items relate to
the Closing Date and periods subsequent to the Closing Date. Except as otherwise
specifically provided herein, the net amount of all Prorations shall be settled
and paid on the Settlement Date as provided by Section 3.2(e) hereof:
(a) Personal property taxes, real estate taxes and assessments, and
other taxes, if any, on or with respect to the Purchased Assets; provided
that special assessments for work actually commenced or levied prior to the
date of this Agreement shall be paid by Company or CAL Properties, as the
case may be, only to the extent such assessments are actually due prior to
the Closing Date. All amounts due after the Closing Date shall be paid by
Buyer.
(b) Rents, additional rents, taxes and other items payable by Company
under any lease, license, permit, contract or other agreement or
arrangement to be assigned to or assumed by Buyer.
(c) The amount of rents, taxes and charges for sewer, water, fuel,
telephone, electricity and other utilities; provided that, if practicable,
meter readings shall be taken at the Closing Date and the respective
obligations of the parties determined in accordance with such readings.
(d) All other items normally adjusted in connection with similar
transactions.
If the actual expense of any of the above items for the billing period within
which the Closing Date falls is not known on the Settlement Date, the proration
shall be made based on the expense incurred in the previous billing period, for
expenses billed less often than quarterly, and on the average expense incurred
in the preceding three billing periods, for expenses billed quarterly or more
often. Company agrees to furnish Buyer with such documents and other records as
shall be reasonably requested in order to confirm all proration calculations.
3.5. Other Payments and Adjustments. The amount of wages and other
remuneration due in respect of periods up to the Closing Date to employees of
Company shall be paid by Company directly to such employees. Except to the
extent reserved for on the Final Closing
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<PAGE>
Balance Sheet, Buyer shall receive a credit on the Settlement Date in an amount
equal to all vacation pay unpaid by Company as of the Closing Date attributable
to any period or partial period of employment by Company prior to the Closing
Date, plus employee payroll taxes applicable thereto due or to become due, for
Transferred Employees of Company who shall be employed by Buyer after the
Closing and (i) who have not as of the Closing Date taken vacation time earned
prior to Closing, or (ii) who have not earned vacation time as of the Closing
Date but who would have earned vacation time for any such period or partial
period of employment prior to the Closing (on a pro rata basis) had they
continued as employees of Company to the date when such vacation pay would have
accrued to them. Buyer shall pay any such credited or accrued amounts to the
Transferred Employees or, at its election, recognize equivalent days of vacation
time.
3.6. Allocation of Purchase Price. The aggregate Company Purchase Price
(including the assumption by Buyer of the Assumed Liabilities) shall be
allocated among the Purchased Assets for tax purposes in accordance with
Schedule 3.6. Company and Buyer shall follow and use such allocation in all tax
returns, filings or other related reports made by them to any governmental
agencies. To the extent that disclosures of this allocation are required to be
made by the parties to the Internal Revenue Service ("IRS") under the provisions
of Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any regulations thereunder, Buyer and Company shall disclose such reports to
the other prior to filing with the IRS.
ARTICLE
4.
REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SHAREHOLDERS
Company makes the following representations and warranties to Buyer, each
of which is true and correct on the date hereof, shall remain true and correct
to and including the Closing Date, shall be unaffected by any investigation
heretofore or hereafter made by Buyer, or any knowledge of Buyer other than as
specifically disclosed in the Disclosure Schedules (the "Schedules") delivered
to Buyer prior to the closing of the transactions contemplated by this Agreement
and shall survive the Closing of the transactions provided for herein for a
period of two years.
4.1. Corporate.
(a) Organization. Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Minnesota.
(b) Corporate Power. Company has all requisite corporate power and
---------------
authority to own, operate and lease its properties, to carry on its
business as and where such is now being conducted, to enter into this
Agreement and the other documents and instruments to be executed and
delivered by Company pursuant hereto and to carry out the transactions
contemplated hereby and thereby.
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<PAGE>
(c) Qualification. Company is duly licensed or qualified to do
-------------
business as a foreign corporation, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased by it,
or the nature of its business, makes such licensing or qualification
necessary except where such failure would not be material to the business,
financial condition or results of operation of Company taken as a whole,
(such effect, with reference to the Company, or, for purposes of Article 5,
with reference to CAL Properties, "Material Adverse Effect"). The states in
which Company is licensed or qualified to do business are listed in
Schedule 4.1(c).
(d) No Subsidiaries. Except as set forth in Schedule 4.1(d), Company
---------------
does not own any interest in any corporation, partnership or other entity.
4.2. Authority. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Company pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors and shareholders of Company.
No other or further corporate act or proceeding on the part of Company is
necessary to authorize this Agreement or the other documents and instruments to
be executed and delivered by Company pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes, and
when executed and delivered, the other documents and instruments to be executed
and delivered by Company pursuant hereto shall constitute, valid binding
agreements of Company, enforceable in accordance with their respective terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally, and by general equitable principles.
4.3. No Violation. Neither the execution and delivery by Company of this
Agreement or the other documents and instruments to be executed and delivered by
Company pursuant hereto, nor the consummation by Company of the transactions
contemplated hereby and thereby (a) shall violate any applicable statute, law,
ordinance, rule or regulation (collectively, the "Laws") or order, writ,
injunction, judgment, plan or decree (collectively, the "Orders"), (b) except
for applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), shall require any authorization, consent, approval,
exemption or other action by or notice to any court, arbitrator, department,
commission, board, bureau, agency, authority, instrumentality or other body,
whether body, whether federal, state, municipal, foreign or other (collectively,
"Government Entities") (including, without limitation, under any "plant closing"
or similar law), or (c) subject to obtaining the consents referred to in
Schedule 4.3, shall violate or conflict with, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or shall result in the termination of, or accelerate the performance
required by, or result in the creation of any Lien other than a Permitted Lien
upon any of the assets of Company under, any term or provision of the corporate
charter or Bylaws of Company or of any contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which Company
is a party or by which Company or any of its assets or properties may be bound
or affected.
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<PAGE>
4.4. Financial Statements. Included as Schedule 4.4 are true and complete
copies of the financial statements of Company consisting of (i) balance sheets
of Company as of November 28, 1998, November 29, 1997 and November 30, 1996, and
the related statements of income and cash flows for the years then ended
(including the notes contained therein or annexed thereto), which financial
statements have been reported on, and are accompanied by, the signed,
unqualified opinions of Grant Thornton, LLP, independent auditors for Company
for such years, and (ii) an unaudited balance sheet of Company as of May 31,
1999 (the "Recent Balance Sheet"), and the related unaudited statements of
income and cash flows for the six (6) months then ended and for the
corresponding period of the prior year (including the notes and schedules
contained therein or annexed thereto). All of such financial statements
(including all notes and schedules contained therein or annexed thereto) are
complete and accurate, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, for the
absence of footnote disclosure and year-end adjustments) applied on a consistent
basis, have been prepared in accordance with the books and records of Company,
and fairly present, in accordance with generally accepted accounting principles,
the assets, liabilities and financial position, the results of operations and
cash flows of Company as of the dates and for the years and periods indicated.
4.5. Tax Matters.
(a) Provision For Taxes. The provision made for taxes on the Recent
-------------------
Balance Sheet is sufficient in all material respects for the payment of all
federal, state, foreign, county, local and other income, ad valorem,
excise, profits, franchise, occupation, property, payroll, sales, use,
gross receipts and other taxes (and any interest and penalties) and
assessments, whether or not disputed at the date of the Recent Balance
Sheet, for all years and periods prior thereto. Since the date of the
Recent Balance Sheet, Company has not incurred any taxes other than taxes
incurred in the ordinary course of business consistent in type and amount
with past practices of Company.
(b) Tax Returns Filed. Except as set forth on Schedule 4.5(b), all
-----------------
federal, state, foreign, county, local and other tax returns required to be
filed by or on behalf of Company have been timely filed and when filed were
true and correct in all material respects, and the taxes shown as due
thereon were paid or adequately accrued. Company has duly withheld and paid
over as required all taxes which it is required to withhold and pay over
relating to salaries and other compensation heretofore paid to employees of
Company.
(c) Tax Audits. The federal and state income tax returns of Company
----------
have been audited by the Internal Revenue Service and appropriate state
taxing authorities for the periods and to the extent set forth in Schedule
4.5(c), and, except as set forth in Schedule 4.5(c), Company has not
received from the Internal Revenue Service or from the tax authorities of
any state, county, local or other jurisdiction any notice of any
underpayment of taxes or other deficiency which has not been paid nor any
objection to any return or report filed by Company. There are outstanding
no agreements or waivers extending the statutory period of limitations
applicable to any tax return or report.
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<PAGE>
(d) Consolidated Group. Schedule 4.5(d) lists every year Company was
------------------
a member of an affiliated group of corporations that filed a consolidated
tax return on which the statute of limitations does not bar a federal tax
assessment, and each corporation that has been part of such group.
(e) Other. Except as set forth in Schedule 4.5(e), since January 1,
-----
1994 Company has not (i) filed any consent or agreement under Section
341(f) of the Code, (ii) applied for any tax ruling, (iii) entered into a
closing agreement with any taxing authority, (iv) filed an election under
Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed election
under Section 338(e) of the Code occurred), (v) made any payments, or been
a party to an agreement (including this Agreement) that under any
circumstances could obligate it to make payments that shall not be
deductible because of Section 280G of the Code, or (vi) been a party to any
tax allocation or tax sharing agreement.
4.6. Accounts Receivable. All accounts receivable of Company reflected on
the Recent Balance Sheet, and as incurred in the normal course of business since
the date thereof, represent arm's length sales actually made in the ordinary
course of the Business; are, to Company's Knowledge, collectible (net of the
reserves shown on the Recent Balance Sheet for doubtful accounts) in the
ordinary course; are subject to no counterclaim or setoff; and are not in
dispute. Schedule 4.6 contains a schedule of aged accounts receivable included
in the Recent Balance Sheet. All accounts receivable of Company reflected on the
Final Closing Balance Sheet shall represent arm's length sales actually made in
the ordinary course of the Business and shall be collectible (net of the reserve
shown on the Final Closing Balance Sheet for doubtful accounts) in the ordinary
course without the necessity of commencing legal proceedings and shall be
subject to no counterclaim or setoff. As used in this Agreement, the term
"Company's Knowledge" shall mean the actual knowledge of the Shareholders, L.W.
Templeton and D. Thomas Griep.
4.7. Inventory. Except as set forth on Schedule 4.7, all inventory of
Company reflected on the Recent Balance Sheet consists of a quality and quantity
usable and saleable in the ordinary course of the Business and is valued in
accordance with generally accepted accounting principles at the lower of cost
(on a LIFO basis) or market. All inventory purchased since the date of such
balance sheet consists of a quality and quantity usable and saleable in the
ordinary course of the Business. Except as set forth in Schedule 4.7, all
inventory of Company is located on premises owned or leased by Company as
reflected in this Agreement. Neither Company nor, to Company's Knowledge, any
such customer is in material breach of the terms of any obligation to the other,
and, to Company's Knowledge, no valid grounds exist for any setoff of amounts
billable to such customers on the completion of orders to which work-in-process
relates. All work-in-process is of a quality ordinarily produced in accordance
with the requirements of the orders to which such work-in-process is identified,
and shall require no material rework with respect to services performed prior to
Closing.
4.8. Absence of Certain Changes. Except as and to the extent set forth in
Schedule 4.8, since the date of the Recent Balance Sheet there has not been:
14
<PAGE>
(a) Adverse Change. Any material adverse change in the financial
--------------
condition, assets, Liabilities, business, prospects or operations of
Company;
(b) Damage. Any loss, damage or destruction in excess of Twenty-Five
------
Thousand Dollars ($25,000) whether covered by insurance or not, affecting
Company's business or properties;
(c) Increase in Compensation. Except in the ordinary course of
------------------------
business and consistent with past practice, any increase in excess of Five
Thousand Dollars ($5,000) per individual per year or Fifty Thousand Dollars
($50,000) for all employees in the aggregate in the compensation, salaries
or wages payable or to become payable to any employee or agent of Company
(including, without limitation, any increase or change pursuant to any
bonus, pension, profit sharing, retirement or other plan or commitment), or
any bonus or other employee benefit granted, made or accrued;
(d) Labor Disputes. Any labor dispute or disturbance, other than
--------------
routine grievances which, individually and in the aggregate, are not
material to the business, financial condition or results of operations of
Company;
(e) Commitments. Any commitment or transaction by Company (including,
-----------
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of the Business consistent with past practice;
(f) Dividends. Any declaration, setting aside, or payment of any
---------
dividend or any other distribution in respect of Company's capital stock;
any redemption, purchase or other acquisition by Company of any capital
stock of Company, or any security relating thereto; or any other payment to
any shareholder of Company in such person's capacity as a shareholder;
(g) Disposition of Property. Any sale, lease or other transfer or
-----------------------
disposition of any properties or assets of Company, except for the sale of
inventory items in the ordinary course of the Business;
(h) Indebtedness. Any indebtedness for borrowed money incurred,
------------
assumed or guaranteed by Company except in the ordinary course of business;
(i) Liens. Any Lien made on any of the properties or assets of
-----
Company except for Permitted Liens;
(j) Amendment of Contracts. Any entering into, amendment or
----------------------
termination by Company of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of the Business;
(k) Loans and Advances. Any loan or advance (other than advances to
------------------
employees in the ordinary course of the Business for travel and
entertainment in
15
<PAGE>
accordance with past practice) to any person including, but not limited to,
any officer, director or employee of Company, or any Shareholder or
Affiliate;
(l) Credit. Any grant of credit to any customer or distributor on
------
terms or in amounts more favorable than those which have been extended to
such customer or distributor in the past, any other change in the terms of
any credit heretofore extended, or any other change of Company's policies
or practices with respect to the granting of credit; or
(m) Unusual Events. Any other event or condition not in the ordinary
--------------
course of the Business that would be reasonable likely to have a Material
Adverse Effect.
4.9. Absence of Undisclosed Liabilities. Except as and to the extent
specifically reserved against in the Recent Balance Sheet or disclosed in
Schedule 4.9, Company does not have any Liabilities other than commercial
liabilities and obligations incurred since the date of the Recent Balance Sheet
in the ordinary course of the Business and consistent with past practice and
none of which has or shall have a Material Adverse Effect on the Company. Except
as and to the extent described in the Recent Balance Sheet or in Schedule 4.9,
the Company has no knowledge of any basis for the assertion against Company of
any Liability and, to Company's Knowledge, there are no circumstances,
conditions, happenings, events or arrangements, contractual or otherwise, which
may give rise to Liabilities, except commercial liabilities and obligations
incurred in the ordinary course of the Business and consistent with past
practice.
4.10. No Litigation. Schedule 4.10 identifies all actions, suits,
proceedings, claims, arbitration, investigation or inquiry, whether civil,
criminal or administrative ("Litigation") to which Company or any of its
directors have been parties since January 1, 1994. Except as set forth in
Schedule 4.10 there is no Litigation pending or, to Company's Knowledge,
threatened against Company, its directors (in such capacity), its business or
any of its assets. To Company's knowledge, there is no basis for any Litigation.
4.11. Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 4.11(a), Company
----------
(including each and all of its operations, practices, properties and
assets) is in compliance in all material respects with all applicable Laws
and Orders, including, without limitation, those applicable to
discrimination in employment, occupational safety and health, trade
practices, competition and pricing, product warranties, zoning, building
and sanitation, employment, retirement and labor relations, product
advertising and the Environmental Laws. Except as set forth in Schedule
4.11(a), neither (i) Company nor its business or assets is subject to any
Order of any Government Entities, and (ii) Company has not received notice
of any violation or alleged violation of, and is subject to no Liability
for past or continuing violation of, any Laws or Orders. All reports and
returns required to be filed by Company with any Government Entity have
been filed, and were accurate and complete in all material respects when
filed. Without limiting the generality of the foregoing:
16
<PAGE>
(i) The operation of Company's business as it is now conducted
does not, nor, to Company's Knowledge, does any condition existing at
any of the Facilities, in any manner constitute a nuisance or other
tortious interference with the rights of any person or persons in such
a manner as to give rise to or constitute the grounds for a suit,
action, claim or demand by any such person or persons seeking
compensation or damages or seeking to restrain, enjoin or otherwise
prohibit any aspect of the conduct of such business or the manner in
which it is now conducted.
(ii) Company has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such
accounts, and each of such accounts has a positive balance.
(iii) Company has delivered to Buyer copies of all reports of
Company since January 1, 1994 required under the federal Occupational
Safety and Health Act of 1970, as amended, and under all other
applicable health and safety laws and regulations. The deficiencies,
if any, noted on such reports have been corrected.
(b) Permits and Licenses. Company has all permits, licenses,
--------------------
approvals, authorizations and consents of all Government Entities and all
certification organizations required for the conduct of the Business (as
presently conducted) and operation of the Facilities except where such
failure would not result in a Material Adverse Effect. All such licenses,
permits, approvals, authorizations and consents are described in Schedule
4.11(b), are in full force and effect and except as otherwise noted on
Schedule 4.11(b) are assignable to Buyer in accordance with the terms
hereof. Except as set forth in Schedule 4.11(b), Company (including its
operations, properties and assets) is and has been in compliance with all
such permits and licenses, approvals, authorizations and consents, except
where such failure would not have a Material Adverse Effect.
(c) Environmental Matters. The applicable Laws relating to pollution
---------------------
or protection of the environment, including Laws relating to emissions,
discharges, generation, storage, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic, hazardous or
petroleum or petroleum-based substances or wastes ("Waste") into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Waste including, without limitation, the
Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery
Act, the Toxic Substances Control Act and the Comprehensive Environmental
Response Compensation Liability Act ("CERCLA"), as amended, and their state
and local counterparts, in effect and as adopted at the time of Closing,
are herein collectively referred to as the "Environmental Laws". Without
limiting the generality of the foregoing provisions of this Section 4.11,
Company is in compliance with all limitations, restrictions, conditions,
standards, prohibitions,
17
<PAGE>
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulations, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except where the failure to so comply
would not have a Material Adverse Effect. Except as set forth in Schedule
4.11(c), there is no Litigation nor any demand, claim, hearing or notice of
violation pending or threatened against Company relating in any way to the
Environmental Laws or any Order issued, entered, promulgated or approved
thereunder. To Company's Knowledge, except as set forth in Schedule
4.11(c), there are no past or present events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans which may
interfere with or prevent compliance or continued compliance with the
Environmental Laws or with any Order issued, entered, promulgated or
approved thereunder, or which may give rise to any Liability, including,
without limitation, Liability under CERCLA or similar state or local Laws,
or otherwise form the basis of any Litigation, hearing, notice of
violation, study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into
the environment, of any Waste.
4.12. Title to and Condition of Properties.
(a) Marketable Title. Company has good and marketable and, in the
----------------
case of the Real Property, insurable, title to all the Company Assets, free
and clear of all mortgages, liens (statutory or otherwise), security
interests, claims, pledges, licenses, equities, options, conditional sales
contracts, assessments, levies, easements, covenants, reservations,
restrictions, rights-of-way, exceptions, limitations, charges or
encumbrances of any nature whatsoever (collectively, "Liens") except; (i)
those described in Schedule 4.12(a), (ii) Liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings (and
which have been sufficiently accrued or reserved against in the Recent
Balance Sheet), (iii) municipal and zoning ordinances and easements for
public utilities, none of which materially interfere with the use of the
property as currently utilized, (iv) mechanics' carriers,' workers' or
other like liens arising in the ordinary course of business, (v) minor
imperfections of title which do not individually, or in the aggregate,
impair the continued use of the real property assets and fixtures to which
they relate in the operation of the Business as currently conducted and
(vi) liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the
ordinary course of business ("Permitted Liens"). To Company's Knowledge,
all presently existing Permitted Liens arising under clauses (ii), (iii),
(iv) and (vi), above are disclosed on Schedule 4.12(a). Subject to
obtaining the consents referred to in Section 4.3, none of the Company
Assets are subject to any restrictions with respect to the transferability
thereof. There are no third parties in or entitled to possession of the
Real Property. Company has complete and unrestricted power and right to
sell, assign, convey and deliver the Company Assets to Buyer as
contemplated hereby and so long as this Agreement remains in force, Company
shall not lease, convey, or otherwise transfer or encumber all or any part
of the Real Property. At Closing, Buyer shall receive good and marketable
title to all the Company Assets, free
18
<PAGE>
and clear of all Liens of any nature whatsoever except those described in
Schedule 4.12(a) and except Permitted Liens.
(b) Condition. All tangible assets (real and personal) constituting
---------
Company Assets hereunder are in good operating condition and repair, normal
wear and tear excepted, free from any defects (except such minor defects as
do not interfere with the use thereof in the conduct of the normal
operations of the Business), have been maintained consistent with the
standards generally followed in the industry and are sufficient to carry on
the Business as conducted during the preceding twelve (12) months. All
buildings, plants and other structures owned or otherwise utilized by
Company are in good condition and repair, normal wear and tear excepted,
and have no material structural defects or defects affecting the plumbing,
electrical, sewerage, or heating, ventilating or air conditioning systems.
(c) Real Property. Schedule 4.12(c) sets forth all real property
-------------
owned, used or occupied by Company (the "Real Property"). Company
previously has delivered to Buyer copies of all written leases currently in
effect for any parcel of Real Property. Schedule 4.12(c) also sets forth,
with respect to each parcel of Real Property which is leased under any oral
agreement, the material terms of such lease. There are now in full force
and effect duly issued certificates of occupancy permitting the Real
Property and improvements located thereon to be legally used and occupied
as the same are now constituted. Neither the Real Property nor its use is
in violation of any local governmental rule, ordinance, regulation, or
building code, except where such violation would not result in a Material
Adverse Effect, nor is there a pending or, to Company's Knowledge,
threatened investigation regarding the possible violation of the foregoing.
There is no claim of adverse possession or prescriptive rights involving
any of the Real Property, and, to Company's Knowledge, no basis exists for
any such claim. No public improvements have been commenced and to Company's
knowledge none are planned which in either case may result in special
assessments against or otherwise materially adversely affect any Real
Property. No portion of any of the Real Property has been used as a
landfill or for storage or landfill of hazardous or toxic materials. Except
as disclosed, to Company's Knowledge there is no (i) planned or proposed
increase in assessed valuations of any Real Property, (ii) Order requiring
repair, alteration, or correction of any existing condition affecting any
Real Property or the systems or improvements thereat, (iii) condition or
defect which could give rise to an order of the sort referred to in "(ii)"
above, or (iv) underground storage tanks, or any structural, mechanical, or
other defects of material significance affecting any Real Property or the
systems or improvements thereat (including, but not limited to, inadequacy
for normal use of mechanical systems or disposal or water systems at or
serving the Real Property).
(d) No Condemnation or Expropriation. Neither the whole nor any
--------------------------------
portion of the property or any other assets of Company is subject to any
Order to be sold or is being condemned, expropriated or otherwise taken by
any Government Entity with or without payment of compensation therefor, nor
to Company's Knowledge has any such
19
<PAGE>
condemnation, expropriation or taking been proposed, nor has Company agreed
to or committed to dedicate any part of the Real Property.
(e) No Certified Survey Map Required. No certified survey map or
--------------------------------
other state, municipal, or other governmental approval regarding the
division, platting, or mapping of real estate is required as a prerequisite
to the conveyance by Company to Buyer (or as a prerequisite to the
recording of any conveyance document) of any Owned Real Property or Leased
Real Property pursuant to the terms hereof.
(f) Further Covenants. Except as set forth in Schedule 4.12(f):
-----------------
(i) The Real Property has free and full access to and from all
adjoining streets, roads and highways, and there is no pending or, to
Company's Knowledge, threatened action which would impair such access.
(ii) The Real Property has not been classified under any
designation authorized by law to obtain a special low ad valorem tax
rate or assessment, or receive either an abatement or deferment of ad
valorem taxes or assessments which, in any such case, will result in
additional, catch-up ad valorem taxes in the future in order to
recover the amounts previously abated or deferred.
(iii) Company has not received any notice nor is it aware of any
litigation or administrative proceeding pending or threatened
(including the expiration of any appeal period with respect thereto)
relating to the Real Property or its use which may adversely affect
the validity of any license, permit or other governmental
determination or authorization necessary to development and operation
of the Real Property.
(iv) Company has not entered into nor is Company aware of any
agreements, commitments or arrangements concerning the Real Property
or development thereof with any person or entity, including, but not
limited to, governmental or quasi-governmental authorities, agencies,
departments, commissions, councils, boards or other instrumentalities,
adjoining landowners, public or private utility companies or
authorities, or highway or street authorities, except as set forth in
the Agreement.
(v) Company has not entered into any agreement which is
presently in effect (other than this Agreement) whereby Company has
agreed to sell, transfer, hypothecate or otherwise encumber the Real
Property, or whereby Company has entered into a lease or other
agreement for possession or use of the Real Property, or granted to
any third party an option or a right of first refusal to purchase or
lease all or any part of the Real Property.
(vi) Company represents that Company has delivered or disclosed
to Buyer all requested information regarding the Real Property and has
not failed to
20
<PAGE>
deliver any material fact of which it has knowledge regarding the
condition of the Real Property.
4.13. Insurance. Set forth in Schedule 4.13 is a complete and accurate list
and description of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the business and properties of Company, true and correct copies of
which have heretofore been delivered to Buyer. Schedule 4.13 includes, without
limitation, the carrier, the description of coverage, the limits of coverage,
retention or deductible amounts, amount of annual premiums, date of expiration
and the date through which premiums have been paid with respect to each such
policy, and any pending claims in excess of $10,000. All such policies are
valid, outstanding and enforceable policies and provide insurance coverage for
the properties, assets and operations of Company, of the kinds, in the amounts
and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. Schedule 4.13
indicates each policy as to which (a) the coverage limit has been reached or (b)
the total incurred losses to date equal 75% or more of the coverage limit. No
notice of cancellation or termination has been received with respect to any such
policy, and to Company's Knowledge, there has been no act or omission of Company
which could result in cancellation of any such policy prior to its scheduled
expiration date. Company has not been refused any insurance with respect to any
aspect of the operations of the business nor has its coverage been limited by
any insurance carrier to which it has applied for insurance or with which it has
carried insurance during the last three years. Company has duly and timely made
all claims it has been entitled to make under each policy of insurance. Since
January 1, 1994 all products liability and general liability policies maintained
by or for the benefit of Company have been "occurrence" policies and not "claims
made" policies. There is no claim by Company pending under any such policies as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies, and to Company's Knowledge there is no basis for denial of any
claim under any such policy. Company has not received any written notice from or
on behalf of any insurance carrier issuing any such policy that insurance rates
therefor shall hereafter be substantially increased (except to the extent that
insurance rates may be increased for all similarly situated risks) or that there
shall hereafter be a cancellation or an increase in a deductible (or an increase
in premiums in order to maintain an existing deductible) or nonrenewal of any
such policy. Such policies are sufficient in all material respects for
compliance by Company with all requirements of law and with the requirements of
all material contracts to which Company is a party.
4.14. Contracts and Commitments.
(a) Real Property Leases. Except as set forth in Schedule 4.14(a),
--------------------
Company has no leases of real property.
(b) Personal Property Leases. Except as set forth in Schedule
------------------------
4.14(b), Company has no leases of personal property involving consideration
or other expenditure
21
<PAGE>
in excess of Ten Thousand Dollars ($10,000) or involving performance over a
period of more than six (6) months.
(c) Purchase Commitments. Except as set forth in Schedule 4.14(c),
--------------------
Company has no purchase commitments for inventory items or supplies that,
together with amounts on hand, constitute in excess of six months normal
usage.
(d) Sales Commitments. Except as set forth on Schedule 4.14(d),
-----------------
Company has no sales contracts or commitments to customers or distributors
which aggregate in excess of $20,000 to any one customer or distributor (or
group of affiliated customers or distributors). Company has no sales
contracts or commitments except those made in the ordinary course of
business, at arm's length, and no such contracts or commitments are for a
sales price which would result in a loss to the Company.
(e) Contracts With Affiliates and Certain Others. Except as set forth
--------------------------------------------
in Schedule 4.14(e), Company has no agreement, understanding, contract or
commitment (written or oral) with any Affiliate or any other officer,
employee, agent, consultant, distributor, dealer or franchisee that is not
cancelable by Company on notice of not longer than thirty (30) days without
liability, penalty or premium of any nature or kind whatsoever.
(f) Powers of Attorney. The Company has not given a power of
------------------
attorney, which is currently in effect, to any person, firm or corporation
for any purpose whatsoever.
(g) Collective Bargaining Agreements. Except as set forth in Schedule
--------------------------------
4.14(g), Company is not a party to any collective bargaining agreements
with any unions, guilds, shop committees or other collective bargaining
groups. Copies of all such agreements have heretofore been delivered to
Buyer.
(h) Loan Agreements. Except as set forth in Schedule 4.14(h), Company
---------------
is not obligated under any loan agreement, promissory note, letter of
credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise.
(i) Guarantees. Except as disclosed on Schedule 4.14(i), Company has
----------
not guaranteed the payment or performance of any person, firm or
corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the
obligations of any person.
(j) Contracts Subject to Renegotiation. Company is not a party to any
----------------------------------
contract with any governmental body which is subject to renegotiation.
(k) Burdensome or Restrictive Agreements. Except as set forth in
------------------------------------
Schedule 4.14(k), Company is not a party to nor is it bound by any
agreement requiring Company to assign any interest in any trade secret or
proprietary information, or prohibiting or
22
<PAGE>
restricting Company from competing in any business or geographical area or
soliciting customers or otherwise restricting it from carrying on its
business anywhere in the world.
(l) Other Material Contracts. Company has no lease, license, contract
------------------------
or commitment of any nature involving consideration or other expenditure in
excess of Twenty-Five Thousand Dollars ($25,000) or involving performance
over a period of more than six (6) months, or which is otherwise
individually material to the operations of Company, except as explicitly
described in Schedule 4.14(l) or in any other Schedule.
(m) No Default. Except as set forth in Schedule 4.14(m), Company is
----------
not in default under any lease, contract or commitment, nor has any event
or omission occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or cause the
acceleration of any of Company's obligations or result in the creation of
any Lien on any of the assets owned, used or occupied by Company. To
Company's Knowledge, no third party is in default under any lease, contract
or commitment to which Company is a party, nor has any event or omission
occurred which, through the passage of time or the giving of notice, or
both, would constitute a default thereunder or give rise to an automatic
termination, or the right of discretionary termination, thereof.
4.15. Labor Matters. Except as set forth in Schedule 4.15, since January 1,
1994 Company has not experienced any labor disputes or any work stoppage due to
labor disagreements in connection with its business. Except to the extent set
forth in Schedule 4.15, (a) Company is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to so comply would not
have a Material Adverse Effect, and is not engaged in any unfair labor practice;
(b) there is no unfair labor practice charge or complaint against Company
pending or, to Company's Knowledge, threatened; (c) there is no labor strike,
dispute, request for representation, slowdown or stoppage actually pending or,
to Company's Knowledge, threatened against or affecting Company nor any
secondary boycott with respect to products of Company; (d) no question
concerning representation has been raised or, to Company's Knowledge, is
threatened respecting the employees of Company; (e) no grievance which might
have a Material Adverse Effect, nor any arbitration proceeding arising out of or
under collective bargaining agreements, is pending and, to Company's Knowledge,
no such claim therefor exists; (f) there are no administrative charges or court
complaints against Company concerning alleged employment discrimination or other
employment related matters pending or, to Company's Knowledge, threatened before
the U.S. Equal Employment Opportunity Commission or any Government Entity or
before any federal or state court; and (g) to Company's Knowledge, there are no
investigations, complaints, citations or other proceedings threatened or pending
against Company by the U.S. Occupational, Safety and Health Administration or
any state agency concerning any health or safety matters.
23
<PAGE>
4.16. Employee Benefit Plans.
(a) Disclosure and Delivery of Documents. Schedule 4.16(a) sets forth
------------------------------------
all pension, thrift, savings, profit sharing, retirement, incentive bonus
or other bonus, medical, dental, life, accident insurance, benefit,
employee welfare, disability, group insurance, stock purchase, stock
option, stock appreciation, stock bonus, executive or deferred
compensation, hospitalization and other similar fringe or employee benefit
plans, programs and arrangements, and any employment or consulting
contracts, "golden parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs, arrangements
and policies, including, without limitation, all "employee benefit plans"
(as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), all employee manuals, and all written or
binding oral statements of policies, practices or understandings relating
to employment, which are provided to, for the benefit of, or relate to, any
persons employed by the Company. (Such items, collectively, the "Employee
Plans/Agreements," and individually, an "Employee Plan/Agreement.") True
and correct copies of all the Employee Plans/Agreements, including all
amendments thereto, have heretofore been provided to Buyer, along with, to
the extent applicable to the particular Employee Plan/Agreement, the
following information: a copy of the annual report (form 5500 series) filed
for the last three years, a copy of the summary plan description, summary
annual report, summary of material modifications, and all material manuals
or communications filed or distributed with respect to the Employee
Plan/Agreement during the last three years, and a copy of any insurance
contract or trust agreement through which the Employee Plan/Agreement is
funded, the most recent IRS determination letter issued with respect to the
Employee Plan/Agreement.
(b) Title IV of ERISA. Except as disclosed on Schedule 4.16(b),
-----------------
Company does not maintain or contribute to, and has never maintained or
contributed to, an Employee Plan/Agreement that is subject to Title IV of
ERISA.
(c) Multiemployer Plans. Except as disclosed on Schedule 4.16(c),
-------------------
Company does not contribute and has never contributed (or been obligated to
contribute) to a multiemployer plan as defined in Section 4001(a)(13) of
ERISA.
(d) Controlled Group Status. Except as disclosed on Schedule 4.16(d),
-----------------------
Company is not a member of (i) a controlled group of corporations, (ii) a
group of trades or businesses under common control, or (iii) an affiliated
service group, within the meaning of Sections 414(b), (c) or (m),
respectively, of the Code.
(e) Severance and Post-Retirement Benefits. Except as disclosed on
--------------------------------------
Schedule 4.16(e), Neither Company nor any Employee Plan/Agreement
maintained or contributed to by Company provides or has any obligation to
provide (or contribute toward the cost of) post-retirement welfare benefits
with respect to current or former employees of Seller or any other entity,
including, without limitation, post-retirement medical, dental, life
24
<PAGE>
insurance, severance or any other similar benefit, whether provided on an
insured or self-insured basis.
(f) Payments and Compliance. With respect to each Employee
-----------------------
Plan/Agreement, except as disclosed on Schedule 4.16(f) (i) all payments
due from any such plan (or from Company with respect to any such plan) have
been made, and all amounts properly accrued to date as liabilities of
Company which have not been paid have been properly recorded on the books
of Company; (ii) Company has complied with, and each such Employee
Plan/Agreement conforms in form and operation to, all applicable laws and
regulations, including but not limited to ERISA and the Code in all
material respects.
(g) COBRA. Company has complied with the continuation coverage
-----
requirements of Section 601 through 608 of ERISA, and the requirements of
any similar State law regarding continued insurance coverage, and Company
has incurred no liability with respect to its failure to offer or provide
continued coverage in accordance with the foregoing requirements, nor is
there any suit or action pending or threatened with respect to such
requirements.
4.17. Employment Compensation. Schedule 4.17 contains a true and correct
list of all employees to whom the Company is paying compensation, including
bonuses and incentives, at an annual rate in excess of Fifty Thousand Dollars
($50,000) for services rendered or otherwise; and in the case of salaried
employees such list identifies the current annual rate of compensation for each
employee and in the case of hourly or commission employees identifies certain
reasonable ranges of rates and the number of employees falling within each such
range.
4.18. Trade Rights.
(a) Schedule 4.18(a) lists all Trade Rights of the type described in
clauses (i), (ii), (iii), (iv), (v) or (vi) of Section 1.1(e) in which
Company now has any interest, specifying whether such Trade Rights are
owned, controlled, used or held (under license or otherwise) by Company,
and also indicating which of such Trade Rights are registered. All Trade
Rights shown as registered in Schedule 4.18(a) have been properly
registered, all pending registrations and applications have been properly
made and filed and all annuity, maintenance, renewal and other fees
relating to registrations or applications are current. In order to conduct
the business of Company, as such is currently being conducted or proposed
to be conducted, Company does not require any Trade Rights that it does not
already have. Company is not infringing and has not infringed any Trade
Rights of another in the operation of the business of Company, nor, to
Company's Knowledge, is any other person infringing the Trade Rights of
Company. Company has not granted any license or made any assignment of any
Trade Right listed on Schedule 4.18(a), and no other person has any right
to use any Trade Right owned or held by Company. Company does not pay any
royalties or other consideration for the right to use any Trade Rights of
others. There is no Litigation pending or, to Company's Knowledge,
threatened to challenge Company's right, title and interest with respect to
its continued
25
<PAGE>
use and right to preclude others from using any Trade Rights of Company.
All Trade Rights of Company are valid, enforceable and in good standing,
and there are no equitable defenses to enforcement based on any act or
omission of Company.
(b) Except as disclosed in Schedule 4.18(b), to Company's Knowledge,
Company's internal systems and Company's major suppliers and vendors and
all products and services marketed by Company are fully Year 2000
Compliant. To be "Year 2000 Compliant" an internal system or a product or
service must at all times before, during and after January 1, 2000
accurately process and handle date and time data (including, but not
limited to calculating, comparing and sequencing) from, into and between
the twentieth and twenty-first centuries, and the years 1999 and 2000,
including leap year calculations, to the extent that other information
technology used in combination with such internal systems and such products
and services properly exchange date/time data with it. To the extent any
such internal systems and such products and services must perform as a
system, such internal systems and such products and services used in
combination with other such internal systems and such products and
services, respectively, must properly exchange date/time data with them in
accordance with the foregoing warranty. There are no pending, and to
Company's Knowledge there are no threatened claims against Company relating
to whether the Products and services of Company are Year 2000 Compliant.
4.19. Major Customers and Suppliers.
(a) Major Customers. Schedule 4.19(a) contains a list of the ten (10)
---------------
largest customers, including distributors, of Company for each of the two
(2) most recent fiscal years and for the current fiscal year to the date of
the Recent Balance Sheet (determined on the basis of the total dollar
amount of net sales) showing the total dollar amount of net sales to each
such customer during each such period. To Company's Knowledge, there are no
facts indicating, nor any other reason to believe, that any of the
customers listed on Schedule 4.19(a) shall not continue to be customers of
the business of Company after the Closing at substantially the same level
of purchases as heretofore.
(b) Major Suppliers. Schedule 4.19(b) contains a list of the ten (10)
---------------
largest suppliers to Company for each of the two (2) most recent fiscal
years and for the current fiscal year to the date of the Recent Balance
Sheet (determined on the basis of the total dollar amount of purchases)
showing the total dollar amount of purchases from each such supplier during
each such period. To Company's Knowledge, there are no facts indicating,
nor any other reason to believe, that any of the suppliers listed on
Schedule 4.19(b) shall not continue to be suppliers to the business of
Company after the Closing and shall not continue to supply the business
with substantially the same quantity and quality of goods at competitive
prices.
(c) Dealers and Distributors. Schedule 4.19(c) contains a list by
product line of all sales representatives, dealers, distributors and
franchisees of Company, together with representative copies of all sales
representative, dealer, distributor and franchise
26
<PAGE>
contracts and policy statements, and a description of all substantial
modifications or exceptions.
4.20. Product Warranty and Product Liability. Schedule 4.20 contains a
true, correct and complete copy of Company's standard warranty or warranties for
sales of Products and, except as stated therein, there are no warranties,
commitments or obligations with respect to the return, repair or replacement of
Products. Schedule 4.20 sets forth the estimated aggregate annual cost to
Company of performing warranty obligations for customers for each of the five
(5) preceding fiscal years and the current fiscal year to the date of the Recent
Balance Sheet. Schedule 4.20 contains a description of all product liability
claims and similar Litigation relating to Products manufactured or sold, or
services rendered, which are presently pending or which to Company's Knowledge
are threatened, or which have been asserted or commenced against Company within
the last five (5) years, in which a party thereto either requests injunctive
relief or alleges damages (whether or not covered by insurance) which exceed
$5,000. There are no defects in design, construction or manufacture of Products
which would adversely affect performance or create an unusual risk of injury to
persons or property. Except as disclosed in Schedule 4.20, none of the Products
has been the subject of any replacement, field fix, retrofit, modification or
recall campaign and, to Company's Knowledge, no facts or conditions exist which
could reasonably be expected to result in such a recall campaign. The Products
have been designed, manufactured and labeled so as to meet and comply with all
governmental standards and specifications currently in effect, and have received
all governmental approvals necessary to allow their sale and use. The term
"Products" means any and all products currently or at any time previously
manufactured, distributed or sold by Company, or by any predecessor of Company
under any brand name or mark under which products are or have been manufactured,
distributed or sold by Company.
4.21. Affiliates' Relationships to Company.
(a) Contracts With Affiliates. All leases, contracts, agreements or
-------------------------
other arrangements between Company and any Affiliate are described on
Schedule 4.21(a).
(b) No Adverse Interests. Except as set forth in Schedule 4.21(b), no
--------------------
Affiliate has any direct or indirect interest in (i) any entity which does
business with Company or is competitive with Company's business, or (ii)
any property, asset or right which is used by Company in the conduct of its
business.
(c) Obligations. All obligations of any Affiliate to Company, and all
-----------
obligations of Company to any Affiliate, are listed on Schedule 4.21(c).
4.22. Assets Necessary to Business. The Purchased Assets include all
property and assets (except for the Excluded Assets), tangible and intangible,
and all leases, licenses and other agreements, which are necessary to permit
Buyer to carry on, or currently used or held for use in, the Business as
presently conducted.
4.23. No Brokers or Finders. None of Company, CAL Properties or the
Shareholders, nor any of their directors, officers, employees or agents have
retained, employed or
27
<PAGE>
used any broker or finder in connection with the transaction provided for herein
or in connection with the negotiation thereof. Company and CAL Properties,
jointly and severally, agree to hold Buyer harmless from and against all claims
for brokerage commissions or finder's fees incurred through any act of Company,
CAL Properties or the Shareholders in connection with the execution of this
Agreement or the transactions provided for herein.
4.24. Copies of Certain Documents. Company has heretofore delivered to
Buyer full and complete copies of: (a) all agreements entered into by Company,
if any, providing for the acquisition or disposition of businesses or product
lines; (b) all federal and other tax returns filed by Company and, to the extent
such returns relate to the properties, assets or operations of Company, by any
Shareholder, for the years ended November 28, 1998, November 29, 1997 and
November 30, 1996; and (c) a complete list of all investments of Company, if
any, in marketable or other securities (whether debt or equity).
4.25. Underlying Documents. Any underlying documents listed or described in
the Schedules referred to in this Agreement will be furnished to Buyer or its
representatives. All such documents furnished to Buyer will be true and complete
copies, without any amendments or modifications thereto, except as expressly
noted in the Schedules in which such documents are incorporated. The minute
books of Company contain full, complete and accurate records of all meetings and
other corporate actions taken by the directors and Shareholders of Company.
4.26. Business of Company. Except as set forth in Schedule 4.26, To
Company's Knowledge, there are no conditions existing with respect to the
markets, products, Facilities or personnel of Company which would reasonably be
expected to materially and adversely affect the Business or prospects of
Company, other than such conditions as may generally affect the industry in
which Company participates.
4.27. Disclosure of Material Facts. To Company's Knowledge, Company has
disclosed to Buyer all material facts relating to the condition (financial or
otherwise), of the Business, assets, properties, liabilities, operations or
prospects of Company. The representations and warranties contained in Article 4
of this Agreement and in the Schedules hereto do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained herein or therein not misleading.
ARTICLE
5.
REPRESENTATIONS AND WARRANTIES OF CAL PROPERTIES
CAL Properties makes the following representations and warranties to Buyer,
each of which is true and correct on the date hereof, shall remain true and
correct to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by Buyer, or any knowledge of Buyer
other than as specifically disclosed in the Schedules delivered to Buyer prior
to the Closing of the transactions contemplated by this Agreement, and shall
survive the Closing of the transactions provided for herein for a period of two
years.
28
<PAGE>
5.1. Partnership.
(a) Organization. CAL Properties is a general partnership duly
------------
organized, validly existing and in good standing under the laws of the
State of Minnesota.
(b) Partnership Power. CAL Properties has all requisite partnership
-----------------
power and authority to own, operate and lease its properties, to carry on
its business as and where such is now being conducted, to enter into this
Agreement and the other documents and instruments to be executed and
delivered by CAL Properties pursuant hereto and to carry out the
transactions contemplated hereby and thereby.
(c) Qualification. CAL Properties is duly licensed or qualified to do
-------------
business as a foreign partnership, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased by it,
or the nature of its business, makes such licensing or qualification
necessary except where such failure would not result in a Material Adverse
Effect. The states in which CAL Properties is licensed or qualified to do
business are listed in Schedule 5.1(c).
(d) No Subsidiaries. CAL Properties does not own any interest in any
---------------
corporation, partnership or other entity.
5.2. Authority. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by CAL Properties
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the partners of CAL Properties. No other or
further partnership act or proceeding on the part of CAL Properties is necessary
to authorize this Agreement or the other documents and instruments to be
executed and delivered by CAL Properties pursuant hereto or the consummation of
the transactions contemplated hereby and thereby. This Agreement constitutes,
and when executed and delivered, the other documents and instruments to be
executed and delivered by CAL Properties pursuant hereto shall constitute, valid
binding agreements of CAL Properties, enforceable in accordance with their
respective terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and by
general equitable principles.
5.3. No Violation. Neither the execution and delivery of this Agreement or
the other documents and instruments to be executed and delivered by CAL
Properties pursuant hereto, nor the consummation by CAL Properties of the
transactions contemplated hereby and thereby (a) shall violate any applicable
Law or Order, (b) except for applicable requirements of the HSR Act, shall
require any authorization, consent, approval, exemption or other action by or
notice to any Government Entity (including, without limitation, under any "plant
closing" or similar law), or (c) subject to obtaining the consents referred to
in Section 10.4, shall violate or conflict with, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or shall result in the termination of, or accelerate the performance
required by, or result in the creation of any Lien other than a Permitted Lien
upon any of the assets of CAL Properties under, any term or provision of the
partnership agreement or Bylaws of CAL Properties or of any contract,
commitment, understanding, arrangement, agreement or restriction
29
<PAGE>
of any kind or character to which CAL Properties is a party or by which CAL
Properties or any of its assets or properties may be bound or affected.
5.4. Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 5.4(a), CAL
----------
Properties (including each and all of its operations, practices, properties
and assets) is in compliance, except where such failure would not have a
Material Adverse Effect, with all applicable Laws and Orders relating to
the Owned Real Property. Except as set forth in Schedule 5.4(a), CAL
Properties has not received notice of any violation or alleged violation
of, and is subject to no Liability for past or continuing violation of, any
Laws or Orders relating to the Owned Real Property. All reports and returns
required to be filed by CAL Properties, relating to the Owned Real
Property, with any Government Entity have been filed, and were accurate and
complete, in all material respects, when filed. Without limiting the
generality of the foregoing, the operation of CAL Properties' business as
it is now conducted does not, nor does any condition existing at the Owned
Real Property, in any manner constitute a nuisance or other tortious
interference with the rights of any person or persons in such a manner as
to give rise to or constitute the grounds for a suit, action, claim or
demand by any such person or persons seeking compensation or damages or
seeking to restrain, enjoin or otherwise prohibit any aspect of the conduct
of such business or the manner in which it is now conducted.
(b) Permits and Licenses. CAL Properties has all permits, licenses,
--------------------
approvals, authorizations and consents of all Government Entities required
for the ownership and use of the Owned Real Property, except where the
failure would not have a Material Adverse Effect. All such licenses,
permits, approvals, authorizations and consents are described in Schedule
5.4(b), are in full force and effect and except as otherwise noted on
Schedule 5.4(b) are assignable to Buyer in accordance with the terms
hereof. Except as set forth in Schedule 5.4(b), CAL Properties (including
its operations, properties and assets) is and has been in compliance, in
all material respects, with all such permits and licenses, approvals,
authorizations and consents, except where such failure would not have a
Material Adverse Effect.
(c) Environmental Matters. Without limiting the generality of the
---------------------
foregoing provisions of this Section 5.4, CAL Properties is in compliance
in all material respects with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any
regulations, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except
where the failure to so comply would not have a Material Adverse Effect.
Except as set forth in Schedule 5.4(c), there is no Litigation nor any
demand, claim, hearing or notice of violation pending or threatened against
CAL Properties relating in any way to the Environmental Laws or any Order
issued, entered, promulgated or approved thereunder. Except as set forth in
Schedule 5.4(c), to Company's Knowledge, there are no past or present
events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans
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which may interfere with or prevent compliance or continued compliance with
the Environmental Laws or with any Order issued, entered, promulgated or
approved thereunder, or which may give rise to any Liability, including,
without limitation, Liability under CERCLA or similar state or local Laws ,
or otherwise form the basis of any Litigation, hearing, notice of
violation, study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into
the environment, of any Waste.
5.5. Title to and Condition of Properties.
(a) Marketable Title. CAL Properties has good and marketable and
----------------
insurable title to the Owned Real Property, free and clear of all Liens,
except those described in Schedule 5.5(a) and Permitted Liens. To Company's
Knowledge, all presently existing Permitted Liens (arising under clauses
(a)(ii), (a)(iii), (a)(iv) and (a)(vi) of Section 4.12) are disclosed on
Schedule 5.5(a). The Owned Real Property is not subject to any restrictions
with respect to the transferability thereof. Other than the Company (or an
Affiliate), there are no third parties in or entitled to possession of the
Owned Real Property. CAL Properties has complete and unrestricted power and
right to sell, assign, convey and deliver the Owned Real Property to Buyer
as contemplated hereby and so long as this Agreement remains in force, CAL
Properties shall not lease, convey or otherwise transfer or encumber all or
any part of the Owned Real Property. At Closing, Buyer shall receive good
and marketable title to the Owned Real Property, free and clear of all
Liens of any nature whatsoever except those described in Schedule 5.5(a)
and Permitted Liens.
(b) Condition. All improvements upon the Owned Real Property are in
---------
good condition and repair, ordinary wear and tear excepted, have no
structural defects or defects affecting the plumbing, electrical, sewerage,
or heating, ventilating or air conditioning systems thereto, and have been
maintained consistent with reasonable commercial standards.
(c) Real Property. Schedule 1.1(a) accurately describes the Owned
-------------
Real Property. There are now in full force and effect duly issued
certificates of occupancy permitting the Owned Real Property and
improvements located thereon to be legally used and occupied as the same
are now constituted. Neither the Owned Real Property nor its use is in
violation of any local governmental rule, ordinance, regulation, or
building code, which violation would have a Material Adverse Effect, nor is
there a pending or threatened investigation regarding the possible
violation of the foregoing. There is no claim of adverse possession or
prescriptive rights involving the Owned Real Property, and, to Company's
Knowledge, no basis exists for any such claim. No public improvements have
been commenced and, to CAL Properties' knowledge, none are planned which
may result in special assessments against or otherwise materially adversely
affect the Owned Real Property. No portion of any of the Owned Real
Property has been used as a landfill or for storage or landfill of
hazardous or toxic
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materials. Except as disclosed, CAL Properties has no notice or knowledge
of any (i) planned or proposed increase in assessed valuations of the Owned
Real Property, (ii) Order requiring repair, alteration, or correction of
any existing condition affecting Owned Real Property or the systems or
improvements thereat, (iii) condition or defect which could give rise to an
order of the sort referred to in (ii) above, or (iv) underground storage
tanks, or any structural, mechanical, or other defects of material
significance affecting the Owned Real Property or the systems or
improvements thereat (including, but not limited to, inadequacy for normal
use of mechanical systems or disposal or water systems at or serving the
Owned Real Property).
(d) No Condemnation or Expropriation. Neither the whole nor any
--------------------------------
portion of the Owned Real Property is subject to any Order to be sold or is
being condemned, expropriated or otherwise taken by any Government Entity
with or without payment of compensation therefor, nor to the best of CAL
Properties' knowledge, has any such condemnation, expropriation or taking
been proposed, nor has CAL Properties agreed to or committed to dedicate
any part of the Owned Real Property.
(e) No Certified Survey Map Required. No certified survey map or
--------------------------------
other state, municipal, or other governmental approval regarding the
division, platting, or mapping of real estate is required as a prerequisite
to the conveyance by CAL Properties to Buyer (or as a prerequisite to the
recording of any conveyance document) of the Owned Real Property pursuant
to the terms hereof.
(f) Further Covenants. Except as set forth in Schedule 5.5(f):
-----------------
(i) The Owned Real Property has free and full access to and
from all adjoining streets, roads and highways, and there is no
pending or, to Company's Knowledge, threatened action which would
impair such access.
(ii) The Owned Real Property has not been classified under any
designation authorized by law to obtain a special low ad valorem tax
rate or assessment, or receive either an abatement or deferment of ad
valorem taxes or assessments which, in any such case, will result in
additional, catch-up ad valorem taxes in the future in order to
recover the amounts previously abated or deferred.
(iii) CAL Properties has not received any notice nor is it aware
of any litigation or administrative proceeding pending or threatened
(including the expiration of any appeal period with respect thereto)
relating to the Owned Real Property or its use which may adversely
affect the validity of any license, permit or other governmental
determination or authorization necessary to development and operation
of the Owned Real Property.
(iv) CAL Properties has not entered into nor is CAL Properties
aware of any agreements, commitments or arrangements concerning the
Owned Real Property or development thereof with any person or entity,
including, but not limited to, governmental or quasi-governmental
authorities, agencies,
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departments, commissions, councils, boards or other instrumentalities,
adjoining landowners, public or private utility companies or
authorities, or highway or street authorities, except as set forth in
the Agreement.
(v) CAL Properties has not entered into any agreement which is
presently in effect (other than this Agreement) and leases to the
Company or an Affiliate whereby CAL Properties has agreed to sell,
transfer, hypothecate or otherwise encumber the Owned Real Property,
or whereby CAL Properties has entered into a lease or other agreement
for possession or use of the Owned Real Property, or granted to any
third party an option or a right of first refusal to purchase or lease
all or any part of the Owned Real Property.
(vi) CAL Properties represents that CAL Properties has delivered
or disclosed to Buyer all requested information regarding the Owned
Real Property and has not failed to deliver any material fact of which
it has knowledge regarding the condition of the Owned Real Property.
ARTICLE
6.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Company and
CAL Properties, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date, shall be unaffected
by any investigation heretofore or hereafter made by Company or any notice to
Company, and shall survive the Closing of the transactions provided for herein.
6.1. Corporate.
(a) Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware.
(b) Corporate Power. Buyer has all requisite corporate power to enter
---------------
into this Agreement and the other documents and instruments to be executed
and delivered by Buyer and to carry out the transactions contemplated
hereby and thereby.
6.2. Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Buyer pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors of Buyer. No other corporate
act or proceeding on the part of Buyer or its shareholders is necessary to
authorize this Agreement or the other documents and instruments to be executed
and delivered by Buyer pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer pursuant hereto shall constitute, valid and binding agreements of
Buyer, enforceable in accordance with
33
<PAGE>
their respective terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and by
general equitable principles.
6.3. No Brokers or Finders. Except for Madison Dearborn Partners, Inc.,
neither Buyer nor any of its directors, officers, employees or agents have
retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation thereof.
Buyer agrees to hold Company, CAL Properties and Shareholders harmless from and
against all claims for brokerage commissions or finder's fees incurred through
any act of Buyer in connection with the execution of this Agreement or the
transactions provided for herein.
6.4. No Violation. Neither the execution and delivery of this Agreement or
the other documents and instruments to be executed and delivered by Buyer
pursuant hereto, nor the consummation by Buyer of the transactions contemplated
hereby and thereby (a) shall violate any applicable Law or Order, or (b) except
for applicable requirements of the HSR Act, shall require any authorization,
consent, approval, exemption or other action by or notice to any Government
Entity (including, without limitation, under any "plant closing" or similar
law).
6.5. Disclosure. To Buyer's knowledge, no representation or warranty by
Sellers contains any untrue statement or fact or omits any material fact
necessary in order to make the statements of fact contained therein not
misleading.
ARTICLE
7.
EMPLOYEES EMPLOYEE BENEFITS
7.1. Transferred Employees. As soon as is practicable after the date
hereof, Company shall provide Buyer with Schedule 7.1 which shall be a complete
list of all current employees of the Company including such employees' job
titles and rates of pay. Buyer shall make offers of employment to each such
employee disclosed on Schedule 7.1. Such offers of employment shall contain a
provision for compensation that is substantially similar to each employee's
current compensation. The Company hereby authorizes the Buyer to enter into
discussions with any of such employees concerning the future employment of such
individual by the Buyer; provided, however, that without Company's prior consent
(i) such discussions will not be commenced prior to July 20, 1999 and then only
after the giving of notice by the Company to the employees of the Company of the
transactions contemplated by this Agreement; and (ii) all such discussions will
be conducted in such a manner as not to interfere unreasonably with the business
operations of the Company. Except as otherwise provided in this Agreement, the
terms and conditions of such employment will be established by the Buyer in its
sole discretion. Any such employee who accepts an employment offer with the
Company and reports for work on the date directed by the Buyer shall be
sometimes referred to as a "Transferred Employee." Prior to the Closing Date,
Buyer shall not communicate with either of the Unions representing current
employees of the Company.
7.2. Payroll Tax. Company agrees to make a clean cutoff of payroll and
payroll tax reporting with respect to Transferred Employees paying over to the
federal, state and city
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<PAGE>
governments those amounts respectively withheld or required to be withheld for
periods ending on or prior to the Closing Date. Company also agrees to issue, by
the date prescribed by IRS Regulations, Forms W-2 for wages paid through the
Closing Date. Except as set forth in this Agreement, Buyer shall be responsible
for all payroll and payroll tax obligations after the Closing Date for
Transferred Employees.
7.3. Severance Pay. The Buyer will be responsible for making any required
payment of severance compensation including any notice pay and severance pay in
order to comply with the requirements of the Worker Adjustment and Retraining
Act ("WARN") (or any similar state or local Law) to any employee of the Company
who is (i) not offered employment by the Buyer, (ii) who, as a result of being
offered a position by Buyer which is substantially different than the position
such employee held with Company, refuses to accept any such offer of employment
by the Buyer, or (iii) accepts employment with the Buyer and whose employment is
subsequently terminated by Buyer.
7.4. Participation in Buyer Plans. Each Transferred Employee will be
permitted to participate in the Buyer's benefit plans, policies and practices in
accordance with the terms thereof applicable to newly hired employees and
without regard to service with the Company or any aspect of participation in any
benefit plans, practices or policies of the Company, except (i) a Transferred
Employee will be eligible to participate in the Buyer's medical, dental
disability and life insurance plans effective as of the date in which he or she
becomes a Transferred Employee in accordance with the otherwise applicable terms
of such plans and the Buyer will waive or cause to be waived any pre-existing
condition, exclusions or limitations applicable to such persons under such
medical and dental plans provided such Transferred Employees participated in the
Company's medical or dental plans, as the case may be, on the Closing Date, (ii)
a Transferred Employee who would be eligible to participate in Buyer's employee
pension benefit plans if such Transferred Employee's service with the Company
were counted as eligibility service for purposes of such employee pension
benefit plan will be permitted to enter Buyer's employee pension benefit plan no
later than on the first day of the calendar month after the calendar month in
which Closing occurs and such Transferred Employee's service with the Company
will be counted for vesting purposes with respect to Buyer's employee pension
benefit plan; and (iii) the Buyer will recognize a Transferred Employee's
service with the Company for purposes of the Buyer's vacation, sick pay and
severance policies and (iv) the benefit plans offered by Buyer to Transferred
Employees who are members of a union at the warehouses located in West Saint
Paul, Minnesota and Nashville, Tennessee will be subject to bargaining with the
appropriate union representatives. Prior to the Closing Date, the Company shall
be permitted to disclose to such unions the material provisions contained in
this Article 7, provided that the Company shall keep Buyer apprised of all
communications between the Company and such unions.
7.5. COBRA. Within three business days after the Closing, the Company will
deliver to Buyer a complete and accurate list of the date and nature of the
qualifying event pursuant to which each individual listed on Schedule 7.5 became
covered or eligible to be covered under any "group health plan" maintained by
the Company pursuant to the group health plan continuation requirements of
COBRA, and the last known address of each such individual, together with all
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<PAGE>
documents, records, forms, elections, notices and other materials relating to
such coverage or eligibility to elect such coverage in the possession of any of
or reasonably accessible to the Company. With respect to each individual listed
on Schedule 7.5 who received proper notification of his or her continuation
coverage rights pursuant to COBRA, in connection with any "qualifying event"
that has occurred on or before the Closing Date (including, without limitation
the "qualifying event" caused by the transaction, contemplated hereby) or (ii)
with respect to whom the deadline for providing such notice in connection with
such qualifying event has not passed as of the date of delivery of such list, as
between the Buyer, on the one hand, and the Company, on the other hand, the
Buyer is responsible for providing group health plan continuation coverage in
accordance with COBRA. Except with respect to each individual who becomes
entitled to COBRA benefits as a result of the "qualifying event" caused by the
transaction contemplated hereby, Company will reimburse Buyer for all costs
incurred in providing such coverage.
7.6. Termination of Qualified Plans. On or prior to the Closing Date, the
Company shall terminate the Tru-Part Manufacturing Corporation Profit Sharing
Plan and the Tru-Part Manufacturing Corporation Commissioned Employees' 401(k)
Profit Sharing Plan (collectively, the "Plans"), effective as of the date prior
to the Closing Date. Prior to the Closing Date, or promptly thereafter, the
Company shall, at the Company's expense, take any action required by the Plans
or applicable law in connection with the termination and seek a determination
letter from the IRS relating to the termination of the Plans. As soon as
administratively practicable after receiving a favorable determination letter,
the Company shall, at the Company's expense, complete the distribution of assets
from the Plans and take any other actions necessary to complete the termination
of the Plans. Buyer will allow Transferred Employees (who are still employed by
Buyer at such time) to roll over the distribution of their account balances from
the Plans to Buyer's Plan. Within five (5) days after the Closing Date, Buyer
shall make a contribution to each of the Plans, on behalf of and as an agent for
Company, in an amount equal to the accrued liability for such contributions
shown on the Estimated Closing Balance Sheet.
ARTICLE
8.
OTHER MATTERS
8.1. Title Commitment. Not less than five (5) days prior to the Closing,
CAL Properties at its sole expense, shall provide to Buyer a title insurance
commitment, issued by a title insurance company or companies reasonably
satisfactory to Buyer, agreeing to issue to Buyer standard form owner's policy
of title insurance with respect to the Owned Real Property, together with a copy
of each document to which reference is made in such commitment. Such policy, to
be purchased at Buyer's sole expense, shall be a standard ALTA 1990 Form B
owner's policy in the full amount of the Owned Real Property Purchase Price,
insuring good and marketable title thereto (expressly including all easements
and other appurtenances). The policy shall insure title in full accordance with
the representations and warranties set forth herein and shall be subject only to
such conditions and exceptions as shall be reasonably acceptable to Buyer, and
shall contain such endorsements as Buyer shall reasonably request (including,
but not limited to, an endorsement over rights of creditors, if requested by
Buyer or Buyer's lender).
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<PAGE>
The title commitment shall (i) bear a date subsequent to the date hereof; (ii)
include legible copies of all documents, maps or plats set forth therein as
affecting the Real Property; and (iii) be updated at Closing.
8.2. Environmental and Health and Safety Audits. Buyer, at its sole
expense, shall promptly retain a firm engaged in the regular business of
environmental engineering to conduct such environmental and health and safety
audits of Company's operations and the real estate occupied by Company as Buyer
in its discretion shall consider necessary or appropriate.
8.3. Noncompetition; Confidentiality. Subject to the Closing, and as an
inducement to Buyer to execute this Agreement and complete the transactions
contemplated hereby, and in order to preserve the goodwill associated with the
business of Company being acquired pursuant to this Agreement, and in addition
to and not in limitation of any covenants contained in any agreement executed
and delivered pursuant to this Agreement, Company hereby covenants and agrees as
follows:
(a) Covenant Not to Compete. For a period of two (2) years from the
-----------------------
Closing Date, Company shall not, directly or indirectly:
(i) engage in, continue in or carry on any business which
competes with the Business or is substantially similar thereto,
including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business organization
which is so engaged;
(ii) consult with, advise or assist in any way, whether or not
for consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of Buyer in
any aspect with respect to the Business including, but not limited to,
advertising or otherwise endorsing the products of any such
competitor; soliciting customers or otherwise serving as an
intermediary for any such competitor; loaning money or rendering any
other form of financial assistance to or engaging in any form of
business transaction on other than an arm's length basis with any such
competitor;
(iii) offer employment to any employee of Buyer, including any
Transferred Employee, without the prior written consent of Buyer; or
(iv) engage in any practice the purpose of which is to evade the
provisions of this covenant not to compete;
provided, however, that the foregoing shall not prohibit the ownership of
securities of corporations which are listed on a national securities
exchange or traded in the national over-the-counter market in an amount
which shall not exceed 5% of the outstanding shares of any such
corporation; provided, further, that the foregoing shall not apply to the
N-Complete business being retained by the Company. The parties agree that
the geographic scope of this covenant not to compete shall extend
throughout North America
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<PAGE>
and Company acknowledge that such territory is reasonable in light of the
business of the Company. The parties agree that Buyer may sell, assign or
otherwise transfer this covenant not to compete, in whole or in part, to
any person, corporation, firm or entity that purchases all or part of the
business or the Purchased Assets being acquired by Buyer hereunder. In the
event a court of competent jurisdiction determines that the provisions of
this covenant not to compete are excessively broad as to duration,
geographical scope or activity, it is expressly agreed that this covenant
not to compete shall be construed so that the remaining provisions shall
not be affected, but shall remain in full force and effect, and any such
over broad provisions shall be deemed, without further action on the part
of any person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in such
jurisdiction.
(b) Covenant of Confidentiality. Company shall not at any time
---------------------------
subsequent to the Closing, except as explicitly requested by Buyer, (i) use
for any purpose, (ii) disclose to any person, or (iii) keep or make copies
of documents, tapes, discs or programs containing, any confidential
information concerning Company. For purposes hereof, "confidential
information" shall mean and include, without limitation, all Trade Rights
in which Company has an interest, all customer lists and customer
information, and all other information concerning Company's processes,
apparatus, equipment, packaging, products, marketing and distribution
methods, not already in the public domain.
(c) Equitable Relief for Violations. Company agrees that the
provisions and restrictions contained in this Section 8.3 are necessary to
protect the legitimate continuing interests of Buyer in acquiring the
business and goodwill of the business through the purchase of the Purchased
Assets and the assumption of the Assumed Liabilities, and that any
violation or breach of these provisions shall result in irreparable injury
to Buyer for which a remedy at law would be inadequate and that, in
addition to any relief at law which may be available to Buyer for such
violation or breach and regardless of any other provision contained in this
Agreement, Buyer shall be entitled to injunctive and other equitable relief
as a court may grant after considering the intent of this Section 8.3.
8.4. Product Liability Matters. At or prior to the Closing, Company
at Buyer's expense shall cause Buyer to be named as an additional insured under
each of its occurrence-type policy or policies of insurance insuring against
claims for personal injury and property damage arising out of or resulting from
any products manufactured by Company prior to the Closing Date. At the Closing,
Company shall deliver to Buyer one or more certificates of insurance evidencing
the insurance policy then in effect that has the Buyer named as an additional
insured. Following the Closing, Buyer shall continue to utilize Company's
product serial number system presently in effect or a similar system which shall
permit the manufacturer of the products of the business to be determined.
8.5. Use of Company's Name. Following the Closing, neither Company nor any
Affiliate shall, without the prior written consent of Buyer, make any use of the
name "Tru-Part Manufacturing Corporation" or "TISCO" or any other name
confusingly similar thereto, except
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<PAGE>
as may be necessary for Company to pay its liabilities, prepare tax returns and
other reports, and to otherwise wind up and conclude its business.
8.6. Unemployment Compensation. Company shall, upon the request of Buyer,
cooperate with Buyer in any efforts by Buyer to obtain the transfer of Company's
portion of any state unemployment compensation accounts applicable to
Transferred Employees, to the extent Buyer elects to be a successor to such
accounts. In connection therewith, Company shall execute such documents as Buyer
may reasonably request in order to effectuate such transfer.
8.7. Property Leases. Buyer shall enter into leases for the properties
described on Schedule 8.7 (the "Leased Real Properties") with the lessors
identified on Schedule 8.7 (the "Lessors") on terms and conditions mutually
acceptable to Buyer and Company (the "Lease Agreements").
8.8. Delivery of Schedules. As soon as is practicable after the date
hereof, but in any event at least five (5) days prior to the Closing Date, the
parties shall cooperate to prepare the Schedules contemplated by this Agreement.
The party responsible for preparing any respective Schedule shall provide such
proposed Schedule to the other party. The receiving party shall have an
opportunity to review such Schedule and, prior to the Closing Date, to object to
the form or substance of such Schedule. If no objection is made by the receiving
party prior to the Closing Date, such Schedule shall become part of this
Agreement. If a timely objection is made by the receiving party, the parties
will attempt to resolve the dispute through good faith negotiation. If, in
either parties' sole and absolute discretion, resolution of the dispute cannot
be resolved through good faith negotiation, either party may terminate this
Agreement without liability to the other party pursuant to Article 12 herein.
ARTICLE
9.
FURTHER COVENANTS OF COMPANY
Company covenants and agrees as follows:
9.1. Access to Information and Records. During the period prior to the
Closing:
(a) Company shall give Buyer, its counsel, accountants and other
representatives (i) access during normal business hours to all of the
properties, books, records, contracts and documents of Company for the
purpose of such inspection, investigation and testing as Buyer deems
appropriate (and Company shall furnish or cause to be furnished to Buyer
and its representatives all information with respect to the business and
affairs of Company as Buyer may request); (ii) access to employees, agents
and representatives for the purposes of such meetings and communications as
Buyer reasonably desires; and (iii) with the prior consent of Company in
each instance (which consent shall not be unreasonably withheld), access to
vendors, customers, manufacturers of its machinery and equipment, and
others having business dealings with Company; and
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(b) CAL Properties shall give Buyer and its representatives access to
the Owned Real Estate for purposes of inspection, investigation and testing
upon reasonable advance notice by Buyer.
9.2. Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing by the Buyer:
(a) No Changes. Company shall carry on its business diligently and in
----------
the same manner as heretofore and shall not make or institute any changes
in its methods of purchase, sale, management, accounting or operation.
(b) Maintain Organization. Company shall take such action as may be
---------------------
necessary to maintain, preserve, renew and keep in force and effect the
existence, rights and franchises of Company and shall use its reasonable
best efforts to preserve the business organization of Company intact, to
keep available to Buyer the present officers and employees, and to preserve
for Buyer its present relationships with suppliers and customers and others
having business relationships with Company.
(c) No Breach. Company shall not do or omit any act, which may cause
---------
a breach of any material contract, commitment or obligation, or any breach
of any representation, warranty, covenant or agreement made by Company
herein, or which would have required disclosure on Schedule 4.8 had it
occurred after the date of the Recent Balance Sheet and prior to the date
of this Agreement.
(d) No Material Contracts. No contract or commitment shall be entered
---------------------
into, and no purchase of raw materials or supplies and no sale of goods or
services (real, personal, or mixed, tangible or intangible) shall be made,
by or on behalf of Company, except contracts, commitments, purchases or
sales which are in the ordinary course of business and consistent with past
practice, or are not material to the Company (individually or in the
aggregate) and would not have been required to be disclosed in the
Disclosure Schedule had they been in existence on the date of this
Agreement.
(e) No Corporate Changes. Company shall not amend its Articles of
--------------------
Incorporation or Bylaws or make any changes in authorized or issued capital
stock.
(f) Maintenance of Insurance. Company shall maintain all of the
------------------------
insurance in effect as of the date hereof.
(g) Maintenance of Property. Company shall use, operate, maintain and
-----------------------
repair all property of Company in a prudent business manner consistent with
its past practice.
(h) Interim Financials. Company shall provide Buyer with interim
------------------
monthly financial statements and other management reports as and when they
are available to Company management.
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9.3. Change of Corporate Name. Concurrently with the Closing, Company
shall change its corporate name to a name bearing no resemblance to its present
name so as to permit the use of its present name by Buyer.
9.4. No Negotiations. Unless this Agreement is terminated pursuant to
Article 14, the Company shall not directly or indirectly (through a
representative or otherwise) solicit or furnish any information to any
prospective buyer, commence, or conduct presently ongoing, negotiations with any
other party or enter into any agreement with any other party concerning the sale
of Company, Company's assets or business or any party thereof or any equity
securities of Company (an "Acquisition Proposal"), and Company shall immediately
advise Buyer of the receipt of any Acquisition Proposal.
9.5. Consents. Company shall use its reasonable best efforts prior to
Closing to obtain all consents necessary for the consummation of the
transactions contemplated hereby.
9.6. Other Action. Company shall use its reasonable best efforts to cause
the fulfillment at the earliest practicable date of all of the conditions to the
parties' obligations to consummate the transactions contemplated in this
Agreement.
9.7. Disclosure. Company shall have a continuing obligation to promptly
notify Buyer in writing with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, but no such
disclosure shall cure any breach of any representation or warranty which is
inaccurate.
ARTICLE
10.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
10.1. Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Company and CAL Properties in this
Agreement, and the statements contained in the Schedules or in any instrument,
list, certificate or writing delivered by Company pursuant to this Agreement,
shall be true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing Date as though
such representations and warranties were made or given on and as of the Closing
Date, except for any changes permitted by the terms of this Agreement or
consented to in writing by Buyer.
10.2. Compliance With Agreement. Company and CAL Properties shall have
performed and complied in all material respects with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date, including the delivery of the closing
documents specified in this Agreement.
41
<PAGE>
10.3. Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Company, CAL Properties or any of the affiliates,
officers or directors of any of them, with respect to the transactions
contemplated hereby.
10.4. Consents and Approvals. All approvals, consents and waivers that are
required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to Buyer
not less than two business days prior to the Closing. After the Closing, Company
shall continue to use its reasonable efforts to obtain any consents or
approvals, the receipt of which prior to Closing has been waived by Buyer, and
the Company shall not be relieved of any liability hereunder for failure to
perform any of its respective covenants or for the inaccuracy of any
representation or warranty.
10.5. Title Insurance. CAL Properties shall have delivered to Buyer the
title insurance commitment, dated as of the Closing Date, conforming to the
specifications set forth in Section 8.1 hereof.
10.6. Hart-Scott-Rodino Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
10.7. Environmental and Health and Safety Audit. The results of the
environmental and health and safety audit conducted pursuant to Section 8.2
shall not have disclosed any past or present condition, process or practice with
respect to Company or any property owned, occupied or operated by Company which
is not in full compliance with all applicable Environmental Laws.
10.8. Due Diligence. Buyer and its accountants, counsel, and other
authorized representatives shall have been afforded access as provided in
Section 9.1, and Buyer shall be satisfied, in its sole discretion (and without
waiving any liability of Company, CAL Properties or Shareholders for a breach of
the representations and warranties made by them in this Agreement), with the
condition and nature of the Purchased Assets and the Assumed Liabilities.
10.9. Employment Agreement. Buyer and L.W. "Bill" Templeton shall have
reached a mutually satisfactory agreement for Mr. Templeton's employment by
Buyer for an initial term of two (2) years commencing on the Closing Date.
10.10. Escrow Agreement. Company, Buyer and the escrow agent shall have
executed the Escrow Agreement.
10.11. Lease Agreements. Buyer, as lessee, and the Lessors shall have
entered into the Lease Agreements. Any lease agreements between the Lessors and
Company shall have been terminated.
10.12. Noncompetition Agreements. Buyer and each of the Shareholders shall
have entered into noncompetition agreements in a form and substance satisfactory
to Shareholders
42
<PAGE>
calling for aggregate payments to Shareholders of $500,000 (the "Shareholder
Noncompetition Agreements").
ARTICLE
11.
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
Each and every obligation of Sellers and Shareholders to be performed on
the Closing Date shall be subject to the satisfaction prior to or at the Closing
of the following conditions:
11.1. Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made or given on and as of the Closing Date.
11.2. Compliance With Agreement. Buyer shall have performed and complied
in all material respects with all of Buyer's agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
on the Closing Date, including the delivery of the closing documents specified
in Section 13.2.
11.3. Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Company or any of the affiliates, officers or
directors of any of them, with respect to the transactions contemplated hereby.
11.4. Hart-Scott-Rodino Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
11.5. Escrow Agreement. Company, Buyer and the escrow agent shall have
executed the Escrow Agreement.
11.6. Lease Agreements. Buyer, as lessee, and the Lessors shall have
entered into the Lease Agreements.
ARTICLE
12.
INDEMNIFICATION
12.1. By Company and CAL Properties. Subject to the terms and conditions
of this Article 12, Company and CAL Properties hereby agree to indemnify, defend
and hold harmless Buyer, and its directors, officers, employees and controlled
and controlling persons ("Buyer's Affiliates"), from and against all Claims
asserted against, resulting to, imposed upon, or incurred by Buyer, Buyer's
Affiliates or the business and assets transferred to Buyer pursuant to this
Agreement, directly or indirectly, by reason of, arising out of or resulting
from (a) the inaccuracy or breach of any representation or warranty of Company
or CAL Properties contained in or made
43
<PAGE>
pursuant to this Agreement; (b) the breach of any covenant of Company or CAL
Properties contained in this Agreement; or (c) the Excluded Liabilities. As used
in this Article 12, the term "Claim" shall include (i) all Liabilities; (ii) all
losses, damages (but excluding any claims for consequential damages, lost
profits, or punitive damages), judgments, awards, settlements, costs and
expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties (except penalties imposed on Buyer
due to its own actions or inactions), court costs and attorneys fees and
expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings and assessments, whether or not
ultimately determined to be valid.
12.2. By Buyer. Subject to the terms and conditions of this Article 12,
Buyer hereby agrees to indemnify, defend and hold harmless Company and CAL
Properties, their directors, officers, employees and controlling persons, and
each Shareholder from and against all Claims asserted against, resulting to,
imposed upon or incurred by any such person, directly or indirectly, by reason
of or resulting from (a) the inaccuracy or breach of any representation or
warranty of Buyer contained in or made pursuant to this Agreement; (b) the
breach of any covenant of Buyer contained in this Agreement; (c) the Assumed
Liabilities; or (d) the operation of the Business after the Closing Date.
12.3. Indemnification of Third Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article 12 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
(a) Notice and Defense. The party or parties to be indemnified
------------------
(whether one or more, the "Indemnified Party") shall give the party from
whom indemnification is sought (the "Indemnifying Party") prompt written
notice of any such Claim, and the Indemnifying Party shall undertake the
defense thereof by representatives chosen by it. Failure to give such
notice shall not affect the Indemnifying Party's duty or obligations under
this Article 12, except to the extent the Indemnifying Party is prejudiced
thereby. So long as the Indemnifying Party is defending any such Claim
actively and in good faith, the Indemnified Party shall not settle such
Claim. The Indemnified Party shall make available to the Indemnifying Party
or its representatives all records and other materials reasonably required
by them and in the possession or under the control of the Indemnified
Party, for the use of the Indemnifying Party and its representatives in
defending any such Claim, and shall in other respects give reasonable
cooperation in such defense.
(b) Failure to Defend. If the Indemnifying Party, within a reasonable
-----------------
time after notice of any such Claim, fails to defend such Claim actively
and in good faith, the Indemnified Party shall (upon further notice) have
the right to undertake the defense, compromise or settlement of such Claim
or consent to the entry of a judgment with respect to such Claim, on behalf
of and for the account and risk of the Indemnifying Party, and the
Indemnifying Party shall thereafter have no right to challenge the
Indemnified Party's defense, compromise, settlement or consent to judgment.
44
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(c) Indemnified Party's Rights. Anything in this Article 12 to the
--------------------------
contrary notwithstanding, (i) if there is a reasonable probability that a
Claim may materially and adversely affect the Indemnified Party other than
as a result of money damages or other money payments, the Indemnified Party
shall have the right to defend, compromise or settle such Claim, and (ii)
the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry
of any judgment which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party of a
release from all Liability in respect of such Claim.
12.4. Payment.
(a) Time for Payment. Upon judgment, determination, settlement or
----------------
compromise of any third party Claim, the Indemnifying Party shall pay
promptly on behalf of the Indemnified Party, and/or to the Indemnified
Party in reimbursement of any amount theretofore required to be paid by it,
the amount so determined by judgment, determination, settlement or
compromise and all other Claims of the Indemnified Party with respect
thereto, unless in the case of a judgment an appeal is made from the
judgment. If the Indemnifying Party desires to appeal from an adverse
judgment, then the Indemnifying Party shall post and pay the cost of the
security or bond to stay execution of the judgment pending appeal.
Notwithstanding the foregoing, if the Claims of the Indemnified Party with
respect to any particular matter exceed One Hundred Thousand Dollars
($100,000), the Indemnifying Party shall be required to advance funds to
Indemnified Party against ongoing Claims pending final resolution of the
matter by judgment, determination, settlement or compromise.
(b) Effect of Payment. Upon the payment in full by the Indemnifying
-----------------
Party of such amounts, the Indemnifying Party shall succeed to the rights
of such Indemnified Party, to the extent not waived in settlement, against
the third party who made such third party Claim.
12.5. Limitations on Indemnification.
(a) Time Limitation. No claim or action shall be brought under this
---------------
Article 12 for breach of a representation or warranty after the lapse of
two (2) years following the Closing, except as to Claims of which notice
has been given to the Indemnifying Party prior to the expiration of such
period. Regardless of the foregoing, however, or any other provision of
this Agreement:
(i) There shall be no time limitation on, and Company and CAL
Properties hereby waive all applicable statutory limitation periods
with respect to, Claims (A) for breach of Section 4.12(a) or 5.5(a) or
(B) based upon fraud in connection with the sale of the Purchased
Assets to Buyer ("Fraud and Title Claims").
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<PAGE>
(ii) If any act, omission, disclosure or failure to disclose
shall form the basis for a claim for breach of more than one
representation or warranty, and such claims have different periods of
survival hereunder, the termination of the survival period of one
claim shall not affect a party's right to make a claim based on the
breach of representation or warranty still surviving.
(b) Amount Limitation.
-----------------
(i) Notwithstanding any provision of this Article 12 to the
contrary, no claim for indemnification shall be deemed to arise unless
and until the aggregate claims of a party shall exceed Fifty Thousand
Dollars ($50,000); but, in such event, the Indemnified Party shall be
entitled to indemnification in full for all Claims.
(ii) Sellers shall have no liability for indemnification
pursuant to this Article 12 for any amounts in excess of the Escrow
Amount; provided, however, that such limitation shall not apply to
Fraud and Title Claims.
(c) Waiver. The closing of the transactions contemplated by this
------
Agreement shall constitute a waiver by any party of its rights to
indemnification hereunder, if the party seeking indemnification has actual
knowledge of the breach, violation or failure of condition constituting the
basis of the Claim at or before the Closing.
(d) Tax and Insurance Reduction. All claims or indemnification by
---------------------------
any party hereto shall be determined net of: (i) any proceeds of insurance
coverage payable to the Indemnified Party with respect to such claim, and
(ii) any tax benefit realized by the Indemnified Party resulting from the
claim, and (iii) in the case where the Indemnified Party is the Buyer, any
adverse effects on Buyer's future depreciation and amortization deductions
resulting from the purchase price adjustments caused by the indemnification
payments.
(e) Source of Indemnification. The Buyer acknowledges and agrees
-------------------------
that with respect to all claims for indemnification (other than Fraud and
Title Claims, (i) the Buyer's sole source of seeking reimbursement for such
claims shall be the escrow account established pursuant to the Escrow
Agreement, and (ii) Buyer is not entitled to indemnification from the
Sellers (or their successors or assigns) in excess of the Escrow Amount,
nor is it entitled to any further indemnification once the Escrow Amount
has been properly distributed pursuant to the Escrow Agreement.
(f) Limitation on Remedies. Notwithstanding anything contained in
----------------------
this Agreement to the contrary, either party shall only have the right to
make a claim against the other party for damages (other than an
indemnification claim pursuant to this Article 12) if the non-claiming
party has willfully and materially breached any of its representations,
covenants or agreements set forth in this Agreement. For purposes of this
provision, a party shall be deemed to have willfully breached any of its
representations, covenants or agreements set forth in this Agreement if
such party has
46
<PAGE>
intentionally and knowingly taken, or intentionally and knowingly failed to
take, any action which causes a breach of any of its representations,
covenants or agreements set forth in this Agreement.
ARTICLE
13.
CLOSING
The closing of this transaction (the "Closing") shall take place at the
offices of Foley & Lardner, 330 N. Wabash Avenue, Suite 3300, Chicago, Illinois
on such date and time as Buyers and Sellers shall agree upon. Such date is
referred to in this Agreement as the "Closing Date".
13.1. Documents to be Delivered by Company and CAL Properties. At the
Closing, Company and CAL Properties shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
(a) Deeds, Bills of Sale. Warranty deeds to real estate and bills of
--------------------
sale and such other instruments of assignment, transfer, conveyance and
endorsement as shall be sufficient in the opinion of Buyer and its counsel
to transfer, assign, convey and deliver to Buyer the Purchased Assets as
contemplated hereby.
(b) Compliance Certificate. A certificate signed by an officer of
----------------------
Company and a partner of CAL Properties, respectively, that each of the
representations and warranties made by them, respectively, in this
Agreement is true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date (except for
any changes permitted by the terms of this Agreement or consented to in
writing by Buyer), and that Company and CAL Properties have performed and
complied with all of Company's and CAL Properties' obligations under this
Agreement which are to be performed or complied with on or prior to the
Closing Date.
(c) Opinion of Counsel. A written opinion of Oppenheimer, Wolff &
------------------
Donnelly, counsel to Sellers and Shareholders, dated as of the Closing
Date, addressed to Buyer and to Credit Suisse First Boston, as
Administrative Agent, in a form mutually acceptable to each party.
(d) Lease Agreements. The Lease Agreements.
----------------
(e) Certified Resolutions. A certified copy of the resolutions of the
---------------------
Boards of Directors and shareholders of Company authorizing and approving
this Agreement and the consummation of the transactions contemplated by
this Agreement.
(f) Escrow Agreement. The Escrow Agreement.
----------------
(g) Articles; Bylaws; Good Standing. A copy of the corporate charter
-------------------------------
of Company certified by the Secretary of State of the state of its
incorporation, a copy of the
47
<PAGE>
Bylaws of Company certified by its corporate secretary, and copies of a
good standing certificate of Company from the Secretary of State of its
state of incorporation and each state Company is qualified to do business
as a foreign corporation.
(h) Incumbency Certificate. Incumbency certificates relating to each
----------------------
person executing any document executed and delivered to Buyer pursuant to
the terms hereof.
(i) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to Buyer at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
(j) Noncompetition Agreements. The Shareholder Noncompetition
-------------------------
Agreements.
13.2. Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Company the following documents, in each case duly executed or
otherwise in proper form:
(a) Cash Purchase Price. To Company, a wire transfer as required by
-------------------
Section 3.2(c); to the Escrow Agent a wire transfer as required by Section
3.2(b); and to CAL Properties a wire transfer as required by Section 3.2(d)
hereof.
(b) Assumption of Liabilities. Such undertakings and instruments of
-------------------------
assumption as are reasonably sufficient in the opinion of Company and its
counsel to evidence the assumption by Buyer of the Assumed Liabilities.
(c) Compliance Certificate. A certificate signed by an officer of
----------------------
Buyer that the representations and warranties made by Buyer in this
Agreement are true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given
on and as of the Closing Date (except for any changes permitted by the
terms of this Agreement or consented to in writing by Company), and that
Buyer has performed and complied with all of Buyer's obligations under this
Agreement which are to be performed or complied with on or prior to the
Closing Date.
(d) Opinion of Counsel. A written opinion of Foley & Lardner, counsel
------------------
to Buyer, dated as of the Closing Date, addressed to Company and
Shareholders, in a form mutually acceptable to each party.
(e) Lease Agreements. The Lease Agreements.
----------------
(f) Certified Resolutions. A certified copy of the resolutions of the
---------------------
Board of Directors of Buyer authorizing and approving this Agreement and
the consummation of the transactions contemplated by this Agreement.
(g) Escrow Agreement. The Escrow Agreement.
----------------
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<PAGE>
(h) Incumbency Certificate. Incumbency certificates relating to each
----------------------
person executing any document executed and delivered to Company by Buyer
pursuant to the terms hereof.
(i) Noncompetition Agreements. The Shareholder Noncompetition
-------------------------
Agreements.
(j) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to Company at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Company may reasonably request.
ARTICLE
14.
TERMINATION
14.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
(a) by mutual written agreement of Buyer and Sellers;
(b) by either Buyer or Sellers if the Closing shall not have occurred
on or before September 1, 1999, provided the terminating party has not,
through breach of a representation, warranty or covenant, prevented the
Closing from occurring on or before such date;
(c) by either Buyer or Sellers if any of the Schedules to be
delivered in connection herewith are not satisfactory to each party in each
parties' sole and absolute discretion; or
(d) by either the Buyer or the Sellers if any of (i) the Lease
Agreements, (ii) the Escrow Agreement, (iii) the Non-Compete Agreements, or
(iv) any other agreement to be delivered by either party in connection with
the closing of the transactions contemplated hereby are not satisfactory to
each party in such party's sole and absolute discretion.
14.2. Termination by Buyer. If (i) there has been a material violation or
breach by Sellers of any of the agreements, representations or warranties
contained in this Agreement which has not been waived in writing by Buyer, or
(ii) there has been a failure of satisfaction of a condition to the obligations
of Buyer which Buyer has not waived in writing, or (iii) Sellers shall have
attempted to terminate this Agreement under this Article 14 or otherwise without
grounds to do so, then Buyer may, by written notice to Sellers at any time prior
to the Closing that such violation, breach, failure or wrongful termination
attempt is continuing, terminate this Agreement with the effect set forth in
Section 14.4 hereof.
14.3. Termination by Sellers. If (i) there has been a material violation
or breach by Buyer of any of the agreements, representations or warranties
contained in this Agreement which
49
<PAGE>
has not been waived in writing by Sellers, or (ii) there has been a failure of
satisfaction of a condition to the obligations of Sellers which Sellers has not
waived in writing, (iii) by Sellers if the Title Commitment discloses defects to
title, which, in Seller's reasonable estimation, would require an expenditure of
more than $100,000 to cure; or (iv) Buyer shall have attempted to terminate this
Agreement under this Article 14 or otherwise without grounds to do so, then
Sellers may, by written notice to Buyer at any time prior to the Closing that
such violation, breach, failure or wrongful termination attempt is continuing,
terminate this Agreement with the effect set forth in Section 14.4 hereof.
14.4. Effect of Termination. In the event of termination and abandonment
pursuant to this Article 14, written notice thereof shall forthwith be given to
the other party or parties, the provisions of this Agreement shall terminate,
and the transactions contemplated herein shall be abandoned, without further
action by any party hereto. If this Agreement is terminated as provided herein:
(i) each party will, upon request, redeliver all documents, work papers and
other material of any other party (and all copies thereof) relating to the
transactions contemplated herein, whether so obtained before or after the
execution hereof, to the party furnishing the same; (ii) the Confidentiality
Agreement dated December 4, 1998 shall remain in full force and effect; and
(iii) no party shall have any liability for a breach of representation,
warranty, agreement, covenant or other provision of this Agreement, unless such
breach was due to a willful or bad faith action or omission of such party or any
representative, agent, employee or independent contractor thereof.
ARTICLE
15.
MISCELLANEOUS
15.1. Further Assurance. From time to time, at Buyer's request and without
further consideration, Company and CAL Properties shall execute and deliver to
Buyer such documents and take such other action as Buyer may reasonably request
in order to consummate more effectively the transactions contemplated hereby and
to vest in Buyer good, valid and marketable title to the business and assets
being transferred hereunder.
15.2. Disclosures and Announcements. Both the timing and the content of
all disclosure to third parties and public announcements concerning the
transactions provided for in this Agreement by either Sellers or Buyer shall be
subject to the approval of the other in all essential respects.
15.3. Assignment; Parties in Interest.
(a) Assignment. Except as expressly provided herein, the rights and
----------
obligations of a party hereunder may not be assigned, transferred or
encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, (i) Buyer may, without consent of any other
party, cause one or more subsidiaries of Buyer to carry out all or part of
the transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any
such subsidiary, hereunder; and (ii) Buyer may assign its interest in this
Agreement to Credit
50
<PAGE>
Suisse First Boston, as agent, as additional security for Buyer's
obligations to such lender and Sellers agree to execute such documents as
reasonably may be required by such lender in order to effect such
assignment.
(b) Parties in Interest. This Agreement shall be binding upon, inure
-------------------
to the benefit of, and be enforceable by the respective successors and
permitted assigns of the parties hereto. Nothing contained herein shall be
deemed to confer upon any other person any right or remedy under or by
reason of this Agreement.
15.4. Amendment and Modification. The parties hereto may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing.
15.5. Notice. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, demands or requests are as
follows:
(a) If to Buyer, to:
Woods Equipment Company
6944 Newburg Road
Rockford, Illinois 61108
Attention: Thomas J. Laird
Facsimile: (815) 732-6047
(with a copy, which copy shall not constitute notice, to)
Madison Dearborn Partners, Inc.
Three First National Plaza
Suite No. 3800
Chicago, Illinois 60602
Attention: Paul R. Wood
Facsimile: (312) 895-1156
(and to)
Foley & Lardner
One IBM Plaza, Suite 3300
Chicago, Illinois 60611
Attention: Stephen M. Slavin
Facsimile: (312) 755-1925
or to such other person or address as Buyer shall furnish to Company in writing.
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<PAGE>
(b) If to Sellers or Shareholders, to:
Tru-Part Manufacturing Corporation
200 Lothenbach Avenue
St. Paul, Minnesota 55118
Attention: Benjamin B. Calmenson
Facsimile: (651) 450-8807
and
Tru-Part Manufacturing Corporation
200 Lothenbach Avenue
St. Paul, Minnesota 55118
Attention: Calvin B. Calmenson
Facsimile: (651) 450-8807
(with copies, which copies shall not constitute notice, to)
Oppenheimer, Wolff & Donnelly
3400 Plaza VII
45 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Kevin M. Klemz
Facsimile: (612) 607-7100
and
Grant Thornton, LLP
500 Pillsbury Center
200 South Sixth Street
Minneapolis, Minnesota 55402
Attention: James C. Phillips
Facsimile: (612) 677-5364
or to such other person or address as Company shall furnish to Buyer in writing.
If personally delivered or sent by overnight courier, such communication
shall be deemed delivered upon actual receipt; if electronically transmitted
pursuant to this paragraph, such communication shall be deemed delivered the
next business day after transmission (and sender shall bear the burden of proof
of delivery); and if sent by U.S. mail pursuant to this paragraph, such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Any party
to this Agreement may change its address for the purposes of this Agreement by
giving notice thereof in accordance with this Section.
52
<PAGE>
15.6. Expenses. Regardless of whether or not the transactions contemplated
hereby are consummated:
(a) Expenses to be Paid by Buyer. Buyer shall pay for the following:
----------------------------
(i) Environmental Audit. The fees and other expenses relating
-------------------
to the environmental audit performed pursuant to Section 8.2 hereof.
(ii) HSR Filing. The filing fees relating to the applicable
----------
requirements of the HSR Act.
(iii) SAS 71 Fees. The fees of Grant Thornton associated with the
-----------
SAS 71 review.
(iv) Professional Fees. All fees and expenses of Buyer's legal,
-----------------
accounting, investment banking and other professional counsel in
connection with the transactions contemplated hereby.
(b) Expenses to be Paid by Sellers. Sellers shall pay, and shall
------------------------------
indemnify, defend and hold Buyer harmless from and against, each of the
following:
(i) Professional Fees. All fees and expenses of Company's
-----------------
legal, accounting, investment banking and other professional counsel
in connection with the transactions contemplated hereby.
(ii) Title Commitment. All fees and expenses relating to
----------------
obtaining the title commitment as contemplated by Section 8.1.
(c) Other. Except as otherwise provided herein, each of the parties
-----
shall bear its own expenses and the expenses of its counsel and other
agents in connection with the transactions contemplated hereby.
(d) Costs of Litigation or Arbitration. The parties agree that the
----------------------------------
prevailing party in any action brought with respect to or to enforce any
right or remedy under this Agreement shall be entitled to recover from the
other party or parties all reasonable costs and expenses of any nature
whatsoever incurred by the prevailing party in connection with such action,
including without limitation attorneys' fees and prejudgment interest.
15.7 Entire Agreement. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
15.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
53
<PAGE>
15.9 Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
15.10. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
15.11. Shareholder Guarantee. Each of the Shareholders severally and not
jointly, hereby unconditionally guarantees the obligation of the Sellers to
indemnify the Buyer for any Fraud and Title Claim successfully asserted by Buyer
pursuant to Article 12. Any payments due under this Section 15.11 may be
accomplished in whole or in part, at the option of the Buyer, by setting off any
amount owed to the Shareholders by the Buyer. To the extent setoff is made by
the Buyer in satisfaction or partial satisfaction of an obligation under this
Section 15.11 that is disputed by the Shareholders, upon a subsequent
determination by final judgment not subject to appeal that all or a portion of
such obligation was not owed to the Buyer, the Buyer shall pay the Shareholders
the amount which was set off and not owed together with interest from the date
of setoff until the date of such payment at an annual rate equal to the Prime
Rate as published in the Wall Street Journal.
15.12. Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Acquisition Proposal" - Section 9.4
"Affiliate" - Section 1.2(e)
"Assumed Liabilities" - Section 2.1
"Average Accounts Payable" - Section 3.2(e)
"Average Accounts Receivable" - Section 3.2(e)
"Average Accrued Expenses" - Section 3.2(e)
"Average Inventories" - Section 3.2(e)
"Average Working Capital" - Section 3.2(e)
"Business" - Recitals
"Buyer's Accountants" - Section 3.3(b)
"Buyer's Affiliates" - Section 12.1
"Cash Amount" - Section 3.1(a)
"CERCLA" - Section 4.11(c)
"Claim" - Section 12.1
"Closing" - Preamble to Article 13
"Closing Date" - Preamble to Article 13
"Code" - Section 3.6
"Company Assets" - Section 1.1
"Company Purchase Price" - Section 3.1(a)
"Company's Accountants" - Section 3.3(b)(ii)
"Company's Knowledge" - Section 4.6
"Contracts" - Section 1.1(f)
54
<PAGE>
"Closing Date" - Section 3.3(a)
"Employee Plans/Agreements" - Section 4.16(a)
"Environmental Laws" - Section 4.11(c)
"ERISA" - Section 4.16(a)
"Escrow Agreement" - Section 3.2(b)
"Escrow Amount" - Section 3.2(b)
"Estimated Closing Balance Sheet" - Section 3.3(a)
"Excluded Contracts" - Section 1.1(i)
"Excluded Assets" - Section 1.2
"Facilities" - Recitals
"Final Closing Balance Sheet" - Section 3.3(b)(iii)
"Fraud and Title Claims" - Section 12.5(a)(i)
"Government Entities" - Section 4.3
"HSR Act" - Section 4.3
"IRS" - Section 3.6
"Indemnified Party" - Section 12.3(a)
"Indemnifying Party" - Section 12.3(a)
"Inventory" - Section 1.1(c)
"Laws" - Section 4.3
"Lease Agreement" - Section 8.7
"Leased Real Properties" - Section 8.7
"Lessors" - Section 8.7
"Liability" - Section 2.1
"Liens" - Section 4.12(a)
"Litigation" - Section 4.10
"Material Adverse Effect" - Section 4.1(c)
"Orders" - Section 4.3
"Owned Property Purchase Price" - Section 3.1(b)
"Owned Real Property" - Section 1.1(a)
"Permitted Liens" - Section 4.12(a)
"Personal Property Leases" - Section 1.1(d)
"Plans" - Section 7.6
"Products" - Section 4.20
"Proration" - Section 3.4
"Purchased Assets" - Section 1.1
"Purchase Price Adjustment" - Section 3.2(e)
"Real Property" - Section 4.12(c)
"Real Property Leases" - Section 8.7
"Recent Balance Sheet" - Section 4.4
"Schedules" - Preamble to Article 4
"Sellers" - Section 1.1
"Settlement Date" - Section 3.2(e)
"Shareholder Noncompetition Agreements" - Section 10.12
"Third Accounting Firm" - Section 3.3(b)(iii)
"Trade Rights" - Section 1.1(e)
55
<PAGE>
"Transferred Employee" - Section 7.1
"WARN" - Section 7.3
"Waste" - Section 4.11(c)
"Year 2000 Compliant" - Section 4.18(b)
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
56
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
WEC COMPANY
By: /s/ Steven M. Vandemore
----------------------------------
Its: Vice President
TRU-PART MANUFACTURING
CORPORATION
By: /s/ Benjamin B. Calmenson
----------------------------------
Its: Chairman of Board
CAL PROPERTIES
By: /s/ Robert J. Calmenson
----------------------------------
Its: Managing Partner
SHAREHOLDERS:
/s/ Benjamin B. Calmenson
-------------------------------------
Benjamin B. Calmenson, as to Section 15.11
only
/s/ Calvin B. Calmenson
-------------------------------------
Calvin B. Calmenson, as to Section 15.11 only
/s/ Robert L. Calmenson
-------------------------------------
Robert L. Calmenson, as to Section 15.11 only
57
<PAGE>
/s/ Buddy Howell
-------------------------------------
Buddy Howell, as to Section 15.11 only
58
<PAGE>
EXHIBIT 2.4
AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT is entered into as of the 28/th/ day of July, 1999, by and
among WEC Company ("Buyer"), Tru-Part Manufacturing Corporation ("Company"), CAL
Properties, and the Shareholders listed below, and amends that certain Asset
Purchase Agreement dated as of July 1, 1999 (the "Purchase Agreement") by and
among the parties.
1. Amendment to Section 1.1(J): Section 1.1(j) of the Purchase Agreement
---------------------------
is hereby restated in its entirety as follows:
(j) Notes and Accounts Receivable. All notes, drafts and
-----------------------------
accounts receivable of Company, except for those described in Sections
1.2(d), 1.2(e), 1.2(g) and 1.2(j).
2. Amendment to Section 1.2 and additional Defined Term: There is hereby
----------------------------------------------------
added to Section 1.2 of the Purchase Agreement the following subsection (j) and
the additional defined term "Excluded Receivables":
(j) Excluded Receivables. Accounts receivable outstanding on
--------------------
the Closing Date and identified in Schedule 1.2(j), to a maximum of One
Million Three Hundred Thousand Dollars ($1,300,000) (such accounts to the
extent of such maximum, the "Excluded Receivables"). Collection of Excluded
Receivables shall be effected in the manner described in Section 8.9.
3. Amendment to Section 7.1: The second sentence of Section 7.1 of the
------------------------
Purchase Agreement is hereby restated in its entirety as follows:
Buyer shall make offers of employment to each employee disclosed on
Schedule 7.1 other than the Shareholders and the Shareholders' spouses.
4. Amendment to Article 8: There is hereby added to Article 8 of the
----------------------
Purchase Agreement a new Section 8.9 as follows:
8.9 Collection of Excluded Receivables. During the Collections
Period (as defined below), Buyer shall collect the Excluded Receivables in
accordance with its normal business practices for Company's account. All
collected Excluded Receivables shall be disbursed to Company at the
conclusion of the Collections Period. As used in this Section 8.9,
"Collections Period" shall mean a period of time beginning on the first
business day following the Closing Date and continuing until such time as
Buyer has collected a total of $1,300,000 in Excluded Receivables or, if
earlier, August 27, 1999. Nothing in this Agreement shall be construed to
guarantee to
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<PAGE>
Company that Buyer will collect a total of $1,300,000 in Excluded
Receivables during the Collections Period.
5. Remainder of Agreement Unaffected: All other provisions of the Purchase
---------------------------------
Agreement are unchanged by this Amendment.
(The next page is the signature page.)
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
and year first above written.
WEC COMPANY
By: /s/ Steven M. Vandemore
---------------------------------------
Steven M. Vandemore, Vice President
TRU-PART MANUFACTURING
CORPORATION
By: /s/ B.B. Calmenson
--------------------------------------
Its: Chairman of Board
CAL PROPERTIES
By: /s/ Robert Calmenson
--------------------------------------
Its: General Partner
SHAREHOLDERS:
/s/ Benjamin B. Calmenson
---------------------------------------
Benjamin B. Calmenson
/s/ Calvin B. Calmenson
---------------------------------------
Calvin B. Calmenson
/s/ Robert L. Calmenson
---------------------------------------
Robert L. Calmenson
/s/ Buddy Howell
---------------------------------------
Buddy Howell
-3-
<PAGE>
EXHIBIT 2.5
====================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
WEC COMPANY
("BUYER"),
C. CHRISTOPHER ZANETIS,
ANN B. ZANETIS,
MARK R. KINDER,
REBA M. KINDER,
WILLIAM J. BETHARDS, AND
ROBERT E. BETHARDS
(COLLECTIVELY, "SHAREHOLDERS")
AND
ZANETIS ENTERPRISES, LLC
(THE "LLC")
DATED AS OF JULY 30, 1999
====================================================================
<PAGE>
<TABLE>
<S> <C>
ARTICLE I PURCHASE AND SALE 1
1.01 Purchase and Sale of Shares...................................................... 1
ARTICLE II PURCHASE PRICE - PAYMENT 2
2.01 Purchase Price................................................................... 2
2.02 Payment of Purchase Price........................................................ 2
2.03 Determination of Working Capital Value and Indebtedness Amount................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS 5
3.01 Corporate........................................................................ 6
3.02 No Violation..................................................................... 6
3.03 Financial Statements............................................................. 6
3.04 Shareholders..................................................................... 7
3.05 Capitalization................................................................... 7
3.06 Tax Matters...................................................................... 7
3.07 Accounts Receivable.............................................................. 9
3.08 Inventory........................................................................ 9
3.09 Absence of Certain Changes....................................................... 9
3.10 Absence of Undisclosed Liabilities............................................... 11
3.11 No Litigation.................................................................... 11
3.12 Compliance With Laws and Orders.................................................. 11
3.13 Title to and Condition of Properties............................................. 13
3.14 Title Insurance.................................................................. 14
3.15 Surveys.......................................................................... 14
3.16 Bank Accounts.................................................................... 14
3.17 Insurance........................................................................ 14
3.18 Contracts and Commitments........................................................ 15
3.19 Labor Matters.................................................................... 16
3.20 Employee Benefits Plans.......................................................... 17
3.21 Employment Compensation.......................................................... 21
3.22 Proprietary Rights............................................................... 21
3.23 Major Customers and Suppliers.................................................... 22
3.24 Product Warranty and Product Liability........................................... 22
3.25 Affiliates' Relationships to Company............................................. 23
3.26 Spinoff of Ingram Division; Transfer of Ingram Employees and Employee Benefits... 23
3.27 Production Transition............................................................ 24
3.28 Assets Necessary to PA Business.................................................. 24
3.29 Copies of Certain Documents...................................................... 24
3.30 Underlying Documents............................................................. 24
3.31 PA Business of Company........................................................... 24
3.32 Disclosure of Material Facts..................................................... 24
3.33 No Payment of Transaction Expenses............................................... 24
3.34 No Brokers or Finders............................................................ 24
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 25
4.01 Corporate........................................................................ 25
4.02 Authority........................................................................ 25
4.03 No Brokers or Finders............................................................ 25
ARTICLE V POST-CLOSING COVENANTS 25
5.01 Noncompetition; Confidentiality.................................................. 25
5.02 Preparation of Company's Tax Return.............................................. 27
5.03 Underground Storage Tank......................................................... 27
5.04 Year 2000 Compliance............................................................. 27
5.05 Further Assurance................................................................ 28
5.06 Payment of Line of Credit........................................................ 28
ARTICLE VI [Intentionally Omitted] 28
ARTICLE VII RELEASE 28
7.01 By the LLC and Members........................................................... 28
ARTICLE VIII INDEMNIFICATION 28
8.01 By Shareholder................................................................... 28
8.02 By Buyer......................................................................... 29
8.03 Indemnification of Third-Party Claims............................................ 29
8.04 Payment.......................................................................... 30
8.05 Limitations on Indemnification................................................... 31
8.06 Exclusive Remedy................................................................. 32
ARTICLE IX CLOSING 32
9.01 Shareholders' Closing Deliveries................................................. 33
9.02 LLC and Members' Closing Deliveries.............................................. 34
9.03 Buyer's Closing Deliveries....................................................... 34
ARTICLE X MISCELLANEOUS 35
10.01 Schedules........................................................................ 35
10.02 Disclosures and Announcements.................................................... 35
10.03 Assignment; Parties in Interest.................................................. 35
10.04 Law Governing Agreement.......................................................... 35
10.05 Amendment and Modification....................................................... 35
10.06 Notice........................................................................... 35
10.07 Expenses......................................................................... 37
10.08 Entire Agreement................................................................. 37
10.09 Counterparts..................................................................... 37
10.10 Headings......................................................................... 38
10.11 Index of Terms................................................................... 38
</TABLE>
-ii-
<PAGE>
Exhibits
Exhibit A - Form of Legal Opinion of Baker & Daniels
Exhibit B - Form of Lease Agreement
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Employment Agreement
Exhibit E - Form of Consulting Agreement
Exhibit F - Form of Non-Competition Agreement
Exhibit G - Form of Legal Opinion of Foley & Lardner
Schedules
Schedule 2.03(d) Estimated Closing Balance Sheet
Schedule 3.01 Qualifications
Schedule 3.02 No Violation
Schedule 3.03 Financial Statements
Schedule 3.05 Capitalization
Schedule 3.06 Tax Matters
Schedule 3.07 Accounts Receivable
Schedule 3.08 Inventory
Schedule 3.09 Absence of Certain Changes
Schedule 3.10 Absence of Undisclosed Liabilities
Schedule 3.11 Litigation
Schedule 3.12 Compliance with Laws and Orders
Schedule 3.13 Title to and Condition of Personal and Real Properties
Schedule 3.16 Bank Accounts
Schedule 3.17 Insurance
Schedule 3.18 Contracts and Commitments
Schedule 3.19 Labor Matters
Schedule 3.20 Employee Benefit Plans
Schedule 3.21 Employment Compensation
Schedule 3.22 Proprietary Rights
Schedule 3.23 Major Customers and Suppliers
Schedule 3.24 Product Warranty and Product Liability
Schedule 3.25 Affiliates' Relationships to Company
Schedule 3.26 Ingram Spinoff
Schedule 5.04 Year 2000 Compliance
Schedule 5.06 Payment of Line of Credit
Schedule 8.06 Certain Tax Matters
Schedule 9.01(j) Assets to be Transferred from Zanetis Enterprises
Schedule 9.01(k) Third Party Obligations To Be Released at Closing
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated July 30, 1999, by and
among WEC COMPANY d/b/a Woods Equipment Company, a Delaware corporation
("Buyer"), C. Christopher Zanetis, Ann B. Zanetis, Mark R. Kindler, Reba M.
Kinder, William J. Bethards and Robert E. Bethards (each individually, a
"Shareholder," and, together, "Shareholders"), and Zanetis Enterprises, LLC, an
Illinois limited liability corporation (the "LLC").
RECITALS
A. Alitec Corporation, an Indiana corporation ("Company"), is engaged in
the manufacture and sale of power attachment tools (the "PA Business") and heavy
equipment (together with the PA Business, the "Business"). Shareholders own all
of the issued and outstanding shares (the "Shares") of capital stock of Company.
B. Company's facilities formerly consisted of manufacturing facilities
located in Brownsburg, Indiana and Danville, Indiana (collectively, the
"Facilities"). Company's divisions formerly consisted of a power attachment
division (the "PA Division") and a heavy equipment division (the "Ingram
Division"). As of the date of this Agreement, the PA Division is the sole
division of Company and the PA Business is the only business in which the
Company is engaged.
C. Buyer desires to purchase the outstanding stock of Company which at
the time of such acquisition shall consist solely of the PA Division of Company.
D. Buyer desires to purchase the Shares from Shareholders and
Shareholders desire to sell to Buyer the Shares, upon the terms and conditions
set forth herein.
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows. Capitalized terms are defined herein. An index of defined terms is set
forth in Section 10.11 hereof.
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, on the Closing Date Buyer agrees to purchase from Shareholders,
and Shareholders agree to sell to Buyer, all of the Shares.
<PAGE>
ARTICLE II
PURCHASE PRICE - PAYMENT
2.01 Purchase Price.
(a) The purchase price (the "Purchase Price") for the Shares shall
be equal to:
(i) Seven Million Dollars ($7,000,000); plus
(ii) the amount, if any, by which the Working Capital Value as
of the Closing Date exceeds the April 1999 Value; minus
(iii) the amount, if any, by which the April 1999 Value exceeds
the Working Capital Value as of the Closing Date; minus
(iv) the amount, if any, by which the Indebtedness Amount
exceeds Four Million Dollars ($4,000,000) as of the Closing Date.
2.02 Payment of Purchase Price. The Purchase Price shall be paid by Buyer
as follows:
(a) Cash to Escrow Agent. At the Closing, Buyer shall deliver to
--------------------
the Escrow Agent, under the Escrow Agreement, the sum of Seven Hundred
Thousand Dollars ($700,000) (the "Escrow Amount").
(b) Cash to Shareholders. At the Closing, Buyer shall deliver to
--------------------
Shareholders or their designee the Purchase Price, calculated pursuant to
the Estimated Closing Balance Sheet, less the Escrow Amount.
(c) Post-Closing Adjustment. On or before the fifth business day
-----------------------
following the final determination of the Final Closing Balance Sheet
("Settlement Date"), the parties shall make the following adjustments:
(i) Shareholders shall pay to Buyer the amount, if any, by
which the Working Capital Value as reflected on the Estimated Closing
Balance Sheet exceeds the Working Capital Value as reflected on the
Final Closing Balance Sheet, or Buyer shall pay to Shareholders the
amount, if any by which the Working Capital Value as reflected on the
Estimated Closing Balance Sheet is less than the Working Capital
Value as reflected on the Final Closing Balance Sheet; and
(ii) Shareholders shall pay to Buyer the amount, if any, by
which the Excess Indebtedness Amount as reflected on the Estimated
Closing Balance Sheet is less than the Excess Indebtedness Amount on
the Final Closing Balance Sheet, or Buyer shall pay to Shareholders
the amount, if any, by which the Excess Indebtedness Amount as
reflected on the Final Closing
-2-
<PAGE>
Balance Sheet is less than the Excess Indebtedness Amount as
reflected on the Estimated Closing Balance Sheet.
Any Settlement Date payments shall be made together with interest on the
amount being paid from the Closing Date to the date of payment at a rate of
eight percent (8%) per annum.
(d) Source and Method of Payment. All payments under this Section
----------------------------
2.02 shallfollowing the be made by wire transfer of immediately available
funds to an account designated by the recipient not less than forty-eight
(48) hours prior to the time for payment specified herein. With respect to
any payments required to be made by Shareholders pursuant to Section
2.02(c), the parties agree that Buyer's initial source of payment will be
C. Christopher Zanetis, on behalf of Shareholders, and that Shareholders
(other than C. Christopher Zanetis) will have direct payment obligations
only if C. Christopher Zanetis fails to cover Shareholders payment
obligations under this Section 2.02.
2.03 Determination of Working Capital Value and Indebtedness Amount.
(a) Definition of April 1999 Value. The term "April 1999 Value"
------------------------------
shall mean Two Million Four Hundred Fifty-Seven Thousand Dollars
($2,457,000), which sum represents the Working Capital Value of the Company
as of April 30, 1999.
(b) Definition of Working Capital Value. The term "Working Capital
-----------------------------------
Value" shall mean the dollar amount by which the sum of current assets of
the PA Division exceeds the sum of current liabilities of the PA Division,
each as reflected in the Estimated Closing Balance Sheet or Final Closing
Balance Sheet, as applicable.
(c) Definition of Indebtedness Amount, Excess Indebtedness Amount
-------------------------------------------------------------
and Affiliate.
-------------
(i) The term "Indebtedness Amount" shall mean all indebtedness
other than accounts payable and accrued expenses, including both
amounts owed to unaffiliated third parties (including any bank
overdrafts) and indebtedness to any Affiliate outstanding as of the
Closing Date, as reflected in the Estimated Closing Balance Sheet or
Final Closing Balance Sheet, as applicable.
(ii) The term "Excess Indebtedness Amount" shall mean the
amount, if any, by which the Indebtedness Amount exceeds the sum of
$4,000,000.
(iii) As used in this Agreement, the term "Affiliate" shall mean
and include all Shareholders, directors and officers of Company, the
spouse of any such person, any person who would be the heir or
descendant of any such person if such person were not living and any
entity in which any of the foregoing has a direct or indirect
interest, except through ownership of less
-3-
<PAGE>
than five percent (5%) of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in
the national over-the-counter market.
(d) Estimated Closing Balance Sheet. For purposes of determining
-------------------------------
the amount to be paid by Buyer at the Closing, the parties have agreed as
follows:
(i) They will use the balance sheet of the PA Division
attached hereto as Schedule 2.03(d), which balance sheet (the
"Estimated Closing Balance Sheet") is stated as of the close of
business on the business day immediately prior to the Closing Date
(hereinafter the "Effective Time"), and
(ii) The Working Capital Value adjustment required by the
Estimated Closing Balance Sheet is a subtraction from the Purchase
Price otherwise payable at Closing in the amount of One Hundred
Twenty Thousand and Eighty-Eight Dollars ($120,088).
(e) Final Closing Balance Sheet. The Final Closing Balance Sheet of
---------------------------
Company shall be prepared as follows:
(i) Within forty-five (45) days after the Closing Date, Buyer
shall deliver to Shareholders a pro forma balance sheet of the PA
Division as of the Effective Time, prepared in accordance with
generally accepted accounting principles from the books and records
of Company, on a basis consistent with the generally accepted
accounting principles theretofore followed by Company in the
preparation of the Recent Balance Sheet and in accordance with this
Section 2.03, and fairly presenting the financial position of the PA
Division as of the Effective Time. The balance sheet shall be
accompanied by detailed schedules and by a report of Buyer's
independent accounts ("Buyer's Accountants") setting forth (1) the
Working Capital Value and Indebtedness Amount reflected in the
balance sheet, and (2) the amount of any adjustment to the Purchase
Price to be paid and by whom pursuant to Section 2.02(c) hereof,
which adjustment shall be calculated in a manner consistent with the
calculations used to arrive at the number set forth in Section
2.03(d)(ii).
(ii) Within thirty (30) days following the delivery of the
balance sheet referred to in (i) above, Shareholders or their
independent accountants ("Shareholders' Accountants") may object to
any of the information contained in said balance sheet or
accompanying schedules which could affect the necessity or amount of
any adjustment to Purchase Price pursuant to Section 2.02(c) hereof.
Any such objection shall be made in writing and shall state
Shareholders' calculation of Working Capital Value and Indebtedness
Amount.
(iii) In the event of a dispute or disagreement relating to such
balance sheet or accompanying schedules which Buyer and Shareholders
are unable to
-4-
<PAGE>
resolve, either party may elect to have such dispute or disagreement
resolved by an accounting firm of nationally recognized standing (the
"Third Accounting Firm") to be mutually selected by Shareholders and
Buyer or, if no agreement is reached, by Shareholders' Accountants
and Buyer's Accountants. The Third Accounting Firm shall make a
resolution of the balance sheet of Company as of the Effective Time
and the calculations of Working Capital Value and Indebtedness
Amount, which shall be final and binding for purposes of this Article
II. The Third Accounting Firm shall be instructed to use every
reasonable effort to perform its services within fifteen (15) days of
submission of the balance sheet to it and, in any case, as soon as
practicable after such submission. The fees and expenses for the
services of the Third Accounting Firm shall be shared by Buyer and
Shareholders as follows:
Shareholders shall pay a percentage of such fees and expenses equal
to A/(A+B) and Buyer shall pay a percentage of such fees and expenses
equal to B/(A+B), where A is equal to the absolute value of the
difference (in dollars) between Working Capital Value and
Indebtedness Amount as finally determined by the Third Accounting
Firm and Working Capital Value and Indebtedness Amount as reflected
in the objection prepared and delivered by Shareholders in accordance
with Section 2.03(d)(ii), and B is equal to the absolute value of the
difference (in dollars) between Working Capital Value and
Indebtedness Amount as finally determined by the Third Accounting
Firm and Working Capital Value and Indebtedness Amount as reflected
in the report prepared and delivered by Buyer and Buyer's Accountants
in accordance with Section 2.03(d)(i). As used in this Agreement, the
term "Final Closing Balance Sheet" shall mean the balance sheet of
Company as of the Effective Time as finally determined for purposes
of this Article II, whether by acquiescence of Shareholders to the
figures supplied by Buyer in accordance with Section 2.03(d)(i), by
negotiation and agreement of the parties, or prepared by the Third
Accounting Firm in accordance with Section 2.03(d)(iii).
(iv) After the Closing Date, Buyer agrees to permit
Shareholders, Shareholders' Accountants, and their respective
representatives, during normal business hours, to have reasonable
access to, and to examine any books and records of Company, which
documents and access are necessary to review the balance sheet
delivered by Buyer in accordance with this Section.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders, jointly and severally, make the following representations and
warranties to Buyer, each of which is true and correct on the date hereof, shall
be unaffected by any investigation heretofore or hereafter made by Buyer, or any
knowledge of Buyer other than as
-5-
<PAGE>
specifically disclosed in the Disclosure Schedules (the "Schedules") delivered
to Buyer, and shall survive the Closing of the transactions provided for herein.
3.01 Corporate.
(a) Organization. Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Indiana.
(b) Corporate Power. Company has all requisite corporate power and
---------------
authority to own, operate and lease its properties and to carry on the PA
Business as and where such is now being conducted.
(c) Qualification. Company is duly licensed or qualified to do
-------------
business as a foreign corporation, and is in good standing, in each
jurisdiction where the character of the properties owned or leased by it,
or the nature of the Business, makes such licensing or qualification
necessary. The states in which Company is licensed or qualified to do
business are listed in Schedule 3.01.
(d) No Subsidiaries. Company does not own any interest in any
---------------
corporation, partnership or other entity.
3.02 No Violation. Except as set forth on Schedule 3.02, neither the
execution and delivery of this Agreement or the other documents and instruments
to be executed and delivered by Shareholders pursuant hereto, nor the
consummation by Shareholders of the transactions contemplated hereby and thereby
(a) will violate any applicable statute, law, ordinance, rule or regulation
(collectively, "Laws"), or any order, writ, injunction, judgment, plan or decree
(collectively, "Orders"), (b) will require any authorization, consent, approval,
exemption or other action by or notice to any government entity (including,
without limitation, under any "plant closing" or similar law), or (c) will
violate or conflict with, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the assets of Company or the
Shares under any term or provision of the Articles of Incorporation or By-laws
of Company or of any contract, commitment, understanding, arrangement, agreement
or restriction of any kind or character to which Company is a party, or by which
Company, any of its assets or properties, any Shareholder, or any of their
respective assets or properties, may be bound or affected.
3.03 Financial Statements. Included as Schedule 3.03 are true and complete
copies of the financial statements of the PA Division consisting of (i) balance
sheets of the PA Division as of December 31, 1998, December 31, 1997 and
December 31, 1996, and the related statements of income and cash flows for the
years then ended (including the notes contained therein or annexed thereto),
which financial statements have been reported on, and are accompanied by, the
signed, unqualified opinions of Greenwalt Sponsel & Co., Inc., independent
auditors for Company for such years, and (ii) an unaudited balance sheet of the
PA Division as of June 30, 1999 (the "Recent Balance Sheet"), and the related
unaudited statements of income and cash flows for the six (6) months then ended
and for the
-6-
<PAGE>
corresponding period of the prior year (including the notes and schedules
contained therein or annexed thereto). All of such financial statements
(including all notes and schedules contained therein or annexed thereto) have
been prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, for the absence of footnote
disclosure) applied on a consistent basis, have been prepared in accordance with
the books and records of Company, and fairly present, in accordance with
generally accepted accounting principles, the assets, liabilities and financial
position, the results of operations and cash flows of the PA Division as of the
dates and for the years and periods indicated.
3.04 Shareholders.
(a) Power. Each Shareholder has full power, legal right and
-----
authority to enter into, execute and deliver this Agreement and the other
documents and instruments to be executed and delivered by the parties
pursuant hereto (such other documents sometimes referred to herein as
"Ancillary Documents") and to carry out the transactions contemplated
hereby and thereby.
(b) Validity. This Agreement and each Ancillary Document has been
--------
duly and validly executed and delivered by each Shareholder, and is the
legal, valid and binding obligation of each such Shareholder, enforceable
in accordance with its terms, except as such may be limited by bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights
generally, and by general equitable principles.
(b) Title. Each Shareholder has, and at Closing, Buyer will
-----
receive, good and marketable title to the Shares, free and clear of all
Liens including, without limitation, voting trusts or agreements, proxies,
marital or community property interests.
(c) Obligations with Respect to Shares. Company and Shareholders
----------------------------------
have no commitment or obligation to issue, deliver or sell, under any
offer, subscription, stock option agreement, stock bonus agreement, stock
purchase plan, incentive compensation plan, warrant, call, conversion right
or otherwise, any shares of its capital stock or securities, except as
contemplated under this Agreement. There are no shareholder agreements,
voting agreements, voting trusts or other agreements or arrangements which
may have the effect of restricting or limiting the transfer, voting or
other rights associated with the Shares, except as contemplated by this
Agreement.
3.05 Capitalization. Schedule 3.05 sets forth a complete list of all the
authorized capital stock of Company. No shares of such capital stock are issued
or outstanding except for the Shares, which are owned of record and beneficially
by Shareholders in the respective numbers set forth in Schedule 3.05.
3.06 Tax Matters.
(a) Provision For Taxes. The provision made for taxes on the Recent
-------------------
Balance Sheet is sufficient for the payment of all federal, state, foreign,
county, local and other income, ad valorem, excise, profits, franchise,
occupation, property,
-7-
<PAGE>
payroll, sales, use, gross receipts and other taxes (and any interest and
penalties) and assessments, whether or not disputed at the date of the
Recent Balance Sheet, and for all years and periods prior thereto. Since
the date of the Recent Balance Sheet, Company has not incurred any taxes
other than taxes incurred in the ordinary course of the PA Business
consistent in type and amount with past practices of Company.
(b) Tax Returns Filed. Except as set forth on Schedule 3.06, all
-----------------
federal, state, foreign, county, local and other tax returns required to be
filed by or on behalf of Company (including, without limitation, the
Company's 1998 federal tax return) have been timely filed and when filed
were true and correct in all material respects, and the taxes shown as due
thereon were paid or adequately accrued. Company has duly withheld and paid
all taxes which it is required to withhold and pay relating to salaries and
other compensation heretofore paid to the employees of Company.
(c) Tax Audits. The federal and state income tax returns of Company
----------
have been audited by the Internal Revenue Service (the "IRS") and
appropriate state taxing authorities for the periods and to the extent set
forth in Schedule 3.06, and Company has not received from the IRS or from
the tax authorities of any state, county, local or other jurisdiction any
notice of underpayment of taxes or other deficiency which has not been
paid, nor has the IRS or any of such tax authorities made any objection to
any return or report filed by Company. There are outstanding no agreements
or waivers extending the statutory period of limitations applicable to any
tax return or report of Company.
(d) Consolidated Group. Schedule 3.06 lists every year in which
------------------
Company was a member of an affiliated group of corporations that filed a
consolidated tax return on which the statute of limitations does not bar a
federal tax assessment, and each corporation that has been part of such
group.
(e) Other. Except as set forth in Schedule 3.06, since January 1,
-----
1990, Company has not (i) filed any consent or agreement under Section
341(f) of the Code, (ii) applied for any tax ruling, (iii) entered into a
closing agreement with any taxing authority, (iv) filed an election under
Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed election
under Section 338(e) of the Code occurred), (v) made any payments, or been
a party to an agreement (including this Agreement) that under any
circumstances could obligate it to make payments that will not be
deductible because of Section 280G of the Code, or (vi) been a party to any
tax allocation or tax sharing agreement.
-8-
<PAGE>
3.07 Accounts Receivable. All accounts receivable reflected on the Recent
Balance Sheet, and incurred since the date thereof, represent arm's length sales
actually made in the ordinary course of the PA Business, are subject to no
counterclaim or setoff, and are not in dispute. Schedule 3.07 contains an aged
schedule of accounts receivable included in the Recent Balance Sheet. All
accounts receivable reflected on the Final Closing Balance Sheet will represent
arm's length sales actually made in the ordinary course of the PA Business.
3.08 Inventory. All inventory reflected on the Recent Balance Sheet
consists of a quality and quantity usable and saleable in the ordinary course of
the PA Business, had a commercial value at least equal to the value shown on
such balance sheet and is valued in accordance with generally accepted
accounting principles at the lower of cost (on a FIFO basis) or market. All
inventory purchased since the date of such balance sheet consists of a quality
and quantity usable and saleable in the ordinary course of the PA Business.
Except as set forth in Schedule 3.08, all inventory of the PA Division is
located on premises owned or leased by Company as reflected in this Agreement.
All work-in-process contained in inventory constitutes items in process of
production pursuant to contracts or open orders taken in the ordinary course of
the PA Business, from regular customers of Company with no recent history of
credit problems with respect to Company; neither Company nor any such customer
is in material breach of the terms of any obligation to the other, and no valid
grounds exist for any set-off of amounts billable to such customers on the
completion of orders to which work-in-process relates. All work-in-process is of
a quality ordinarily produced in accordance with the requirements of the orders
to which such work-in-process is identified, and will require no rework with
respect to services performed prior to Closing.
3.09 Absence of Certain Changes. Since April 30, 1999, unless otherwise
described in Schedule 3.09 or consented to in writing by Buyer, Company has
conducted the PA Business only in the ordinary and usual course consistent with
past practice and, without limiting the generality of the foregoing, there has
not been:
(a) Adverse Change. Any adverse change in the financial condition,
--------------
assets, the PA Business, prospects or operations of the PA Division, or the
liabilities of Company;
(b) Damage. Any loss, damage or destruction in excess of $10,000,
------
whether covered by insurance or not, affecting the PA Business, Facilities
or properties;
(c) Increase in Compensation. Any increase in excess of $5,000 per
------------------------
individual per year or $50,000 for all employees in the aggregate in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company (including, without limitation, any increase
or change pursuant to any bonus, pension, profit sharing, retirement or
other plan or commitment), or any bonus or other employee benefit granted,
made or accrued;
-9-
<PAGE>
(d) Labor Disputes. Any labor dispute or disturbance, other than
--------------
individual routine grievances which are not material to the PA Business,
financial condition or results of operations of the PA Division;
(e) Commitments. Any commitment or transaction by Company
-----------
(including, without limitation, any borrowing or capital expenditure) other
than in the ordinary course of the PA Business consistent with past
practice or other than such commitments as will be transferred in
connection with the Ingram Spinoff;
(f) Dividends. Any declaration, setting aside, or payment of any
---------
dividend or any other distribution in respect of Company's capital stock;
any redemption, purchase or other acquisition by Company of any capital
stock of Company, or any security relating thereto; or any other payment to
any Shareholder in such person's capacity as a shareholder;
(g) Disposition of Property. Any sale, lease or other transfer or
-----------------------
disposition of any properties or assets of Company, except for (i) the
disposition of all the Ingram Assets and (ii) the sale of inventory items
in the ordinary course of the PA Business;
(h) Indebtedness. Any indebtedness for borrowed money incurred,
------------
assumed or guaranteed by Company;
(i) Liens. Any liens (statutory or otherwise), security interests,
-----
claims, pledges, licenses, equities, options, conditional sales contracts,
assessments, levies, easements, covenants, reservations, restrictions,
rights-of-way, exceptions, limitations, charges or encumbrances of any
nature whatsoever (collectively, "Liens") made on any of the properties or
assets of Company other than the Ingram Assets;
(j) Amendment of Contracts. Any entering into, amendment or
----------------------
termination by Company of any contract, or any waiver of material rights
thereunder, other than (i) in the ordinary course of the PA Business or
(ii) such contracts as will be transferred in connection with the Ingram
Spinoff;
(k) Loans and Advances. Any loan or advance (other than advances
------------------
to employees in the ordinary course of the PA Business for travel and
entertainment in accordance with past practice) to any person including,
but not limited to, any officer, director or employee of Company, or any
Shareholder or Affiliate;
(l) Credit. Any grant of credit to any customer or distributor on
------
terms or into employees amounts more favorable than those which have been
extended to such customer or distributor in the past, any other change in
the terms of any credit heretofore extended, or any other change of
Company's policies or practices with respect to the granting of credit; or
(m) Unusual Events. Any other event or condition not in the
--------------
ordinary course of the PA Business.
-10-
<PAGE>
3.10 Absence of Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Recent Balance Sheet or in Schedule 3.10, Company
does not have any liabilities other than commercial liabilities and obligations
incurred since the date of the Recent Balance Sheet in the ordinary course of
the PA Business and consistent with past practice and none of which has or will
have a material adverse effect on the PA Business, financial condition or
operations of Company. Except as and to the extent described in the Recent
Balance Sheet or in Schedule 3.10, no Shareholder has knowledge of any basis for
the assertion against Company of any liability and there are no circumstances,
conditions, happenings, events or arrangements, contractual or otherwise, which
may give rise to Liabilities, except commercial liabilities and obligations
incurred in the ordinary course of the PA Business and consistent with past
practice.
3.11 No Litigation. Except as set forth in Schedule 3.11, there is no
action, suit, arbitration, proceeding, investigation or inquiry, whether civil,
criminal or administrative (collectively, "Litigation") pending or threatened
against Company, its directors (in their capacity as directors of Company), the
PA Business or any of its assets, nor does any Shareholder know, or have grounds
to know, of any basis for any Litigation. Schedule 3.11 also identifies all
Litigation to which Company or any of its directors have been parties since
January 1, 1994. Except as set forth in Schedule 3.11, none of Company, the PA
Business or Company's assets is subject to any Order of any government entity.
3.12 Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 3.12, Company
----------
(including each and all of its operations, practices, properties and
assets) is in compliance with all applicable Laws and Orders, including,
without limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, competition and pricing,
product warranties, zoning, building and sanitation, employment, retirement
and labor relations, product advertising and the Environmental Laws (as
hereinafter defined). Except as set forth in Schedule 3.12, Company has not
received notice of any violation or alleged violation of, and is subject to
no liability for past or continuing violation of, any Laws or Orders. All
reports and returns required to be filed by Company with any government
entity have been filed, and were accurate and complete when filed. Without
limiting the generality of the foregoing:
(i) The operation of the Business as it is now conducted does
not, nor does any condition existing at any of the Facilities, in any
manner constitute a nuisance or other tortious interference with the
rights of any person or persons in such a manner as to give rise to
or constitute the grounds for a suit, action, claim or demand by any
such person or persons seeking compensation or damages or seeking to
restrain, enjoin or otherwise prohibit any aspect of the conduct of
the Business or the manner in which it is now conducted.
-11-
<PAGE>
(ii) Company has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such
accounts, and each of such accounts has a positive balance.
(iii) Company has delivered to Buyer copies of all reports of
Company for the past five (5) years required under the federal
Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety laws and regulations. The
deficiencies, if any, noted on such reports have been corrected.
(b) Permits and Licenses. Company has all permits, licenses,
--------------------
approvals, authorizations and consents of all government entities and all
certification organizations required for the conduct of the Business (as
presently conducted) and operation of the Facilities. All such licenses,
permits, approvals, authorizations and consents are described in Schedule
3.12, are in full force and effect and, except as to those permits and
licenses unique to the Ingram Division or otherwise noted on Schedule 3.12,
are assignable to Buyer in accordance with the terms hereof. Except as set
forth in Schedule 3.12, Company (including its operations, properties and
assets) is and has been in compliance with all such permits and licenses,
approvals, authorizations and consents.
(c) Environmental Matters. The applicable Laws relating to
---------------------
pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, releases or threatened releases
of pollutants, contaminants, chemicals or industrial, toxic, hazardous or
petroleum or petroleum-based substances or wastes (collectively, "Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Waste including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"),
each as amended (collectively, all such laws, together with their state and
local counterparts, "Environmental Laws." Without limiting the generality
of the foregoing provisions of this Section 3.12, Company is in full
compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in the Environmental Laws or contained in any regulations, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder. Except as set forth in
Schedule 3.12, there is no Litigation nor any demand, claim, hearing or
notice of violation pending or threatened against Company relating in any
way to the Environmental Laws or any Order issued, entered, promulgated or
approved thereunder. Except as set forth in Schedule 3.12, there are no
past or present (or, to the best of Shareholders' knowledge, future)
events, conditions, circumstances, activities, practices, incidents,
actions, omissions
-12-
<PAGE>
or plans with respect to the operations of the Business, the activities of
Company or the condition of any Real Property currently or previously
leased or owned by Company which may interfere with or prevent compliance
or continued compliance with the Environmental Laws or with any Order
issued, entered, promulgated or approved thereunder, or which may give rise
to any liability, including, without limitation, liability under CERCLA or
similar state or local Laws, or otherwise form the basis of any Litigation,
hearing, notice of violation, study, investigation or remediation based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any Waste.
3.13 Title to and Condition of Properties.
(a) Marketable Title. Company has good and marketable title to all
----------------
of Company's personal property and other assets (other than the Leased Real
Property) used by Company to conduct the PA Business, free and clear of all
mortgages and Liens except those described in Schedule 3.13. None of such
personal property or assets is subject to any restrictions with respect to
the transferability thereof.
(b) No Owned Real Property. Company does not own or have an option
----------------------
to purchase any real property.
(c) Condition. All tangible assets owned by Company and used in
---------
the operation of the PA Division are in good operating condition and
repair, free from any defects (except such minor defects as do not
interfere with the use thereof in the conduct of the normal operations of
the PA Division), have been maintained consistent with the standards
generally followed in the industry and are sufficient to carry on the PA
Business as conducted during the twelve (12) months preceding the date
hereof.
(d) Leased Real Property. Schedule 3.13 sets forth a description of
--------------------
all real property used or occupied by Company (the "Leased Real Property").
Schedule 3.13 also includes copies of each such lease. There are now in
full force and effect duly issued certificates of occupancy permitting the
Leased Real Property and improvements located thereon to be legally used
and occupied as the same are now constituted. Neither the Leased Real
Property nor its use is in violation of any local governmental ordinance,
regulation or building code, nor is there a pending or threatened
investigation regarding a possible violation of any of the foregoing. There
are no claims of adverse possession or prescriptive rights involving any
parcel of the Leased Real Property, and no basis exists for any such claim.
No public improvements have been commenced, and, to Shareholders'
knowledge, no public improvements are planned, which may result in special
assessments against, or which may otherwise materially adversely affect,
any Leased Real Property. No portion of any parcel of the Leased Real
Property has been used as a landfill or for storage or landfill of
hazardous or toxic materials. No Shareholder has notice or knowledge of any
(i) Order requiring repair, alteration, or correction of any existing
condition
-13-
<PAGE>
affecting any Leased Real Property or the systems or improvements thereat,
(ii) condition or defect which could give rise to an Order of the sort
referred to in "(i)" above, or (iii) underground storage tanks (except as
referenced in Section 5.03), or any structural, mechanical, or other
defects of material significance affecting any Leased Real Property or the
systems or improvements thereat (including, but not limited to, inadequacy
for normal use of mechanical systems or disposal or water systems at or
serving the Leased Real Property).
(e) No Condemnation or Expropriation. Neither the whole nor any
--------------------------------
portion of the property or any other assets of Company is subject to any
Order to be sold or is being condemned, expropriated or otherwise taken by
any government entity with or without payment of compensation therefor,
nor, to the best of Shareholders' knowledge, has any such condemnation,
expropriation or taking been proposed, nor has Company agreed or committed
to dedicate any part of the Leased Real Property.
(f) No Omission of Material Fact regarding the Leased Real Property.
---------------------------------------------------------------
Company and Shareholders represent that Company or Shareholders have
delivered or disclosed to Buyer all information known to Company or
Shareholders regarding the Leased Real Property, and that Company and
Shareholders have not failed to deliver any material fact of which either
of such parties has knowledge regarding the condition of the Leased Real
Property.
3.14 Title Insurance. Shareholders have provided to Buyer correct and
complete copies of Company's leasehold title insurance policies.
3.15 Surveys. Shareholders have provided to Buyer correct and complete
copies of the most recent surveys of all Leased Real Property.
3.16 Bank Accounts. Set forth in Schedule 3.16 is a list of each bank in
which Company has an account or safe deposit box, the name and number of each
such account or box and the names of all persons authorized to draw thereon or
who have access thereto, with the amounts they are authorized to draw.
3.17 Insurance. Set forth in Schedule 3.17 is a complete and accurate list
and description of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the Business and properties of Company, true and correct copies of
which have heretofore been delivered to Buyer. Schedule 3.17 includes, without
limitation, the carrier, the description of coverage, the limits of coverage,
retention or deductible amounts, amount of annual premiums, date of expiration
and the date through which premiums have been paid with respect to each such
policy, and any pending claims in excess of $10,000. All such policies are
valid, outstanding and enforceable policies and provide insurance coverage for
the properties, assets and operations of Company, of the kinds, in the amounts
and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the
-14-
<PAGE>
date hereof. Schedule 3.17 indicates each policy as to which (a) the coverage
limit has been reached or (b) the total incurred losses to date equal 75% or
more of the coverage limit. No notice of cancellation or termination has been
received with respect to any such policy. Company has not been refused any
insurance with respect to any aspect of the operations of the Business nor has
its coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last three years.
Company has duly and timely made all claims it has been entitled to make under
each policy of insurance. All products liability and general liability policies
maintained by or for the benefit of Company have been "occurrence" policies and
not "claims made" policies. There is no claim by Company pending under any such
policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies, and no Shareholder knows of any basis for denial
of any claim under any such policy.
3.18 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in Schedule 3.13,
--------------------
Company has no leases of real property.
(b) Personal Property Leases. Except as set forth in Schedule 3.18,
------------------------
Company has no leases of personal property involving consideration or other
expenditure in excess of $10,000 or involving performance over a period of
more than six (6) months.
(c) Purchase Commitments. Company has no purchase commitments for
--------------------
inventory items or supplies that, together with amounts on hand, constitute
in excess of six (6) months normal usage, or which are at an excessive
price.
(d) Sales Commitments. Company has no sales contracts or
-----------------
commitments to customers or distributors (collectively, "Sales
Commitments") except those made in the ordinary course of the Business, at
arm's length and none of such Sales Commitments is for a sales price which
would result in a loss, in the aggregate for any one customer, to Company.
(e) Contracts With Affiliates and Certain Others. Except as
--------------------------------------------
disclosed in Schedule 3.18, Company has no agreement, understanding,
contract or commitment (written or oral) with any Affiliate or any other
officer, employee, agent, consultant, distributor, dealer or franchisee
that is not cancelable by Company on notice of not longer than thirty (30)
days without liability, penalty or premium of any nature or kind
whatsoever.
(f) Powers of Attorney. Company has not given a power of attorney,
------------------
which is currently in effect, to any person, firm or corporation for any
purpose whatsoever.
(g) Collective Bargaining Agreements. Company is not a party to
--------------------------------
any collective bargaining agreements with any unions, guilds, shop
committees or other collective bargaining groups.
-15-
<PAGE>
(h) Loan Agreements. Except as set forth in Schedule 3.18, Company
---------------
is not obligated under any loan agreement, promissory note, letter of
credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise.
(i) Guarantees. Except as disclosed on Schedule 3.18, Company has
----------
not guaranteed the payment or performance of any person, firm or
corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the
obligations of any person.
(j) Contracts Subject to Renegotiation. Company is not a party to
----------------------------------
any contract with any government entity body which is subject to
renegotiation.
(k) Burdensome or Restrictive Agreements. Company is not a party to
------------------------------------
nor is it bound by any agreement, deed, lease or other instrument which is
so burdensome as to materially affect or impair the PA Business or
operation of the PA Division. Without limiting the generality of the
foregoing, Company is not a party to nor is it bound by any agreement
requiring Company to assign any interest in any trade secret or proprietary
information, or prohibiting or restricting Company from competing in any
business or geographical area or soliciting customers or otherwise
restricting it from carrying on the PA Business anywhere in the world.
(l) Other Material Contracts. Company has no lease, license,
------------------------
contract or commitment of any nature involving consideration or other
expenditure in excess of $50,000 or involving performance over a period of
more than six (6) months, or which is otherwise individually material to
the operations of Company, except as explicitly described in Schedule 3.18
or in any other Schedule.
(m) No Default. Company is not in default under any lease, contract
----------
or commitment, nor has any event or omission occurred which through the
passage of time or the giving of notice, or both, would constitute a
default thereunder or cause the acceleration of any of Company's
obligations or result in the creation of any Lien on the Facilities or any
of the assets owned, used or occupied by Company. No third party is in
default under any lease, contract or commitment to which Company is a
party, nor has any event or omission occurred which, through the passage of
time or the giving of notice, or both, would constitute a default
thereunder or give rise to an automatic termination, or the right of
discretionary termination, thereof.
3.19 Labor Matters. Except as set forth in Schedule 3.19, within the last
five (5) years Company has not experienced any labor disputes, union
organization attempts or any work stoppage due to labor disagreements in
connection with the Business. Except to the extent set forth in Schedule 3.19,
(a) Company is in compliance with all applicable Laws regarding employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (b) there is no unfair labor
practice charge or complaint against Company pending or threatened; (c) there is
no labor strike, dispute, request for representation, slowdown or stoppage
actually pending or threatened against or affecting Company nor any secondary
boycott with respect to products of
-16-
<PAGE>
Company; (d) no question concerning representation has been raised or is
threatened respecting the employees of Company; (e) no grievance which might
have a material adverse effect on the Business or operation of Company, nor any
arbitration proceeding arising out of or under collective bargaining agreements,
is pending and no such claim therefor exists; (f) there are no administrative
charges or court complaints against Company concerning alleged employment
discrimination or other employment related matters pending or threatened before
the U.S. Equal Employment Opportunity Commission or any government entity or
before any federal or state court; and (g) there are no investigations,
complaints, citations or other proceedings threatened or pending against Company
by the U.S. Occupational, Safety and Health Administration or any state agency
concerning any health or safety matters.
3.20 Employee Benefits Plans.
(a) Disclosure. Schedule 3.20 sets forth all pension, thrift,
----------
savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, cafeteria plan (as defined in Section 125 of
the Code), reimbursement plans for medical expenses or dependent care,
qualified transportation or parking benefit program, adoption or education
assistance program, stock purchase, stock option, stock appreciation, stock
bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and
any employment or consulting contracts, "golden parachutes," collective
bargaining agreements, severance agreements or plans, vacation and sick
leave plans, programs, arrangements and policies, including, without
limitation, all "employee benefit plans" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (such act,
"ERISA")), all employee manuals, and all written or binding oral statements
of policies, practices or understandings relating to employment, which are
provided to, for the benefit of, or relate to, any persons employed by
Company. The items described in the foregoing sentence are hereinafter
sometimes referred to collectively as "Employee Plans/Agreements." True and
correct copies of all the Employee Plans/Agreements, including all
amendments thereto, have heretofore been provided to Buyer. Each of the
Employee Plans/Agreements is identified on Schedule 3.20, to the extent
applicable, as one or more of the following: an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), a "defined benefit plan" (as
defined in Section 414 of the Code), an "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and/or as a plan intended to be
qualified under Section 401 of the Code. No Employee Plan/Agreement is a
"multi-employer plan" (as defined in Section 4001 of ERISA), and Company
has never contributed to, or been obligated to contribute to, any such
multi-employer plan.
(b) Terminations, Proceedings, Penalties, etc. With respect to each
-----------------------------------------
employee benefit plan (including, without limitation, the Employee
Plans/Agreements) that is subject to the provisions of Title IV of ERISA
and with respect to which Company or any of its assets may, directly or
indirectly, be subject to any liability, contingent or otherwise, or the
imposition of any Lien (whether by reason of the
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complete or partial termination of any such plan, the funded status of any
such plan, any "complete withdrawal" (as defined in Section 4203 of ERISA)
or "partial withdrawal" (as defined in Section 4205 of ERISA) by any person
from any such plan, or otherwise):
(i) no such plan has been terminated so as to subject,
directly or indirectly, any assets of Company to any liability,
contingent or otherwise, or the imposition of any lien under Title IV
of ERISA;
(ii) no proceeding has been initiated or threatened by any
person (including the Pension Benefit Guaranty Corporation ("PBGC"))
to terminate any such plan;
(iii) no condition or event currently exists or currently is
expected to occur that could subject, directly or indirectly, any
assets of Company to any liability, contingent or otherwise, or the
imposition of any lien under Title IV of ERISA, whether to the PBGC
or to any other person or otherwise on account of the termination of
any such plan;
(iv) if any such plan were to be terminated as of the Closing
Date, no assets of Company would be subject, directly or indirectly,
to any liability, contingent or otherwise, or the imposition of any
lien under Title IV of ERISA;
(v) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred with respect to any such plan;
(vi) no such plan which is subject to Section 302 of ERISA or
Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code, respectively), whether or not waived; and
(vii) no such plan is a multi-employer plan or a plan described
in Section 4064 of ERISA.
(c) Prohibited Transactions, etc. There have been no "prohibited
----------------------------
transactions" within the meaning of Section 406 or 407 of ERISA or Section
4975 of the Code for which a statutory or administrative exemption does not
exist with respect to any Employee Plan/Agreement, and no event or omission
has occurred in connection with which Company or any of its assets or any
Employee Plan/Agreement, directly or indirectly, could be subject to any
liability under ERISA, the Code or any other Law or Order applicable to any
Employee Plan/Agreement, or under any agreement, instrument, Law or Order
pursuant to or under which Company has agreed to indemnify or is required
to indemnify any person against liability incurred under any such Law or
Order.
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<PAGE>
(d) Full Funding. The funds available under each Employee
------------
Plan/Agreement which is intended to be a funded plan exceed the amounts
required to be paid, or which would be required to be paid if such Employee
Plan/Agreement were terminated, on account of rights vested or accrued as
of the Closing Date (using the actuarial methods and assumptions then used
by Company's actuaries in connection with the funding of such Employee
Plan/Agreement).
(e) Controlled Group; Affiliated Service Group; Leased Employees.
------------------------------------------------------------
Company has never been a member of a controlled group of corporations as
defined in Section 414(b) of the Code or in common control with any
unincorporated trade or business as determined under Section 414(c) of the
Code. Company has never been a member of an "affiliated service group"
within the meaning of Section 414(m) of the Code. There are not and never
have been any leased employees within the meaning of Section 414(n) of the
Code who perform services for Company, and no individuals are expected to
become leased employees with the passage of time.
(f) Payments and Compliance. With respect to each Employee
-----------------------
Plan/Agreement, (i) all payments due from Company to date have been made
and all amounts properly accrued to date as liabilities of Company which
have not been paid have been properly recorded on the books of Company and
are reflected in Company's balance sheets; (ii) Company has complied with,
and each such Employee Plan/Agreement conforms in form and operation to,
all applicable laws and regulations, including but not limited to ERISA and
the Code, in all respects and all reports and information relating to such
Employee Plan/Agreement required to be filed with any governmental entity
have been timely filed; (iii) each Employee Plan/Agreement which is a
"group health plan" (as defined in Section 5000(b) of the Code) has been
operated in accordance with the group health plan continuation coverage
requirements and portability requirements of the Code and ERISA; (iv) all
reports and information relating to each such Employee Plan/Agreement
required to be disclosed or provided to participants or their beneficiaries
have been timely disclosed or provided; (v) each such Employee
Plan/Agreement which is intended to qualify under Section 401 of the Code
has received a favorable determination letter from the Internal Revenue
Service with respect to such qualification, its related trust has been
determined to be exempt from taxation under Section 501(a) of the Code, and
nothing has occurred since the date of such letter that has or is likely to
adversely affect such qualification or exemption; (vi) there are no
actions, suits or claims pending (other than routine claims for benefits)
or, to the best of Shareholders' knowledge, threatened with respect to such
Employee Plan/Agreement or against the assets of such Employee
Plan/Agreement; (vii) no investigation, review or audit of any Employee
Plan/Agreement by the IRS, United States Department of Labor or other
government entity is in progress, pending, scheduled or noticed; and (viii)
no Employee Plan/Agreement is a plan which is established and maintained
outside the United States primarily for the benefit of individuals
substantially all of whom are nonresident aliens.
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(g) Post-Retirement Benefits. No Employee Plan/Agreement provides
------------------------
benefits, including, without limitation, death or medical benefits (whether
or not insured) with respect to current or former Company's employees
beyond their retirement or other termination of service other than (i)
coverage mandated by applicable law, (ii) death or retirement benefits
under any Employee Plan/Agreement that is an employee pension benefit plan,
(iii) deferred compensation benefits accrued as liabilities on the books of
Company (including the Recent Balance Sheet), (iv) disability benefits
under any Employee Plan/Agreement that is an employee welfare benefit plan
and which have been fully provided for by insurance or otherwise or (v)
benefits in the nature of severance pay.
(h) No Triggering of Obligations. The consummation of the
----------------------------
transactions contemplated by this Agreement will not (i) entitle any
current or former employee of Company to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee or (iii)
result in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available.
(i) Delivery of Documents. There has been delivered to Buyer, with
---------------------
respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required under ERISA, with
respect to each such Employee Plan/Agreement for the last two (2)
years;
(ii) a copy of the summary plan description, together with each
summary of material modifications, required under ERISA with respect
to such Employee Plan/Agreement, all material employee communications
relating to such Employee Plan/Agreement, and, unless the Employee
Plan/Agreement is embodied entirely in an insurance policy to which
Company is a party, a true and complete copy of such Employee
Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded through a trust
or any third party funding vehicle (other than an insurance policy),
a copy of the trust or other funding agreement and the latest
financial statements thereof;
(iv) the most rece nt determination letter received from the
IRS with respect to each Employee Plan/Agreement that is intended to
be a "qualified plan" under Section 401 of the Code; and
(v) a copy of any investment management agreement which
delegates authority for investment of the assets of any Employee
Plan/Agreement.
(vi) With respect to each Employee Plan/Agreement for which an
annual report has been filed and delivered to Buyer pursuant to
Section
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<PAGE>
3.17(i)(i) hereof, no material adverse change has occurred with
respect to the matters covered by the latest such annual report since
the date thereof.
(j) Future Commitments. Company has not announced any plan or
------------------
legally binding commitment to create any additional Employee
Plans/Agreements or to amend or modify any existing Employee
Plan/Agreement.
3.21 Employment Compensation. Schedule 3.21 contains a true and correct
list of all employees to whom Company is paying compensation, including bonuses
and incentives, at an annual rate in excess of $50,000 for services rendered or
otherwise; and in the case of salaried employees such list identifies the
current annual rate of compensation for each employee and in the case of hourly
or commission employees identifies certain reasonable ranges of rates and the
number of employees falling within each such range.
3.22 Proprietary Rights.
(d) Schedule 3.22 constitutes a full and complete list of all
trademarks, trade names, service marks, copyrights and patents, or
applications therefor, owned or used by Company in the PA Business. Company
owns or possesses adequate licenses or other rights to use all patents,
patent applications, trademarks, trademark registrations, applications for
trademark registrations, trade secrets, service marks, service mark
registrations, applications for service mark registrations, trade names,
labels, slogans, claims of copyright, copyright registrations, applications
for copyright registrations, copyrights, drawings, designs, proprietary
know-how or information, or other rights with respect thereto (collectively
referred to as "Proprietary Rights"), used in the PA Business or operation
of the PA Division (as so used, the "PA Proprietary Rights"), and the same
are sufficient to conduct the PA Business as it has been and is now being
conducted.
(e) Company warrants that all maintenance and renewal fees have been
paid in full and according to schedule.
(f) The operations of Company do not conflict with or infringe, and
no one has asserted to Company or any Shareholder that such operations
conflict with or infringe, any Proprietary Rights owned, possessed or used
by any third party. To the knowledge of each Shareholder, there are no
third parties whose operations conflict with or infringe, nor has anyone
asserted that such operations conflict with or infringe, any Proprietary
Rights owned, possessed or used by Company.
(a) There are no pending claims, and no Shareholder has any
knowledge of any threatened claims, against Company relating to whether the
Products and services of Company are Year 2000 Compliant.
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3.23 Major Customers and Suppliers.
(a) Major Customers. Schedule 3.23 contains a list of the ten (10)
---------------
largest customers, including distributors, of the PA Division for each of
the two (2) most recent fiscal years (determined on the basis of the total
dollar amount of net sales) showing the total dollar amount of net sales to
each such customer during each such year. No Shareholder has any knowledge
or information of any facts indicating, nor any other reason to believe,
that any of the customers listed on Schedule 3.23 will not continue to be
customers of Company after the Closing at substantially the same level of
purchases as heretofore.
(b) Major Suppliers. Schedule 3.23 contains a list of the ten (10)
---------------
largest suppliers to the PA Division for each of the two (2) most recent
fiscal years (determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from each such
supplier during each such year. No Shareholder has any knowledge or
information of any facts indicating, nor any other reason to believe, that
any of the suppliers listed on Schedule 3.23 will not continue to be
suppliers to Company after the Closing and will not continue to supply
Company with substantially the same quantity and quality of goods at
competitive prices.
(c) Dealers and Distributors. Schedule 3.23 contains a list of all
------------------------
sales representatives, dealers, distributors and franchisees of the PA
Division, together with representative copies of all sales representative,
dealer, distributor and franchise contracts and policy statements, and a
description of all substantial modifications or exceptions.
3.24 Product Warranty and Product Liability. Schedule 3.24 contains a
true, correct and complete copy of Company's standard warranty or warranties for
sales of Products, and, except as stated therein, there are no warranties,
commitments or obligations with respect to the return, repair or replacement of
Products. Schedule 3.24 sets forth the estimated aggregate annual cost to
Company of performing warranty obligations for customers of the PA Division for
each of the five (5) preceding fiscal years and the current fiscal year to the
date of the Recent Balance Sheet. Schedule 3.24 contains a description of all
product liability claims and similar Litigation relating to Products
manufactured or sold, or services rendered, which are presently pending or which
to any Shareholder's knowledge are threatened, or which have been asserted or
commenced against Company within the last five (5) years, in which a party
thereto either requests injunctive relief or alleges damages in excess of
$50,000 (whether or not covered by insurance). There are no defects in design,
construction or manufacture of Products which would adversely affect performance
or create an unusual risk of injury to persons or property. None of the Products
has been the subject of any replacement, field fix, retrofit, modification or
recall campaign and, to any Shareholder's knowledge, no facts or conditions
exist which could reasonably be expected to result in such a recall campaign.
The Products have been designed, manufactured and labeled so as to meet and
comply with all governmental standards and specifications currently in effect,
and have received all governmental approvals necessary to allow their sale and
use. The term
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<PAGE>
"Products" means any and all products currently or at any time previously
manufactured, distributed or sold by Company, or by any predecessor of Company
under any brand name or mark under which products are or have been manufactured,
distributed or sold by Company.
3.25 Affiliates' Relationships to Company.
(a) Contracts With Affiliates. All leases, contracts, agreements or
-------------------------
other arrangements between Company and any Affiliate are described on
Schedule 3.25.
(b) No Adverse Interests. None of the Affiliates have any direct or
--------------------
indirect interest in (i) any entity which does business with Company or is
competitive with the PA Business, or (ii) any property, asset or right
which is used by Company in the conduct of the PA Business.
(c) Obligations. All obligations of any Affiliate to Company, and
-----------
all obligations of Company to any Affiliate, are listed on Schedule 3.25.
3.26 Spinoff of Ingram Division; Transfer of Ingram Employees and Employee
Benefits.
(a) All of the Ingram Assets and Ingram Liabilities, and the
business of the Ingram Division, have been transferred by Company ("New
Ingram"). "Ingram Assets" shall mean all assets of Company relating
exclusively to the Ingram Division. "Ingram Liabilities" shall mean all
payment obligations, contingent liabilities and other liabilities of
Company, however and whenever incurred, and whenever due and payable,
arising out of, as a result of, or related to the operations of the Ingram
Division. The foregoing transfer of Ingram Assets and the Ingram
Liabilities is referred to in this Agreement as the "Ingram Spinoff."
(b) Company has terminated the employment of certain employees set
forth on Schedule 3.26 hereto, and such employees have been transferred to
New Ingram. Company has transferred the employment of certain employees set
forth on Schedule 3.26 from the Ingram Division to the PA Division. Company
represents and warrants that those employees transferred from the Ingram
Division to the PA Division are necessary to the operation of the PA
Business.
(c) The Employee Benefit Plans of Company shall be transferred to
New Ingram or retained by Company, as described on Schedule 3.26.
(d) The Ingram Division shall be released from any and all
obligations relating to an intra-company loan from the PA Division, in an
amount, as of June 30, 1999, equal to Three Million Five Hundred Three
Thousand Dollars.
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<PAGE>
3.27 Production Transition. Company has transferred the vibratory roller
operations and related PA Division Products from Company's Danville, Indiana
Facility to Company's Brownsburg, Indiana Facility.
3.28 Assets Necessary to PA Business. Upon the Ingram Spinoff and the
transfer of the assets referenced in Section 9.01(j), the Company will own all
property and assets, tangible and intangible, and all leases, licenses and other
agreements, which are necessary to permit Buyer to carry on the PA Business as
presently conducted.
3.29 Copies of Certain Documents. Shareholders have heretofore delivered
to Buyer true and complete copies of: (a) all agreements entered into by
Company, if any, providing for the acquisition or disposition of businesses or
product lines; (b) all federal and other tax returns filed by Company and, to
the extent such returns relate to the properties, assets or operations of
Company, by any Shareholder, for the years ended on December 31, 1998, December
31, 1997, and December 31, 1996; and (c) a complete list of all investments of
Company, if any, in marketable or other securities (whether debt or equity).
3.30 Underlying Documents. Any underlying documents listed or described in
this Agreement or in the attached Schedules have heretofore been furnished to
Buyer or its representatives. All such documents furnished to Buyer or its
representatives are true and complete copies, and there are no amendments or
modifications thereto, except as expressly noted in the Schedules in which such
documents are listed, described and/or incorporated. The minute books of Company
contain full, complete and accurate records of all meetings and other corporate
actions taken by the directors and Shareholders of Company.
3.31 PA Business of Company. To the knowledge of Shareholders, there are
no conditions existing with respect to the markets, products, Facilities or
personnel of Company which would reasonably be expected to materially and
adversely affect the PA Business or prospects of the PA Division, other than
such conditions as may affect the industry in general in which Company
participates.
3.32 Disclosure of Material Facts. Shareholders have disclosed to Buyer
all material facts relating to the condition (financial or otherwise), of the
Business, net worth, assets, properties, liabilities, operations or future
prospects of Company. The representations and warranties contained in Article
III of this Agreement and in the Schedules hereto, and any other documents or
information furnished to Buyer by any Shareholder do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained herein or therein not misleading.
3.33 No Payment of Transaction Expenses. Shareholders have not caused nor
have taken any action which will cause Company to pay, or reimburse
Shareholders, for any expenses incurred by Company or Shareholders pursuant to
or otherwise in connection with the transactions contemplated by this Agreement.
3.34 No Brokers or Finders. Neither Company nor any of its directors,
officers, employees, Shareholders or agents have retained, employed or used any
broker or finder in
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<PAGE>
connection with the transaction provided for herein or in connection with the
negotiation thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Shareholders,
each of which is true and correct on the date hereof, shall be unaffected by any
investigation heretofore or hereafter made by Shareholders or any notice to
Shareholders, and shall survive the Closing of the transactions provided for
herein.
4.01 Corporate.
(a) Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware.
(b) Corporate Power. Buyer has all requisite corporate power to
---------------
enter into this Agreement and the other documents and instruments to be
executed and delivered by Buyer and to carry out the transactions
contemplated hereby and thereby.
4.02 Authority. The execution and delivery of this Agreement and the
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by the board of directors of Buyer. No
other corporate act or proceeding on the part of Buyer is necessary to authorize
this Agreement, any of the Ancillary Documents, or the consummation of the
transactions contemplated hereby and thereby. When executed and delivered, each
of this Agreement and each Ancillary Document constitutes a valid and binding
agreement of Buyer, enforceable in accordance with its terms, except as such may
be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
4.03 No Brokers or Finders. Neither Buyer nor any of its directors,
officers, employees or agents have retained, employed or used any other broker
or finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
ARTICLE V
POST-CLOSING COVENANTS
5.01 Noncompetition; Confidentiality. Subject to the Closing, and as an
inducement to Buyer to execute this Agreement and complete the transactions
contemplated hereby, and in order to preserve the goodwill associated with the
PA Business being acquired pursuant to this Agreement, each Shareholder hereby
covenants and agrees as follows:
(a) Covenant Not to Compete. For a period of five (5) years from the
-----------------------
Closing Date, no Shareholder will, directly or indirectly:
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<PAGE>
(i) engage in, continue in or carry on any business which
competes with the PA Business or is substantially similar thereto,
including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business organization
which is so engaged;
(ii) consult with, advise or assist in any way, whether or not
for consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of Buyer
in any aspect with respect to the PA Business including, but not
limited to, advertising or otherwise endorsing the products of any
such competitor; soliciting customers or otherwise serving as an
intermediary for any such competitor; loaning money or rendering any
other form of financial assistance to or engaging in any form of
business transaction on other than an arm's length basis with any
such competitor;
(iii) offer employment to any employee of Buyer without the
prior written consent of Buyer; or
(iv) engage in any practice the purpose of which is to evade
the provisions of this covenant not to compete or to commit any act
which adversely affects the PA Business; provided, however, that the
foregoing shall not prohibit the ownership of securities of
corporations which are listed on a national securities exchange or
traded in the national over-the-counter market in an amount which
shall not exceed five percent (5%) of the outstanding shares of any
such corporation. The parties agree that the geographic scope of this
covenant not to compete shall extend throughout North and South
America and Europe, and Shareholders acknowledge that such territory
is reasonable in light of the PA Business. The parties agree that
Buyer may sell, assign or otherwise transfer this covenant not to
compete, in whole or in part, to any person, corporation, firm or
entity that purchases all or part of the PA Business or the Shares.
In the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as
to duration, geographic scope or activity, it is expressly agreed
that this covenant not to compete shall be construed so that the
remaining provisions shall not be affected, but shall remain in full
force and effect, and any such over broad provisions shall be deemed,
without further action on the part of any person, to be modified,
amended and/or limited, but only to the extent necessary to render
the same valid and enforceable in such jurisdiction.
(b) Covenant of Confidentiality. No Shareholder shall at any time
---------------------------
subsequent to the Closing, except as explicitly requested by Buyer, (i) use
for any purpose, (ii) disclose to any person, or (iii) keep or make copies
of documents, tapes, discs or programs containing, any confidential
information concerning the PA Division. For purposes hereof, "confidential
information" shall mean and include, without limitation, all PA Proprietary
Rights in which has an interest, all customer
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<PAGE>
lists and customer information, and all other information concerning the PA
Division's processes, apparatus, equipment, packaging, products, marketing
and distribution methods, not already in the public domain.
(c) Equitable Relief for Violations. Each Shareholder agrees that
-------------------------------
the provisions and restrictions contained in this Section 5.01 are
necessary to protect the legitimate continuing interests of Buyer in
acquiring the PA Division, and that any violation or breach of these
provisions will result in irreparable injury to Buyer for which a remedy at
law would be inadequate and that, in addition to any relief at law which
may be available to Buyer for such violation or breach and regardless of
any other provision contained in this Agreement, Buyer shall be entitled to
injunctive and other equitable relief as a court may grant after
considering the intent of this Section 5.01.
5.02 Preparation of Company's Tax Return. Buyer shall prepare Company's
federal and state income tax return for the period beginning January 1, 1999 and
ending on the Closing Date.
5.03 Underground Storage Tank. Following the Closing, the Shareholders and
the LLC will comply fully with applicable Indiana Environmental Laws with
respect to the closure or removal of any underground storage tank located on the
premises of the Brownsburg Facility.
5.04 Year 2000 Compliance.
(a) Current Status of Year 2000 Compliance. The parties acknowledge
--------------------------------------
that Company's internal systems are not, as of the Closing, fully Year 2000
Compliant, and that the Shareholders have not conducted inquiries to
determine whether Company's major suppliers and vendors and all Products
and services marketed by Company are fully Year 2000 Compliant. To be "Year
2000 Compliant" (i) an internal system or a product or service must at all
times before, during and after January 1, 2000, accurately process and
handle date and time data (including, but not limited to calculating,
comparing and sequencing) from, into and between the twentieth and twenty-
first centuries, and the years 1999 and 2000, including leap year
calculations, to the extent that other information technology used in
combination with such internal systems and such products and services
properly exchange date/time data with it, and (ii) to the extent any such
internal systems and such products and services must perform as a system,
such internal systems and such products and services used in combination
with other such internal systems and such products and services,
respectively, must properly exchange date/time data with them in accordance
with clause (i).
(b) Post-Closing Costs of Year 2000 Compliance. Shareholders will
------------------------------------------
reimburse Buyer for all reasonable costs incurred in good faith as a result
of (i) the installation and start-up of the software described in Schedule
5.04; and (ii) the application of Buyer's Y2K readiness campaign to the
Company. To the extent not
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<PAGE>
reimbursed by Shareholders, such costs shall be subject to offset against
any special bonus amounts which may hereafter become due and owing under
the Employment Agreement.
5.05 Further Assurance. From time to time, at Buyer's request and without
further consideration, Shareholders will execute and deliver to Buyer such
documents and take such other action as Buyer may reasonably request in order to
consummate more effectively the transactions contemplated hereby and to vest in
Buyer good, valid and marketable title to the Shares.
5.06 Payment of Line of Credit. Contemporaneously with the Closing, Buyer
shall cause the payment obligations associated with Company's obligations to
Peoples Bank, set forth on Schedule 3.18, to be satisfied.
ARTICLE VI
[Intentionally Omitted]
ARTICLE VII
RELEASE
7.01 By the LLC and Members. The LLC, C. Christopher Zanetis and Ann B.
Zanetis (the "Members") each, personally and on behalf of such person's heirs,
successors and assigns, hereby releases, remises, forever discharges and
covenants not to sue Buyer or any of Buyer's Affiliates, of and from all manner
of Claims arising from or based upon any obligations and liabilities relating to
the Town of Brownsburg, Indiana Variable Rate Demand Economic Development
Revenue Bonds, Series 1998 (Zanetis Enterprises, L.L.C. Project) (the "Bonds")
including loss of tax exemption.
ARTICLE VIII
INDEMNIFICATION
8.01 By Shareholder. Subject to the terms and conditions of this Article
VIII, each Shareholder, jointly and severally, hereby agrees to indemnify,
defend and hold harmless Buyer, and its directors, officers, employees and
controlled and controlling persons (hereinafter "Buyer's Affiliates"), from and
against all Claims asserted against, resulting to, imposed upon, or incurred by
Buyer, Buyer's Affiliates, Company or the Business, directly or indirectly, by
reason of, arising out of or resulting from (a) the inaccuracy or breach of any
representation or warranty of any Shareholder contained in or made pursuant to
this Agreement (regardless of whether such breach is deemed "material"); (b) the
breach of any covenant of any Shareholder contained in this Agreement
(regardless of whether such breach is deemed "material"); (c) any environmental
matters identified on Schedule 3.12; (d) PA Division obligations and liabilities
existing or arising from events occurring prior to the Closing Date which are
not reflected on the Recent Balance Sheet (or which exceed the amounts on the
Recent Balance Sheet reserved therefor), including, without limitation,
contingent or
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undisclosed liabilities, Litigation or claims of any kind, whether or not
pending or threatened, relating to any claim, event or occurrence prior to the
Closing Date, taxes (including penalties and interest thereon) owed for any
period prior to the Closing Date, environmental and employee benefit plan
liabilities and claims or liabilities (including warranty obligations in excess
of that reflected on the Recent Balance Sheet) for any PA Division Product
manufactured or sold by Company prior to the Closing Date; or (e) any Ingram
Liabilities and New Ingram liabilities, including, without limitation,
contingent or undisclosed Ingram Liabilities and New Ingram liabilities,
Litigation or claims of any kind, whether or not pending or threatened, relating
to any claim, event or occurrence occurring prior to or at any time after the
Closing Date, taxes (including penalties and interest thereon), owed for any
period prior to or after the Closing Date on the operations of the Ingram
Division or New Ingram, as the case may be, including, without limitation, taxes
(including penalties and interest thereon) incurred as a result of the Ingram
Spinoff, environmental and employee benefit plan liabilities and claims or
liabilities for any Product of the Ingram Division manufactured or sold by
Company or New Ingram (or any successor thereto), as the case may be, prior to
or at any time after the Closing Date (including without limitation any warranty
obligations with respect to Products of the Ingram Division).
As used in this Article VIII, the term "Claim" shall include (i) all
liabilities; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, settlements, costs and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and reasonable attorneys' fees and
expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings and assessments, whether or not
ultimately determined to be valid.
8.02 By Buyer. Subject to the terms and conditions of this Article VIII,
Buyer hereby agrees to indemnify, defend and hold harmless each Shareholder from
and against all Claims asserted against, resulting to, imposed upon or incurred
by any such person, directly or indirectly, by reason of or resulting from (a)
the inaccuracy or breach of any representation or warranty of Buyer contained in
or made pursuant to this Agreement (regardless of whether such breach is deemed
"material"); (b) the breach of any covenant of Buyer contained in this Agreement
(regardless of whether such breach is deemed "material"); or (c) obligations and
liabilities relating to the PA Division existing or arising from events
occurring after the Closing Date.
8.03 Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other party under this Article VIII
with respect to Claims relating to third parties shall be subject to the
following terms and conditions:
(a) Notice and Defense. The party or parties to be indemnified
------------------
(whether one or more, the "Indemnified Party") will give the party from
whom indemnification is sought (the "Indemnifying Party") prompt written
notice of any such Claim, and the Indemnifying Party and/or its chosen
representatives will undertake the defense thereof. Failure by the
Indemnified Party to give such notice shall not affect the Indemnifying
Party's duties or obligations under this Article VIII,
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except to the extent the Indemnifying Party is prejudiced thereby. So long
as the Indemnifying Party is defending any such Claim actively and in good
faith, the Indemnified Party shall not settle such Claim. The Indemnified
Party shall make available to the Indemnifying Party and/or its
representatives all records and other materials reasonably required by them
and in the possession or under the control of the Indemnified Party, for
the use of the Indemnifying Party and/or its representatives in defending
any such Claim, and shall in all other respects give reasonable cooperation
in such defense.
(b) Failure to Defend. If the Indemnifying Party, within a
-----------------
reasonable time period after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon further
notice from the Indemnifying Party) have the right to undertake the
defense, compromise or settlement of such Claim or to consent to the entry
of a judgment with respect to such Claim, on behalf of and for the account
and risk of the Indemnifying Party, and the Indemnifying Party shall
thereafter have no right to challenge the Indemnified Party's defense,
compromise, settlement or consent to judgment.
(c) Indemnified Party's Rights. Anything in this Article VIII to the
--------------------------
contrary notwithstanding, (i) if there is a reasonable probability that a
Claim may materially and adversely affect the Indemnified Party other than
as a result of money damages or other money payments, the Indemnified Party
shall have the right to defend, compromise or settle such Claim, and (ii)
the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry
of any judgment which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Claim.
8.04 Payment.
(a) Time for Payment. Upon judgment, determination, settlement or
----------------
compromise of any third-party Claim, the Indemnifying Party shall pay
promptly on behalf of the Indemnified Party, and/or to the Indemnified
Party in reimbursement of any amount theretofore required to be paid by it,
the amount so determined by judgment, determination, settlement or
compromise and all other Claims of the Indemnified Party with respect
thereto, unless in the case of a judgment an appeal is made from the
judgment. If the Indemnifying Party desires to appeal from an adverse
judgment, then the Indemnifying Party shall post and pay the cost of the
security or bond to stay execution of the judgment pending appeal.
(b) Effect of Payment. Upon the payment in full by the Indemnifying
-----------------
Party of such amounts, the Indemnifying Party shall succeed to the rights
of such Indemnified Party, to the extent not waived in settlement, against
the third party who made such third-party Claim.
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(c) Source and Procedure for Payment of Certain Buyer Claims. With
--------------------------------------------------------
respect to any claims for indemnification by Buyer that are subject to the
limitations of Section 8.06(b)(i), the parties agree that that Buyer's sole
source of payment will be disbursements from the escrow account established
pursuant to the terms of the Escrow Agreement, such disbursements to be
effected in accordance with the procedures set forth in the Escrow
Agreement.
8.05 Limitations on Indemnification.
(a) Time Limitation. No Claim shall be brought under this Article
---------------
VIII after the lapse of two (2) years following the Closing. Regardless of
the foregoing, however, or any other provision of this Agreement:
(i) There shall be no time limitation on Claims brought for
breach of any representation or warranty made by Shareholders in
Sections 3.04 and 3.05, or for claims or actions brought for fraud in
connection with the sale of the Shares to Buyer by Shareholders and
(all such Claims, collectively, "Fraud and Title Claims") and
Shareholders hereby waive all applicable statutory limitation periods
with respect thereto.
(ii) The time limitation on Claims brought for breach of any
representation or warranty made by Shareholders in Section 3.06 or
for those items identified on Schedule 8.06 ("Tax Claims") shall be
twelve (12) months following the end of any applicable taxing
authority's statute of limitations period.
(iii) There shall be no time limitation on Claims for breach of
any representation or warranty made by Shareholders in Section
3.12(c) or Claims brought with respect to Shareholders'
indemnification obligations under clause (d) of Section 8.01
("Environmental Claims"), and Shareholders hereby waive all
applicable statutory limitation periods with respect thereto.
(iv) There shall be no time limitation on Claims with respect
to Shareholders' indemnification obligations under clause (e) of
Section 8.01 to the extent arising from Company's litigation with
Attec International, as described in Schedule 3.11 ("Attec Claims").
(v) There shall be no time limitation on Claims for breach of
any representation or warranty made by Shareholders to the extent
that such representation or warranty is made with respect to the
Ingram Division, the Ingram Assets or the Ingram Liabilities, or
Claims with respect to Shareholders' indemnification obligations
under clause (f) of Section 8.01 (all such Claims, the "Ingram
Claims").
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(vi) There shall be no time limitation on Claims brought for
breach of any representation or warranty made by the LLC, or for
claims or actions brought in connection with the Bonds.
(vii) If any act, omission, disclosure or failure to disclosure
shall form the basis for a claim for breach of more than one
representation or warranty, and such claims have different periods of
survival hereunder, the termination of the survival period of one
claim shall not affect a party's right to make a claim based on the
breach of representation or warranty still surviving.
(b) Amount Limitation.
-----------------
(i) Except as provided for in Subsections 8.06(b)(ii) and
(iii), Shareholders shall have liability to Buyer and Buyer's
Affiliates only to the extent of the Escrow Amount.
(ii) Shareholders shall have liability to Buyer and Buyer's
Affiliates, to the extent such liability does not exceed the Purchase
Price, for Fraud and Title Claims, Tax Claims, Environmental Claims,
Attec Claims or Ingram Claims.
(iii) Claims by Buyer pursuant Section 5.04(b) are subject to
offset as provided in that Section.
(c) No Waiver. The closing of the transactions contemplated by this
---------
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of
condition constituting the basis of the Claim at or before the Closing, and
regardless of whether such breach, violation or failure is deemed to be
"material."
8.06 Exclusive Remedy. The indemnification provisions in this Article VIII
shall be the sole remedy, exclusive of all other remedies, causes of actions or
claims (whether common law or statutory) of the Indemnified Party for any
monetary relief or recovery against the Indemnifying Party in connection with
any claim arising out of a matter subject to indemnification under this Article
VIII or any breach of the representations and warranties set forth in Articles 3
and 4. All indemnification payments under this Article VIII shall be deemed
adjustments to the Purchase Price.
ARTICLE IX
CLOSING
The closing of this transaction (the "Closing") shall take place at the
offices of Foley & Lardner at 330 North Wabash Avenue, Suite 3300, Chicago,
Illinois at 10:00 A.M. on July 30, 1999, or at such other time and place as the
parties hereto shall agree upon. Such date is referred to in this Agreement as
the "Closing Date."
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9.01 Shareholders' Closing Deliveries. At the Closing, Shareholders shall
deliver to Buyer the following documents, in each case duly executed or
otherwise in proper form:
(a) Stock Certificates. Stock certificates representing the Shares,
------------------
duly endorsed for transfer or with duly executed stock powers attached.
(b) Opinion of Counsel. A written opinion of Baker & Daniels,
------------------
counsel to Shareholders, dated as of the Closing Date, addressed to Buyer,
substantially in the form of Exhibit A hereto.
(c) Resignations. The resignations of all of the officers and
------------
directors of Company, effective as of the Closing Date and in form and
substance satisfactory to Buyer.
(d) Termination of Lease Agreements. The termination of the lease
-------------------------------
agreements existing prior to the Closing Date for the Leased Real Property.
(e) Lease Agreements. The lease agreement in the form of Exhibit B
----------------
(the "Lease Agreement"), each duly executed by the owner of the related
parcel of Leased Real Property.
(f) Escrow Agreement. The Escrow Agreement duly executed by
----------------
Shareholders in the form of Exhibit C hereto (the "Escrow Agreement").
(g) Articles; By-laws. A current copy of the By-laws of Company
-----------------
certified by the secretary of Company, and a current copy of the Articles
of Incorporation of Company certified by the Secretary of State of the
state of incorporation of Company.
(h) General Releases. Each Shareholder shall deliver duly executed
----------------
general releases, in form and substance satisfactory to Buyer, releasing
Company from all liabilities to the Closing Date.
(i) Employment Agreement; Consulting Agreement; Non-Competition
-----------------------------------------------------------
Agreement. An employment agreement, consulting agreement and non-
---------
competition agreement in the forms of Exhibit D, Exhibit E and Exhibit F,
respectively, duly executed by C. Christopher Zanetis.
(j) Transfer of Assets. Transfer documentation in form and substance
------------------
satisfactory to Buyer effecting the transfer of those assets listed on
Schedule 9.01(j) from the LLC to Company.
(k) Release of Liens and Other Third Party Obligations. Payoff
--------------------------------------------------
letters or similar documentation in form and substance reasonably
satisfactory to Buyer enabling Buyer to ascertain that the third parties
listed on Schedule 9.01(k) will, upon payment of the amounts set forth in
such payoff letters: (i) release any and all Liens on the Company's assets
(including assets transferred to the Company pursuant to the
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<PAGE>
transaction required by Section 9.01(j); and (ii) release any and all
guaranties or other contingent obligations of Company delivered in favor of
such persons.
(l) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to Buyer at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
9.02 LLC and Members' Closing Deliveries. At the Closing, LLC and Members,
as applicable, shall deliver to Buyer releases or similar documentation in form
and substance reasonably satisfactory to Buyer evidencing Company's
unconditional release from (i) the Unlimited Continuing Guaranty, dated June 3,
1998, by and between Company and Firstar; (ii) the General Security Agreement,
dated June 3, 1998, by and between Company and Firstar; (iii) any and all
indemnifications owed to Firstar by Company; and (iii) Environmental Indemnity
Agreement, dated June 3, 1998, by and between Company and the LLC.
9.03 Buyer's Closing Deliveries. At the Closing, Buyer shall deliver to
Shareholders the following documents, in each case duly executed or otherwise in
proper form:
(a) Estimated Purchase Price. To Shareholders the estimated Purchase
------------------------
Price as required by Section 2.02(b), and to the Escrow Agent the Escrow
Amount as required by Section 2.02(a).
(b) Opinion of Counsel. A written opinion of Foley & Lardner,
------------------
counsel to Buyer, dated as of the Closing Date, addressed to Shareholders,
in substantially the form of Exhibit G hereto.
(c) Certified Resolutions. A certified copy of the resolutions of
---------------------
the Board of Directors of Buyer authorizing and approving this Agreement
and the consummation of the transactions contemplated by this Agreement.
(d) Escrow Agreement. The Escrow Agreement duly executed by Buyer.
----------------
(e) Lease Agreement. The Lease Agreement, duly executed by Buyer.
---------------
(f) Incumbency Certificate. Incumbency certificates relating to each
----------------------
person executing any document executed and delivered to Shareholders by
Buyer pursuant to the terms hereof.
(g) Employment Agreement. The Employment Agreement duly executed by
--------------------
Buyer.
(h) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to Shareholders at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Shareholders may reasonably request.
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<PAGE>
ARTICLE X
MISCELLANEOUS
10.01 Schedules. Information set forth in the Schedules specifically refers
to the article and section of this Agreement to which such information is
responsive and such information shall not be deemed to have been disclosed with
respect to any other article or section of this Agreement or for any other
purpose. Except as specifically provided for herein, the Schedules shall not
vary, change or alter the language of the representations and warranties
contained in this Agreement and, to the extent the language in the Schedules
does not conform in every respect to the language of such representations and
warranties, such language shall be disregarded and be of no force or effect.
10.02 Disclosures and Announcements. Both the timing and the content of all
disclosure to third parties and public announcements concerning the transactions
provided for in this Agreement by either Shareholders or Buyer shall be subject
to the approval of the other in all essential respects.
10.03 Assignment; Parties in Interest.
(a) Assignment. Except as expressly provided herein, the rights and
----------
obligations of a party hereunder may not be assigned, transferred or
encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, (i) Buyer may, without consent of any other
party, cause one or more subsidiaries of Buyer to carry out all or part of
the transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any
such subsidiary, to Shareholders hereunder; and (ii) Buyer may assign its
interest in this Agreement to CSFB, as agent, as additional security for
Buyer's obligations to such lender and Shareholders agree to execute
acknowledgements of such assignments as reasonably may be required by such
lender.
(b) Parties in Interest. This Agreement shall be binding upon,
-------------------
inure to the benefit of, and be enforceable by the respective successors
and permitted assigns of the parties hereto. Nothing contained herein shall
be deemed to confer upon any other person any right or remedy under or by
reason of this Agreement.
10.04 Law Governing Agreement. This Agreement may not be modified or
terminated orally, and shall be construed and interpreted according to the
internal laws of the State of Illinois, excluding any choice of law rules that
may direct the application of the laws of another jurisdiction.
10.05 Amendment and Modification. Buyer and Shareholders may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
10.06 Notice. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by facsimile transmission or other electronic means of transmitting written
documents; or (c) sent to the
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<PAGE>
parties at their respective addresses indicated herein by registered or
certified U.S. mail, return receipt requested and postage prepaid, or by private
overnight mail courier service. The respective addresses to be used for all such
notices, demands or requests are as follows:
(a) If to Buyer, to:
Woods Equipment Company
6944 Newburg Road
Rockford, Illinois 61108
Attention: Thomas J. Laird
Facsimile: (815) 381-6047
(with a copy, which copy shall not constitute notice, to)
Madison Dearborn Partners, Inc.
Three First National Plaza
Suite 3800
Chicago, Illinois 60602
Attention: Paul R. Wood
Facsimile: (312) 895-1156
(and to)
Foley & Lardner
One IBM Plaza, Suite 3300
Chicago, Illinois 60611
Attention: Stephen M. Slavin
Facsimile: (312) 755-1925
or to such other person or address as Buyer shall furnish to Shareholders in
writing.
(b) If to Shareholders, to:
C. Christopher Zanetis
7291 Windridge Way
Brownsburg, Indiana 46112
(with a copy, which copy shall not constitute notice, to)
Baker & Daniels
300 North Meridian Street
Indianapolis, Indiana 46204
Attention: David A. Given
Facsimile: (317) 237-1000
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<PAGE>
or to such other person or address as Shareholders shall furnish to Buyer in
writing.
If personally delivered or sent by overnight courier, such communication
shall be deemed delivered upon actual receipt; if electronically transmitted
pursuant to this paragraph, such communication shall be deemed delivered the
next business day after transmission (and sender shall bear the burden of proof
of delivery); and if sent by U.S. mail pursuant to this paragraph, such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Any party
to this Agreement may change its address for the purposes of this Agreement by
giving notice thereof in accordance with this Section.
10.07 Expenses. Regardless of whether or not the transactions contemplated
hereby are consummated:
(a) Brokerage. Shareholders and Buyer each represent and warrant to
---------
each other that there is no broker involved or in any way connected with
the transfer provided for herein. Buyer agrees to hold Shareholders
harmless from and against all claims for brokerage commissions or finder's
fees incurred through any act of Buyer in connection with the execution of
this Agreement or the transactions provided for herein. Shareholders,
jointly and severally, agree to hold Buyer harmless from and against all
claims for brokerage commissions or finder's fees incurred through any act
of any Shareholder in connection with the execution of this Agreement or
the transactions provided for herein.
(b) Expenses to be Paid by Shareholders. Shareholders shall pay, and
-----------------------------------
shall indemnify, defend and hold Buyer harmless from and against, any
sales, use, excise, transfer or other similar tax imposed with respect to
the transactions provided for in this Agreement, and any interest and
survey costs or penalties related thereto.
(c) Expenses to be Paid by Buyer. Buyer shall pay, and shall
----------------------------
indemnify, defend and hold Shareholders harmless from and against the fees
and other expenses relating to the environmental and health and safety
audit performed by Buyer.
(d) Other. Except as otherwise provided herein, each of the parties
-----
shall bear its own expenses and the expenses of its counsel and other
agents in connection with the transactions contemplated hereby.
10.08 Entire Agreement. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
10.09 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
10.10 Headings. The headings in this Agreement are inserted for convenience
only and shall not constitute a part hereof.
10.11 Index of Terms. The following sets forth the location of definitions
of capitalized terms defined in the body of this Agreement:
"Affiliate" - Section 2.03(c)(iii)
"Attec Claims" - Section 8.06(a)(v)
"Ancillary Documents" - Section 3.04(a)
"April 1999 Value" - Section 2.03(a)
"Bonds" - Section 8.03
"Business" - Recitals
"Buyer's Accountants" - Section 2.03(e)(i)
"Buyer's Affiliates" - Section 8.01
"Brownsburg Facility" - Section 6.02
"CERCLA" - Section 3.12(c)
"Claim" - Section 8.01
"Closing" - Preamble to Article IX
"Closing Date" - Preamble to Article IX
"Code" - Section 3.06(e)
"Company" - Recitals
"CSFB" - Section 9.01(b)
"Effective Time" - Section 2.03(d)
"Employee Plans/Agreements" - Section 3.20(a)
"Environmental Claims" - Section 8.06(a)(ii)
"Environmental Laws" - Section 3.12(c)
"ERISA" - Section 3.20(a)
"Escrow Agreement" - Section 9.01(f)
"Escrow Amount" - Section 2.02(a)
"Estimated Closing Balance Sheet" - Section 2.03(d)
"Excess Indebtedness Amount" - Section 2.03(c)(ii)
"Excluded Assets" - Section 1.02
"Excluded Liabilities" - Section 1.03
"Facilities" - Recitals
"Final Closing Balance Sheet" - Section 2.03(e)(iii)
"Firstar" - Section 9.02(a)
"Fraud and Title Claims" - Section 8.06(a)(i)
"IRS" - Section 3.06(c)
"Indebtedness Amount" - Section 2.03(c)(i)
"Indemnified Party" - Section 8.04(a)
"Indemnifying Party" - Section 8.04(a)
"Ingram Division" - Recitals
"Ingram Assets" - Section 3.26(a)
"Ingram Claims" - Section 8.06(a)(iv)
"Ingram Liabilities" - Section 3.26(a)
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<PAGE>
"Ingram Spinoff" - Section 3.26(a)
"LLC" - Recitals
"Laws" - Section 3.02
"Lease Agreement" - Section 9.01(e)
"Leased Real Property" - Section 3.13(d)
"Liens" - Section 3.09(i)
"Litigation" - Section 3.11
"Members" - Section 7.01
"New Ingram" - Section 3.26(a)
"Operation Agreement" - Section 6.08
"Orders" - Section 3.02
"PA Business" - Recitals
"PA Division" - Recitals
"PA Proprietary Rights" - Section 3.22(a)
"PBGC" - Section 3.20(b)(ii)
"Products" - Section 3.24
"Proprietary Rights" - Section 3.22(a)
"Purchase Price" - Section 2.01(a)
"Recent Balance Sheet" - Section 3.03
"Sales Commitments" - Section 3.18(d)
"Schedules" - Preamble to Article III
"Settlement Date" - Section 2.02(c)
"Shareholders' Accountants" - Section 2.03(e)(ii)
"Shares" - Recitals
"Third Accounting Firm" - Section 2.03(e)(iii)
"Waste" - Section 3.12(c)
"Working Capital Value" - Section 2.03(b)
"Year 2000 Compliant" - Section 3.22(b)
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
***************
(The next page is the signature page)
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
WEC COMPANY
By: /s/ Steven M. Vandemore
--------------------------------
Its: Vice President
SHAREHOLDERS:
/s/ C. Christopher Zanetis
--------------------------------
C. Christopher Zanetis
/s/ Ann Zanetis
--------------------------------
Ann Zanetis
/s/ Mark R. Kinder
--------------------------------
Mark R. Kinder
/s/ Reba M. Kinder
--------------------------------
Reba M. Kinder
/s/ William J. Bethards
--------------------------------
William J. Bethards
/s/ Robert E. Bethards
--------------------------------
Robert E. Bethards
<PAGE>
ZANETIS ENTERPRISES, LLC
/s/ C. Christopher Zanetis
--------------------------------
By: C. Christopher Zanetis
Its: Member
-2-
<PAGE>
EXHIBIT 2.6
RECAPITALIZATION AGREEMENT
WOODS EQUIPMENT COMPANY
July 28, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C>
1. DEFINITIONS............................................................................ 2
2. RECAPITALIZATION....................................................................... 9
2.01 Authorization................................................................. 9
2.02 Investment Transaction........................................................ 10
2.03 Repurchase Transaction........................................................ 10
2.04 Exchange Transaction.......................................................... 11
2.05 Closing....................................................................... 12
2.06 Final Closing Balance Sheet................................................... 14
3. REPRESENTATIONS AND WARRANTIES OF COMPANY.............................................. 16
3.01 Organization, Qualification, and Corporate Power.............................. 16
3.02 Good Standing................................................................. 16
3.03 Enforceability................................................................ 16
3.04 Capitalization of Company..................................................... 16
3.05 Obligations with Respect to Capital Stock..................................... 17
3.06 Noncontravention.............................................................. 17
3.07 Subsidiary.................................................................... 18
3.08 Joint Venture................................................................. 18
3.09 Tax Matters................................................................... 18
3.10 Financial Statements.......................................................... 19
4. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF COMPANY................................... 20
4.01 Undisclosed Liabilities....................................................... 20
4.02 Events Subsequent to Most Recent Fiscal Year End.............................. 20
4.03 Legal Compliance.............................................................. 22
4.04 Personal Property............................................................. 22
4.05 Real Property................................................................. 22
4.06 Intellectual Property......................................................... 23
4.07 Contracts..................................................................... 24
4.08 Product Warranty.............................................................. 26
4.09 Product Liability............................................................. 26
4.10 Litigation.................................................................... 26
4.11 Employee Benefit Plans........................................................ 26
4.12 Employment Compensation....................................................... 28
4.13 Labor Relations............................................................... 28
4.14 Insurance..................................................................... 28
4.15 Necessary Licenses and Permits................................................ 29
4.16 Environmental, Health, and Safety Matters..................................... 29
4.17 Certain Business Relationships with Company................................... 29
4.18 Corporate Documents........................................................... 30
4.19 Brokers' Fees................................................................. 30
4.20 Inventory..................................................................... 30
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.21 Notes and Accounts Receivable................................................ 30
4.22 Tangible Assets.............................................................. 30
4.23 Dealers...................................................................... 30
4.24 Supplier and Customer Relationships.......................................... 30
4.25 Joint Venture Relationship................................................... 31
4.26 Exclusivity of Representations and Warranties................................ 31
5. COVENANT TO SELL; REPRESENTATIONS AND WARRANTIES CONCERNING SELLERS................... 31
5.01 Authorization................................................................ 31
5.02 Noncontravention............................................................. 31
5.03 Repurchased Shares........................................................... 31
5.04 Broker's Fees................................................................ 32
6. REPRESENTATIONS AND WARRANTIES CONCERNING CONTINUING STOCKHOLDERS..................... 32
6.01 Authorization................................................................ 32
6.02 Noncontravention............................................................. 32
6.03 Repurchased Shares........................................................... 32
6.04 Broker's Fees................................................................ 32
6.05 Investment Intent............................................................ 33
7. REPRESENTATIONS AND WARRANTIES CONCERNING PURCHASER................................... 33
7.01 Organizational............................................................... 33
7.02 Authority.................................................................... 33
7.03 Brokers' Fees................................................................ 33
7.04 Investment Intent............................................................ 33
8. COVENANTS............................................................................. 33
8.01 General...................................................................... 33
8.02 Notices and Consents......................................................... 34
8.03 Operation of Business........................................................ 34
8.04 Purchaser Access; Confidentiality............................................ 34
8.05 HSR Act Filings.............................................................. 34
8.06 Exclusivity.................................................................. 34
8.07 Confidentiality.............................................................. 35
8.08 Title Insurance.............................................................. 35
8.09 Surveys...................................................................... 35
8.10 Title Exceptions and Survey Conditions....................................... 36
8.11 Employee Benefit Plans....................................................... 36
8.12 Intellectual Property Matters................................................ 36
9. CLOSING............................................................................... 36
9.01 Closing Preparations......................................................... 36
9.02 Company's Closing Deliveries................................................. 37
9.03 Purchaser's Closing Deliveries............................................... 39
</TABLE>
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<TABLE>
<S> <C>
9.04 Additional Actions To Be Effective Immediately After Closing................ 39
9.05 Additional Closing Deliveries............................................... 40
10. CONDITIONS TO OBLIGATION TO CLOSE.................................................... 41
10.01 Conditions to Obligation of Company and the Seller Parties.................. 41
10.02 Conditions to Obligation of Purchaser....................................... 41
11. SURVIVAL; CLAIMS AGAINST ESCROW AMOUNT............................................... 42
11.01 Nature and Survival of Representations...................................... 42
11.02 Environmental Remedies...................................................... 43
11.03 Claims Against Escrow Amount by Purchaser................................... 43
11.04 Matters Involving Third Parties............................................. 43
11.05 Determination of Adverse Consequences....................................... 45
11.06 Exclusive Remedy; Limitations on Remedy..................................... 45
11.07 Apportionment of Escrow Proceeds by Sellers' Representative................. 46
12. MISCELLANEOUS........................................................................ 46
12.01 Press Releases and Public Announcements..................................... 46
12.02 No Third-Party Beneficiaries................................................ 46
12.03 Entire Agreement............................................................ 46
12.04 Succession and Assignment................................................... 47
12.05 Counterparts................................................................ 47
12.06 Headings.................................................................... 47
12.07 Notices..................................................................... 47
12.08 Governing Law............................................................... 48
12.09 Amendments and Waivers...................................................... 48
12.10 Severability................................................................ 48
12.11 Expenses.................................................................... 49
</TABLE>
EXHIBITS:
- --------
Exhibit A __ Statement of Accounting Principles
Exhibit B __ Form of Escrow Agreement
Exhibit C-1 __ Form of General Release, Waiver and Covenant Not to Sue (to
Stockholders)
Exhibit C-2 __ Form of General Release, Waiver and Covenant Not to Sue
(from Stockholders)
Exhibit D [_] Form of Contingent Stock Purchase Warrant
Exhibit E [_] Form of Amended and Restated Certificate of Incorporation
-iii-
<PAGE>
Exhibit F __ Form of Opinion of Counsel to Company and Stockholders
Exhibit G __ Form of Opinion of Counsel to Purchaser
Exhibit H [_] Form of Stockholders Agreement
-iv-
<PAGE>
RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT ("Agreement") is made and entered into as
of July 28, 1998, by and among WOODS EQUIPMENT COMPANY, a Delaware corporation
(the "Company"); MADISON DEARBORN CAPITAL PARTNERS II, L.P., a Delaware limited
partnership ("Purchaser") the Stockholders of the Company (the "Stockholders")
and Brian P. Simmons, as Sellers' Representative (the "Sellers'
Representative"). The Company, the Purchaser, the Sellers' Representative and
the Stockholders are sometimes collectively referred to herein as the "Parties"
and individually as a "Party". Capitalized terms used herein and not otherwise
defined herein have the meanings given to such terms in Section 1 below.
RECITALS
A. The Company desires to reconstitute its capital structure through (i)
the sale of certain newly issued equity securities, the repurchase of certain of
its outstanding equity securities and the exchange by certain continuing holders
of certain of their shares of Old Preferred Stock and Common Stock for Common
Stock and/or New Preferred Stock, in each case on the terms and subject to the
conditions set forth herein and (ii) the prepayment, redemption and retirement
of certain indebtedness and the incurrence of certain new indebtedness.
B. The Purchaser desires to purchase from the Company certain newly
issued equity securities of the Company on the terms and subject to the
conditions set forth herein.
C. Certain of the Stockholders desire the Company to repurchase certain
equity securities and/or option rights of the Company held by such Stockholders
on the terms and subject to the conditions set forth herein.
D. Certain of the Stockholders desire to exchange certain Option Rights
and/or shares of Old Preferred Stock and/or Common Stock for shares of Common
Stock and/or New Preferred Stock.
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AGREEMENT
In consideration of the mutual covenants, agreements and understandings
herein contained, the Parties agree as follows:
1. Definitions.
"Accounting Principles" means the Statement of Accounting Principles
attached hereto as Exhibit A.
"Acquisition Notes and Non-Competes" means the notes and non-competition
agreements listed on Schedule 1.00.
"Adjustment Amount" has the meaning set forth in Section 2.03(a).
"Adjustment Payment Date" has the meaning set forth in Section 2.05(b).
"Adverse Consequences" has the meaning set forth in Section 11.05.
"Affiliated Group" means any affiliated group within the meaning of Code
(S)1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Amended Certificate" has the meaning set forth in Section 2.01(a).
"Business" means the business of the Company and the Subsidiary as
presently conducted.
"Cash Amount" has the meaning set forth in Section 2.03(a).
"Closing" has the meaning set forth in Section 2.05.
"Closing Date" has the meaning set forth in Section 2.05.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Seller" means a Stockholder who elects to sell Common Stock in the
Repurchase Transaction.
"Common Stock" means the common stock of the Company.
"Common Stock Repurchase Price" has the meaning set forth in Section
2.03(b).
"Common Stock Value" has the meaning set forth in Section 2.03(a).
"Continuing Stockholder" means a Stockholder who elects to remain a
stockholder of the Company after the Closing and to participate in the Exchange
Transaction.
"Debt Amount" has the meaning set forth in Section 2.03(a).
2
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"Draft Balance Sheet" has the meaning set forth in Section 2.06(a).
"Employee Benefit Plan" means any (a) nonqualified deferred compensation,
retirement bonus, incentive, separation or severance plan or arrangement, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan, (d) Employee Welfare
Benefit Plan as defined in ERISA (S)3(1), or (e) any material fringe benefit
plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)3(2).
"Environmental, Health, and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, and ordinances, all other legal
requirements, and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
as such requirements are enacted and in effect on or prior to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity which is treated as a single employer
with Company or Subsidiary for purposes of Code (S)414.
"Escrow Account" means the account established pursuant to the Escrow
Agreement.
"Escrow Agreement" means the Escrow Agreement in the form of Exhibit B.
"Escrow Amount" means Five Million Dollars ($5,000,000).
"Escrow Cash Amount" means an amount equal to the Escrow Amount less the
Escrow Stock Value.
"Escrow Common Shares" means a number of shares of Common Stock to be
deposited into the Escrow Account, such number to be equal to the Escrow Common
Value divided by the Estimated Common Stock Repurchase Price.
"Escrow Preferred Shares" means a number of shares of New Preferred Stock
to be deposited into the Escrow Account, such number to be equal to the Escrow
Preferred Value divided by the liquidation value of the New Preferred Stock
($1,000).
"Escrow Common Value" means the Escrow Stock Value less the Escrow
Preferred Value.
3
<PAGE>
Escrow Prefer red Value" means the Escrow Stock Value multiplied by a
fraction, the numerator of which is the New Preferred Equity and the denominator
of which is the sum of the New Common Equity and the New Preferred Equity.
"Escrow Shares" means the Escrow Common Shares and/or the Escrow Preferred
Shares.
"Escrow Stock Value" means an amount equal to the Escrow Amount multiplied
by a fraction, (a) the numerator of which is (i) the total number of all shares
of Common Stock and shares underlying Option Rights held by the Continuing
Stockholders immediately prior to Closing, less (ii) the total number of
Repurchased Common Shares held by Continuing Stockholders immediately prior to
Closing, and less (iii) the total number of shares underlying all Option Rights
repurchased from Continuing Stockholders; and (b) the denominator of which is
the total number of shares of Common Stock and shares underlying Option Rights
held by all Stockholders immediately prior to Closing.
"Estimated Closing Balance Sheet" has the meaning set forth in Section
9.01(a)(ii).
"Estimated Common Stock Repurchase Price" means an amount equal to equal to
(a) the sum of the Estimated Common Stock Value and the aggregate exercise price
of all Repurchased Option Rights and all Option Rights surrendered in the
Exchange Transaction, divided by (b) the sum of (i) the total number of shares
of Common Stock held by all Stockholders immediately prior to the Closing and
(ii) the total number of shares of Common Stock issuable upon exercise of all
outstanding Option Rights immediately prior to the Closing.
"Estimated Common Stock Value" shall be One Hundred Forty-Seven Million
Five Hundred Thousand Dollars ($147,500,000), adjusted as follows: (I) plus or
minus as the case may be, the Adjustment Amount, (II) minus the aggregate
Preferred Stock Repurchase Price paid to all Preferred Sellers, (III) minus the
Escrow Amount, (IV) plus or minus, as the case may be, the Working Capital
Adjustment, estimated as of the Closing Date by reference to the Estimated
Closing Balance Sheet, and (V) minus amounts that would be paid to Continuing
Stockholders if the shares of Old Preferred Stock held by such persons were
subject to the Repurchase Transaction.
"Estimated Option Repurchase Price" means the aggregate amount paid at
Closing to all Option Sellers pursuant to the following calculation: each Option
Seller shall receive an amount equal to the Estimated Common Stock Repurchase
Price multiplied by the total number of shares of Common Stock issuable upon
exercise of the Repurchased Option Rights sold by such Option Seller, less the
aggregate exercise price that would have been paid by such Option Seller upon
the exercise of all of his or her Repurchased Option Rights.
"Exchange Transaction" has the meaning set forth in Section 2.04.
"Exchange Stock" means the shares of Common Stock, Old Preferred Stock
and/or Option Rights to be exchanged by the Continuing Stockholders for Common
Stock and/or New
4
<PAGE>
Preferred Stock in the Exchange Transaction, as more particularly designated on
the Schedule of Continuing Stockholders.
"Fair Market Value" shall have the meaning set forth in the Stockholders
Agreement.
"Final Closing Balance Sheet" has the meaning set forth in Section 2.06.
"Financial Statements" has the meaning set forth in Section 3.10.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Agency" has the meaning set forth in Section 3.06.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Investment Transaction" has the meaning set forth in Section 2.02.
"Joint Venture" means Alloway Industries, L.L.C., a Delaware limited
liability company.
"Joint Venture Agreements" means (a) that certain Operating Agreement by
and between Subsidiary and Deere & Company dated July 1, 1996; (b) that certain
Contract Manufacturing Agreement between the Joint Venture and Subsidiary dated
July 1, 1996; and (c) that certain Indenture of Lease between the Joint Venture
and the Subsidiary dated July 1, 1996.
"Knowledge," or other variations of such term, means (a) as to Company, the
actual knowledge of Thomas J. Laird, David S. Crider, or Michael Carney, in any
case without any independent investigation, and (b) as to Purchaser, the actual
knowledge of Paul R. Wood, Thomas Reusche or Timothy Hurd, in any case without
any independent investigation; provided, however, that Purchaser shall be deemed
to have Knowledge of any matter disclosed to Purchaser in writing in this
Agreement or the Schedules attached hereto.
"Leased Real Property" means all real property, including all buildings,
fixtures and other improvements located therein, and all interests therein held
by Company or Subsidiary pursuant to any leasehold, subleasehold, license,
concession or other similar real property interest.
"Leases" has the meaning set forth in Section 4.05(b).
"Liabilities" means and includes any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or contingent, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured.
5
<PAGE>
"Liens" has the meaning set forth in Section 4.04.
"Material Adverse Effect" means a material adverse effect on the business,
operations or financial condition (calculated on a consolidated basis) of
Company and Subsidiary, taken as a whole.
"Most Recent Financial Statements" has the meaning set forth in Section
4.01.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4.01.
"New Common Equity" means Nine Million Dollars ($9,000,000).
"New Equity Amount" means an amount equal to the New Common Equity plus the
New Preferred Equity less the Escrow Stock Value.
"New Preferred Equity" means Twenty-Five Million Two Hundred Fifty Thousand
Dollars ($25,250,000).
"New Preferred Stock" means the class of preferred stock of the Company to
be created by the filing of the Amended Certificate.
"New Surveys" has the meaning set forth in Section 8.09.
"Old Preferred Stock" means the class of preferred stock held by the
Continuing Stockholders prior to the Exchange Transaction.
"Old Surveys" has the meaning set forth in Section 8.09.
"Option Repurchase Price" has the meaning set forth in Section 2.03(c).
"Option Rights" means all contractual rights, including the rights to
purchase Common Stock, provided in connection with the options described on
Schedule 3.05(a).
"Option Sellers" means those Stockholders holding Option Rights who have
elected to sell such rights to the Company as designated on the Schedule of
Sellers.
"Ordinary Course of Business" means the ordinary course of the Business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Property" means the land legally described in Schedule 4.05(a),
together with all buildings, fixtures and other improvements located thereon,
and all easements, rights of way, tenements, hereditaments, appurtenances,
privileges and other rights with respect thereto owned by Company or Subsidiary.
"Party" has the meaning set forth in the preamble.
"PBGC" means the Pension Benefit Guaranty Corporation.
6
<PAGE>
"Permitted Liens" means, with respect to the Owned Real Property: (a)
general real estate taxes and assessments except to the extent that such taxes
or assessments are past due, (b) mechanics, carriers, workers, repairers and
similar statutory liens arising in the Ordinary Course of Business which would
not have a Material Adverse Effect, (c) zoning and other laws which are not
violated by current use and operation thereof, except to the extent that such
violation would not have a Material Adverse Effect, and (d) easements,
covenants, conditions, restrictions, encroachments, and other similar matters of
record affecting title which would not, in the aggregate, have a Material
Adverse Effect.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Preferred Seller" means a Stockholder who elects to sell Preferred Stock
in the Repurchase Transaction.
"Preferred Stock Repurchase Price" has the meaning set forth in Section
2.03(d).
"Purchaser" has the meaning set forth in the Preamble.
"Releases" means the documents entitled General Release, Waiver and
Covenant Not to Sue in the form of Exhibits C-1 and C-2.
"Reportable Event" has the meaning set forth in ERISA (S)4043.
"Repurchase Transaction" has the meaning set forth in Section 2.03.
"Repurchased Common Shares" has the meaning set forth in Section 2.01(c).
"Repurchased Option Rights" has the meaning set forth in Section 2.01(c).
"Repurchased Preferred Shares" has the meaning set forth in Section
2.01(c).
"Repurchased Shares" has the meaning set forth in Section 2.01(c).
"Schedule of Continuing Stockholders" means the schedule delivered pursuant
to Section 9.01(a)(iii).
"Schedule of Purchasers" means the schedule delivered pursuant to Section
9.01(b).
"Schedule of Sellers" means the schedule delivered pursuant to Section
9.01(a)(iv).
"Seller" means a Common Seller, a Preferred Seller and/or an Option Seller,
without regard to class.
"Seller Party" means, collectively, the Sellers and the Sellers'
Representative.
7
<PAGE>
"Sellers' Representative" has the meaning set forth in the Preamble.
"Special Dividends" has the meaning set forth in Section 4.2(A)(2)(b),
Article FOURTH of the Certificate of Incorporation of Company, as amended.
"Stockholders" has the meaning set forth in the Preamble.
"Stockholders Agreement" has the meaning set forth in Section 10.01(e).
"Subsidiary" means WEC Company, a Delaware corporation.
"Tax" means any federal, state, local, foreign or other income, profits,
sales or use, transfer, excise, utility, real or personal property, payroll,
wage or other withholdings estimated and other taxes of any kind whatsoever
(including any interest, penalty, or addition thereto), whether disputed or not;
the foregoing shall include any transferee or secondary liability for a Tax and
any liability assumed by agreement or arising as a result of being (or ceasing
to be) a member of any Affiliated Group or being included (or required to be
included) in any Tax Return relating thereto.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto or any amendment thereof.
"Title Commitments" has the meaning set forth in Section 8.08.
"Title Company" has the meaning set forth in Section 8.08.
"Title Policies" has the meaning set forth in Section 9.05(a).
"Trade Rights" means and includes (i) all trademark rights, business
identifiers, trade dress, service marks, trade names, brand names and internet
domain names, all registrations thereof and applications therefor and all
goodwill associated with the foregoing; (ii) all copyrights, copyright
registrations and copyright applications, and all other rights associated with
the foregoing and the underlying works of authorship; (iii) all patents and
patent applications and all international proprietary rights associated
therewith; (iv) all computer software; (v) all inventions, mask works and mask
work registrations, know-how, discoveries, improvements, designs, trade secrets,
confidential information, shop and royalty rights and all other types of
intellectual property; and (vi) all claims for infringement or misappropriation
of the foregoing.
"Transactions" means the Investment Transaction, the Repurchase Transaction
and the Exchange Transaction.
"Transaction Agreements" means this Agreement, the Escrow Agreement, the
Releases and the Stockholders Agreement.
8
<PAGE>
"Updated Surveys" has the meaning set forth in Section 8.09.
"Warrant" means the Contingent Stock Purchase Warrant to be issued by
Company to Code, Hennessy & Simmons, L.L.C., as Trustee for the Stockholders, in
the form of Exhibit D hereto.
"Working Capital" means Company's net working capital calculated in
accordance with the Accounting Principles.
"Working Capital Adjustment" means the adjustment to the Common Stock Value
which is that amount, whether positive or negative, equal to the difference
between Company's Working Capital as of the Closing Date and Thirty-Five Million
Dollars ($35,000,000).
2. Recapitalization.
2.01 Authorization.
-------------
(a) The Company shall, and the Stockholders shall cause the
Company to, authorize the filing under the laws of the State of
Delaware of an amended and restated certificate of incorporation of
the company in the form of Exhibit E attached hereto (as so amended
and restated, the "Amended Certificate"). The Amended Certificate
shall be duly filed by the Company on or prior to the Closing Date and
shall be in full force and effect under the laws of the State of
Delaware as of the Closing.
(b) The Company shall, and the Stockholders shall cause the
Company to, authorize the issuance and sale to the Purchaser, in
consideration of the New Equity Amount (i) a number of shares of
Common Stock equal to (A) the New Common Equity less the Escrow Common
Value, divided by (B) the Estimated Common Stock Repurchase Price; and
(ii) a number of shares of New Preferred Stock equal to (A) the New
Preferred Equity less the Escrow Preferred Value, divided by (B) the
liquidation value of the New Preferred Stock ($1,000). The Company
also shall, and the Stockholders shall cause the Company to, authorize
the issuance to the Continuing Stockholders of the Escrow Shares.
(c) The Company shall authorize the repurchase (i) from the
Sellers, such number of shares of the Company's Common Stock (the
"Repurchased Common Shares") and Old Preferred Stock (the "Repurchased
Preferred Shares") as and to the extent set forth on the Schedule of
Sellers, and (ii) from the Option Sellers, the Option Rights (the
"Repurchased Option Rights") as and to the extent set forth on the
Schedule of Sellers. The Repurchased Common Shares, the Repurchased
Preferred Shares and the Repurchased Option Rights are herein
collectively referred to as the "Repurchased Shares."
9
<PAGE>
(d) The Company shall authorize the issuance to each Continuing
Stockholder of shares of Common Stock and/or New Preferred Stock in
exchange for the Exchange Stock held by such Continuing Stockholder.
2.02 Investment Transaction. On the basis of the representations,
----------------------
warranties, covenants and agreements set forth herein and subject to the
satisfaction or waiver of the conditions set forth in Section 10 below and the
consummation of the Repurchase Transaction and Exchange Transaction, Purchaser
and the Company agree to and shall consummate, and the Sellers and Continuing
Stockholders shall cause the Company to consummate, at the Closing, the
following transaction (the "Investment Transaction"): the Company shall sell to
Purchaser, and Purchaser shall purchase from the Company, the number of shares
of Common Stock and New Preferred Stock set forth in Section 2.01(b), upon
payment of immediately available funds to the Company of the New Equity Amount.
Purchaser shall be entitled, at its option, to allow certain employees of
Subsidiary to participate in the Investment Transaction, as and to the extent
identified on the Schedule of Purchasers.
2.03 Repurchase Transaction. On the basis of the representations,
----------------------
warranties, covenants and agreements set forth herein and subject to the
satisfaction or waiver of the conditions set forth in Section 9 below and the
consummation of the Investment Transaction and Exchange Transaction, the Company
and each of the Sellers agrees to and shall consummate, at the Closing, the
following transaction (the "Repurchase Transaction"): the Company shall
repurchase from each Seller that number of Repurchased Shares set forth opposite
such Seller's name on the Schedule of Sellers, in consideration for the payment
to such Seller of the Common Stock Repurchase Price, the Option Repurchase Price
and/or the Preferred Stock Repurchase Price, as applicable, multiplied by the
number of Repurchased Common Shares, Repurchased Option Shares and Repurchased
Preferred Shares set forth opposite such Seller's name on the Schedule of
Sellers.
(a) For purposes of calculating the Common Stock Repurchase
Price, the Common Stock Value shall be an amount equal to One Hundred
Forty-Seven Million Five Hundred Thousand Dollars ($147,500,000),
adjusted as follows: (i) plus the cash and marketable securities held
by the Company on the Closing Date (collectively the "Cash Amount");
(ii) minus indebtedness (including all amounts outstanding under the
Acquisition Notes and Non-Competes, whether or not contested by the
Company), guarantees of indebtedness, capitalized lease obligations,
related party obligations and Taxes accrued (if positive), all as of
the Closing Date, including any interest, penalties or premiums
accrued thereon (collectively the "Debt Amount") (the amount, whether
positive or negative, derived by subtracting the Debt Amount from the
Cash Amount is herein the "Adjustment Amount"); (iii) minus the
aggregate Preferred Stock Repurchase Price (as defined below) paid to
all Preferred Sellers; (iv) minus any disbursements to Purchaser or
the Company pursuant to the Escrow Agreement (with disbursements of
Escrow Shares valued as
10
<PAGE>
provided in the Escrow Agreement); (v) plus or minus, as the case may
be, the Working Capital Adjustment; and (vi) minus amounts that would
be paid to Continuing Stockholders if the shares of Old Preferred
Stock held by such persons were subject to the Repurchase Transaction.
(b) The purchase price for each Repurchased Common Share
(the "Common Stock Repurchase Price") will be equal to (i) the sum of
the Common Stock Value and the aggregate exercise price of all
Repurchased Option Rights and all Option Rights surrendered in the
Exchange Transaction, divided by (ii) the sum of (A) the total number
of shares of Common Stock held by all Stockholders immediately prior
to the Closing and (B) the total number of shares of Common Stock
issuable upon exercise of all outstanding Option Rights immediately
prior to the Closing.
(c) The purchase price for any Repurchased Option Rights
(the "Option Repurchase Price") shall be equal to (i) the Common Stock
Repurchase Price, multiplied by (ii) the total number of shares of
Common Stock issuable upon exercise of the Repurchased Option Rights
sold by an Option Seller, less (iii) the aggregate exercise price that
would have been paid by such Option Seller upon the exercise of all of
his or her Repurchased Option Rights.
(d) The purchase price for each Repurchased Preferred Share
(the "Preferred Stock Repurchase Price") shall be equal to $1,000 plus
all Special Dividends accrued but unpaid on such Old Preferred Stock
at the Closing Date.
2.04 Exchange Transaction. On the basis of the representations,
--------------------
warranties, covenants and agreements set forth herein and subject to the
satisfaction or waiver of the conditions set forth in Section 10 below and the
consummation of the Investment Transaction and Repurchase Transaction, the
Company and each of the Continuing Stockholders agrees to and shall consummate,
at the Closing, the following transaction (the "Exchange Transaction"): the
Company shall issue to each Continuing Stockholder the shares of Common Stock
and/or New Preferred Stock indicated opposite such Stockholder's name in the
Schedule of Continuing Stockholders in exchange for the Exchange Stock set forth
opposite such Stockholders' name on such Schedule. The aggregate number of
shares of Exchange Stock that must be surrendered by any Continuing Stockholder
for exchange shall, when multiplied by the Estimated Common Stock Repurchase
Price (in the case of Common Stock being surrendered), the Estimated Option
Repurchase Price (in the case of Option Rights being surrendered) and/or the
Preferred Stock Repurchase Price (in the case of Old Preferred Stock being
surrendered), equal the sum of (a) the aggregate liquidation value of the New
Preferred Stock being received by such Continuing Stockholder, and (b) the
aggregate number of shares of Common Stock being received by such Continuing
Stockholder in the Exchange Transaction, multiplied by the Estimated Common
Stock Repurchase Price.
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<PAGE>
2.05 Closing. The closing of each of the Investment Transaction, the
-------
Repurchase Transaction and the Exchange Transaction (the "Closing") shall take
place at the offices of Foley & Lardner, One IBM Plaza, 33/rd/ Floor, Chicago,
Illinois, or at such other place as may be mutually agreeable to the Parties,
commencing at 9:00 a.m., Chicago time, on August 7, 1998, or, if any of the
conditions to Closing set forth in Section 10 below have not been satisfied or
waived by the Party entitled to the benefit thereof on or prior to such date, on
the second business day following satisfaction or waiver of such conditions (the
"Closing Date"). This Agreement may be terminated immediately on notice given by
Purchaser or Sellers' Representative if the Closing has not occurred on or
before August 31, 1998, provided that the terminating Party has not, through
breach of a representation, warranty or covenant, prevented the Closing from
occurring on or before such date. Termination of this Agreement pursuant to the
foregoing sentence shall not in any way terminate or limit the rights and
remedies of any Party against any other Party which has violated, breached or
failed to satisfy any of the representations, warranties, covenants or other
provisions of this Agreement prior to termination hereof. The Investment
Transaction, the Repurchase Transaction and the Exchange Transaction shall each
constitute a separate transaction hereunder.
(a) At the Closing, the Parties shall consummate the Investment
Transaction, the Repurchase Transaction and the Exchange Transaction
by means of the following transfers of funds and securities:
(i) Purchaser shall deliver to the Company the New Equity
Amount by wire transfer of immediately available funds to an
account designated by the Company.
(ii) The Company shall deliver to Purchaser stock
certificates evidencing the number of shares of Common Stock and
New Preferred Stock set forth in Section 2.01(b).
(iii) The Company shall pay, by wire transfer of immediately
available funds, to an account designated by the Sellers'
Representative (A) for the benefit of the Preferred Sellers, the
aggregate Preferred Stock Repurchase Price to be paid to all
Preferred Sellers, (B) for the benefit of the Common Sellers, the
aggregate Estimated Common Stock Repurchase Price to be paid to
all Common Sellers, and (C) for the benefit of the Option
Sellers, the aggregate Estimated Option Repurchase Price to be
paid to all Option Sellers.
(iv) The Sellers' Representative shall distribute the funds
received so that: (A) each Common Seller receives an amount equal
to the Estimated Common Stock Repurchase Price multiplied by the
number of Repurchased Common Shares sold by such Common Seller;
(B) each Option Seller receives his or her appropriate portion
(calculated by reference to the Option Rights sold by such Option
Seller) of the Estimated Option Repurchase Price; and (C) each
Preferred Seller
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<PAGE>
receives the Preferred Stock Repurchase Price multiplied by the
number of Repurchased Preferred Shares sold by such Preferred
Seller; provided, however, that the Sellers' Representative may
withhold such portion of the funds received as he shall deem
reasonably necessary to meet the post-Closing obligations of the
Sellers under this Agreement.
(v) The Company shall pay the Escrow Cash Amount, by wire
transfer of immediately available funds, to the Escrow Account,
and shall deposit stock certificates representing the Escrow
Shares into the Escrow Account. Unless and until disbursed to
Company or Purchaser as provided by the Escrow Agreement, the
Escrow Cash Amount shall be deemed the property of the Sellers
and the Escrow Shares shall be deemed the property of the
Continuing Stockholders.
(vi) Upon payment of the amounts required to be paid to
the Sellers pursuant to this Section 2.05(a), each Common Seller
or Preferred Seller shall deliver to the Company the stock
certificates evidencing the Repurchased Shares held by such
Seller, duly endorsed in blank or accompanied by duly executed
stock powers, and each Option Seller shall deliver to the Company
evidence of termination of the Option Rights.
(vii) Each Continuing Stockholder will exchange the number
of shares of Exchange Stock indicated opposite his or her name in
the Schedule of Continuing Stockholders for the number of shares
of Common Stock and/or New Preferred Stock indicated opposite his
name in said Schedule, and will deliver to the Company any stock
certificates evidencing Common Stock and any option contracts
evidencing Option Rights which are not subject to the Exchange
Transaction or the Repurchase Transaction. The Company shall
deliver to each such Continuing Stockholder a new stock
certificate or certificates representing any shares of Common
Stock owned by such Continuing Stockholder after the Closing, and
new option contracts evidencing any Option Rights remaining
outstanding after the Closing; provided, however, that without
Purchaser's approval, no such Option Rights shall remain
outstanding after the Closing.
(viii) Purchaser shall cause that portion of the Debt Amount
owed to the lenders listed on Schedule 2.05(a)(viii) to be paid
to such lenders, respectively, by wire transfer of immediately
available funds and otherwise in accordance with the instructions
contained in the pay-off letters delivered pursuant to Section
9.02(l).
(b) On or before the fifth business day following the final
determination of the Final Closing Balance Sheet (the "Adjustment
Payment
13
<PAGE>
Date"), either (i) the Stockholders shall pay to the Company the
amount, if any, by which the Estimated Common Stock Value exceeds the
Common Stock Value (calculated as if the full amount of the Escrow
Amount were to be paid to Purchaser), as determined based upon the
Final Closing Balance Sheet, together with interest on the amount
being paid from the Closing Date to the Adjustment Payment Date at a
rate per annum equal to the prime rate as published in the Wall Street
Journal (Midwest edition) on the Closing Date, or (ii) the Company
shall pay to the Seller's Representative, for the benefit of the
Stockholders, the amount, if any, by which the Common Stock Value
(calculated as if the full amount of the Escrow Amount were to be paid
to Purchaser), as determined based upon the Final Closing Balance
Sheet, exceeds the Estimated Common Stock Value, together with
interest on the amount being paid from the Closing Date to the
Adjustment Payment Date at a rate per annum equal to the prime rate as
published in the Wall Street Journal (Midwest Edition) on the Closing
Date.
(c) All payments required to be made under Section 2.05(b) shall
be made as follows: (i) if payment is to be made by the Company to the
Stockholders, it shall be made on the Adjustment Payment Date by wire
transfer of immediately available funds to the account designated by
the Sellers' Representative, or (ii) if payment is to be made by the
Stockholders to the Company, (A) the Sellers' proportionate share of
such payment shall be made on the Adjustment Payment Date by wire
transfer of immediately available funds to the account designated by
the Company, and (B) each of the Continuing Stockholders shall pay his
or her proportionate share of such payment (I) if such person is also
a Seller, by wire transfer to the account designated by the Company to
the extent that such person has any Repurchase Transaction proceeds
remaining after the payment contemplated by clause (A), and/or (II) to
the extent the full amount of required payment cannot be made by the
method described in clause (B)(I), by personal check or, at such
Continuing Stockholders' option, by execution and delivery to the
Company of a promissory note dated as of the Adjustment Payment Date
and having a one year term, payable to the Company and bearing
interest at a rate of eight percent (8%) per annum.
2.06 Final Closing Balance Sheet. The final balance sheet of Company
---------------------------
(the "Final Closing Balance Sheet"), prepared as of the Closing Date, shall be
prepared as follows:
(a) Within thirty (30) days after the Closing Date, the Sellers'
Representative shall deliver to Purchaser a balance sheet of Company
as of the Closing Date, prepared in accordance with the books and
records of Company, on a basis consistent with GAAP and in accordance
with the Accounting Principles, and fairly presenting the financial
position of Company as of the Closing Date (the "Draft Balance
Sheet"). The Draft Balance Sheet shall be
14
<PAGE>
accompanied by a report signed by the Sellers' Representative (i)
setting forth a statement of Working Capital prepared in accordance
with the Accounting Principles and the resulting amount of the Working
Capital Adjustment, (ii) stating that the Draft Balance Sheet has been
prepared in accordance with GAAP, on a basis consistent with the
accounting principles theretofore followed by Company, and (iii)
setting forth the amount of any adjustment to the Common Stock Value
and by whom such adjustment shall be paid pursuant to Section 2.05.
Company management shall be made reasonably available to the Sellers'
Representative in connection with the preparation of the Draft Balance
Sheet.
(b) Within thirty (30) days following the delivery of the Draft
Balance Sheet, Purchaser may object to the statement of Working
Capital and the resulting amount of the Working Capital Adjustment.
Any such objection shall be made in writing, shall state Purchaser's
determination of the amount of the Working Capital Adjustment, and
shall be signed by Purchaser. If Purchaser does not object within the
thirty-day period, the Draft Balance Sheet shall become the Final
Closing Balance Sheet.
(c) In the event of a dispute or disagreement relating to the
Statement of Working Capital and the resulting amount of the Working
Capital Adjustment which Purchaser and the Sellers' Representative are
unable to resolve, the Parties will jointly retain KPMG Peat Marwick
(the "Third Accounting Firm") to resolve all such disputes or
disagreements. The Third Accounting Firm shall be instructed to use
every reasonable effort to perform its services within thirty (30)
days of submission of the Draft Balance Sheet to it and, in any case,
as soon as practicable after such submission, and Purchaser and
Sellers' Representative will cooperate with the Third Accounting Firm
during its engagement. The Third Accounting Firm shall make a
resolution of the balance sheet of Company as of the Closing Date,
which shall be the Final Closing Balance Sheet, and the calculation of
the Working Capital Adjustment, which shall be final and binding for
purposes of this Section 2. The Third Accounting Firm will consider
only those items with respect to the statement of Working Capital set
forth in the Purchaser's objection notice which Purchaser and Sellers'
Representative are unable to resolve, and the Third Accounting Firm
will base its determination solely on the Accounting Principles and
the definition of Working Capital provided in this Agreement. The
determination of the Third Accounting Firm will be conclusive and
binding on all Parties and shall be enforceable pursuant to the terms
of the Illinois Uniform Arbitration Act. The fees, costs and expenses
of the Third Accounting Firm shall be borne by the Stockholders, on
the one hand, and Purchaser, on the other hand, based on the
percentages which the portion of the contested amount not awarded to
such party bears to the total contested amount.
15
<PAGE>
3. Representations and Warranties of Company. Company represents and
warrants to Purchaser that the statements contained in this Section 3 are true,
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date.
3.01 Organization, Qualification, and Corporate Power. Each of Company
------------------------------------------------
and Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and assets in the
manner in which such properties and assets are now owned, and to carry on the
Business. The Joint Venture is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has all requisite power and authority to own, lease and operate its
properties and assets in the manner in which such properties and assets are now
owned, and to perform its obligations under the Joint Venture Agreements. Except
for the Joint Venture, neither the Company nor the Subsidiary controls directly
or indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust or other business association.
3.02 Good Standing. Each of Company, Subsidiary and the Joint Venture
-------------
is duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required, except where the lack of
such qualification would not individually or in the aggregate have a Material
Adverse Effect. Schedule 3.02 sets forth the states in which Company and
Subsidiary are licensed or qualified to do business.
3.03 Enforceability. Each of the Transaction Agreements constitutes
--------------
the valid and legally binding obligation of Company enforceable in accordance
with its terms and conditions.
3.04 Capitalization of Company.
-------------------------
(a) Prior to the filing of the Amended Certificate, the entire
authorized capital stock of Company consists of 15,000,000 shares of
common stock, $0.01 par value per share, of which 3,824,375 shares are
currently issued and outstanding (including 5,875 shares held in
treasury), and 6,000 shares of preferred stock, $0.01 par value per
share, all of which are currently issued and outstanding (including
39.70 shares held in treasury). Except as disclosed in Schedule 3.04,
all of the issued and outstanding shares of common stock and of
preferred stock issued prior to the filing of the Amended Certificate
have been and are duly authorized, validly issued, fully paid, and
nonassessable and are held of record by the Persons set forth in
Schedule 3.04.
(b) Upon the filing of the Amended Certificate, the authorized
capital stock of Company will consist of the classes and the number of
authorized shares of stock described in the Amended Certificate. The
Common Stock and the New Preferred Stock to be issued to Purchaser
will, when payment has been made by Purchaser in accordance with the
terms of the Investment Transaction,
16
<PAGE>
constitute duly authorized, validly issued, fully paid, and
nonassessable shares of stock.
3.05 Obligations with Respect to Capital Stock. Except as disclosed
-----------------------------------------
in Schedule 3.05, none of Company, Subsidiary or the Joint Venture have
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require such entity to issue, sell, or otherwise cause to become
outstanding any of its capital stock or membership interests. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Company or Subsidiary. Except
as disclosed on Schedule 3.05, (a) the Company is not a party to any agreement
with respect to the capital stock of Company or Subsidiary, (b) to the Company's
Knowledge, there are no agreements among stockholders or voting trusts, proxies
or other agreements with respect to the capital stock of Company or Subsidiary,
and (c) the Joint Venture Agreements represent the sole agreements between the
members of the Joint Venture.
3.06 Noncontravention. Except as disclosed in Schedule 3.06, neither
----------------
the execution nor the delivery of the Transaction Agreements, nor the
consummation of the transactions contemplated thereby, will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Company, Subsidiary or the Joint Venture is subject, (b) violate
any provision of the certificate of incorporation or by-laws of Company or
Subsidiary or the certificate of formation or operating agreement of the Joint
Venture, or (c) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Company, Subsidiary (or, to the Company's Knowledge, the Joint Venture) is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Liens upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or imposition of Liens would not
individually or in the aggregate have a Material Adverse Effect or impair the
Parties' ability to consummate the transactions contemplated by the Transaction
Agreements. Without limiting the foregoing, except as disclosed in Schedule
3.06, neither the execution nor the delivery of the Transaction Agreements, nor
the consummation of the transactions contemplated thereby will conflict with,
result in a breach of, constitute a default under, result in the acceleration of
or create a right to accelerate, terminate, modify, cancel or require any notice
under the Acquisition Notes and Non-Competes. None of Company, Subsidiary or the
Joint Venture is required to submit any notice, report or other filing to any
governmental agency, instrumentality, commission, authority, board or body
(collectively, a "Governmental Agency") in connection with the execution or
delivery of the Transaction Agreements and the consummation of the transactions
contemplated thereby, except for filings under applicable requirements of the
HSR Act or as set forth in Schedule 3.06 or where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not
individually or in the aggregate have a Material Adverse Effect or impair the
Parties' ability to consummate the transactions contemplated by the Transaction
Agreements.
17
<PAGE>
3.07 Subsidiary. The Certificate of Incorporation of Subsidiary
----------
authorizes 1,000 shares of Common Stock of which 900 shares are issued,
outstanding and owned of record and beneficially by Company, and, except as
disclosed on Schedule 3.07, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
Taxes, Liens, options, warrants, purchase rights, contracts, commitments,
equities, claims and demands. All of the issued and outstanding shares of
capital stock of Subsidiary have been duly authorized and are validly issued,
fully paid, and nonassessable.
3.08 Joint Venture. Except as disclosed on Schedule 3.08, Subsidiary
-------------
owns of record and beneficially fifty percent (50%) of the membership interests
in the Joint Venture, free and clear of any restrictions on transfer (other than
those set forth in the operating agreement of the Joint Venture), Taxes, Liens,
options, warrants, purchase rights, contracts, commitments, equities, claims and
demands.
3.09 Tax Matters.
-----------
(a) Company and Subsidiary have filed all Tax Returns that each
was required to file and all such Tax Returns were correct and
complete in all material respects. Company and Subsidiary have paid
all Taxes due and owing (whether or not such Taxes are required to be
shown on a Tax Return).
(b) Neither Company nor Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to Tax assessment or deficiency.
(c) Neither Company nor Subsidiary is a party to any Tax
allocation or sharing agreement.
(d) Neither Company nor Subsidiary has been a member of an
Affiliated Group (other than an Affiliated Group of which Company is
the common parent) filing a consolidated, combined or unitary Tax
Return.
(e) The accrual for Taxes on the Most Recent Financial
Statements would be adequate to pay all Tax liabilities of Company and
Subsidiary if their current tax year were treated as ending on the
date of the Most Recent Fiscal Month End (excluding any amount
recorded which is attributable solely to timing differences between
book and Tax income and that is expected to be payable in a subsequent
year), and since the Most Recent Fiscal Month End neither Company nor
Subsidiary has incurred any liability for Taxes other than in the
Ordinary Course of Business.
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<PAGE>
(f) Except as disclosed on Schedule 3.09:
(i) No deficiency or proposed adjustment which has not
been settled or otherwise resolved for any amount of Tax has been
proposed, asserted or assessed by any taxing authority against
Company or Subsidiary, and there is no action, suit, taxing
authority proceeding, examination or audit now in progress,
pending, or, to Company's or Subsidiary's knowledge, threatened
against or with respect to the Taxes of Company or Subsidiary;
(ii) There are no Liens for Taxes upon the assets of
Company or Subsidiary, except Liens for Taxes not yet due;
(iii) Company and Subsidiary have withheld and paid over to
the appropriate taxing authority all Taxes which each is required
to withhold from amounts paid or owing to any employee,
shareholder, creditor or other third party;
(iv) Neither Company nor Subsidiary are obligated to
include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of (A) any adjustments
under Section 481 of the Code (or any corresponding provision of
state, local or foreign income Tax law) attributable to or
resulting from a change in method of accounting for a taxable
period ending on or prior to the Closing Date, (B) any closing
agreement described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign income Tax law
to the extent the item of income or expense was realized in a
taxable period ending on or prior to the Closing Date); (C) any
installment sale made prior to the Closing Date; or (D) any
deferred intercompany gain or any excess loss account described
in Treasury Regulations under Section 1502 of the Code (or any
corresponding provision of state, local or foreign income Tax
law); and
(v) Neither Company nor Subsidiary has made, or has any
obligations to make (including, without limitation, with respect
to the transactions contemplated hereunder), any payment that
could be nondeductible under Section 280G of the Code (or any
corresponding provision of state, local or foreign Tax law).
3.10 Financial Statements. Schedule 3.10 contains (a) the financial
--------------------
statements of Company prepared on a consolidated basis for the years ended
December 31, 1994, December 30, 1995, December 28, 1996 and December 27, 1997,
which include the audited balance sheets and related statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal years
then ended, including notes and schedules contained herein or annexed thereto
(collectively "Financial Statements") and (b) the unaudited
19
<PAGE>
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as of and for the
six (6) months ended June 27, 1998 (the "Most Recent Fiscal Month End") for
Company and Subsidiary. Except as disclosed in Schedule 3.10, the Financial
Statements and the Most Recent Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and, as required by GAAP, present fairly in all material
respects the financial condition of Company and Subsidiary as of such dates and
the results of operations of Company and Subsidiary for such periods; provided,
however, that the Most Recent Financial Statements are subject to normal year-
end adjustments and lack footnotes and other presentation items.
4. Additional Representations and Warranties of Company. Company
represents and warrants to Purchaser that, to its Knowledge, the statements
contained in this Section 4 are true, correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date.
4.01 Undisclosed Liabilities. Neither Company nor Subsidiary has any
-----------------------
Liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
either of them giving rise to any Liability), except for (i) Liabilities set
forth in the balance sheet included in the Most Recent Financial Statements,
(ii) Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business, (iii) Liabilities set forth in Schedule 4.01, and
(iv) other Liabilities which would not individually or in the aggregate have a
Material Adverse Effect. The Joint Venture does not have any Liabilities (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability) which, individually or in the aggregate, would have a Material
Adverse Effect.
4.02 Events Subsequent to Most Recent Fiscal Year End. Except as
------------------------------------------------
disclosed in Schedule 4.02, since the most recent fiscal year end, no events
have occurred, individually or in the aggregate, having a Material Adverse
Effect. Without limiting the generality of the foregoing, since December 27,
1997:
(a) neither the Company nor the Subsidiary has sold, leased,
transferred, or assigned any of its assets, tangible or intangible,
other than for commercially reasonable consideration in the Ordinary
Course of Business;
(b) neither the Company nor the Subsidiary has entered into any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) (i) involving more than
$200,000, (ii) outside the Ordinary Course of Business, or (iii)
involving performance over a period of more than one (1) year;
(c) no party (including the Company or the Subsidiary) has
accelerated, terminated, modified, or cancelled any agreement,
contract, lease or license (or series of related agreements,
contracts, leases and licenses)
20
<PAGE>
involving more than $50,000 to which the Company or the Subsidiary is
a party or by which either of them is bound;
(d) neither the Company nor the Subsidiary has made any capital
expenditure (or series of related capital expenditures) either
involving more than $250,000 or outside the Ordinary Course of
Business;
(e) neither the Company nor the Subsidiary has made any capital
investment in, any loan to, or any acquisition of the securities or
assets of, (i) the Joint Venture, or (ii) any other Person (or series
of related capital investments, loans and acquisitions) either
involving more than $50,000 or outside the Ordinary Course of
Business;
(f) neither the Company nor the Subsidiary has (i) issued any
note, bond, or other debt security or created, incurred, assumed or
guaranteed any indebtedness for borrowed money or capitalized lease
obligation or (ii) imposed any Lien (other than a Permitted Lien) upon
any of its assets, tangible or intangible;
(g) neither the Company nor the Subsidiary has delayed or
postponed the payment of accounts payable and other Liabilities, or
accelerated the payment of accounts receivable, outside the Ordinary
Course of Business;
(h) neither the Company nor the Subsidiary has cancelled,
compromised, waived or released any right or claim (or series of
related rights and claims) either involving more than $50,000 or
outside the Ordinary Course of Business;
(i) neither the Company nor the Subsidiary has granted any
license or sublicense of any rights under or with respect to any Trade
Rights;
(j) neither the Company nor the Subsidiary has experienced any
material damage, destruction or loss (whether or not covered by
insurance) to its property;
(k) neither the Company nor the Subsidiary has (i) entered into
any employment contract or modified the terms of any existing such
contract, or (ii) granted any increase in the base compensation of,
made any other change in employment terms for, made any loan to, or
entered into any other transaction with, any of its directors,
officers and employees outside the Ordinary Course of Business;
(l) neither the Company nor the Subsidiary has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance
or other plan, contract or commitment for the benefit of any of its
directors, officers and
21
<PAGE>
employees (or taken any such action with respect to any other Employee
Benefit Plan);
(m) there has not been any other material occurrence, event,
incident, action, failure to act or transaction outside the Ordinary
Course of Business involving the Company or the Subsidiary;
(n) there has not been any material occurrence, event, incident,
action, failure to act or transaction with respect to the Joint
Venture that would have a Material Adverse Effect; and
(o) neither the Company nor the Subsidiary has committed to any
of the foregoing.
4.03 Legal Compliance. Except as disclosed in Schedule 4.03, none of
----------------
Company, Subsidiary or the Joint Venture have received notice of any violation
or alleged violation of, and has not failed to comply with and is not subject to
any Liability for past or continuing violation of, any laws, rules, regulations,
orders, judgments or decrees. All reports and returns required to be filed by
Company, Subsidiary or the Joint Venture with any government entity have been
filed, and were accurate and complete when filed, except where the failure to
comply would not individually or in the aggregate have a Material Adverse
Effect.
4.04 Personal Property. Except as disclosed in Schedule 4.04, each of
-----------------
Company and Subsidiary has good and marketable title to, or a valid leasehold
interest in, all of the respective tangible personal property and assets used by
them, located on their premises, shown in the balance sheet for the Most Recent
Fiscal Month End, or acquired thereafter free and clear of all mortgages, liens,
securities interests, claims, pledges, licenses, equities, options, conditional
sales contracts, assessments, levies, easements, covenants, reservations,
restrictions, rights-of-way, exceptions, limitations, charges or encumbrances of
any nature (collectively, "Liens"), except for property and assets disposed of
in the Ordinary Course of Business since the Most Recent Fiscal Month End.
4.05 Real Property.
-------------
(a) Schedule 4.05(a) lists Owned Real Property, and a true and
complete legal description thereof, owned by Company, Subsidiary or
the Joint Venture. Except as set forth in Schedule 4.05(a), and except
for Permitted Liens and other matters which would not have a Material
Adverse Effect:
(i) Company, Subsidiary and the Joint Venture have good and
marketable title to the Owned Real Property, free and clear of
any Liens;
(ii) Except as disclosed in Schedule 4.05(b), there are no
leases, subleases, licenses, concessions, or other agreements
granting to
22
<PAGE>
any party or parties the right of use or occupy of any portion of
the Owned Real Property; and
(iii) There are no outstanding options, rights of first
refusal or other agreements to purchase the Owned Real Property,
or any portion thereof or interest therein.
(iv) None of Company, Subsidiary or the Joint Venture is a
party to any agreement to purchase any real property or acquire
any interest therein.
(b) Schedule 4.05(b) lists each of the leases, subleases,
licenses or other agreements pursuant to which such Leased Real
Property is held by Company, Subsidiary or the Joint Venture (which,
together with all amendments, extensions, renewals, guaranties and
other documents with respect thereto, are referred to herein
individually as a "Lease" and collectively the "Leases"). Company has
delivered to Purchaser a true and complete copy of all of the Leases.
Each Lease is legal, valid, binding, enforceable, and in full force
and effect, except where the illegality, invalidity, nonbinding
nature, unenforceability, or ineffectiveness would not individually or
in the aggregate have a Material Adverse Effect. With respect to each
Lease, (i) none of Company, Subsidiary, the Joint Venture, or any
other party to the Lease is in default under the Lease, and no event
has occurred or circumstance exists which, with the delivery of
notice, passage of time or both, would constitute such a default under
the Lease; and (ii) none of Company, Subsidiary or the Joint Venture
has assigned, subleased, mortgaged, deeded in trust or otherwise
transferred or encumbered such Lease or any interest therein.
(c) The Owned Real Property and the Leased Real Property
together constitute all of the real property used in the operation of
Company and Subsidiary in the Ordinary Course of Business.
(d) There are no condemnation or other eminent domain
proceedings pending or threatened, affecting any of the Owned Real
Property or Leased Real Property, or any portion thereof.
4.06 Intellectual Property.
---------------------
(a) Schedule 4.06 identifies all patented or registered
documented Trade Rights and pending patent applications or other
applications for registrations of documented Trade Rights owned by
Company or Subsidiary. Schedule 4.06 also identifies each license,
security interest, agreement or other permission which Company or
Subsidiary has obtained from or granted to any third party with
respect to Trade Rights.
23
<PAGE>
(b) The Trade Rights identified on Schedule 4.06 are all of the
material documented Trade Rights used in or necessary for the
operation of the Business of Company and Subsidiary as currently
conducted. Company and Subsidiary also own undocumented Trade Rights
including unregistered copyrights, trade marks, trade secrets and
confidential information.
(c) Except as disclosed on Schedule 4.06, Company or Subsidiary
owns and possesses all right, title and interest in and to, or has a
valid and enforceable license to use, all of the Trade Rights used in
or necessary for the operation of the Business as currently conducted
(including, but not limited to the Trade Rights set forth in Schedule
4.06) (collectively, the "Company Trade Rights") free and clear of all
Liens, licenses, encumbrances and other restrictions.
(d) No claim by any third party contesting the validity,
enforceability, use or ownership of any of the Company Trade Rights
has been made, is currently outstanding or is threatened and the
conduct of the Business as currently conducted does not infringe,
misappropriate or otherwise conflict with, in any material respect,
Trade Rights of others.
(e) Except as disclosed on Schedule 4.06, no loss or expiration
of any Trade Right identified on such Schedule is pending or
threatened, and no loss or expiration of any other material Company
Trade Right or related group of intellectual property rights is
pending or threatened.
(f) The transactions contemplated by this Agreement will not
adversely affect the right, title and interest in and to, or the right
to use, the Company Trade Rights or the validity and enforceability
thereof. Company and Subsidiary have taken all necessary action to
maintain and protect such Company Trade Rights and will use
commercially reasonable efforts to maintain and protect such Company
Trade Rights so as to not adversely affect in any material respect the
validity or enforceability thereof. The owners of any Trade Rights
licensed to the Company or Subsidiary have taken all necessary and
desirable action to maintain and protect the Trade Rights subject to
such licenses.
(g) Except as set forth in Schedule 4.06, no third party
currently is infringing, misappropriating or otherwise conflicting
with any of the Company Trade Rights.
4.07 Contracts.
---------
(a) Real Property Leases. Except as disclosed in Schedule
--------------------
4.05(b), neither Company nor Subsidiary is a party to any written or
oral Lease.
24
<PAGE>
(b) Personal Property Leases. Except as disclosed in Schedule
------------------------
4.07(b), neither Company nor Subsidiary has written or oral personal
property leases involving consideration in excess of Fifty Thousand
Dollars ($50,000) or involving performance over a period of more than
one (1) year.
(c) Purchase Commitments. Except as disclosed in Schedule
--------------------
4.07(c), neither Company nor Subsidiary has written or oral purchase
contracts or commitments except those made in the Ordinary Course of
Business. Except as disclosed in Schedule 4.07(c), none of Company,
Subsidiary or the Joint Venture has purchase contracts or commitments
in excess of Two Hundred Thousand Dollars ($200,000).
(d) Sales Commitments. Neither Company nor Subsidiary has
-----------------
written or oral sales contracts or commitments except those made in
the Ordinary Course of Business. Except as disclosed in Schedule
4.07(d), neither Company nor Subsidiary has sales contracts or
commitments in excess of Two Hundred Thousand Dollars ($200,000).
(e) Loan Agreements. Except as disclosed in Schedule 4.07(e),
---------------
neither Company nor Subsidiary is obligated under any written or oral
loan agreement, promissory note, letter of credit, capitalized lease
obligation, or other evidence of indebtedness as a signatory,
guarantor or otherwise.
(f) Guarantees. Except as disclosed in Schedule 4.07(f), neither
----------
Company nor Subsidiary has guaranteed the payment or performance of
any person, firm or corporation, agreed to indemnify any person or act
as a surety, or otherwise agreed to be contingently or secondarily
liable for the obligations of any person.
(g) Contracts Subject to Renegotiation. Neither Company nor
----------------------------------
Subsidiary is a party to any written or oral contract with any
governmental body which is subject to renegotiation.
(h) Other Agreements. Except as disclosed in Schedule 4.07(h),
----------------
neither Company nor Subsidiary is a party to any written or oral (i)
partnership or joint venture agreements, (ii) non-compete and
confidentiality agreement, (iii) employment, severance, stock
option/purchase, profit sharing and deferred compensation agreements,
or (iv) agreement for the acquisition or disposition of any business
or material assets (whether structured as a merger, consolidation,
purchase or exchange of stock or sale of assets) entered into within
the last five (5) years.
(i) Powers of Attorney. Except as specifically disclosed in
------------------
Schedule 4.07(i), there are no written or oral outstanding powers of
attorney executed on behalf of Company or Subsidiary. Company has
made available for review by Purchaser a correct and complete copy of
each written agreement listed in
25
<PAGE>
Schedule 4.07. Except as set forth in Schedule 4.07, with respect to
each such written agreement: (A) the agreement is legal, valid,
binding, enforceable and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default
and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (D) no party has repudiated
any provision of the agreement, except, in the case of clauses (A)
through (D) above, where the failure to meet the applicable
requirement or condition would not individually or in the aggregate
have a Material Adverse Effect.
4.08 Product Warranty. Schedule 4.08 contains complete copies of
----------------
Company's and Subsidiary's standard terms and conditions for sales or lease of
products (containing applicable guaranty, warranty and indemnity provisions).
Neither the Company nor the Subsidiary has any known liability for replacement
or repair of products manufactured or sold by them since January 1, 1996 or
other damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the face of the balance sheet included in the Most
Recent Financial Statements as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company and
the Subsidiary. Except as set forth in Schedule 4.08, no product manufactured,
sold, leased or delivered by the Company or the Subsidiary is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale or lease and requirements of applicable law.
4.09 Product Liability. Schedule 4.09 contains a description of all
-----------------
product liability claims and similar litigation relating to products
manufactured and sold, or services rendered, which are presently pending or
threatened, or which have been asserted or commenced against Company, Subsidiary
or the Joint Venture within the last two (2) years. Except as disclosed in
Schedule 4.09, none of Company, Subsidiary or the Joint Venture has any
Liability arising out of any injury to individuals or property as a result of
the ownership, possession or use of any product manufactured, sold, leased or
delivered by Company, Subsidiary or the Joint Venture since January 1, 1996,
except for any such Liability which individually or in the aggregate would not
have a Material Adverse Effect.
4.10 Litigation. Except as specifically disclosed in Schedule 4.10,
----------
none of Company, Subsidiary or the Joint Venture (a) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (b) is a
party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator.
4.11 Employee Benefit Plans.
----------------------
26
<PAGE>
(a) Schedule 4.11 sets forth each Employee Benefit Plan that
Company, Subsidiary or the Joint Venture maintains or to which
Company, Subsidiary or the Joint Venture contributes or has any actual
or potential liability. No such Employee Benefit Plan is an "employee
pension benefit plan" subject to Section 412 of the Code or a
"multiemployer plan" as defined in ERISA (S)3(37).
(b) Each such Employee Benefit Plan and each related trust,
insurance contract, or fund complies in form and in operation in all
material respects with applicable law, including, without limitation,
ERISA and the Code.
(c) All contributions premiums, payments and reimbursements
(including all employer contributions and employee salary reduction
contributions) which are due have been paid to each such Employee
Benefit Plan or accrued on the appropriate balance sheet.
(d) Each Employee Benefit Plan which is an Employee Pension
Benefit Plan and each trust forming a part thereof has received a
determination letter from the Internal Revenue Service as to
qualification under the Code of such plan and the tax-exempt status of
such trust and nothing has occurred since the date of such
determination letter that could adversely affect such plan or the tax-
exempt status of such trust.
(e) As of the last day of the most recent prior plan year, the
fair market value of assets under each Employee Benefit Plan which is
an Employee Pension Benefit Plan equaled or exceeded the present value
of liabilities thereunder.
(f) Company has delivered to Purchaser correct and complete
copies of the Employee Benefit Plan documents and summary plan
descriptions, the most recent determination letter received from the
Internal Revenue Service, the Form 5500 Annual Reports filed for the
most recent two (2) years, the two (2) most recent actuarial reports,
all related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(g) With respect to each Employee Benefit Plan that Company,
Subsidiary, the Joint Venture or any ERISA Affiliate maintains or has
maintained during the past five (5) years or to which any of them
contributes, or has been required to contribute during the past five
(5) years:
(i) No material action, suit, proceeding, hearing, or
investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other
than routine claims for benefits) is pending; and
27
<PAGE>
(ii) None of Company, Subsidiary or the Joint Venture has
any actual or potential liability to the PBGC (other than PBGC
premium payments), Department of Labor or Internal Revenue
Service or otherwise under Title IV of ERISA (including any
withdrawal liability) with respect to any Employee Benefit Plan
which is an Employee Pension Benefit Plan.
(h) Company, Subsidiary and the Joint Venture have complied with
the health care continuation requirements of Part 6 of Subtitle B of
Title I of ERISA.
(i) Except as disclosed on Schedule 4.11, none of Company,
Subsidiary and the Joint Venture have any obligation under any
Employee Benefit Plan to provide "welfare-type" benefits with respect
to any current or former employees of Company or Subsidiary beyond
their retirement or other termination of service.
(j) None of Company, Subsidiary or the Joint Venture have any
liability with respect to any unfunded workers' compensation
liabilities, other than liabilities which would not have, individually
or in the aggregate, a Material Adverse Effect.
4.12 Employment Compensation. Schedule 4.12 contains a correct and
-----------------------
complete list of all current employees to whom Company or Subsidiary is paying
compensation, including bonuses and incentives, at an annual rate in excess of
One Hundred Twenty-Five Thousand Dollars ($125,000) for services rendered or
otherwise, showing all changes in such compensation over the last twelve months.
No executive, key employee or group of employees has any plans to terminate
employment with the Company or the Subsidiary.
4.13 Labor Relations. Except as disclosed on Schedule 4.13, within the
---------------
last two (2) years, none of Company, Subsidiary or the Joint Venture have
experienced any labor disputes, union organization attempts or any work stoppage
due to labor disagreements in connection with its Business. Each of Company,
Subsidiary and the Joint Venture is in compliance with all applicable laws in
all material respects respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in any unfair
labor practice. There are no collective bargaining agreements covering any of
the employees of Company or Subsidiary. No consent of any union (or any similar
group or organization) is required in connection with the consummation of the
transaction contemplated hereby.
4.14 Insurance. Set forth in Schedule 4.14 is a complete and accurate
---------
list and description of all policies of liability, fire, worker's compensation,
health and other forms of insurance (including bonds) presently in effect
insuring the properties, assets and operations of the Business, correct copies
of which have been made available to Purchaser. Schedule 4.14 includes the
carrier, the description of coverage, the limits of coverage, retention or
deductible
28
<PAGE>
amounts, amount of annual premiums, date of expiration and the date through
which premiums have been paid with respect to each such policy, and any pending
claims in excess of Ten Thousand Dollars ($10,000).
4.15 Necessary Licenses and Permits. Except as set forth on Schedule
------------------------------
4.15, each of Company, Subsidiary and the Joint Venture has all material
licenses, permits, consents, concessions and whether foreign, federal, state, or
local (collectively "Permits"), required to own and lease its properties and
assets and to conduct its business as now
4.16 Environmental, Health, and Safety Matters. Except as set forth on
------------------------------------------
Schedule 4.16:
(a) Each of Company, Subsidiary and the Joint Venture has
complied and is in compliance with Environmental, Health, and Safety
Requirements, except for such noncompliance as would not individually
or in the aggregate have a Material Adverse Effect.
(b) None of Company, Subsidiary or the Joint Venture have
received any written notice, report or other information regarding any
actual or alleged material violation of Environmental, Health, and
Safety Requirements, or any material liabilities or potential material
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective
obligations, relating to Company, Subsidiary or the Joint Venture or
their facilities arising under Environmental, Health, and Safety
Requirements.
(c) Neither Company nor Subsidiary, nor any of their respective
predecessors or affiliates, has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled or released any
substance, including without limitation any hazardous substance or
currently or previously owned or operated any property or facility
(and no such property or facility is contaminated by any such
substance) in a manner that has given or would give rise to any
material liabilities or material investigatory, corrective or remedial
obligations pursuant to any Environmental, Health and Safety
Requirements.
(d) This Section 4.16 contains the sole and exclusive
representations and warranties of Company with respect to any
environmental, health, or safety matters, including without limitation
any arising under any Environmental, Health, and Safety Requirements.
4.17 Certain Business Relationships with Company. Except as disclosed
-------------------------------------------
in Schedule 4.17, no affiliate of Company or Subsidiary has been involved in any
material business arrangement or relationship with Company, Subsidiary or the
Joint Venture within the past twelve (12) months, and no affiliate of Company or
Subsidiary owns any material asset, tangible or intangible, which is used in
their businesses.
29
<PAGE>
4.18 Corporate Documents. Complete and correct copies of the Joint
-------------------
Venture Agreements and the certificate of incorporation and by-laws, and of all
amendments thereto, and of the minute books, stock certificate books and stock
record books of Company and Subsidiary have been previously made available for
inspection and copying by Purchaser, and no changes in or addition to such
documents have been made other than those contemplated by this Agreement in
connection with the filing of the Amended Certificate.
4.19 Brokers' Fees. Except as to the fees which may be payable by the
-------------
Sellers to Bowles Hollowell Conner & Co., neither Company, Subsidiary, nor any
of their stockholders, directors, officers, employees or agents if any, has
retained, employed or used any broker or finder in connection with the
transactions provided for herein or in connection with the negotiation thereof.
4.20 Inventory. The inventory of the Company and the Subsidiary
---------
consists of raw materials and supplies, manufactured and purchased parts, goods
in process and finished goods, all of which is usable or saleable in the
Ordinary Course of Business within a reasonable time, subject only to the
reserve for inventory writedown set forth on the face of the balance sheet
included in the Most Recent Financial Statements as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Company and the Subsidiary.
4.21 Notes and Accounts Receivable. All notes and accounts receivable
-----------------------------
of the Company and the Subsidiary are reflected properly on their books and
records and are valid receivables subject to no setoffs or counterclaims,
subject only to the reserve for bad debts set forth on the face of the balance
sheet included in the Most Recent Financial Statements as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company and the Subsidiary.
4.22 Tangible Assets. The Company and the Subsidiary own or lease all
---------------
buildings, machinery, equipment and other tangible assets necessary for the
conduct of their businesses as presently conducted. Except as disclosed in
Schedule 4.22, each such tangible asset having a replacement value in excess of
$50,000 has been maintained in accordance with the Company's customary practices
and is in reasonable operating condition considering its age and prior use.
4.23 Dealers. Schedule 4.23 lists the fifty (50) largest dealers of
-------
Company and Subsidiary by dollar volume of sales for the fiscal year ended
December 27, 1997 and for the six months ended June 27, 1998, showing sales for
each such period to such dealers. No such dealer has terminated or threatened to
terminate its relationship with, or significantly decreased or threatened to
significantly decrease its purchases from, the Company and Subsidiary. Schedule
4.23 contains copies of all rebate, incentive and other promotional programs
offered to dealers of Company and Subsidiary since January 1, 1997.
4.24 Supplier and Customer Relationships. No supplier of Company or
-----------------------------------
Subsidiary has terminated or threatened to terminate its relationship with, or
significantly decreased or threatened to significantly decrease its sales to or
otherwise materially adversely
30
<PAGE>
alter the terms on which it does business with, Company and Subsidiary. No
customer of Company or Subsidiary has terminated or threatened to terminate its
relationship with, or significantly decreased or threatened to significantly
decrease its purchases from, or otherwise materially adversely alter the terms
on which it does business with, Company and Subsidiary.
4.25 Joint Venture Relationship. The other member of the Joint
--------------------------
Venture has not terminated or threatened to terminate its relationship with, or
significantly decreased or threatened to significantly decrease its contract
manufacturing purchases from, the Joint Venture.
4.26 Exclusivity of Representations and Warranties. Except as
---------------------------------------------
expressly set forth in Section 3, this Section 4 and the Schedules thereto and
hereto, Company makes no representation or warranty, express or implied, with
respect to itself, Subsidiary, the Joint Venture or their assets, liabilities,
operations or prospects.
5. Covenant to Sell; Representations and Warranties Concerning Sellers.
Those Stockholders listed on Schedule 5.00 agree to sell all of their
shares of Common Stock, and Old Preferred Stock and Option Rights, if any, in
the Repurchase Transaction. Each such Stockholder, and each other Stockholder
who elects to be a Seller, represents and warrants to Purchaser, severally and
not jointly, that the statements contained in this Section 5 are true, correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date.
5.01 Authorization. Such Seller has full legal capacity, power and
-------------
authority (including, if the Seller is a corporation or partnership, full
corporate or partnership power and authority), to execute and deliver this
Agreement and to perform its obligations hereunder. The Transaction Agreements
to which such Seller is or will be a party constitute the valid and legally
binding obligation of such Seller enforceable in accordance with their
respective terms and conditions.
5.02 Noncontravention. Such Seller is not a party to any other
----------------
agreement, contract, lease, license, instrument or other arrangement which would
be violated or breached by the Transaction Agreements to which Seller is a
party. As to any Seller who is not a natural person, the execution and delivery
of the Transaction Agreements to which such Seller is a party and the
consummation of the transactions contemplated thereby do not violate any
provision of its organizational or operational documents or any other agreements
or other documents pursuant to which it is organized or governed.
5.03 Repurchased Shares. As of the Closing Date such Seller holds of
------------------
record and owns beneficially all Repurchased Shares set forth opposite its name
on the Schedule of Sellers, free and clear of any restrictions on transfer
(except those disclosed on Schedule 3.05 and those imposed by the Securities Act
of 1933 and state securities laws), taxes, Liens, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. Such Seller is
not a party to any option, warrant, purchase right, or other contract or
commitment that could require such Seller to sell, transfer, or otherwise
dispose of the Repurchased Shares (other than this Agreement). Except as set
forth in Schedule 3.05, such
31
<PAGE>
Seller is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the Repurchased Shares.
5.04 Broker's Fees. Except as to the fees which may be payable by the
-------------
Sellers to Bowles Hollowell Conner & Co., neither such Seller nor any of its
stockholders, directors, officers, employees or agents, if any, has retained,
employed or used any broker or finder in connection with the transactions
provided for herein or in connection with the negotiation thereof.
6. Representations and Warranties Concerning Continuing Stockholders.
Each Stockholder who elects to be a Continuing Stockholder represents and
warrants to Purchaser, severally and not jointly, that the statements contained
in this Section 6 are true, correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date.
6.01 Authorization. Such Continuing Stockholder has full legal
-------------
capacity, power and authority, to execute and deliver this Agreement and to
perform its obligations hereunder. The Transaction Agreements to which such
Continuing Stockholder is or will be a party constitute the valid and legally
binding obligation of such Continuing Stockholder enforceable in accordance with
their respective terms and conditions.
6.02 Noncontravention. Such Continuing Stockholder is not a party to
----------------
any other agreement, contract, lease, license, instrument or other arrangement
which would be violated or breached by the Transaction Agreements to which such
Continuing Stockholder is a party.
6.03 Repurchased Shares. As of the Closing Date such Continuing
------------------
Stockholder holds of record and owns beneficially all Exchange Shares set forth
opposite its name on the Schedule of Continuing Stockholders, free and clear of
any restrictions on transfer (except those disclosed on Schedule 3.05 and those
imposed by the Securities Act of 1933 and state securities laws), taxes, Liens,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. Such Continuing Stockholder is not a party to any option, warrant,
purchase right, or other contract or commitment that could require such
Continuing Stockholder to sell, transfer, or otherwise dispose of the Exchange
Shares (other than this Agreement). Except as set forth in Schedule 3.05,
Continuing Stockholder is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the Exchange Shares.
6.04 Broker's Fees. Except as to the fees which may be payable by the
-------------
Sellers to Bowles Hollowell Conner & Co., neither such Continuing Stockholder
nor any of its agents if any, has retained, employed or used any broker or
finder in connection with the transactions provided for herein or in connection
with the negotiation thereof.
32
<PAGE>
6.05 Investment Intent. Continuing Stockholder is acquiring those
-----------------
securities of the Company referred to in Section 2 above for purposes of
investment and not with a view to resale or other distribution thereof.
7. Representations and Warranties Concerning Purchaser. Purchaser
represents and warrants to Company that the statements contained in this Section
7 are true, correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date.
7.01 Organizational.
---------------
(a) Organization. Purchaser is a limited partnership duly
------------
organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) Partnership Power. Purchaser has all requisite partnership
-----------------
power to enter into the Transaction Agreements and to carry out the
transactions contemplated thereby.
7.02 Authority. The execution and delivery of the Transaction
---------
Agreements and the consummation of the transactions contemplated thereby do not
violate any provision of the Certificate of Limited Partnership, partnership
agreement or any other agreements or other documents pursuant to which Purchaser
is organized or governed. No other partnership act or proceeding on the part of
Purchaser or its partners is necessary to authorize the Transaction Agreements
or the consummation of the transactions contemplated hereby. Each of the
Transaction Agreements constitutes the valid and binding agreement of Purchaser,
enforceable in accordance with its terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally, and by general equitable principles.
7.03 Brokers' Fees. Neither Purchaser nor any of its partners,
-------------
employees or agents have retained, employed or used any broker or finder in
connection with the transaction provided for herein or in connection with the
negotiation hereof.
7.04 Investment Intent. Purchaser is acquiring those securities of the
-----------------
Company referred to in Section 2 above for purposes of investment and not with a
view to resale or other distribution thereof.
8. Covenants. The Parties agree as follows with respect to the period
between the execution of this Agreement and Closing:
8.01 General. Each of the Parties will, and the Sellers will cause
-------
the Company to, use commercially reasonable efforts to take all action and do
all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 10
below).
33
<PAGE>
8.02 Notices and Consents. Company will, will cause Subsidiary to, and
--------------------
will use reasonable efforts to cause the Joint Venture to, give any required
notices to third parties, and will use commercially reasonable efforts to obtain
any third party consents required for consummation of the Transactions
contemplated hereby.
8.03 Operation of Business. Company will, and will cause Subsidiary
---------------------
to, operate in the Ordinary Course of Business. Without limiting the foregoing,
neither Company nor Subsidiary shall take any of the actions described in
Section 4.02.
8.04 Purchaser Access; Confidentiality.
---------------------------------
(a) Company will permit, will cause Subsidiary to permit, and
will use reasonable efforts to cause the Joint Venture to, Purchaser,
Purchaser's financing sources, and the attorneys and accountants
retained by Purchaser and its financing sources to have access at
reasonable times, with the supervision of Company or its designees,
and in a manner so as not to interfere with normal business operations
of Company and Subsidiary, to all premises, properties, management
personnel, accountants, books, records (including tax records),
contracts, and documents of or pertaining to Company and Subsidiary.
(b) Purchaser will remain subject to the conditions and adhere
to the terms of the Confidentiality Agreement dated as of May 7, 1998.
8.05 HSR Act Filings. To the extent such filings have not been
---------------
completed prior to the execution of this Agreement, each Party shall, in
cooperation with the other Parties, file or cause to be filed any reports or
notifications that may be required to be filed by it under the HSR Act, with the
Federal Trade Commission and the Antitrust Division of the Department of
Justice, and shall furnish to the other Parties all such information in its
possession as may be necessary for the completion of the reports or
notifications to be filed by the other. All Parties agree to use their
reasonable best efforts to achieve early termination of the HSR Act waiting
period. Prior to making any communication, written or oral, with the Federal
Trade Commission, the Antitrust Division of the United States Department of
Justice or any other governmental agency or authority or members of their
respective staffs with respect to this Agreement or the transactions
contemplated hereto, each Party shall consult with the other Parties.
8.06 Exclusivity. None of the Company, the Subsidiary, the Sellers or
-----------
the Continuing Stockholders will (i) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities or any substantial portion of
the assets, of the Company or the Subsidiary (including any acquisition
structured as a purchase of stock, merger, consolidation or share exchange) or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, enter into any agreement
with respect to or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. None of the Sellers or the Continuing
Stockholders will vote their stock in the Company in favor of any such
acquisition structured as a merger, consolidation or share exchange. The
Company, the
34
<PAGE>
the Sellers and the Continuing Stockholders will notify the Purchaser within
forty-eight (48) hours if any Person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
8.07 Confidentiality. Each of the Sellers and the Continuing
---------------
Stockholders will treat and hold as such all of the Confidential Information,
refrain from using any of the Confidential Information except in connection with
this Agreement and deliver promptly to Purchaser or destroy, at the request and
option of the Purchaser, all tangible embodiments (and all copies) of the
Confidential Information which are in his or its possession. In the event that
any of the Sellers or the Continuing Stockholders is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process) to
disclose any Confidential Information, such person will notify Purchaser
promptly of the request or requirement so that Purchaser may seek an appropriate
protective order or waive compliance with the provisions of this Section 8.07.
If, in the absence of a protective order or the receipt of a waiver hereunder,
any of the Sellers or the Continuing Stockholders is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, then such person may disclose the Confidential Information
to the tribunal; provided, however, that such disclosing Person shall use his or
its reasonable best efforts to obtain, at the reasonable request and cost of
Purchaser an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as Purchaser shall designate. The foregoing provisions shall not apply
to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
8.08 Title Insurance. Prior to Closing, Company shall exercise
---------------
reasonable efforts to obtain and deliver to Purchaser, a commitment for an ALTA
Owner's Title Insurance Policy -Form B 1972, where available, or Form 1992 with
deletion of the title exception for creditor's rights, for each parcel of Owned
Real Property, issued by Chicago Title Insurance Company (the "Title Company"),
together with a copy of all underlying title documents referenced therein (the
"Title Commitments"). Purchaser shall pay all costs and expenses with respect to
the Title Commitments.
8.09 Surveys. Company, to the extent available, shall deliver to
-------
Purchaser promptly following the execution of this Agreement a survey for each
parcel of Owned Real Property prepared by a licensed surveyor other than the
Owned Real Property located in Texas and California (the "Old Surveys"). Between
the date hereof and the Closing Date, Company shall exercise reasonable efforts
to, at the option of Purchaser, (a) cause the Old Surveys to be updated to a
date which is after the date hereof (the "Updated Surveys"), or (b) obtain new
surveys prepared by a licensed surveyor acceptable to Purchaser and conforming
to 1992 ALTA/ACSM Land Title Surveys Detail Requirements for Urban Land Title
Surveys (the "New Surveys"). The Updated Surveys or the New Surveys, as
applicable, shall be certified to Purchaser, Purchaser's lender and the Title
Company. Company shall also exercise reasonable efforts to correct any condition
which exists on the Owned Real Property which correction the Title Company
requires as a condition to the removal of any survey exceptions
35
<PAGE>
from the Title Policies. Purchaser shall pay all costs with respect to the
Updated Surveys and the New Surveys.
8.10 Title Exceptions and Survey Conditions. Company shall exercise
--------------------------------------
reasonable efforts to correct or remove any condition which exists on the Owned
Real Property or title exception reflected on the Title Commitments which
correction the Title Company requires as a condition to the removal of any
survey exceptions from the Title Policies or which Purchaser's lender requires
as a condition to financing the Transactions; provided, however, that Company
shall not be required to undertake any action which would require the payment of
money or require construction or demolition on any Owned Real Property.
8.11 Employee Benefit Plans. To the extent such documents and
----------------------
descriptions do not already exist, Company shall use reasonable efforts to (a)
commence preparation of written plan documents and summary plan descriptions, as
defined in Title I of ERISA, for all Employee Benefit Plans currently in place
and currently offered to Subsidiary's employees located in Sandy, Oregon, and,
(b) to the extent summary plan descriptions have not previously been prepared or
provided to such employees and their preparation is completed prior to Closing,
to provide copies thereof to such persons.
8.12 Intellectual Property Matters. Company shall make reasonable
-----------------------------
efforts (a) to encourage the prior owner of the Du-Al trademarks to address the
gaps in title for such trademarks described on Schedule 4.06, and (b) to address
the transfer recordation issues described in Schedule 4.06 with respect to
certain trademarks and patents purchased from Fiatallis North America, Inc.
9. Closing. At or prior to Closing, each party to this Agreement will
take the actions and deliver the documents, consideration or other items
described in Sections 2.01 and 2.05(a) in order to effect the Investment
Transaction, the Repurchase Transaction and the Exchange Transaction in the
manner so described. In addition, the parties agree to deliver the documents set
forth in this Section 9.
9.01 Closing Preparations. At least three (3) business days prior to
--------------------
Closing, Company shall prepare and deliver to Purchaser:
(i) a statement of the amount of the Preferred Stock
Repurchase Price, calculated as of the Closing Date;
(ii) for purposes of determining the Working Capital
Adjustment and the Estimated Common Stock Value, a balance sheet
of Company, estimated as of the Closing Date, prepared in
accordance with the Accounting Principles and including a
calculation of the Working Capital Adjustment (the "Estimated
Closing Balance Sheet"), provided that Purchaser shall have the
opportunity to review and comment on the Estimated Closing
Balance Sheet;
36
<PAGE>
(iii) a schedule detailing which Stockholders have
elected to be Continuing Stockholders, setting forth the number
of shares of Common Stock or New Preferred Stock to be issued to
such Continuing Stockholder in the Exchange Transaction;
(iv) a schedule detailing which Stockholders have
elected to be Common Sellers, Preferred Sellers and Option
Sellers, setting forth the number of shares of Common Stock, Old
Preferred Stock and Option Rights to be sold by such Sellers in
the Repurchase Transaction; and
(v) account designations and complete wiring
instructions for each account to which payments are to be made.
(b) At least three (3) business days prior to Closing, Purchaser
and Company shall agree upon a schedule detailing any employees of the
Subsidiary who have elected to participate in the Investment
Transaction, and the number of shares of Common Stock and New
Preferred Stock to be issued to each such person.
9.02 Company's Closing Deliveries. At Closing, Company shall deliver
----------------------------
to Purchaser the following documents, in each case duly executed or otherwise in
proper form:
(a) Compliance Certificate. A certificate signed by Company's
----------------------
President, that the representations and warranties made by Company in
this Agreement are true and correct on and as of the Closing Date
(except for any changes permitted by the terms of this Agreement or
consented to in writing by Purchaser), and that Company has performed
and complied with all of Company's obligations under this Agreement
which are to be performed or complied with on or prior to the Closing
Date.
(b) Opinion of Counsel. A written opinion of counsel to the
------------------
Company and the Stockholders, dated as of Closing, addressed to
Purchaser, in the form of Exhibit F.
(c) Escrow Agreement. The Escrow Agreement.
----------------
(d) Certified Resolutions. Certified copies of the resolutions
---------------------
of the Board of Directors and stockholders of Company, authorizing and
approving this Agreement and the consummation of the transactions
contemplated hereby.
(e) Charter; By-Laws. Copies of the by-laws of Company and
----------------
Subsidiary certified by the secretary of Company and Subsidiary,
respectively, and copies of the Certificates of Incorporation of
Company and Subsidiary as in existence immediately prior to the filing
of the Amended Certificate, certified by the Delaware Secretary of
State.
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(f) Amended Certificate. Evidence of the filing of the Amended
-------------------
Certificate.
(g) Subsidiary Shares. Original share certificates evidencing
-----------------
Company's stock ownership of Subsidiary.
(h) Joint Venture Documents. A copy of (i) the Certificate of
-----------------------
Formation for the Joint Venture, certified by the Delaware Secretary
of State; and (ii) the operating agreement for the Joint Venture,
together with any amendments thereto, certified as true and correct by
the secretary of the Company.
(i) Good Standing. Copies of good standing certificates of
-------------
Company, Subsidiary and the Joint Venture from the Secretary of State
(or similar applicable governmental authority) of its state of
incorporation and each state where Company and Subsidiary are
qualified to do business as a foreign entity
(j) Resignations. Resignations of all officers and directors of
------------
Company and Subsidiary, except to the extent that Purchaser shall have
notified Company prior to Closing that it will not require the
resignation of any particular person.
(k) Minute Books. The original minute books and stock record
------------
books of Company and Subsidiary.
(l) Payoff Letters and Releases. Payoff letters from those
---------------------------
lenders listed on Schedule 2.05(a)(viii) and executed releases of any
filed Liens in favor of such lenders; provided, however, that payoff
letters shall not be required from the holders of any Acquisition
Notes and Non-Competes listed on such Schedule.
(m) Incumbency Certificate. Incumbency certificates relating to
----------------------
each person executing any document executed and delivered pursuant to
this Agreement.
(n) Termination of Certain Agreements. Evidence of termination of
---------------------------------
all agreements referenced on Schedule 9.02(n).
(o) Proprietary Information Agreements. Copies of Subsidiary's
----------------------------------
standard form Management and Technical Employment Agreement, executed
by each of the Continuing Stockholders.
(p) Investment Letter. An investment letter signed by each of
-----------------
the Continuing Stockholders certifying whether such person has been
provided the opportunity to review certain offering materials and
otherwise obtain
38
<PAGE>
information in connection with the Exchange Transaction and the
investment decision represented by such transaction.
(q) Other Documents. All other documents, instruments or
---------------
writings required to be delivered to Purchaser at or prior to Closing
pursuant to this Agreement and such other certificates of authority
and documents as Purchaser may reasonably request.
9.03 Purchaser's Closing Deliveries. At Closing, Purchaser shall
------------------------------
deliver the following, in each case duly executed or otherwise in proper form:
(a) Warrant. The Warrant.
-------
(b) Compliance Certificate. A certificate signed by the
----------------------
Purchaser that the representations and warranties made by Purchaser in
this Agreement are true and correct on and as of the Closing Date
(except for any changes permitted by the terms of this Agreement or
consented to by Company and Sellers' Representative), and that
Purchaser has performed and complied with all of its obligations under
this Agreement which are to be performed or complied with on or prior
to the Closing Date.
(c) Opinion of Counsel. A written opinion of Purchaser counsel,
------------------
dated as of Closing, addressed to Company and Sellers' Representative,
in the form of Exhibit G.
(d) Escrow Agreement. The Escrow Agreement.
----------------
(e) Incumbency Certificate. Incumbency certificates relating to
----------------------
each person executing any document executed and delivered pursuant to
this Agreement.
(f) Other Documents. All other documents, instruments or
---------------
writings required to be delivered at or prior to Closing pursuant to
this Agreement and such other certificates of authority and documents
as Company may reasonably request.
9.04 Additional Actions To Be Effective Immediately After Closing.
------------------------------------------------------------
The Parties shall take, and Purchaser shall cause the Company to take, all
actions necessary to cause the following to be effective immediately following
the Closing:
(a) Purchaser, Company and Subsidiary shall execute and deliver
to the Stockholders the Release attached hereto as Exhibit C-1.
(b) The Stockholders shall execute and deliver to Purchaser,
Company and Subsidiary the Release attached hereto as Exhibit C-2.
39
<PAGE>
(c) The Company shall adopt a management equity plan entitling
the Continuing Stockholders and certain other employees to acquire an
additional three and one-half percent (3.5%) of the Company's common
equity on a fully diluted basis immediately after Closing, such plan
to be on terms otherwise mutually acceptable to the Company and the
Continuing Stockholders.
9.05 Additional Closing Deliveries. Company shall use its reasonable
-----------------------------
efforts to deliver the following additional documents at Closing, but failure to
deliver such items shall not be deemed a breach of this Agreement by Company or
a failure of any condition to the obligation of Purchaser to consummate the
transactions contemplated by this Agreement:
(a) Company shall cause the Title Company to issue title
insurance policies (which may be in the form of a mark-up of the Title
Commitment) in accordance with the Title Commitments, insuring
Company's or Subsidiary's fee simple interest (as the case may be) in
each such parcel of Owned Real Property as of the Closing Date
(included all recorded easements benefiting such parcel insured as a
separate parcel) with gap coverage through the date of recording,
subject only to the Permitted Liens, in such amount as Purchaser
reasonably determines to be the fair market value of the Owned Real
Property insured thereunder (the "Title Policies"). The Title Policies
shall include the following endorsements (to the extent available in
the respective jurisdiction, but regardless of whether any additional
fee is charged for such endorsements): (i) an extended coverage; (ii)
ALTA Form 3.1 zoning endorsement (with parking); (iii) survey
endorsement (to the extent available based on the Old Surveys, Updated
Surveys or New Surveys); (iv) access endorsement; (v) contiguity
endorsement (if applicable); (vi) a tax parcel endorsement; (vii) ALTA
Form 9 owner's comprehensive endorsement; and (viii) non-imputation
endorsement. Purchaser shall pay all costs and expenses with respect
to the Title Policies.
(b) Company shall deliver Updated Surveys or New Surveys, as
applicable in accordance with Section 8.09, which shall not disclose
any survey defect or encroachment from or onto any of the Owned Real
Property which has not been cured or insured over prior to the Closing
which, if allowed to persist after Closing, would have Material
Adverse Effect. Purchaser shall pay all costs and expenses with
respect to the Updated Surveys and the New Surveys.
(c) As to those parties and agreements or instruments listed on
Schedule 9.05(c), Company shall deliver the written consent and waiver
of any termination or acceleration rights arising under such
agreements or instruments by reason of the Transactions./1/
_______________________
/1/ Schedule 9.05(c) will list Rockford lease and the two Gannon (Perryman)
mortgages.
40
<PAGE>
10. Conditions to Obligation to Close.
10.01 Conditions to Obligation of Company and the Seller Parties. The
----------------------------------------------------------
obligation of Company and the Seller Parties to consummate the transactions
contemplated by this Agreement is subject to satisfaction of the following
conditions as of the Closing Date:
(a) Purchaser's representations and warranties set forth in
Section 7 shall be true and correct at and as of the Closing Date;
(b) Purchaser shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing Date;
(c) There shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(d) All applicable waiting periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated and
the Parties shall have received all other required authorizations,
consents, and approvals of Governmental Agencies;
(e) Purchaser shall have executed and delivered the Stockholders
Agreement in the form attached hereto as Exhibit H (the "Stockholders
Agreement"); and
(f) All actions to be taken by Purchaser in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Company and Sellers'
Representative.
10.02 Conditions to Obligation of Purchaser. The obligation of
-------------------------------------
Purchaser to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing Date:
(a) The authorizations and actions provided in Section 2.01
shall have been received and completed;
(b) The aggregate equity value to be held by the Continuing
Stockholders immediately following the Closing shall be at least Three
Million Two Hundred Fifty Thousand Dollars ($3,250,000), which "value"
shall be measured by (i) multiplying (A) the aggregate number of
shares of Exchange Stock surrendered by the Continuing Stockholders in
the Exchange Transaction by (B) the Estimated Common Stock Repurchase
Price, the Estimated Option Repurchase Price, and/or the Preferred
Stock Repurchase Price, and (ii) adding to such sum the product of (A)
the aggregate number of shares of Common
41
<PAGE>
Stock owned by the Continuing Stockholders immediately after the
Closing (exclusive of any shares of Common Stock purchased by such
persons pursuant to the equity plan described in Section 9.04(c), any
Common Stock issued to such persons in the Exchange Transaction, and
any Common Stock purchased by such persons together with Purchaser in
the Investment Transaction) and (B) the Estimated Common Stock
Repurchase Price;
(c) Company's representations and warranties set forth in
Sections 3 and 4 shall be true and correct at and as of the Closing
Date;
(d) Each Seller's representations and warranties set forth in
Section 5 and each Continuing Stockholder's representations and
warranties set forth in Section 6 shall be true and correct at and as
of the Closing Date;
(e) Company shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing Date;
(f) There shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(g) All applicable waiting periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated and
the Parties shall have received all other required authorizations,
consents, and approvals of Governmental Agencies;
(h) Company, the Continuing Stockholders and Code, Hennessy &
Simmons, L.L.C. shall have executed and delivered counterpart(s) of
the Stockholders Agreement; and
(i) All actions to be taken by Company, the Seller Parties and
the Continuing Stockholders in connection with consummation of the
Transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to Purchaser.
11. Survival; Claims Against Escrow Amount
11.01 Nature and Survival of Representations. With the exception of
--------------------------------------
the representations and warranties contained in Section 3.04, Section 5 and
Section 6, which shall survive the Closing Date until the expiration of the
applicable statute of limitations, the representations and warranties contained
in this Agreement shall survive the Closing for three hundred (300) days
following the Closing Date. Purchaser acknowledges that it has been afforded the
opportunity to perform such investigation of the Company and the Subsidiary as
it deems necessary or appropriate; however, no investigation by Purchaser will
diminish or obviate any of the representations, warranties, covenants or
agreements or Purchaser's right to
42
<PAGE>
rely upon such representations, warranties, covenants and agreements unless
Purchaser has at the time of Closing Knowledge of facts, circumstances or events
that are at variance with a representation or warranty of Company hereunder, in
which case consummation of the Transactions by Purchaser shall preclude
Purchaser from asserting any claims hereunder or under the Escrow Agreement for
breach of such representation and warranty. Purchaser agrees that any matter
disclosed by Company in one Schedule hereto shall be deemed disclosed on any
other Schedule hereto, provided that the relevance to the Schedule from which
any such matter is omitted is reasonably apparent from the disclosure on the
Schedule on which such matter is included.
11.02 Environmental Remedies. Without limiting the generality of
----------------------
Section 11.01, Purchaser understands and agrees that its right to make claims
against the Escrow Amount under Section 11.03 for breach of the representations
and warranties contained in Section 4.16 shall constitute its sole and exclusive
remedy against the Seller Parties (whether under this Agreement or any
applicable law) with respect to any environmental, health, or safety matter
relating to the past, current or future facilities, properties or operations of
Company and Subsidiary, and all of their respective predecessors or affiliates,
including without limitation any such matter arising under any Environmental,
Health, and Safety Requirements. Aside from claims against the Escrow Amount,
Purchaser hereby waives any right, whether arising at law or in equity, to seek
contribution, cost recovery, damages, or any other recourse or remedy
(including, but not limited to injunctive relief) from the Seller Parties, and
hereby releases the Seller Parties from any claim, demand or liability which the
Company or the Subsidiary may have against them, with respect to any such
environmental, health, or safety matter (including without limitation any
arising under any Environmental, Health, and Safety Requirements and including
without limitation any arising under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), any analogous state law, or the common
law).
11.03 Claims Against Escrow Amount by Purchaser. In the event Company
-----------------------------------------
breaches any of its representations or warranties contained herein, and, if
Purchaser gives notice thereof no later than that date which is three hundred
(300) days after the Closing Date, Purchaser shall be entitled to disbursement
from the Escrow Account for any Adverse Consequences Purchaser shall suffer
through and after the date of the claim against the Escrow Account caused by the
breach; provided, however, that other than a claim for breach of Section 3.04,
no such claim shall be made against the Escrow Account until the Adverse
Consequences suffered by reason of all such breaches is in excess of Five
Hundred Thousand Dollars ($500,000) (for which purpose no effect shall be given
to any materiality qualification, including Material Adverse Effect, contained
in the representations and warranties), after which point Purchaser shall be
entitled to make claims against the Escrow Account only for Adverse Consequences
in excess of Five Hundred Thousand Dollars ($500,000).
11.04 Matters Involving Third Parties.
-------------------------------
(a) If any third party shall notify Purchaser or Company with
respect to any matter (a "Third Party Claim") which may give rise to a
claim against the
43
<PAGE>
Escrow Amount under this Section 11, then Purchaser shall promptly
notify the Sellers' Representative thereof in writing; provided,
however, that the failure to give notice of a Third Party Claim shall
not affect Purchaser's rights of recovery under this Section 11 unless
such failure adversely affects the ability of the Sellers'
Representative to defend such Third Party Claim.
(b) The Sellers' Representative will have the right at any time
to assume and thereafter conduct the defense of the Third Party Claim
with counsel of its choice, reasonably satisfactory to Purchaser so
long as (i) the Sellers' Representative notifies Purchaser in writing
within fifteen (15) days after Purchaser has given notice of the Third
Party Claim that the Sellers will hold the Purchaser harmless solely
from and to the extent of the funds in the Escrow Account from and
against any Adverse Consequences Purchaser may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (ii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iii) the
Sellers' Representative conducts the defense of the Third Party Claim
actively and diligently and (iv) the available funds in the Escrow
Account are sufficient, in the reasonable judgment of Sellers'
Representative and Purchaser (or, if such parties cannot agree, in the
reasonable judgment of mutually satisfactory independent counsel
retained to handle such Third Party Claim) to cover such Adverse
Consequences; provided, however, that the Sellers' Representative will
not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written
consent of Purchaser (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of money
damages without admission of liability and does not impose an
injunction or other equitable relief upon Purchaser; provided,
further, that the consent of Purchaser shall be obtained if the
judgment or proposed settlement would have a material adverse effect
on the Taxes of Purchaser, Company or Subsidiary (or any limited
liability company or joint venture in which Company or Subsidiary has
an interest) for any period (or portion thereof) following the Closing
Date, which consent shall not unreasonably be withheld. Anything to
the contrary not withstanding, once the Sellers' Representative
assumes the defense of the Third Party Claim, as provided for in this
Section 11.04(b), Purchaser will not be entitled to include its
counsel fees in any claims against the Escrow Account except for
counsel fees reasonably incurred in monitoring such defense.
(c) Unless and until the Sellers' Representative assumes the
defense of the Third Party Claim as provided in Section 11.04(b)
above, Purchaser may defend against the Third Party Claim in any
manner it reasonably may deem appropriate.
(d) Upon payment in full from the Escrow Account, the Seller
Parties shall succeed to the rights of Purchaser, as the case may be,
to the extent
44
<PAGE>
not waived in settlement, against the third party who made such Third
Party Claim.
11.05 Determination of Adverse Consequences. The term "Adverse
-------------------------------------
Consequences" means all actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, Liabilities, obligations,
Taxes, Liens, losses, expenses and fees, including court costs and reasonable
attorneys' fees and expenses, but shall not include (a) punitive damages, or (b)
consequential damages, until the consequential damages suffered with respect to
any particular claim are in excess of One Hundred Thousand Dollars ($100,000),
after which point Purchaser shall be entitled to make such claim against the
Escrow Account only for consequential damages in excess of One Hundred Thousand
Dollars ($100,000) and not to exceed One Million Dollars ($1,000,000) per matter
giving rise to the Adverse Consequences. In computing Adverse Consequences, no
amount shall be deducted therefrom for (y) the amount of any insurance proceeds
or other third party recoveries received by Purchaser or Company, and (z) any
Tax benefit to Company or Subsidiary realizable from any expense deduction,
depreciation or amortization deduction or tax credit in connection with the
payment of the matter giving rise to the Adverse Consequences; provided,
however, that if such a Tax benefit is actually realized by Company or
Subsidiary, such amount, net of any Tax detriment, shall be paid to Sellers when
actually received by Company or Subsidiary. For purposes of determining whether
a Tax benefit exists, the overall Tax liability of Company or Subsidiary taking
into account the payment of the matter giving rise to the Adverse Consequences
shall be compared to the overall Tax liability of Company or Subsidiary without
taking into account such payment and any amount arising from any expense
deduction, depreciation or amortization deduction or tax credit in connection
with such payment shall be treated as the last item claimed by Company or
Subsidiary.
11.06 Exclusive Remedy; Limitations on Remedy.
---------------------------------------
(a) With the exception of the representations and warranties
contained in Section 3.04, Section 5 and Section 6, claims against the
Escrow Amount pursuant to this Section 11 shall be the sole remedy,
exclusive of all other remedies, causes of actions or claims (whether
common law or statutory) of Purchaser for any monetary relief or
recovery in connection with any claim for breach of Company's
representations or warranties in this Agreement, other than claims
arising out of fraud. All disbursements from the Escrow Cash Amount
portion of the Escrow Account pursuant to this Section 11 shall be
deemed adjustments to the Common Stock Repurchase Price. To the
maximum extent permitted by law, the survival period specified in
Section 11.01 shall bar any claim against Company, the Seller Parties
or the Continuing Stockholders made after the expiration of such
survival period other than claims arising out of fraud,
notwithstanding any statutory limitations period which may extend
beyond such survival period.
45
<PAGE>
(b) Except for claims arising out of fraud, with respect to
any claim against a Seller for a breach of the representations and
warranties contained in Section 5, Purchaser shall not be entitled to
recover any damages or other remedies in excess of the total
repurchase price proceeds received by such Seller in the Repurchase
Transaction.
(c) Except for claims arising out of fraud, with respect to
any claim against a Continuing Stockholder for a breach of the
representations and warranties contained in Section 6, Purchaser shall
not be entitled to recover any damages or other remedies in excess of
the then fair market value of the shares of Common Stock and/or New
Preferred Stock received by such Continuing Stockholder in the
Exchange Transaction and the then Fair Market Value of any shares of
Common Stock which such Continuing Stockholder owned immediately after
the Closing Date.
11.07 Apportionment of Escrow Proceeds by Sellers' Representative.
-----------------------------------------------------------
(a) If, pursuant to the Escrow Agreement, the Sellers'
Representative receives any disbursement of the Escrow Cash Amount
then remaining, the Sellers' Representative will allocate such amount
among all Sellers in proportion to the escrow percentage interests
reflected opposite their names on the Schedule of Sellers.
(b) If, pursuant to the Escrow Agreement, the Sellers'
Representative receives any disbursement of the Escrow Shares then
remaining, the Sellers' Representative will allocate such shares among
all Continuing Stockholders in proportion to the escrow percentage
interests reflected opposite their names on the Schedule of Continuing
Stockholders.
12. Miscellaneous.
12.01 Press Releases and Public Announcements. No Party shall issue
---------------------------------------
any press release or make any public announcement relating to the subject matter
of this Agreement, prior to Closing, without the prior written approval of the
other Parties; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Parties prior to
making the disclosure).
12.02 No Third-Party Beneficiaries. This Agreement shall not confer
----------------------------
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
12.03 Entire Agreement. This Agreement (including the documents
----------------
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior
46
<PAGE>
understandings, agreements, or representations by or among the Parties, written
or oral, to the extent they have related in any way to the subject matter
hereof.
12.04 Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. Neither Company nor any Seller or Continuing
Stockholder may assign either this Agreement or their respective rights,
interests, or obligations hereunder without the prior written approval of
Purchaser, and Purchaser may not assign either this Agreement or its rights,
interests, or obligations hereunder without the prior written approval of the
Sellers' Representative; provided, however, that Purchaser shall be permitted to
collaterally assign its rights hereunder to its lenders.
12.05 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
12.06 Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.07 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Company or to Code, Hennessy & Simmons
The Sellers' Representative: 10 South Wacker Drive, Suite 3175
Chicago, Illinois 60606
Telephone: (312) 876-1840
Facsimile: (312) 876-3854
Attention: Brian P. Simmons
Peter M. Gotsch
(with a copy, which copy shall
not constitute notice, to:) Foley & Lardner
330 N. Wabash Ave., Suite 3300
Chicago, Illinois 60611
Telephone: (312) 755-1900
Facsimile: (312) 755-1925
Attention: Stephen M. Slavin
47
<PAGE>
If to Purchaser: c/o Madison Dearborn Capital Partners, Inc.
Suite 3800
Three First National Plaza
Chicago, Illinois 60602
Telephone: (312) 895-1150
Facsimile: (312) 895-1156
Attention: Paul R. Wood
(with a copy, which copy shall
not constitute notice, to:) Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Telephone: (312) 861-2094
Facsimile: (312) 861-2200
Attention: Michael H. Kerr, P.C.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telescope, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
12.08 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic laws of the State of Illinois without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois. Any dispute that
arises under or relates to this Agreement (whether contract, tort or otherwise)
shall be resolved in any state or federal court situated in Cook County,
Illinois. Each Party waives any objection based on lack of personal
jurisdiction, improper venue or forum non conveniens.
12.09 Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
12.10 Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
48
<PAGE>
12.11 Expenses. The Parties will bear their own costs and expenses
--------
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby. The Seller Parties and the Continuing
Stockholders shall be responsible for any fees due Bowles, Hollowell, Conner &
Co.
[The next page is the signature page.]
49
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
Madison Dearborn Capital Partners II, L.P.
By Madison Dearborn Partners II, L.P.,
--
ITS GENERAL PARTNER
By Madison Dearborn Partners, Inc.,
--
IT'S GENERAL PARTNER
By: /s/ Paul R. Wood
-----------------------------------
Its: Vice President
Woods Equipment Company
By: /s/ illegible
-----------------------------------
Its: Chairman
/s/ illegible
-----------------------------------
Brian P. Simmons, as attorney-in-fact for the
Stockholders listed on the attached Schedule of
Stockholders
/s/ illegible
-----------------------------------
Brian P. Simmons, as Sellers'
Representative and not individually
50
<PAGE>
Schedule of Stockholders
A&G Investors
Bill Brown
Michael Carney
Code, Hennessy & Simmons, L.P.
Dennis Countryman
David Stephen Crider
Michael L. Dawson
Gary Eckhardt
Steve Farmer
David Ferguson
Chuck Fordham
Thomas Formolo
Mark Fryer
Charles Glass
Peter M. Gotsch
Robert C. Hickman
Leslie C. Jones
Stephen Kewish
Lyndon R. Krans
Thomas & Kathleen M. Laird
Karen A. Madonia
Bill Moore
James T. Muraski
Pamela Russell
Steven E. Starret
Ron Tiller
Steven M. Vandemore
Jon S. Vesely
Steve Voelker
WC Investors
Steve Wells
Lawrence J. Weyers
51
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
WOODS EQUIPMENT COMPANY
ONE: The name of the Corporation is Woods Equipment Company.
---
TWO: The registered office of the Corporation within the State of
---
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
19805. The name of its registered agent at such address is Corporation Service
Company.
THREE: The nature of the business or purpose to be conducted or
-----
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware
("DGCL").
----
FOUR:
----
AUTHORIZED SHARES The total number of shares of all classes of
-----------------
capital stock which the Corporation has authority to issue is 1,050,000 shares,
consisting of:
(1) 50,000 shares of 8% Cumulative Redeemable Preferred Stock, par
value $.0l per share (the "Preferred Stock"); and
---------------
(2) 1,000,000 shares of Common Stock, par value $.0l per share (the
"Common Stock").
-------------
The Preferred Stock and the Common Stock are collectively referred to
herein as "Stock." The shares of Stock shall have the rights, preferences and
-----
limitations set forth below.
-1-
<PAGE>
A. PREFERRED STOCK
---------------
Section 1. Dividends.
---------
1A. General Obligation. When and as declared by the Corporation's
------------------
Board of Directors (the "Board") and to the extent permitted by law, the
-----
Corporation shall pay preferential dividends in cash to the holders of the
Preferred Stock as provided in this Section 1. Except as provided in Paragraph
4B hereof, dividends on each share of the Preferred Stock (a "Preferred Share")
---------------
shall accrue on a daily basis at the rate (any such rate, the "Dividend Rate")
-------------
of 8% per annum of the sum of the Liquidation Value thereof plus all accumulated
and unpaid dividends thereon from and including the date of issuance of such
Preferred Share to and including the first to occur of (i) the date on which the
Liquidation Value of such Preferred Share (plus all accrued and unpaid dividends
thereon) is paid to the holder thereof in connection with the liquidation of the
Corporation or the redemption of such Preferred Share by the Corporation or (ii)
the date on which such share is otherwise acquired by the Corporation. Such
dividends shall accrue whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends. The date on which the Corporation initially
issues any Preferred Share shall be deemed to be its "date of issuance"
----------------
regardless of the number of times transfer of such Preferred Share is made on
the stock records maintained by or for the Corporation and regardless of the
number of certificates which may be issued to evidence such Preferred Share.
1B. Dividend Reference Dates. To the extent not paid on March 31,
------------------------
June 30, September 30 and December 31 of each year, beginning on March 31, June
30, September 30 and December 31 following the date of issuance of a Preferred
Share (the "Dividend Reference Dates"), all dividends which have accrued on such
------------------------
Preferred Share outstanding during the three-month period (or other period in
the case of the initial Dividend Reference Date) ending upon each such Dividend
Reference Date shall be accumulated and shall remain accumulated dividends with
respect to such Preferred Share until paid to the holder thereof.
1C. Distribution of Partial Dividend Payments. Except as otherwise
-----------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Preferred Shares, such payment
shall be distributed pro rata among the holders thereof based upon the number of
Preferred Shares held by each such holder.
Section 2. Liquidation. Upon any liquidation, dissolution or winding
-----------
up of the Corporation (whether voluntary or involuntary), each holder of
Preferred Shares shall be entitled to be paid, before any distribution or
payment is made upon any Junior Securities, an amount in cash equal to the
aggregate Liquidation Value of all Preferred Shares held by such holder (plus
all accrued and unpaid dividends thereon), and the holders of Preferred Shares
shall not be entitled to any further payment. If upon any such liquidation,
dissolution or winding up of the Corporation, the Corporation's assets to be
distributed among the holders of the Preferred Shares are insufficient to
-2-
<PAGE>
permit payment to such holders of the aggregate amount which they are entitled
to be paid under this Section 2, then the entire assets available to be
distributed to the Corporation's stockholders shall be distributed pro rata
among such holders based upon the number of Preferred Shares held by each such
holder. Prior to the liquidation, dissolution or winding up of the Corporation,
the Corporation shall declare for payment all accrued and unpaid dividends with
respect to the Preferred Shares. Not less than 60 days prior to the payment date
stated therein, the Corporation shall mail written notice of any such
liquidation, dissolution or winding up to each record holder of Preferred
Shares, setting forth in reasonable detail the amount of proceeds to be paid
with respect to each Preferred Share and each share of Common Stock in
connection with such liquidation, dissolution or winding up. Neither the
consolidation or merger of the Corporation into or with any other entity or
entities (whether or not the Corporation is the surviving entity), nor the sale
or transfer by the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the Corporation nor any other form of
recapitalization or reorganization affecting the Corporation shall be deemed to
be a liquidation, dissolution or winding up of the Corporation within the
meaning of this Section 2.
Section 3. Priority of Preferred Shares on Dividends and Redemptions.
---------------------------------------------------------
So long as any Preferred Shares remain outstanding, without the prior written
consent of the holders of a majority of the outstanding Preferred Shares, the
Corporation shall not, nor shall it permit any Subsidiary to, redeem, purchase
or otherwise acquire directly or indirectly any Junior Securities, nor shall the
Corporation directly or indirectly pay or declare any dividend or make any
distribution upon (i) any Junior Securities or (ii) any equity securities issued
by the Subsidiaries other than any Subsidiary which is directly or indirectly
wholly-owned by the Corporation; provided that the Corporation may repurchase
shares of Common Stock in accordance with the provisions of the Stockholders
Agreement.
Section 4. Redemptions.
-----------
4A. Scheduled Redemption. The Corporation shall redeem (the
--------------------
"Scheduled Redemption") all of the shares of Preferred Stock (or such lesser
- ---------------------
number then outstanding) on December 31, 2018 (the "Scheduled Redemption Date"),
-------------------------
at a price per Preferred Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon).
4B. Optional Redemptions. The Corporation may at any time make an
--------------------
offer to the holders of Preferred Shares to redeem all (but not less than all)
of the Preferred Shares then outstanding (the "Redemption Offer"). After the
----------------
Corporation provides notice of a Redemption Offer in accordance with paragraph
4D hereof, each holder of Preferred Shares who wishes to accept the Redemption
Offer shall provide written notice (an "Acceptance Notice") to the Corporation
-----------------
of its acceptance of the Redemption Offer within fifteen (15) days after the
Redemption Notice has been given to such holder. With respect to a holder of
Preferred Shares, if an Acceptance Notice is not received by the Corporation
within such fifteen-day period, the holder of such Preferred Shares shall be
deemed to have declined the Redemption Offer. Upon any such accepted
redemption, the
-3-
<PAGE>
Corporation shall pay a price per Preferred Share equal to the Liquidation Value
thereof (plus all accrued and unpaid dividends thereon). Redemptions made
pursuant to this paragraph shall not relieve the Corporation of its obligation
to redeem Preferred Shares on the Scheduled Redemption Date.
In the event that the Corporation does not make a Redemption Offer
prior to December 31, 2006, then the Dividend Rate shall be 12% per annum of the
sum of the Liquidation Value thereof plus all accumulated and unpaid dividends
thereon from and including January 1, 2007 to and including the first to occur
of (i) the date on which the Liquidation Value of such Preferred Share (plus all
accrued and unpaid dividends thereon) is paid to the holder thereof in
connection with the liquidation of the Corporation or the redemption of such
Preferred Share by the Corporation or (ii) the date on which such share is
otherwise acquired by the Corporation.
In the event that the Corporation makes a Redemption Offer and the
holder of a Preferred Share elects not to have such share redeemed (or is deemed
to have declined such offer), then (i) the Dividend Rate with respect to such
Preferred Share shall be 5% per annum of the sum of the Liquidation Value
thereof plus all accumulated and unpaid dividends thereon from and including the
date after the Redemption Date specified in the Redemption Notice and including
the first to occur of (A) the date on which the Liquidation Value of such
Preferred Share (plus all accrued and unpaid dividends thereon) is paid to the
holder thereof in connection with the liquidation of the Corporation or the
redemption of such Preferred Share by the Corporation or (B) the date on which
such share is otherwise acquired by the Corporation and (ii) at the option of
the Corporation, upon delivery of prior written notice to the holder of such
Preferred Share, dividends on such Preferred Share may be paid to such holder by
the issuance of additional Preferred Shares (based on the Liquidation Value of
such shares), in an amount equal to such dividend ("PIK Dividends"); provided,
-------------
however, that after December 31, 2013, no dividends shall be PIK Dividends, and
all dividends shall be paid in cash, as provided in Section 1 above.
4C. Redemption Payments. For each Preferred Share which is to be
-------------------
redeemed hereunder, the Corporation shall be obligated on the Redemption Date to
pay to the holder thereof (upon surrender by such holder at the Corporation's
principal office of the certificate representing such Preferred Share) an amount
in immediately available funds equal to the Liquidation Value of such Preferred
Share (plus all accrued and unpaid dividends thereon). If the funds of the
Corporation legally available for redemption of Preferred Shares on any
Redemption Date are insufficient to redeem the total number of Preferred Shares
to be redeemed on such date, those funds which are legally available shall be
used to redeem the maximum possible number of Preferred Shares pro rata among
the holders of the Preferred Shares to be redeemed based upon the number of
Preferred Shares held by each such holder (plus all accrued and unpaid dividends
thereon). At any time thereafter when additional funds of the Corporation are
legally available for the redemption of Preferred Shares, such funds shall
immediately be used to redeem the balance of the Preferred Shares
-4-
<PAGE>
which the Corporation has become obligated to redeem on any Redemption Date but
which it has not redeemed.
4D. Notice of Redemption. Except as otherwise provided herein, the
--------------------
Corporation shall mail written notice (a "Redemption Notice") of the Scheduled
-----------------
Redemption and of the Redemption Offer to each record holder thereof not more
than 60 nor less than 30 days prior to the date on which such redemption is to
be made ("Redemption Date"). In case fewer than the total number of Preferred
---------------
Shares represented by any certificate are redeemed, a new certificate
representing the number of unredeemed Preferred Shares shall be issued to the
holder thereof without cost to such holder within five business days after
surrender of the certificate representing the redeemed Preferred Shares.
4E. Dividends After Redemption Date. No Preferred Share shall be
-------------------------------
entitled to any dividends accruing after the date on which the Liquidation Value
of such Preferred Share (plus all accrued and unpaid dividends thereon) is paid
to the holder of such Preferred Share. On such date, all rights of the holder
of such Preferred Share shall cease, and such Preferred Share shall no longer be
deemed to be issued and outstanding.
4F. Redeemed or Otherwise Acquired Shares. Any Preferred Shares
-------------------------------------
which are redeemed or otherwise acquired by the Corporation shall be canceled
and retired to authorized but unissued shares and shall not be reissued, sold or
transferred.
Section 5. Voting Rights. Except as otherwise provided herein and as
-------------
otherwise required by applicable law, the Preferred Shares shall have no voting
rights; provided that each holder of Preferred Shares shall be entitled to
notice of all stockholders meetings at the same time and in the same manner as
notice is given to all stockholders entitled to vote at such meetings.
Section 6. Registration of Transfer. The Corporation shall keep at
------------------------
its principal office a register for the registration of Preferred Shares. Upon
the surrender of any certificate representing Preferred Shares at such place,
the Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Preferred Shares represented by the surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such number of
Preferred Shares as is requested by the holder of the surrendered certificate
and shall be substantially identical in form to the surrendered certificate, and
dividends shall accrue on the Preferred Shares represented by such new
certificate from the date to which dividends have been fully paid on such
Preferred Shares represented by the surrendered certificate.
-5-
<PAGE>
Section 7. Replacement. Upon receipt of evidence reasonably
-----------
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing shares of Preferred Shares, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
Preferred Shares represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Preferred Shares represented by
such new certificate from the date to which dividends have been fully paid on
such lost, stolen, destroyed or mutilated certificate.
Section 8. Events of Noncompliance.
-----------------------
8A. Definition. An Event of Noncompliance shall have occurred if the
----------
Corporation fails to make any redemption payment with respect to the Preferred
Shares which it is required to make hereunder, whether or not such payment is
legally permissible or is prohibited by any agreement to which the Corporation
is subject.
8B. Consequences of an Event of Noncompliance. If an Event of
-----------------------------------------
Noncompliance has occurred, the number of directors constituting the
Corporation's board of directors shall, at the request of the holders of a
majority of the Preferred Shares then outstanding, be increased by one director,
and the holders of Preferred Shares shall have the special right, voting
separately as a single class (with each share being entitled to one vote) and to
the exclusion of all other classes of the Corporation's stock, to elect one
individual to fill such newly created directorship, to remove any individuals
elected to such directorship and to fill any vacancies in such directorship.
The special right of the holders of Preferred Shares to elect a member of the
Board of Directors may be exercised at the special meeting called pursuant to
this subparagraph (2) and, to the extent and in the manner permitted by
applicable law, pursuant to a written consent in lieu of a stockholders meeting.
Such special right shall continue until such time as there is no longer an Event
of Noncompliance in existence, at which time such special right shall terminate
subject to revesting upon the occurrence and continuation of any Event of
Noncompliance which gives rise to such special right hereunder.
At any time when such special right has vested in the holders of
Preferred Shares, a proper officer of the Corporation shall, upon the written
request of the holder of at least 10% of the Preferred Shares then outstanding,
addressed to the secretary of the Corporation, call a special meeting of the
holders of Preferred Shares for the purpose of electing directors pursuant to
this subparagraph. Such meeting shall be held at the earliest legally
permissible date at the principal office of the Corporation, or at such other
place designated by the holders of at least 10% of the Preferred Shares then
outstanding. If such meeting has not been called by a proper officer of the
-6-
<PAGE>
Corporation within 10 days after personal service of such written request upon
the secretary of the Corporation or within 20 days after mailing the same to the
secretary of the Corporation at its principal office, then the holders of at
least 10% of the Preferred Shares then outstanding may designate in writing one
of their number to call such meeting at the expense of the Corporation, and such
meeting may be called by such Person so designated upon the notice required for
annual meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least 10% of the
Preferred Shares then outstanding. Any holder of Preferred Shares so designated
shall be given access to the stock record books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to this
subparagraph.
At any meeting or at any adjournment thereof at which the holders
of Preferred Shares have the special right to elect a director, the presence, in
person or by proxy, of the holders of a majority of the Preferred Shares then
outstanding shall be required to constitute a quorum for the election or removal
of any director by the holders of the Preferred Shares exercising such special
right. The vote of a majority of such quorum shall be required to elect or
remove any such director.
Any director so elected by the holders of Preferred Shares shall
continue to serve as a director until the expiration of the lesser of (a) a
period of six months following the date on which there is no longer any Event of
Noncompliance in existence or (b) the remaining period of the full term for
which such director has been elected. After the expiration of such six-month
period or when the full term for which such director has been elected ceases
(provided that the special right to elect directors has terminated), as the case
may be, the number of directors constituting the board of directors of the
Corporation shall decrease to such number as constituted the whole board of
directors of the Corporation immediately prior to the occurrence of the Event or
Events of Noncompliance giving rise to the special right to elect directors.
Section 9. Definitions. For purposes of this Part A, the following
-----------
terms shall have the following definitions:
"Junior Securities" means any capital stock or other equity securities
-----------------
of the Corporation, except for the Preferred Stock.
"Liquidation Value" of any Preferred Share as of any particular date
-----------------
shall be equal to $1,000.00.
"Recapitalization Agreement" means the Recapitalization Agreement,
---------------------------
dated as of July 28, 1998, by and among the Corporation and the Persons named
therein.
"Redemption Date" as to any Preferred Share means the date specified
---------------
in the Redemption Notice for the Redemption Offer and the Scheduled Redemption
Date for the Scheduled
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<PAGE>
Redemption; provided that, unless otherwise provided herein, no such date shall
be a Redemption Date unless the Liquidation Value of such Preferred Share (plus
all accrued and unpaid dividends thereon and any required premium with respect
thereto) is actually paid in full on such date, and if not so paid in full, the
Redemption Date shall be the date on which such amount is fully paid.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
----------------------
August 7, 1998, by and among the Corporation and the stockholders named therein,
as amended from time to time.
"Subsidiary" means any corporation of which the shares of outstanding
----------
capital stock possessing the voting power (under ordinary circumstances) in
electing the board of directors are, at the time as of which any determination
is being made, owned by the Corporation either directly or indirectly through
Subsidiaries.
Section 10. Amendment and Waiver. No amendment, modification or
--------------------
waiver shall be binding or effective with respect to any provision of this Part
A hereof without the prior written consent of the holders of a majority of the
Preferred Shares outstanding at the time such action is taken; provided that no
such action shall change (a) the rate at which or the manner in which dividends
on the Preferred Shares accrue or the times at which such dividends become
payable or the amount payable on redemption of the Preferred Shares or the times
at which redemption of Preferred Shares is to occur, without the prior written
consent of the holders of at least 75% of the Preferred Shares then outstanding
or (b) the percentage required to approve any change described in clause (a)
above, without the prior written consent of the holders of at least 75% of the
Preferred Shares then outstanding; and provided further that no change in the
terms hereof may be accomplished by merger or consolidation of the Corporation
with another corporation or entity unless the Corporation has obtained the prior
written consent of the holders of the applicable percentage of the Preferred
Shares then outstanding. In exercising its rights hereunder, the Company shall
exercise such rights in the same manner with respect to each holder of Preferred
Shares. The Company shall not enter into any other agreement or conduct any
course of dealing which alters the rights or obligations of any holder of
Preferred Shares with respect thereto, without first offering to each other
holder of Preferred Shares the opportunity to enter into such agreement or
course of dealing. The failure of any party at any time to insist upon strict
performance of any condition, promise, agreement or understanding set forth
herein shall not be construed as a waiver or relinquishment of the right to
insist upon strict performance of the same or any other condition, promise,
agreement or understanding at a future time.
Section 11. Notices. Except as otherwise expressly provided
-------
hereunder, all notices referred to herein shall be in writing and shall be
delivered by registered or certified mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, and shall
be deemed to have been given when so mailed or sent (i) to the Corporation, at
its principal
-8-
<PAGE>
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
B. COMMON STOCK
------------
Section 1. Voting Rights. Except as otherwise provided in this Part
-------------
B or as otherwise required by applicable law, holders of Common Stock shall be
entitled to one (1) vote per share on all matters to be voted on by the
stockholders of the Corporation.
Section 2. Dividends. After dividends on the Preferred Stock shall
---------
have been paid or set apart for payment (to the extent such Preferred Stock may
be entitled thereto), subject to the provisions of Section 3 of Part A, the
Board may declare a dividend upon the Common Stock out of the unrestricted and
unreserved surplus of the Corporation. As and when dividends are declared or
paid thereon, whether in cash, property or securities of the Corporation, the
holders of Common Stock shall be entitled to participate in such dividends
ratably on a per share basis.
Section 3. Liquidation. Subject to the provisions of the Preferred
-----------
Stock, the holders of the Common Stock shall be entitled to participate ratably
on a per share basis in all distributions to the holders of Common Stock in any
liquidation, dissolution or winding up of the Corporation.
Section 4. Registration of Transfer. The Corporation shall keep at
------------------------
its principal office (or such other place as the Corporation reasonably
designates) a register for the registration of shares of the Common Stock. Upon
the surrender of any certificate representing shares of any class of Common
Stock at such place, the Corporation shall, at the request of the registered
holder of such certificate, execute and deliver a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares of such class represented by the surrendered certificate, and the
Corporation forthwith shall cancel such surrendered certificate. Each such new
certificate will be registered in such name and will represent such number of
shares of such class as is requested by the holder of the surrendered
certificate and will be substantially identical in form to the surrendered
certificate. The issuance of new certificates shall be made without charge to
the holders of the surrendered certificates for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
issuance.
Section 5. Replacement. Upon receipt of evidence reasonably
-----------
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing one or more shares of any class of Common Stock, and
in the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Corporation (provided that if the holder is a
financial institution or other institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of
-9-
<PAGE>
such class represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen, destroyed or mutilated certificate.
Section 6. Notices. All notices referred to herein shall be in
-------
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder), and
said Amended and Restated Certificate of Incorporation shall continue in full
force and effect until further amended and changed in the manner prescribed by
the provisions of the DGCL.
FIVE: The Corporation is to have perpetual existence.
----
SIX: In furtherance and not in limitation of the powers conferred by
---
statute, the Board of Directors of the Corporation is expressly authorized to
make, alter or repeal the by-laws of the Corporation.
SEVEN: Meetings of stockholders may be held within or without the
-----
State of Delaware, as the by-laws of the Corporation may provide. The books of
the Corporation may be kept outside the State of Delaware at such place or
places as may be designated from time to time by the board of directors or in
the by-laws of the Corporation. Election of directors need not be by written
ballot unless the by-laws of the Corporation so provide.
EIGHT: To the fullest extent permitted by the DGCL as the same exists
-----
or may here after be amended, a director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director. Any repeal or modification of this Article EIGHT
shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
NINE: The Corporation reserves the right to amend, alter, change or
----
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed herein and by the DGCL, and all rights
conferred upon stockholders herein are granted subject to this reservation.
-10-
<PAGE>
TEN: The Corporation expressly elects to be governed by Section 203
---
of the DGCL.
* * * *
-11-
<PAGE>
EXHIBIT 3.2
BY-LAWS
-------
OF
--
WOODS HOLDING CORP.
-------------------
ARTICLE I
---------
Offices
-------
Section 1. The registered office shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
----------
Meetings of Stockholders
------------------------
Section 1. All meetings of the stockholders shall be held at such
place as may be fixed from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on the
first Monday of February of each year if not a legal holiday, and if a legal
holiday, then on the next business day following, at 10:00 a.m., or at such
other date and time as shall
<PAGE>
be designated from time to time by the board of directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof, at which
the stockholders shall elect by a plurality vote a board of directors, and
transact such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the
2
<PAGE>
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president, and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all
3
<PAGE>
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the certificate of incorporation. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statute or of the
certificate of incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of such
4
<PAGE>
question.
Section 10. Each stockholder shall, at every meeting of the
stockholders, be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three years from its date, unless the proxy provides for
a longer period.
Section 11. Any action required to be taken at any annual or special
meeting of stockholders of the corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
-----------
Directors
---------
Section 1. The number of directors which shall
5
<PAGE>
constitute the whole board shall be not less one (1) nor more than nine (9). The
number of directors of the corporation may be increased or decreased from time
to time within this range of one (1) to nine (9) directors, without further
amendment to this section, only by the affirmative vote of a majority of
directors then entitled to vote thereon. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Directors
need not be stockholders.
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director, and each director so chosen shall hold office until his
successor is elected and qualified, or until his earlier resignation or removal.
If there are no directors in office, then an election of directors may be held
in the manner provided by statute.
Section 3. The business of the corporation shall be managed by or
under the direction of the board of directors which may exercise all such powers
of the corporation and do all such
6
<PAGE>
lawful acts as are not by statute or by the certificate of incorporation or by
these by-laws directed or required to be exercised or done by the stockholders.
Meetings of the Board of Directors
----------------------------------
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver of notice signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall
7
<PAGE>
from time to time be determined by the board.
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director, either personally or by mail
or by telegram; special meetings shall be called by the president in like manner
and on like notice on the written request of two or more directors.
Section 8. At all meetings of the board a majority of the total
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
8
<PAGE>
minutes of proceedings of the board or committee.
Compensation of Directors
-------------------------
Section 10. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
----------
Notices
-------
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may
9
<PAGE>
also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
---------
Officers
--------
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a chairman of the board, a president, a
vice-president, a secretary and a treasurer. The board of directors may elect
additional vice-presidents and one or more assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate of incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a chairman of the board, a
president, one or more vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold
10
<PAGE>
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation may be filled by the board of directors.
The Chairman of the Board
-------------------------
Section 6. The chairman of the board, if there be a chairman,
shall preside at all meetings of the stockholders, of the board of directors and
of the executive committee, if any, and he shall have such other powers and
duties as the board of directors may from time to time prescribe. He may execute
contracts in the name of the corporation. He may sign, with the secretary,
assistant secretary, treasurer or assistant treasurer, certificates for shares
of the corporation, and may sign any policies, deeds, mortgages, bonds,
contracts, or other instruments which the board of directors have authorized to
be executed except in cases where
11
<PAGE>
the signing and execution thereof shall be expressly delegated by the board of
directors or by these by-laws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed.
The President
-------------
Section 7. The president shall be the chief executive officer of the
corporation and shall have the general direction of the affairs of the
corporation except as otherwise prescribed by the board of directors. In the
absence of the chairman of the board, he shall preside at all meetings of the
stockholders, of the board of directors and of the executive committee, if any,
and shall designate the acting secretary for such meetings to take the minutes
thereof for delivery to the secretary. He may execute contracts in the name of
the corporation and appoint and discharge agents and employees of the
corporation. He may sign, with the secretary, assistant secretary, treasurer or
assistant treasurer, certificates for shares of the corporation, and may sign
any policies, deeds, mortgages, bonds, contracts, or other instruments which the
board of directors have authorized to be executed except in cases where the
signing and execution thereof shall be expressly delegated by the board of
directors or by these by-laws to some other officer or agent of the corporation,
or shall be required by
12
<PAGE>
law to be otherwise signed or executed; appoint and discharge agents and
employees of the corporation, and in general, shall perform all duties incident
to the office of president. The president shall be ex-officio a member of all
committees.
The Vice-Presidents
-------------------
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if there be any, (or in the
event there be more than one vice-president, the vice-presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
The Secretary and Assistant Secretary
-------------------------------------
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all proceedings of the
meetings of the corporation and of the board of directors in a book to be kept
for that purpose and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
13
<PAGE>
meetings of the stockholders and special meetings of the board of directors,
and shall perform such other duties as may be prescribed by the board of
directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
The Treasurer and Assistant Treasurers
--------------------------------------
Section 11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the
14
<PAGE>
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination,
15
<PAGE>
then in the order of their election), shall, in the absence of the treasurer or
in the event of his inability or refusal to act, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
ARTICLE VI
----------
Certificate of Stock
--------------------
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as
16
<PAGE>
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Where a certificate is countersigned (i) by a transfer
agent other than the corporation or its employee, or (ii) by a registrar other
than the corporation or its employee, any of or all the signatures of the
officers of the corporation may be a facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be an officer before such certificate is issued, it may be issued
by the corporation with the same effect as if he were such officer at the date
of issue.
Lost Certificates
-----------------
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate theretofore issued by the
corporation
17
<PAGE>
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of the fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Transfers of Stock
------------------
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Fixing Record Date
------------------
Section 5. In order that the corporation may
18
<PAGE>
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
Registered Stockholders
-----------------------
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or
19
<PAGE>
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE VII
-----------
Indemnification
---------------
Section 1. In General. The corporation shall indemnify (a) any
----------
person who was 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 corporation to
procure a judgment in its favor by reason of the fact that such person is or was
a director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit,
and (b) any person who 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 corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or who is or was serving at the
request of the
20
<PAGE>
corporation as a director, officer, employee or agent or another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any such action, suit
or proceeding, in each case to the fullest extent permissible under Section 145
of the Delaware General Corporation Law, as amended from time to time (the
"GCL"), or the indemnification provisions of any successor statute.
Section 2. Exculpation. No director of the corporation shall be liable
-----------
to the corporation or its stockholder for monetary damages for breach of
fiduciary duty as a director, in the manner and to the fullest extent provided
in the Certificate of Incorporation of the corporation and in Section 102 of the
GCL, as the same now exists or may hereafter be amended. No amendment to or
repeal of this Article VII shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
Section 3. No Diminution by Amendment of By-law; Non-exclusive Effect.
----------------------------------------------------------
The foregoing provisions of this Article VII shall be deemed to be a contract
between the corporation and each director and officer who serves in such
capacity at any time while
21
<PAGE>
this by-law is in effect, any repeal or modification thereof shall not affect
any rights or obligations then existing with respect to any state of facts then
or theretofore existing or any action, suit or proceeding theretofore or
thereafter brought based in whole or in part upon any such state of facts. The
foregoing rights of indemnification shall not be deemed exclusive of any
other rights to which any director or officer may be entitled apart from the
provisions of this Article VII. The board of directors in its discretion shall
have power on behalf of the corporation to indemnify any person, other than a
director or officer, made a party to any action, suit or proceeding by reason
of the fact that he, his testator or intestate is or was an employee of the
corporation.
ARTICLE VIII
------------
Amendments
----------
These by-laws may be altered, amended or repealed or new by-laws may
be adopted by the board of directors at any regular meeting of the board of
directors or at any special meeting of the board of directors.
22
<PAGE>
Exhibit 3.3
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/28/1993
753028015 - 2324073
CERTIFICATE OF INCORPORATION
OF
WOODS ACQUISITION CORP.
-----------------------
FIRST. The name of the corporation is:
"Woods Acquisition Corp."
SECOND: The address of its registered office in the State of Delaware
is 32 Loockerman Square, Suite L-100, in the city of Dover, County of Kent. The
name of its registered agent at such address is The Prentice-Hall Corporation
System, Inc.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware as the
same may be amended from time to time ("GCL").
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 1,000 shares of Common Stock, par
value $.01 per share.
FIFTH: The name and mailing address of the incorporator is Kathleen M.
Howard, 10 South Wacker Drive, Suite 4000, Chicago, Illinois 60606.
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the by-laws of the corporation.
SEVENTH: The election of directors need not be by written ballot.
EIGHTH: The corporation shall indemnify, and advance expenses to, each
director, officer, trustee, employee or agent of the corporation and each person
who is or was serving at the request of the corporation as a director, officer,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, in the manner and to the fullest extent provided in
Section 145 of the GCL as the same now exists or may hereafter be amended. No
amendment to or repeal of this Article EIGHTH shall apply to or have any effect
on the liability or alleged liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
NINTH: No director of the corporation shall be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the GCL or any successor provision or (iv) for
any transaction from which the director derived an improper personal benefit.
<PAGE>
THE UNDERSIGNED, being the incorporator hereinabove named, for the
purposes of forming a corporation pursuant to the GCL, does hereunto set her
hand this 27th day of January, 1993.
/s/ Kathleen M. Howard
--------------------------
Kathleen M. Howard
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:00 PM 02/26/1993
753057059 - 2324073
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
WOODS ACQUISITION CORP.
WOODS ACQUISITION CORP., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), HEREBY CERTIFIES:
FIRST: That the sole director of the Corporation duly adopted a
resolution on February 26, 1993 proposing and declaring advisable that Article 1
of the Certificate of Incorporation of the Corporation be amended to read as
follows:
"1. The name of the corporation is Woods Equipment Company"
SECOND: That the foregoing resolution was duly adopted by the sole
stockholder of the Corporation through written consent on February 26, 1993 in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That the foregoing Amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, Woods Acquisition Corp., has caused this
certificate to be signed by its President and attested by the Secretary, as of
this 26th, day of February, 1993.
By: /s/ Daniel J. Hennessy,
-------------------------
Daniel J. Hennessy,
President
Attest:
By: /s/ Peter M. Gotsch,
-----------------------------
Peter M. Gotsch,
Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/29/1994
944075805 - 2324073
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * *
WOODS EQUIPMENT COMPANY, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the sole director of said Corporation, by written consent
pursuant to Section 141(f) of the General Corporation Law, adopted resolutions
proposing and declaring advisable that Article FIRST of the Certificate of
Incorporation of said Corporation be amended and restated as follows:
"FIRST: The name of the corporation is: WEC Company."
SECOND: That in lieu of a meeting and vote of stockholders, the sole
stockholder of the Corporation has given its written consent to said amendment
in accordance with Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said WOODS EQUIPMENT COMPANY has caused this
certificate to be signed by Thomas J. Laird, its President,
<PAGE>
and Peter M. Gotsch, its Assistant Secretary, this 28th day of April, 1994.
By: /s/ Thomas J. Laird
-------------------------------
Thomas J. Laird, President
By: /s/ Peter M. Gotsch
-------------------------------
Peter M. Gotsch, Assistant
Secretary
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
GANNON MANUFACTURING CO., INC.
INTO
WEC COMPANY
------------------
Pursuant to Section 253 of the General
Corporation Law of the State of Delaware
------------------
WEC Company, a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"):
DOES HEREBY CERTIFY:
FIRST: That the Corporation was incorporated on the 28th day of
January, 1993 under the name "Woods Acquisition Corp.", pursuant to the General
Corporation Law of the State of Delaware ("DGCL").
SECOND: That the Corporation owns all of the outstanding shares (the
"Shares") of common stock, no par value per share, and preferred stock, $100 par
value per share, of Gannon Manufacturing Co., Inc., a California corporation
("Gannon"), and Gannon has no classes of stock outstanding other than said
common stock and preferred stock.
THIRD: That the Corporation, by resolutions of its Board of
Directors, duly adopted by the Board of Directors by unanimous consent in lieu
of a meeting on June 30, 1994 has determined to merge Gannon with and into the
Corporation pursuant to Section 253 of the DGCL, with the Corporation as the
surviving corporation (the "Merger"). A true copy of said resolutions is annexed
hereto as Exhibit A and incorporated herein by reference. Said resolutions have
not been modified or rescinded and are in full force and effect on the date
hereof.
FOURTH: That the laws of the jurisdiction of the organization of Gannon
permit a merger of a business corporation of that jurisdiction with a business
corporation of another jurisdiction.
FIFTH: That the Merger shall become effective upon the filing of this
Certificate of Ownership and Merger with the Secretary of State of Delaware in
accordance with the provisions of Sections 103 and 253 of the DGCL.
<PAGE>
IN WITNESS WHEREOF, WEC Company has caused this Certificate of
Ownership and Merger to be signed by Brian P. Simmons, its Chairman and attested
to by Peter M. Gotsch, its Assistant Secretary, as of this 30th day of June,
1994.
WEC COMPANY
By: /s/ Brian P. Simmons
------------------------------
Brian P. Simmons
Chairman
ATTEST:
/s/ Peter M. Gotsch
- -------------------------------
Peter M. Gotsch
Assistant Secretary
2
<PAGE>
Exhibit A
CONSENT IN LIEU OF SPECIAL MEETINGC
OF THE BOARD OF DIRECTORSC
OF WEC COMPANY
---------------------------------------------
The undersigned, constituting the Board of Directors of WEC Company, a
Delaware corporation (the "Corporation"), in lieu of a special meeting, hereby
adopt the following resolutions by written consent pursuant to Section 141(f) of
the General Corporation Laws of the State of Delaware:
WHEREAS, the Corporation owns all of the outstanding shares of common
stock, no par value per share, and preferred stock, $100 par value per
share, of Gannon Manufacturing Co., Inc., a California corporation
("Gannon"), and Gannon has no classes of stock issued and outstanding other
than said common stock and preferred stock; and
WHEREAS, the Board of Directors of the Corporation hereby deems it
advisable and to the advantage of the Corporation the Gannon merge with and
into the Corporation (the "Merger").
NOW, THEREFORE, IT IS
RESOLVED, that in accordance with and pursuant to Section 253 of the
General Corporation Law of the State of Delaware and Section 1110 of the
California General Corporation Law, it is hereby authorized and directed
that Gannon, be merged with and into the Corporation, upon the following
terms and conditions (such merger is hereinafter referred to as the
"Merger"):
(i) At the Effective Time (as hereinafter defined), Gannon shall
be merged with and into the Corporation (in its capacity as the
Surviving corporation in the Merger, it shall sometimes hereinafter be
referred to as the "Surviving Corporation"), which Surviving Corporation
shall continue to be governed by the internal laws of the State of
Delaware, and the separate corporate existence of Gannon shall cease;
(ii) As of and after the Effective Time, all the estate, property,
rights, privileges, franchises, immunities and powers of Gannon, shall
vest in, and be held and enjoyed by, the Surviving Corporation, and the
Surviving Corporation shall assume and be liable for all the duties,
liabilities and obligations of Gannon;
<PAGE>
(iii) The Merger shall be consummated in accordance with Section
253 of the General Corporation Law of the State of Delaware and
Section 1110 of the California General Corporation Law;
(iv) As of and at the Effective Time, by virtue of the Merger and
without any further action or deed by or on behalf of Gannon, the
Corporation or the stockholders thereof, all of the issued and
outstanding shares of the common and preferred stock of Gannon shall be
cancelled and no cash, securities or other consideration shall be
delivered in exchange therefor;
(v) As of and at the Effective Time, the Certificate of
Incorporation and By-Laws of the Corporation as in effect immediately
prior to the Effective Time, shall continue to be the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until thereafter
duly amended in accordance with the General Corporation Law of the State
of Delaware, and the officers and directors of the Corporation shall
continue in office as the officers and directors, respectively, of the
Surviving Corporation without change after the Effective Time;
(vi) As used in this Unanimous Consent Action, the term "Effective
Time" shall be the date of filing with the Secretaries of States.
FURTHER RESOLVED, that the officers of the Corporation be, and they
hereby are, authorized and directed to prepare, acknowledge, execute and
file all required merger documents with the Secretary of State of the
States of California and Delaware by, for or on behalf of and in the name
of the Corporation in accordance with and pursuant to the California
General Corporation Law and the General Corporation Law of the State of
Delaware.
FURTHER RESOLVED, that the officers of the Corporation be, and hereby
are, authorized to issue, execute, deliver and/or record such articles,
certificates, agreements, and other documents, and to perform such acts as
they may deem necessary to implement, and effectuate the foregoing
resolutions, including obtaining such consents to the transactions
contemplated thereby as such officers shall deem appropriate and qualifying
the Corporation to do business or otherwise qualify in such jurisdictions
where Gannon was so qualified.
The actions taken by this consent shall have the same force and effect as
if taken by the undersigned at a special meeting of
<PAGE>
the Board of Directors of the Corporation duly called and constituted pursuant
to the laws of the State of Delaware and the Corporation's By-Laws.
Dated as of June 30, 1994.
/s/ Daniel J. Hennessy
-----------------------
Daniel J. Hennessy, being the sole
director of the Corporation
<PAGE>
Certificate of Ownership and Merger
of
Wain-Roy Holding, Inc.
(a Delaware corporation)
into
WEC COMPANY
(a Delaware corporation)
It Is Hereby Certified that:
1. WEC Company (the "Corporation") is a business corporation in the State
of Delaware.
2. The Corporation is the owner of all of the outstanding shares of the
stock of Wain-Roy Holding, Inc. ("Wain-Roy"), which is also a business
corporation in the State of Delaware.
3. On the date hereof, the Board of Directors of the Corporation
adopted the following resolutions to merge Wain-Roy into the Corporation:
RESOLVED that Wain-Roy be merged into the Corporation, and that all of the
estate, property, rights, privileges, powers and franchises of Wain-Roy be
vested and held in and held and enjoyed by the Corporation as fully and
entirely and without change or diminution as the same were before held and
enjoyed by Wain-Roy in its name; and
RESOLVED that the Corporation shall assume all of the obligations of
Wain-Roy; and
RESOLVED that the Corporation shall cause to be executed and filed and/or
recorded the documents prescribed by the laws of the State of Delaware and
by the laws of any other appropriate jurisdiction and will cause to be
performed all necessary acts within the State of Delaware and within any
other appropriate jurisdiction; and
RESOLVED, that the appropriate officers of the Corporation are hereby
authorized to execute and deliver any and all instruments or documents
necessary or desirable to be executed and delivered in order to effectuate
the foregoing transaction, the approval of which shall be conclusively
established by execution and delivery thereof.
Executed on October 31, 1997.
WEC Company
By: /s/ Thomas J. Laird
--------------------------------
Its President
<PAGE>
CERTIFICATE OF MERGER
OF
CENTRAL FABRICATORS, INC.
(a Wisconsin corporation)
WEC COMPANY
(a Delaware corporation)
It is hereby certified that:
1. The business corporations participating in the merger herein certified
are:
(i) Central Fabricators, Inc. is a business corporation in the State of
Wisconsin; and
(ii) WEC Company is a business corporation in the State of Delaware.
2. An Agreement of Merger has been approved, adopted, certified, executed
and acknowledged by each of the above-listed corporations in accordance with the
provisions of Section 252 of the General Corporation Law of the State of
Delaware and the State of Wisconsin.
3. The name of the surviving corporation in the merger herein is WEC
Company, which will continue its existence as the surviving corporation under
its present name upon the effective date of said merger pursuant to the
provisions of the General Corporation Law of the State of Delaware.
4. The Certificate of Incorporation of the surviving corporation, as now
in force and effect, shall continue to be the Certificate of Incorporation of
said surviving corporation.
5. The executed Agreement of Merger between the above-listed corporations
is on file at the principal place of business of the surviving corporation, the
address of which is as follows:
6944 Newburg Road
Rockford, Illinois 61108
6. A copy of the executed Agreement of Merger will be furnished by the
surviving corporation, on request, and without cost, to any stockholder of each
of the above-listed companies.
<PAGE>
7. The Agreement of Merger between the above-listed corporations provides
that the merger herein certified shall be effective upon filing.
Dated: July 28, 1999
CENTRAL FABRICATORS, INC.
By: /s/ Steven M. Vandemore
-------------------------------------
Its: Vice President
-----------------------------
Steven H. Vandemore
WEC COMPANY
By: /s/ Steven M. Vandemore
------------------------------------
Its: Vice President
Steven H. Vandemore
-2-
<PAGE>
CERTIFICATE OF MERGER
OF
ALITEC CORPORATION
(an Indiana corporation)
WEC COMPANY
(a Delaware corporation)
It is hereby catified that:
1. The business corporations participating in the merger herein certified
are:
(i) Alitec Corporation is a business corporation in the State of
Indiana; and
(ii) WEC Company is a business corporation in the State of Delaware,
2. An Agreement of Merger has been approved, adopted, certified, executed
and acknowledged by each of the above-listed corporations in accordance with the
provisions of Section 252 of the General Corporation Law of the State of
Delaware and the State of Indiana.
3. The name of the surviving corporation in the merger herein is WEC
Company, which will continue its existence as the surviving corporation under
its present name upon the effective date of said merger pursuant to the
provisions of the General Corporation Law of the State of Delaware.
4. The Certificate of Incorporation of the surviving corporation, as now
in force and effect, shall continue to be the Certificate of Incorporation of
said surviving corporation.
5. The executed Agreement of Merger between the above-listed corporations
is on file at the principal place of business of the surviving corporation, the
address of which is as follows:
6944 Newburg Road
Rockford, Illinois 61108
6. A copy of the executed Agreement of Merger will be furnished by the
surviving corporation, on request, and without cost, to any stockholder of each
of the above-listed companies.
<PAGE>
7. The Agreement of Merger between the above-listed corporations provides
that the merger herein certified shall be effective upon filing.
Dated: July 30, 1999
ALITEC CORPORATION
By: /s/ Steven M. Vandemore
--------------------------------
Its: Vice President
Steven M. Vandemore
WEC COMPANY
By: /s/ Steven M. Vandemore
-------------------------------
Its: Vice President
Steven M. Vandemore
-2-
<PAGE>
EXHIBIT 3.4
BY-LAWS
-------
OF
--
WOODS ACQUISITION CORP.
----------------------
ARTICLE I
---------
Offices
-------
Section 1. The registered office shall be in the City of Dover, County
of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
----------
Meetings of Stockholders
------------------------
Section 1. All meetings of the stockholders shall be held at such place
as may be fixed from time to time by the board of directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on the first
Monday of February if not a legal holiday, and if a legal holiday, then on the
next business day following, at 10:00 a.m., or at such other date and time as
shall be designated from
<PAGE>
time to time by the board of directors and stated in the notice of the meeting
or in a duly executed waiver of notice thereof, at which the stockholders shall
elect by a plurality vote a board of directors, and transact such other business
as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the
2
<PAGE>
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president, and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all
3
<PAGE>
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the certificate of incorporation. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statute or of the
certificate of incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of such
4
<PAGE>
question.
Section 10. Each stockholder shall, at every meeting of the
stockholders, be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three years from its date, unless the proxy provides for
a longer period.
Section 11. Any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
-----------
Directors
---------
Section 1. The number of directors which shall
5
<PAGE>
constitute the whole board shall be not less one (1) nor more than nine (9). The
number of directors of the corporation may be increased or decreased from time
to time within this range of one (1) to nine (9) directors, without further
amendment to this section, only by the affirmative vote of a majority of
directors then entitled to vote thereon. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Directors
need not be stockholders.
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director, and each director so chosen shall hold office until his
successor is elected and qualified, or until his earlier resignation or removal.
If there are no directors in office, then an election of directors may be held
in the manner provided by statute.
Section 3. The business of the corporation shall be managed by or
under the direction of the board of directors which may exercise all such powers
of the corporation and do all such
6
<PAGE>
lawful acts as are not by statute or by the certificate of incorporation or by
these by-laws directed or required to be exercised or done by the stockholders.
Meetings of the Board of Directors
----------------------------------
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver of notice signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall
7
<PAGE>
from time to time be determined by the board.
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director, either personally or by
mail or by telegram; special meetings shall be called by the president in like
manner and on like notice on the written request of two or more directors.
Section 8. At all meetings of the board a majority of the total
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
8
<PAGE>
minutes of proceedings of the board or committee.
Compensation of Directors
-------------------------
Section 10. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
----------
Notices
-------
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may
9
<PAGE>
also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
---------
Officers
--------
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a chairman of the board, a president, a vice-
president, a secretary and a treasurer. The board of directors may elect
additional vice-presidents and one or more assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate of incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a chairman of the board, a
president, one or more vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold
10
<PAGE>
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation may be filled by the board of directors.
The Chairman of the Board
-------------------------
Section 6. The chairman of the board, if there be a chairman, shall
preside at all meetings of the stockholders, of the board of directors and of
the executive committee, if any, and he shall have such other powers and duties
as the board of directors may from time to time prescribe. He may execute
contracts in the name of the corporation. He may sign, with the secretary,
assistant secretary, treasurer or assistant treasurer, certificates for shares
of the corporation, and may sign any policies, deeds, mortgages, bonds,
contracts, or other instruments which the board of directors have authorized to
be executed except in cases where
11
<PAGE>
the signing and execution thereof shall be expressly delegated by the board of
directors or by these by-laws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed.
The President
-------------
Section 7. The president shall be the chief executive officer of the
corporation and shall have the general direction of the affairs of the
corporation except as otherwise prescribed by the board of directors. In the
absence of the chairman of the board, he shall preside at all meetings of the
stockholders, of the board of directors and of the executive committee, if any,
and shall designate the acting secretary for such meetings to take the minutes
thereof for delivery to the secretary. He may execute contracts in the name of
the corporation and appoint and discharge agents and employees of the
corporation. He may sign, with the secretary, assistant secretary, treasurer or
assistant treasurer, certificates for shares of the corporation, and may sign
any policies, deeds, mortgages, bonds, contracts, or other instruments which the
board of directors have authorized to be executed except in cases where the
signing and execution thereof shall be expressly delegated by the board of
directors or by these by-laws to some other officer or agent of the corporation,
or shall be required by
12
<PAGE>
law to be otherwise signed or executed; appoint and discharge agents and
employees of the corporation, and in general, shall perform all duties incident
to the office of president. The president shall be ex-officio a member of all
committees.
The Vice-Presidents
-------------------
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if there be any, (or in the
event there be more than one vice-president, the vice-presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
The Secretary and Assistant Secretary
-------------------------------------
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all
13
<PAGE>
meetings of the stockholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
The Treasurer and Assistant Treasurers
--------------------------------------
Section 11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the
14
<PAGE>
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination,
15
<PAGE>
then in the order of their election), shall, in the absence of the treasurer or
in the event of his inability or refusal to act, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
ARTICLE VI
----------
Certificate of Stock
--------------------
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as
16
<PAGE>
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Where a certificate is countersigned (i) by a transfer
agent other than the corporation or its employee, or (ii) by a registrar other
than the corporation or its employee, any of or all the signatures of the
officers of the corporation may be a facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be an officer before such certificate is issued, it may be issued
by the corporation with the same effect as if he were such officer at the date
of issue.
Lost Certificates
-----------------
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation
17
<PAGE>
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of the fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Transfers of Stock
------------------
Section 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Fixing Record Date
------------------
Section 5. In order that the corporation may
18
<PAGE>
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
Registered Stockholders
-----------------------
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or
19
<PAGE>
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE VII
-----------
Indemnification
----------------
Section 1. In General. The corporation shall indemnify (a) any
----------
person who was 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 corporation to
procure a judgment in its favor by reason of the fact that such person is or was
a director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or
suit, and (b) any person who 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 corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or who is or was
serving at the request of the
20
<PAGE>
corporation 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
actually and reasonably incurred by him in connection with any such action, suit
or proceeding, in each case to the fullest extent permissible under Section 145
of the Delaware General Corporation Law, as amended from time to time (the
"GCL"), or the indemnification provisions of any successor statute.
Section 2. Exculpation. No director of the corporation shall be
-----------
liable to the corporation or its stockholder for monetary damages for breach of
fiduciary duty as a director, in the manner and to the fullest extent provided
in the Certificate of Incorporation of the corporation and in Section 102 of the
GCL, as the same now exists or may hereafter be amended. No amendment to or
repeal of this Article VII shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
Section 3. No Diminution by Amendment of By-laws; Non-exclusive
-----------------------------------------------------
Effect. The foregoing provisions of this Article VII shall be deemed to be a
- ------
contract between the corporation and each director and officer who serves in
such capacity at any time while
21
<PAGE>
this by-law is in effect, any repeal or modification thereof shall not affect
any rights or obligations then existing with respect to any state of facts then
or theretofore existing or any action, suit or proceeding theretofore or
thereafter brought based in whole or in part upon any such state of facts. The
foregoing rights of indemnification shall not be deemed exclusive of any other
rights to which any director or officer may be entitled apart from the
provisions of this Article VII. The board of directors in its discretion shall
have power on behalf of the corporation to indemnify any person, other than a
director or officer, made a party to any action, suit or proceeding by reason of
the fact that he, his testator or intestate is or was an employee of the
corporation.
ARTICLE VIII
------------
Amendments
----------
These by-laws may be altered, amended or repealed or new by-laws may
be adopted by the board of directors at any regular meeting of the board of
directors or at any special meeting of the board of directors.
22
<PAGE>
EXHIBIT 4.1
WOODS EQUIPMENT COMPANY
STOCKHOLDERS AGREEMENT
----------------------
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of August 7,
1998, by and among Woods Equipment Company, a Delaware corporation (the
"Company"), Madison Dearborn Capital Partners II, L.P., a Delaware limited
partnership (the "Investor"), Code, Hennessy & Simmons L.L.C., a Delaware
limited liability company, as trustee on behalf of certain parties pursuant to
that certain Trust Agreement dated as of August 7, 1998 ("CHS") and each of the
Persons listed on Schedule I and Schedule II attached hereto (collectively, the
---------- -----------
"Executives"). The Investor, CHS and the Executives are collectively referred to
as the "Stockholders" and individually as a "Stockholder." Certain capitalized
terms used herein are defined in Section 10 hereof.
WHEREAS, the Investor shall purchase shares of the Company's Common
Stock and Preferred Stock pursuant to a Recapitalization Agreement by and among
the Investor, certain of the Executives, the Company and certain others, dated
as of July 28, 1998 (the "Recapitalization Agreement"). Pursuant to the
Recapitalization Agreement, the Company will undergo a recapitalization which
will result in, among other things, the Investor holding the Company's Common
Stock and Preferred Stock, CHS holding the Warrant and the Executives party
thereto holding the Company's Common Stock and Preferred Stock. The execution
and delivery of this Agreement is a condition to the consummation of the
transactions contemplated by the Recapitalization Agreement.
WHEREAS, (i) the Company, Code, Hennessy & Simmons Limited Partnership
("CHSLP"), Dennis Countryman, Michael Dawson, Robert Hickman, Leslie Jones,
Carol Long, Pamela Russell, Frederick Scharer, Jr., and Bo Vanman are parties to
a Management Stockholders Agreement dated as of February 26, 1993, as amended by
Amendment No. 1 to Management Stockholders Agreement dated as of August 31,
1993, and (ii) the Company, CHSLP and Thomas Laird are parties to a Second
Management Stockholders Agreement dated as of May 20, 1993, as amended by
Amendment No. 1 to Second Management Stockholders Agreement dated as of August
31, 1993 and as further amended by Amendment No. 2 to Second Management
Stockholders Agreement dated as of April 28, 1994 (the stockholders agreements
referred to in clauses (i) and (ii) are collectively the "Executive Stockholders
Agreements").
WHEREAS, the Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) defining the manner and terms
by which the Stockholder Shares may be transferred, (ii) providing piggyback
registration rights and (iii) terminating all prior stockholder agreements or
arrangements relating to the Company to which any Stockholder is a party.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Representations and Warranties. Each Stockholder represents and
------------------------------
warrants that (i) such Stockholder is the record and beneficial owner of the
number of Stockholder Shares set forth under its name on its signature page to
this Agreement (in the case of CHS, that it is the record owner of the Warrant),
free and clear of any liens, claims or encumbrances, (ii) this Agreement has
been duly authorized, executed and delivered by such Stockholder and constitutes
the valid and binding obligation of such Stockholder, enforceable in accordance
with its terms, and (iii) such Stockholder has not granted and is not a party to
any proxy, voting trust or other agreement which is inconsistent with, conflicts
with or violates any provision of this Agreement. During the term of this
Agreement, no holder of Stockholder Shares shall grant any proxy or become party
to any voting trust or other agreement which is inconsistent with, conflicts
with or violates any provision of this Agreement.
2. Restrictions on Transfer of Stockholder Shares by Executive
-----------------------------------------------------------
Stockholders.
- ------------
(a) Retention of Stockholder Shares. The Executive Stockholders shall
-------------------------------
not sell, transfer, assign, pledge or otherwise dispose of ("Transfer") any
interest in any Stockholder Shares, except for:
(i) Transfers pursuant to a Qualified Public Offering;
(ii Transfers pursuant to Sections 2(b) [Repurchase Rights], 4
[Drag-Along Rights] and 5 [Tag-Along Rights] hereof;
(iii) Transfers pursuant to Section 6 [Piggyback Registration
Rights];
(iv) Transfers made with the prior written consent of the Board;
(v) Transfers to Permitted Transferees pursuant to Section
2(c) below; and
(vi) Transfers pursuant to Section 3 [First Offer Right for
Stockholder Shares].
Such Transfers described in clauses (i) through (v) above are referred to herein
as "Exempt Transfers."
(b) Repurchase Right.
----------------
(i) In the event Executive Stockholder ceases to be employed
for any reason by the Company and its Subsidiaries (the "Termination"), the
Stockholder Shares (whether held by Executive Stockholder or one or more of
Executive Stockholder's transferees) shall be subject to repurchase by the
Company and the Investor pursuant to the terms and conditions set forth in this
Section 2(b) (the "Repurchase Option").
-2-
<PAGE>
(ii) If the Executive Stockholder's employment is terminated by
the Company without Cause or if the Executive Stockholder voluntarily leaves the
Company for any reason (including, but not limited to, disability or
resignation), the purchase price for each Stockholder Share pursuant to the
Repurchase Option shall be the Fair Market Value for such share.
(iii) If the Executive Stockholder's employment is terminated by
the Company with Cause, then the purchase price for each Stockholder Share
pursuant to the Repurchase Option shall be the lower of (a) the Fair Market
Value for such share and (b) the Original Cost for such share.
(iv) The Board may elect to purchase all or any portion of the
Stockholder Shares by delivering written notice (the "Repurchase Notice") to the
holder or holders of the Stockholder Shares within 90 days after the
Termination. The Repurchase Notice shall set forth the number of Stockholder
Shares to be acquired from each holder of Stockholder Shares, the aggregate
consideration to be paid for such shares and the time and place for the closing
of the transaction. The number of shares to be repurchased by the Company shall
first be satisfied to the extent possible from the shares of Stockholder Shares
held by Executive Stockholder at the time of delivery of the Repurchase Notice.
If the number of shares of Stockholder Shares then held by Executive Stockholder
is less than the total number of shares of Stockholder Shares the Company has
elected to purchase, the Company shall purchase the remaining shares elected to
be purchased from the permitted transferee(s) of such Stockholder Shares under
this Agreement, pro rata according to the number of shares of Stockholder Shares
held by such transferee(s) at the time of delivery of such Repurchase Notice
(determined as close as practicable to the nearest whole shares).
(v) If for any reason the Company does not elect to purchase
all of the Stockholder Shares pursuant to the Repurchase Option, the Investor
shall be entitled to exercise the Repurchase Option for the shares of
Stockholder Shares the Company has not elected to purchase (the "Available
Shares"). As soon as practicable after the Company has determined that there
will be Available Shares, but in any event within 90 days after the date of
Termination, the Company shall give written notice (the "Option Notice") to the
Investor setting forth the number of Available Shares and the purchase price for
the Available Shares. The Investor may elect to purchase all of the Available
Shares by giving written notice to the Company within 30 days after the Option
Notice has been given by the Company. As soon as practicable, and in any event
within ten days after the expiration of the 30-day period set forth above, the
Company shall notify each holder of Stockholder Shares as to the number of
shares being purchased from such holder by the Investor (the "Supplemental
Repurchase Notice"). At the time the Company delivers the Supplemental
Repurchase Notice to the holder(s) of Stockholder Shares, the Company shall also
deliver written notice to the Investor setting forth the number of shares the
Investor is entitled to purchase, the aggregate purchase price and the time and
place of the closing of the transaction. Notwithstanding anything to the
contrary herein, the Repurchase Option shall only apply if the Company and/or
the Investor have elected to purchase all of the Stockholder Shares of the
---
Executive Stockholder whose employment has been terminated.
-3-
<PAGE>
(vi) The closing of the purchase of the Stockholder Shares pursuant
to the Repurchase Option (the "Repurchase Closing") shall take place on the date
designated by the Company in the Repurchase Notice or Supplemental Repurchase
Notice, which date shall not be more than 15 days nor less than five days after
the delivery of the later of either such notice to be delivered. The Company
and/or the Investor shall pay for the Stockholder Shares to be purchased
pursuant to the Repurchase Option by delivery of a check or wire transfer of
funds. In addition, the Company may pay the purchase price for such shares by
offsetting amounts outstanding under any debts owed by Executive Stockholder to
the Company. The purchasers of Stockholder Shares hereunder shall be entitled to
receive customary representations and warranties from the sellers regarding such
sale of shares (including representations and warranties regarding good title to
such shares, free and clear of any liens or encumbrances) and to require all
sellers' signatures be guaranteed by a national bank or reputable securities
broker.
(vii) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Stockholder Shares by the Company shall be subject
to applicable restrictions contained in the Delaware General Corporation Law and
in the Company's and its Subsidiaries debt and equity financing agreements. If
any such restrictions in the Delaware General Corporation Law prohibit the
repurchase of Stockholder Shares hereunder which the Company is otherwise
entitled or required to make, the time periods provided in this Section 2(b)
shall be suspended, and the Company may make such repurchases as soon as it is
permitted to do so under such restrictions.
(viii) If within 90 days after a Repurchase Closing in connection with
a repurchase by the Company and/or the Investor of Stockholder Shares from an
Executive Stockholder pursuant to Section 2(b)(ii), the Company executes an
agreement for a Sale of the Company, the Company shall promptly notify such
Executive Stockholder and the Investor of such sale (which notice shall describe
the price and other principal terms and conditions of the proposed Sale of the
Company). Such Executive Stockholder shall have the right to give notice to the
Company and the Investor within 15 days of receipt of the Company's notice of
such sale (or such lesser number of days as shall expire three (3) business days
prior to the closing of the proposed Sale of the Company), of an irrevocable
election to rescind (effective upon and only upon the closing of such Sale of
the Company) the repurchase by the Company and/or the Investor, as applicable,
of all of such Executive's Stockholder Shares pursuant to Section 2(b)(ii) and
to instead participate in such Sale of the Company. In such event, the Executive
Stockholder, if requested by the Company and/or the Investor, as applicable,
shall deposit in an escrow to be established by the parties, the proceeds
received by the Executive Stockholder in connection with the sale of his or her
Stockholder Shares to the Company and/or the Investor, as applicable, pursuant
to Section 2(b)(ii), which escrow shall provide that such proceeds (together
with any interest thereon) shall be forthwith paid to the Company and/or the
Investor, as applicable, in the event such Sale of the Company is consummated,
and that such proceeds (together with any interest thereon) shall be paid to the
Executive Stockholder in the event such Sale of the Company is not consummated.
-4-
<PAGE>
(c) Certain Permitted Transfers. The restrictions contained in this
---------------------------
Section 2 will not apply with respect to Transfers of Stockholder Shares (i)
pursuant to applicable laws of descent and distribution or (ii) among such
Executive Stockholder's family group (transferees pursuant to clauses (i) and
(ii), are herein collectively "Permitted Transferees"); provided that such
restrictions will continue to be applicable to the Stockholder Shares after any
such Transfer and the Permitted Transferees of such Stockholder Shares shall
have agreed in writing to be bound by the provisions of this Agreement (with the
Permitted Transferees being treated as "Stockholders" for all purposes of this
Agreement). An Executive Stockholder's "family group" means such Executive
Stockholder's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of such Executive Stockholder and/or such Executive
Stockholder's spouse and/or descendants.
(d) Termination of Restrictions. The restrictions on the Transfer of
---------------------------
Stockholder Shares set forth in this Section 2 shall continue with respect to
each Stockholder Share until the earlier of (i) the date on which such
Stockholder Share has been transferred in a Public Sale, (ii) the consummation
of a Qualified Public Offering, (iii) the consummation of a Sale of the Company,
or (iv) the seventh anniversary of the date hereof.
3. First Offer Right for Stockholder Shares.
----------------------------------------
(a) At least 30 days prior to making any Transfer (or, in the case of
an Executive Stockholder, prior to making any non-Exempt Transfer) of any
Stockholder Shares (other than a Public Sale), the transferring holder (the
"Transferring Stockholder") shall deliver a written notice (an "Offer Notice")
to the Company and the Investor. The Offer Notice shall disclose in reasonable
detail the proposed number of Stockholder Shares to be transferred, the proposed
terms and conditions of the Transfer and the identity of the prospective
transferee(s) (if known).
(b) First, the Company may elect to purchase any or all of the
Stockholder Shares specified in the Offer Notice at the price and on the terms
specified therein by delivering written notice of such election to the
Transferring Stockholder and the Investor as soon as practical but in any event
within 20 days after the delivery of the Offer Notice. If the Company has not
elected to purchase all of the Stockholder Shares within such 20-day period, the
Investor may elect to purchase the Stockholder Shares specified in the Offer
Notice not elected to be purchased by the Company (the "First Offer Available
Shares") at the price and on the terms specified in such notice by delivering
written notice of such election to the Transferring Stockholder as soon as
practical but in any event within 30 days after delivery of the Offer Notice.
(c) If the Company and/or the Investor have elected to purchase the
Stockholder Shares from the Transferring Stockholder, the transfer of such
shares shall be consummated as soon as practical (but in any case, within 15
days) after the delivery of the election notice(s) to the Transferring
Stockholder.
(d) To the extent that the Company and the Investor have not elected
to purchase all of the Stockholder Shares being offered, the Transferring
Stockholder may, within the 60-day
-5-
<PAGE>
period immediately following the date on which the Offer Notice has been given
to the Company and the Investor and subject to the provisions of subparagraph
(e) below, transfer such Stockholder Shares to one or more third parties at a
price no less than 95% of the price per share specified in the Offer Notice and
on other terms no more favorable to the transferees thereof than offered to the
Company and the Investor in the Offer Notice.
(e) Any Stockholder Shares not transferred within such 60-day period
shall be reoffered to the Company and the Investor under this Section 3 prior to
any subsequent Transfer (and, in the case of an Executive Stockholder, prior to
any subsequent non-Exempt Transfer). The purchase price specified in any Offer
Notice shall be payable solely in cash at the closing of the transaction or in
installments over time.
(f) With respect to each Stockholder Share, the provisions of this
Section 3 shall terminate immediately prior to the earlier of (i) the closing of
any Qualified Public Offering, (ii) upon consummation of a Sale of the Company,
(iii) the seventh anniversary of the date hereof or (iv) the date on which such
Stockholder Share has been transferred in a Public Sale.
(g) Notwithstanding anything herein to the contrary, this Section 3
shall not apply to any Transfers by (i) CHS of Stockholder Shares received by it
upon exercise of the Warrant, to the original beneficiaries of the Trust and
such beneficiaries' successors (the "Beneficiaries") or (ii) an entity among
such entity's respective Affiliates; provided that such restrictions will
--------
continue to be applicable to the Stockholder Shares after any such Transfer and
such permitted transferees of such Stockholder Shares shall have agreed in
writing to be bound by the provisions of this Agreement (with such permitted
transferees being treated as "Stockholders" for all purposes of this Agreement).
4. Drag-Along Rights.
-----------------
(a) If the Board and the Investor approves of a Sale of the Company
(the "Approved Sale"), each holder of Stockholder Shares will consent to and
-------------
raise no objections against the Approved Sale of the Company or the process
pursuant to which the Approved Sale was arranged and waive any dissenter's
rights, appraisal rights and other similar rights; provided that such waivers
--------
will be effective only if all of the holders of Common Stock receive the same
form and amount of consideration per share of Common Stock, or if any holders of
Common Stock are given an option as to the form and amount of consideration to
be received, all holders be given the same option. Such holder will take all
necessary and desirable actions as directed by the Board and the holders of a
majority of the Common Stock then outstanding in connection with the
consummation of any Approved Sale of the Company, including the execution and
delivery of all documents and instruments as the Company may reasonably request
to effect the Approved Sale and voting all shares of capital stock held by them
in favor of the Approved Sale; provided, however, that no holder shall be
-------- -------
required to incur indemnification obligations in excess of the net proceeds
received by such holder in such Approved Sale.
-6-
<PAGE>
(b) In connection with an Approved Sale, the Investor may require
each holder of Stockholder Shares to sell, or cause to be sold, the same
proportionate number of Stockholder Shares owned by each such holder as are
proposed to be sold or transferred by Investor for the same consideration per
share and otherwise on the same terms and conditions obtained by Investor in the
Approved Sale. On the closing date of the sale of such Stockholder Shares under
this Section 4, the consideration then due such holder of Stockholder Shares
shall be paid to such holder against delivery of a certificate or certificates,
as the case may be, representing the Stockholder Shares sold by such holder duly
endorsed for transfer.
(c) Each holder of Stockholder Shares will bear such holder's pro
rata share (based upon the number of shares sold) of the reasonable costs of any
sale of Stockholder Shares pursuant to an Approved Sale to the extent such costs
are incurred for the benefit of all selling Stockholders and are not otherwise
paid by the Company or the acquiring party. Costs incurred by any holder of
Stockholder Shares on such holder's own behalf will not be considered costs of
the transaction hereunder.
(d) The provisions of this Section 4 shall terminate immediately
prior to the closing of any Qualified Public Offering or, if earlier, upon
consummation of a Sale of the Company.
5. Tag-Along Rights.
----------------
(a) At least 30 days prior to any Transfer of Stockholder Shares
which would result in a Sale of the Company, the Stockholders making such
Transfer (the "Selling Stockholders") shall deliver a written notice (the "Sale
Notice") to the Company and the other Stockholders (the "Other Stockholders"),
specifying in reasonable detail the identity of the prospective transferee(s),
the number (by class) of shares to be transferred and the terms and conditions
of the Transfer (including the proposed price at which such shares are to be
transferred). The Other Stockholders may elect to participate in the
contemplated Transfer at the same price per share and on the same terms by
delivering written notice of such election to the Selling Stockholders within 15
days after delivery of the Sale Notice. If any Other Stockholders have elected
to participate in such Transfer, each Person who is a Selling Stockholder or
Other Stockholder participating in such sale shall be entitled to sell in the
contemplated Transfer, at the same price and on the same terms, a number of
Stockholder Shares (based on each class of stock) equal to the product of (i)
the quotient determined by dividing the percentage of such class of Stockholder
Shares owned by such Person by the aggregate percentage of such class of
Stockholder Shares owned by the Selling Stockholders and the Other Stockholders
participating in such sale and (ii) the number of such class of Stockholder
Shares to be sold in the contemplated Transfer.
For example (by way of illustration only), if the Sale Notice contemplated
-----------------------------------------
a sale of 100 shares of Common Stock by the Selling Stockholder, and if the
Selling Stockholder at such time owns 60% of all Common Stock and if one
Other Stockholder elects to participate and owns 20% of all Common Stock,
the Selling Stockholder would be entitled to sell 75 shares of Common Stock
(60% / 80% x 100
-7-
<PAGE>
shares) and the Other Stockholder would be entitled to sell 25 shares of
Common Stock (20% / 80% x 100 shares).
(b) Each Selling Stockholder shall use reasonable best efforts to
obtain the agreement of the prospective transferee(s) to the participation of
the Other Stockholders in any contemplated Transfer, and no Selling Stockholder
shall transfer any of its Stockholder Shares to any prospective transferee if
such prospective transferee(s) declines to allow the participation of the Other
Stockholders. Each Stockholder transferring Stockholder Shares pursuant to this
Section 5 shall pay its pro rata share (based on the number of Stockholder
Shares to be sold) of the expenses incurred by the Stockholders in connection
with such transfer and shall be obligated to join on a pro rata basis (based on
the number of Stockholder Shares to be sold) in any indemnification or other
obligations that the Selling Stockholders agree to provide in connection with
such transfer (other than any such obligations that relate specifically to a
particular Stockholder such as indemnification with respect to representations
and warranties given by a Stockholder regarding such Stockholder's title to and
ownership of Stockholder Shares; provided that no holder shall be obligated in
--------
connection with such Transfer to agree to indemnify or hold harmless the
transferees with respect to an amount in excess of the net cash proceeds paid to
such holder in connection with such Transfer).
(c) The provisions of this Section 5 shall terminate immediately
prior to the closing of any Qualified Public Offering or, if earlier, upon
consummation of a Sale of the Company.
6. Piggyback Registration Rights.
-----------------------------
(a) Whenever the Company proposes to register any of its Common Stock
or securities convertible into or exchangeable for Common Stock under the
Securities Act (other than a registration statement on Form S-8 or Form S-4 or
successor forms thereto) and the registration form to be used may be used for
the registration of the Stockholder Shares of any Stockholder (such Stockholder
Shares, other than Preferred Stock, the "Registrable Securities"), the Company
will give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and, subject to the provisions of this
Section 6, shall include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion within
30 days after the receipt of the Company's notice (a "Piggyback Registration").
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of the Company and the managing underwriter advises the
Company that in its opinion the number of shares requested to be included in
such registration exceeds the number of shares which can be sold in such
offering, the Company will include in such registration (i) first, the
securities the Company proposes to sell, (ii) second, any securities requested
to be included in such registration by stockholders exercising their contractual
piggyback registration rights granted by the Company in connection with
financing arrangements, (iii) third, the Registrable Securities requested to be
included in such registration, pro rata among the holders of Stockholder Shares
based on the percentage of the outstanding Registrable Securities held by each
such holder, and (iv) fourth, the
-8-
<PAGE>
other securities requested to be included in such registration by stockholders
exercising contractual piggyback registration rights (if any).
(c) If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities and the managing
underwriter advises the Company that in its opinion the number of shares
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities requested to be included therein by the holders initiating the
registration, (ii) second, any securities requested to be included in such
registration by stockholders exercising their contractual piggyback registration
rights granted by the Company in connection with financing arrangements, (iii)
third, the Registrable Securities requested to be included in such registration,
pro rata among the holders of such Registrable Securities based on the aggregate
percentage of outstanding Registrable Securities held by each such holder and
(iv) fourth, the other securities requested to be included in such registration
by stockholders exercising contractual piggyback registration rights (if any).
(d) The Company shall bear the costs of (i) Piggyback Registrations
pursuant to this Section 6 and (ii) each proposed registration which is
initiated as a Piggyback Registration, in each case excluding any underwriting
discounts or commissions, transfer taxes on the sale of Registrable Securities
or the fees and expenses of any counsel retained by the selling Stockholders.
The Company shall, and as a condition to the inclusion of Registrable Securities
of any holder in any registration, such holder shall, execute an underwriting
agreement or similar agreement in a form reasonably acceptable to the Company
and the underwriter(s), if any, for such offering containing customary
indemnification and holdback provisions and provisions obligating the selling
Stockholders to supply customary information for inclusion in the registration
statement. Notwithstanding the foregoing, (i) no holder of Registrable
Securities shall be required to incur indemnification obligations in excess of
the net proceeds received by such holder pursuant to such registration or that
relate to information not supplied by such holder for inclusion in the
registration statement, and (ii) the Company shall indemnify each holder of
Registrable Securities with respect to liabilities arising from such
registration statement other than as a result of information supplied in writing
by such holder of Registrable Securities for inclusion therein.
(e) Each Stockholder agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144) of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the seven days prior to and the 180-day period beginning
on the effective date of any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration) if so requested by the underwriters managing the registered public
offering.
(f) The Company agrees not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any
-9-
<PAGE>
underwritten Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(g) The right of any holder of Registrable Securities to request a
Piggyback Registration shall terminate, after the holders of Registrable
Securities have had the opportunity to participate with respect to at least a
majority of their Registrable Securities; provided however that if during a
current Piggyback Registration the rights to any future Piggyback Registration
would terminate because of this subparagraph (g), then the Company shall
promptly notify all holders of Registrable Securities who have not previously
participated in any Piggyback Registration that such termination will be
triggered; provided further that, subject to the provisions of this Section 6,
the Company shall include in such current Piggyback Registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion within 15 days after the receipt of the Company's notice.
7. Legend. Each certificate evidencing Stockholder Shares and each
------
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
The securities represented by this certificate are subject
to a Stockholders Agreement dated as of August 7, 1998,
among the issuer of such securities (the "Company") and
certain of the Company's stockholders, as amended and
modified from time to time. A copy of such Stockholders
Agreement shall be furnished without charge by the Company
to the holder hereof upon written request.
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws and may not
be transferred, sold or otherwise disposed of except
pursuant to an effective registration under the Securities
Act or pursuant to an opinion of counsel, satisfactory to
the Company, to the effect that an exemption from such
registration is available.
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with the definition of "Stockholder Shares" as
defined in Section 10 hereof.
8. Transfer. Prior to transferring any Stockholder Shares (other
--------
than a Public Sale or a Sale of the Company) to any Person (including transfers
by CHS to the Beneficiaries), the transferring Stockholder shall cause the
prospective transferee to be bound by this Agreement and
-10-
<PAGE>
to execute and deliver to the Company and the holders of Stockholder Shares a
counterpart of this Agreement.
9. Other Covenants.
---------------
(a) Confidentiality. Executive Stockholder acknowledges that the
---------------
information, observations and data obtained by him while employed by the Company
and its Subsidiaries (including those obtained while employed by the Company
prior to the date of this Agreement) concerning the business or affairs of the
Company, any of its Subsidiaries and their customers and vendors ("Confidential
Information") are the property of the Company or such Subsidiary. Therefore,
Executive Stockholder agrees that he shall not disclose to any unauthorized
person or use for his own purposes any Confidential Information without the
prior written consent of the Board, unless and to the extent that the Executive
Stockholder can demonstrate that the aforementioned matters have become
generally known to and available for use by the public other than as a result of
Executive Stockholder's acts or omissions. Executive Stockholder shall deliver
to the Company at the termination of his employment period, or at any other time
the Company may request, all memoranda, notes, plans, records, reports, computer
tapes, printouts and software and other documents and data (and copies thereof)
relating to the Confidential Information, Work Product (as defined below) or the
business of the Company or any Subsidiary which he may then possess or have
under his control. The provisions of this subparagraph (a) shall continue in
full force and effect after the termination of Executive Stockholder's
employment for any reason whatsoever, whether voluntary or involuntary.
(b) Inventions and Patents. Executive Stockholder acknowledges that
----------------------
all inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports and all similar or related information (whether or
not patentable) which relate to the Company's or any of its Subsidiaries' actual
or anticipated business, research and development or existing or future products
or services and which are conceived, developed or made by Executive Stockholder
while employed by the Company and its Subsidiaries ("Work Product") belong to
the Company or such Subsidiary. Executive Stockholder shall promptly disclose
such Work Product to the Board and perform all actions reasonably requested by
the Board (whether during or after the employment period) to establish and
confirm such ownership (including, without limitation, assignments, consents,
powers of attorney and other instruments). In accordance with Section 2872 of
the Illinois Employee Patent Act, Ill. Rev. Stat. Chap. 140, (S) 301 et seq.
-- ---
(1983), Executive Stockholder is hereby advised that this subparagraph (b)
regarding the Company's ownership of intellectual property does not apply to any
invention for which no equipment, supplies, facilities or trade secret
information of the Company was used and which was developed entirely on
Executive Stockholder's own time, unless (i) the invention relates to the
business of the Company or to the Company's actual or demonstrably anticipated
research or development or (ii) the invention results from any work performed by
Executive Stockholder for the Company.
(c) Non-Competition.
---------------
-11-
<PAGE>
(i) In consideration for the continued employment of each
Executive Stockholder listed on Schedule I attached hereto (individually, a
----------
"Schedule I Stockholder") as an employee-at-will after the date hereof and
in order to preserve and protect the interests of the Company in the
Confidential Information and Work Product, each Schedule I Stockholder
agrees that it shall not, for a period starting on the date hereof and
ending on the second anniversary of the date of Termination (the
"Noncompete Period" for such Schedule I Stockholder), directly or
indirectly own any interest in, manage, control, participate in, consult
with, render services for, or in any manner engage in any business
competing with the businesses of the Company or its Subsidiaries, within
any geographical area in which the Company or its Subsidiaries, during the
term of Schedule I Stockholder's employment and at the time of such
Schedule I Stockholder's termination of employment, as the case may be,
engages or has current plans to engage.
(ii) In consideration for the continued employment of each
Executive Stockholder listed on Schedule II attached hereto (individually,
-----------
a "Schedule II Stockholder") as an employee-at-will after the date hereof
and in order to preserve and protect the interests of the Company in the
Confidential Information and Work Product, each Schedule II Stockholder
agrees that it shall not, for a period starting on the date hereof and
ending (i) in the case of a Subject Termination, on the second anniversary
of such Subject Termination, or (ii) in the case of any termination other
than a Subject Termination, on the date of such termination (in each such
case, the "Noncompete Period" for such Schedule II Stockholder), directly
or indirectly own any interest in, manage, control, participate in, consult
with, render services for, or in any manner engage in any business
competing with the businesses of the Company or its Subsidiaries, within
any geographical area in which the Company or its Subsidiaries, during the
term of such Schedule II Stockholder's employment or, in the case of a
Subject Termination, at the time of such termination, engages or has
current plans to engage.
(d) Enforcement. If, at the time of enforcement of this Section 9 of
-----------
this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area. The
Executive Stockholders agree that money damages would not be an adequate remedy
for any breach of this Section 9. Therefore, in the event a breach or threatened
breach of this Section 9, the Company or its successors or assigns may, in
addition to other rights and remedies existing in their favor, apply to any
court of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
hereof (without posting a bond or other security). In addition, in the event of
an alleged breach or violation by any Executive Stockholder of this Section 9,
the Noncompete Period shall be tolled with respect to such Executive Stockholder
until such breach or violation has been duly cured. Each Executive Stockholder
agrees that the restrictions contained in this Section 9 are reasonable.
10. Definitions.
-----------
-12-
<PAGE>
"Affected Stockholder" has the meaning set forth in Section 11.
--------------------
"Affiliate" means, with respect to any Person, any other Person
---------
controlling, controlled by or under common control with such Person.
"Approved Sale" has the meaning set forth in Section 4.
-------------
"Available Shares" has the meaning set forth in Section 2(b).
----------------
"Beneficiaries" has the meaning set forth in Section 3(g).
-------------
"Board" has the meaning set forth in the preamble.
-----
"Cause" shall mean with respect to any Executive Stockholder: (a) the
-----
repeated failure on the part of such Executive Stockholder to perform such
duties as are reasonably requested by the President (or, in the case of the
President, the Board of Directors) of the Company; (b) gross negligence or
willful misconduct on the part of such Executive Stockholder in the conduct of
his or her duties with and/or failure to comply in any material respect with
policies of, the Company or any Subsidiary; (c) a reasonable and good faith
determination by the Board that such Executive Stockholder shall have committed
any act of fraud or embezzlement against the Company, its Subsidiaries and/or
their respective affiliates or any conviction or admission of a felony or
offense involving dishonesty or moral turpitude; (d) willful, knowing or
reckless unauthorized dissemination of Confidential Information; or (e) a
material breach of any provision of this Agreement; provided, however, that with
respect to clauses (a), (b) and (e) above, if such failure or breach is capable
of cure, such failure or breach, as the case may be, shall not be deemed to
constitute "Cause" unless such failure or breach remains uncured after the
expiration of fifteen (15) days following delivery of written notice to such
Executive Stockholder by the Board.
"CHS" has the meaning set forth in the preamble.
---
"CHSLP" has the meaning set forth in the preamble.
-----
"Common Stock" means the Company's Common Stock, par value $.01 per
------------
share.
"Company" has the meaning set forth in the preamble.
-------
"Confidential Information" has the meaning set forth in Section 9.
------------------------
"Executives" has the meaning set forth in the preamble.
----------
"Executive Stockholders" means the Executives and any other employee
----------------------
of the Company or its Subsidiaries who may from time to time become a party to
this Agreement.
-13-
<PAGE>
"Executive Stockholders Agreements" has the meaning set forth in the
---------------------------------
preamble.
"Fair Market Value" means the fair market value as determined by the
-----------------
Board in its good faith discretion; provided, however, that the Fair Market
Value of a share of Preferred Stock shall be the Liquidation Value (as defined
in the Company's Restated Certificate of Incorporation) of such share, plus all
accrued and unpaid dividends thereon.
"First Offer Available Shares" has the meaning set forth in Section 3.
----------------------------
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 15% of the Company's
Common Stock on a fully-diluted basis voting capital stock (a "15% Owner"), who
is not controlling, controlled by or under common control with any such 15%
Owner and who is not the spouse or descendent (by birth or adoption) of any such
15% Owner or a trust for the benefit of such 15% Owner and/or such other
Persons.
"Investor" has the meaning set forth in the preamble.
--------
"Noncompete Period" has the meaning set forth in Section 9.
-----------------
"Offer Notice" has the meaning set forth in Section 3.
------------
"Option Notice" has the meaning set forth in Section 2(c).
-------------
"Original Cost" means the consideration paid to the Company for a
-------------
share of Common Stock (as adjusted for stock splits, stock combinations or other
similar events); provided that for purposes hereof, the "Original Cost" of the
Common Stock (i) issued pursuant to the Recapitalization Agreement, (ii)
retained by the Executives in connection with the Recapitalization Agreement,
and (iii) issued to any Executive pursuant to the Management Stock Agreement
executed by any such Executive as of the date hereof, in each case shall mean
$16.10 per share (as adjusted for stock splits, stock combinations or other
similar events); provided further that the Original Cost of a share of Preferred
Stock shall be the Liquidation Value (as defined in the Company's Restated
Certificate of Incorporation) of such share, plus all accrued and unpaid
dividends thereon.
"Other Stockholders" has the meaning set forth in Section 5.
------------------
"Permitted Transferee" has the meaning set forth in Section 2(c)
--------------------
hereof.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
-14-
<PAGE>
"Piggyback Registration" has the meaning set forth in Section 6.
----------------------
"Preferred Stock" means the Company's 8% Cumulative Redeemable
---------------
Preferred Stock, par value $.01 per share.
"Public Sale" means any sale of Stockholder Shares to the public
-----------
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"Qualified Public Offering" means the sale in an underwritten public
-------------------------
offering registered under the Securities Act of 1933, as amended, of shares of
the Company's Common Stock: (i) at an offering price of at least $32.20 and (ii)
having an aggregate offering value of at least $25 million.
"Recapitalization Agreement" has the meaning set forth in the
--------------------------
preamble.
"Registrable Securities" has the meaning set forth in Section 6.
----------------------
"Repurchase Closing" has the meaning set forth in Section 2(b).
------------------
"Repurchase Option" has the meaning set forth in Section 2(b).
-----------------
"Repurchase Notice" has the meaning set forth in Section 2(b).
-----------------
"Sale Notice" has the meaning set forth in Section 5.
-----------
"Sale of the Company" means the sale of the Company to an Independent
-------------------
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
"Schedule I Stockholder" has the meaning set forth in Section 9(c).
----------------------
"Schedule II Stockholder" has the meaning set forth in Section 9(c).
-----------------------
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
"Selling Stockholders" has the meaning set forth in Section 5.
--------------------
"Stockholder Shares" means (i) any Common Stock purchased or otherwise
------------------
acquired by any Stockholder, (ii) any Common Stock issued directly or indirectly
upon exercise of the
-15-
<PAGE>
Warrant, (iii) any Preferred Stock purchased or otherwise acquired by any
Stockholder and (iv) any equity securities issued or issuable with respect to
the securities referred to in clauses (i), (ii) and (iii) above by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, any Person who holds a Warrant shall be deemed to be the holder
of the Stockholder Shares issuable directly or indirectly upon exercise of such
Warrant, regardless of any restriction or limitation on the exercise thereof. As
to any particular shares constituting Stockholder Shares, such shares shall
cease to be Stockholder Shares when they have been (x) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them or (y) sold to the public through a broker, dealer or
market maker pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act.
"Stockholders" has the meaning set forth in the preamble.
------------
"Subject Termination" means (a) any voluntary resignation or
-------------------
termination of employment by such Schedule II Stockholder, (b) any termination
of such Schedule II Stockholder's employment due to disability or retirement,
and (c) any termination by the Company of such Schedule II Stockholder's
employment for Cause.
"Subsidiary" means, with respect to any Person, any corporation,
----------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing director or general partner
of such limited liability company, partnership, association or other business
entity.
"Supplemental Repurchase Notice" has the meaning set forth in Section
------------------------------
2(b).
"Termination" has the meaning set forth in Section 2(b).
-----------
"Transfer" has the meaning set forth in Section 2(a).
--------
"Transferring Stockholder" has the meaning set forth in Section 3.
------------------------
-16-
<PAGE>
"Warrant" means the Contingent Stock Purchase Warrant issued to CHS on
-------
the date hereof, in connection with the transactions contemplated by the
Recapitalization Agreement which are exercisable into shares of Common Stock.
"Work Product" has the meaning set forth in Section 9.
------------
11. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company or the holders of at
least a majority of the Stockholder Shares, respectively; provided, that, no
-------- ----
modification, amendment or waiver of any provision of this Agreement which
affects any Stockholder (the "Affected Stockholder") in a manner more adverse
than such modification, amendment or waiver affects the other holders of
Stockholder Shares shall be effective against such Affected Stockholder unless
such modification, amendment or waiver is also approved in writing by such
Affected Stockholder. The failure of any party to enforce any of the provisions
of this Agreement shall in no way be construed as a waiver of such provisions
and shall not affect the right of such party thereafter to enforce each and
every provision of this Agreement in accordance with its terms.
12. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
13. Termination of Prior Agreements; Entire Agreement. The Company
-------------------------------------------------
and each of Dennis Countryman, Michael Dawson, Robert Hickman, Leslie Jones,
Pamela Russell and Thomas Laird agree that the Executive Stockholders Agreements
are hereby terminated and shall have no further force or effect. This Agreement
embodies the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
14. Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and permitted
assigns of each of them, so long as they hold Stockholder Shares.
-17-
<PAGE>
15. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
16. Remedies. The Company, the Investor, CHS and the Executives
--------
shall be entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages would not be an adequate remedy for any
breach of the provisions of this Agreement and that the Company, the Investor,
CHS and any Executive may in its sole discretion apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting a bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.
17. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the signature pages hereto and to any
subsequent holder of Stockholder Shares subject to this Agreement at such
address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices shall be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. The
Company's address is:
Woods Equipment Company
6944 Newburg Road
Rockford, IL 61108
Attention: President
18. Governing Law. The corporate law of the State of Delaware shall
-------------
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
19. Business Days. If any time period for giving notice or taking
-------------
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company's chief-executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
20. Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
-18-
<PAGE>
* * * *
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.
WOODS EQUIPMENT COMPANY
By: /s/ Thomas J. Laird
---------------------------------------
Name: Thomas J. Laird
Its: President and CEO
MADISON DEARBORN CAPITAL
PARTNERS II, L.P.
By: Madison Dearborn Partners II, L.P.
Its: General Partner
By: Madison Dearborn Partners, Inc.
Its: General Partner
By: /s/ Paul R. Wood
---------------------------------------
Name: Paul R. Wood
Its: Vice President
Address
-------
Three First National Plaza
Suite 3800
Chicago, IL 60602
Number of Stockholder Shares
----------------------------
Shares of Common Stock: 559,006.21
Shares of Preferred Stock: 25,250.00
<PAGE>
[ADDITIONAL SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
CODE, HENNESSY & SIMMONS L.L.C., AS
TRUSTEE UNDER THE TRUST AGREEMENT
DATED AS OF AUGUST 7, 1998
By: /s/ Peter M. Gotsch
---------------------------------
Name: Peter M. Gotsch
Its: Partner
Address
-------
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Number of Stockholder Shares
----------------------------
Shares of Common Stock:
Shares of Preferred Stock:
<PAGE>
[ADDITIONAL SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
Executive's Signature
Name and Address of Executive
-----------------------------
Number of Stockholder Shares
----------------------------
Shares of Common Stock:
Shares of Preferred Stock:
<PAGE>
SCHEDULE I
----------
Michael Carney
David Stephen Crider
David Ferguson
Mark Fryer
Thomas J. Laird
Steven E. Starrett
Steven M. Vandemore
Lawrence J. Weyers
<PAGE>
SCHEDULE II
-----------
Dennis Countryman
Michael L. Dawson
Gary Eckhardt
Chuck Fordham
Charles Glass
Robert C. Hickman
Leslie C. Jones
Stephen Kewish
Bill Moore
Pamela Russell
Ron Tiller
Steve Voelker
Steve Wells
Gerald D. Johnson
Eric Ritchie
Shawn T. Cleary
Lee A. Horton
Gerald Jelen
David R. Koloszar
Steven A. Lind
Mark A. Miller
<PAGE>
EXHIBIT 4.2
================================================================================
SECURITYHOLDERS AGREEMENT
Dated as of
July 28, 1999
between
WOODS EQUIPMENT COMPANY,
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
and
CREDIT SUISSE FIRST BOSTON CORPORATION
_____________________________________________
Common Stock of
Woods Equipment Company
_____________________________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definitions
SECTION 1.01. Definitions................................................ 1
SECTION 1.02. Rules of Construction...................................... 3
ARTICLE II
----------
Registration and Other Rights
SECTION 2.01. Registration Rights........................................ 3
SECTION 2.02. Preparation and Filing..................................... 5
SECTION 2.03. Indemnification............................................ 8
SECTION 2.04. Drag Along Rights.......................................... 12
SECTION 2.05. Tag Along Rights........................................... 13
ARTICLE III
Miscellaneous
SECTION 3.01. Sales of Preferred Stock................................... 14
SECTION 3.02. Rule 144A.................................................. 15
SECTION 3.03. Persons Benefitting........................................ 15
SECTION 3.04. Amendment.................................................. 15
SECTION 3.05. Notices.................................................... 16
SECTION 3.06. Governing Law.............................................. 17
SECTION 3.07. Successors................................................. 17
SECTION 3.08. Multiple Originals......................................... 17
SECTION 3.09. Table of Contents.......................................... 17
SECTION 3.10. Severability............................................... 17
</TABLE>
i
<PAGE>
SECURITYHOLDERS AGREEMENT dated as of July 28, 1999, between WOODS
EQUIPMENT COMPANY, a Delaware corporation (the "Company"), MADISON DEARBORN
CAPITAL PARTNERS II, L.P., a ___________ limited partnership ("MDP"), and
CREDIT SUISSE FIRST BOSTON CORPORATION.
The Company desires to issue 51,927 Units (the "Units") each of which
consists of one 15% Senior Discount Debenture due 2011 (the "Debentures") with a
principal amount at maturity of $1,000 and .8745 shares of its common stock, par
value $.01 per share (the "Common Stock"), of the Company.
The Debentures and the Common Stock will trade separately upon the
earlier of (i) the commencement of an exchange offer or effectiveness of a shelf
registration statement with respect to the Debentures or (ii) 180 days after the
issue date of the Units.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the shares of Common Stock
issued as part of the Units (collectively, the "Shares"):
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions.
-----------
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Board" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means any day other than a Saturday, Sunday or day on
which commercial banking institutions are not required by law to be open in the
States of New York or Illinois.
1
<PAGE>
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" means any holder from time to time of the Shares.
"Independent Third Party" means any Person that is not an Affiliate of
the Company or MDP.
"Initial Purchaser" means Credit Suisse First Boston Corporation.
"Issue Date" means the date on which the Units are initially issued.
"MDP" means Madison Dearborn Capital Partners II, L.P.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Initial Purchaser. The counsel may be an employee of or
counsel to the Company or the Initial Purchaser.
"Permitted Holder" means Madison Dearborn Capital Partners II, L.P.
and any Affiliate thereof.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Public Offering" means an underwritten public offering of Common
Stock of the Company pursuant to an effective registration statement under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
2
<PAGE>
"Transfer" shall mean any voluntary or involuntary, direct or indirect
sale, transfer, conveyance, assignment, pledge, hypothecation, gift or other
disposition.
"Transfer Restricted Securities" means the Shares. Each Share shall
cease to be a Transfer Restricted Security when (i) it has been disposed of
pursuant to a registration statement of the Company filed with the SEC and
declared effective by the SEC that covers the disposition of such Transfer
Restricted Security, (ii) it has been distributed pursuant to Rule 144
promulgated under the Securities Act (or any similar provisions under the
Securities Act then in effect) or (iii) it has been otherwise transferred and
may be resold without registration under the Securities Act.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
SECTION 1.02. Rules of Construction. Unless the text otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation and
(v) words in the singular include the plural and words in the
plural include the singular.
ARTICLE II
Registration and Other Rights
-----------------------------
SECTION 2.01. Registration Rights. (a) If the Company proposes to
-------------------
register any of its Common Stock pursuant to the Securities Act (other than
pursuant to a registration statement on Form S-8 or Form S-4 or successor
forms thereto or in
3
<PAGE>
connection with a registration the primary purpose of which is to register debt
securities), whether or not for its own account, then the Company shall in each
case give written notice, not later than the date of the initial filing of the
related registration statement, of such proposed registration to the holders of
the Shares and such notice shall offer to the Holders the opportunity to include
in such registration statement such number of Shares as such Holders may
request. Within 20 days after receipt of such notice, the Holders of Transfer
Restricted Securities (the "Requesting Holders") shall, subject to the following
sentence, have the right by notifying the Company in writing to require the
Company to include in such registration statement such number of Shares as such
Holder may request.
(b) Notwithstanding the foregoing, if at any time the managing
underwriter or underwriters of a registration in connection with a Public
Offering (the "Managing Underwriter") shall advise the Company in writing that,
in its opinion, the total number of shares proposed to be sold exceeds the
maximum number of shares which the Managing Underwriter believes may be sold
without materially adversely affecting the price, timing or distribution of the
Public Offering, then the Company will be required to include only that number
of shares which the Managing Underwriter believes may be sold without causing
such adverse effect in the following order:
(i) all the shares that the Company proposes to sell in such
Public Offering, and
(ii) all the shares that are proposed to be sold by any holder
of Common Stock of the Company including the shares of the Requesting
Holders on a pro rata basis in proportion to the amount of shares of Common
Stock owned by the holder thereof in an aggregate number which is equal to
the difference between the maximum number of shares that may be distributed
in such Public Offering as determined by the Managing Underwriter and the
number of shares to be sold in such Public Offering pursuant to clause (i)
above.
(c) The Company will have the right to postpone or withdraw any
registration statement relating to a Public Offering described under this
Section 2.01 prior to the effective date without obligation to any Requesting
Holder.
(d) All registration expenses (other than underwriting commissions and
discounts payable in respect of Shares sold by the Holders) shall be paid by the
Company in the case of any and all registrations governed by this Section 2.01.
4
<PAGE>
SECTION 2.02. Preparation and Filing. (a) Whenever the Company is
----------------------
required to include in a registration statement any Shares, the Company will as
soon as practicable:
(i) prepare and file with the SEC a registration statement with
respect to such common stock and use its best efforts to cause such
registration statement to reasonably become and remain effective for the
period set forth in subsection (ii) below and reasonably promptly notify
the Holders (x) when such registration statement becomes effective, (y)
when any amendment to such registration statement becomes effective and (z)
of any request by the SEC for any amendment or supplement to such
registration statement or any prospectus relating thereto or for additional
information;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities covered by
such registration statement for a period of not less than 90 days after the
effective date of such registration statement (or such shorter period to
the extent necessary to permit the completion of the sale or distribution
of such securities within such period);
(iii) furnish to such Holders such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus), reports on Forms 10-K and 10-Q (or their
equivalents) which the Company shall have filed with the SEC and financial
statements, reports and proxy statements mailed to shareholders of the
Company to the extent such Forms or reports are incorporated by reference
in the registration statement as such Holders may reasonably request in
order to facilitate the disposition of the Shares being sold;
(iv) use its reasonable best efforts to register or qualify, not
later than the effective date of any filed registration statement, the
common stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as such Holders reasonably request;
provided that the Company will not be required to (A) qualify to do
--------
business as a foreign corporation or as a
5
<PAGE>
dealer in any jurisdiction where it is not so qualified, (B) subject itself
to taxation in any jurisdiction where it is not subject to taxation, (C)
consent to general service of process in any jurisdiction where it is not
subject to general service of process or (D) take any action that would
subject it to service of process in suits other than those arising out of
the offer or sale of the Common Stock covered by the registration
statement;
(v) to the extent that the Company has elected to proceed with a
firm commitment underwritten offering ("Underwritten Offering"), make
available, upon reasonable notice and during business hours, for inspection
by the Managing Underwriter or underwriters for the common stock (and their
counsel) (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents, agreements and properties of the Company as
shall be reasonably necessary to enable them to exercise their due
diligence responsibilities and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
Inspector in connection with the registration statement; provided, however,
-------- -------
that any such Inspector shall first agree in writing with the Company that
any information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such Inspector, unless (A)
disclosure of such information is required by a court or administrative
order or is necessary to respond to inquiries of regulatory authorities,
(B) disclosure of such information is required by law (including any
disclosure requirements pursuant to Federal securities laws in connection
with the filing of a registration statement or the use of any prospectus
referred to in this Agreement), (C) such information generally becomes
available to the public other than as a result of a disclosure or failure
to safeguard any such information by any Inspector or (D) such information
becomes available to any such Inspector from a source other than the
Company or its agents and such source is not bound by a confidentiality
agreement; provided, however, that prior to the disclosure of such
-------- -------
information by such Inspector pursuant to clauses (A) or (B) above, such
Inspector shall provide the Company with prompt written notice of such
proposed disclosure to permit the Company to seek an appropriate protective
order preventing such disclosure, but it is understood that the Inspector
may comply with the requirements of law.
6
<PAGE>
(vi) obtain a comfort letter from the Company's independent
public accountants dated the effective date of the registration statement
(and as of such other dates as the Managing Underwriter or underwriters for
the common stock may reasonably request) in customary form and covering
such matters of the type customarily covered by such comfort letters as
such Managing Underwriter or underwriters reasonably request;
(vii) to the extent that the Company has elected to proceed with
an Underwritten Offering, to use its reasonable best efforts to obtain an
Opinion of Counsel dated the effective date of the registration statement
(and as of such other dates as the Managing Underwriter or underwriters for
the common stock may reasonably request) in customary form and covering
such matters of the type customarily covered by such opinions as counsel
designated by such Managing Underwriter or underwriters reasonably
request;
(viii) during the period when the registration statement is
required to be effective, notify such Holders of the happening of any event
as a result of which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will forthwith prepare a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such common stock, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading;
(ix) in the case of an Underwritten Offering, enter into an
underwriting agreement containing customary terms, including such indemnity
and contribution provisions as the managing underwriter or underwriters
customarily require or may reasonably require;
(x) cause such common stock to be traded on each securities
exchange on which similar securities issued by the Company are then traded,
provided that the Company is eligible to do so under applicable listing
requirements; and
(xi) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering a period
7
<PAGE>
of 12 months, beginning within three months after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(b) The Holders participating in such offering shall timely furnish to
the Company such information regarding the distribution of such common stock as
the Company may from time to time reasonably request.
(c) The Holders agree that upon the receipt of any notice from the
Company of the happening of any event of the kind described in paragraph
(a)(viii) above, they will forthwith discontinue, and cause any underwriter
acting on their behalf to agree to discontinue the disposition of common stock
pursuant to the registration statement covering such common stock until the
Holders' receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (a)(viii) above.
SECTION 2.03. Indemnification. (a) In connection with any
---------------
registration statement contemplated by this Agreement, the Company agrees to
indemnify and hold harmless each Holder of Shares covered thereby, the
directors, officers and employees of each such Holder and each person who
controls any such Holder within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement as originally filed or in any amendment thereof, or in
any preliminary prospectus or prospectuses contained therein, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that (i) the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any such Holder
8
<PAGE>
or the underwriter specifically for inclusion therein, and (ii) the Company will
not be liable to any indemnified party under these provisions with respect to
any registration statement or prospectus to the extent that any such loss,
claim, damage or liability of such indemnified party results from the use of the
prospectus during a period when the use of the prospectus has been suspended in
accordance with Section 2.02(a)(viii), hereof; provided, in each case, that such
--------
Holders received prior notice of such suspension. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses (as
hereinafter defined), as provided in Section 2.03(d), of any underwriters of
common stock registered under a registration statement, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Holders common stock covered by
a registration statement as provided in this Section 2.03(a). The Company also
shall, if requested by any Holder of Shares covered by a registration statement,
enter into an underwriting agreement containing customary terms and conditions,
including those related to indemnification.
(b) Each Holder of Shares covered by a registration statement
severally agrees to indemnify and hold harmless (i) the Company, (ii) each of
its directors, (iii) each of its officers who signs such registration statement
and (iv) each Person who controls the Company within the meaning of either the
Securities Act or the Exchange Act to the same extent as the foregoing indemnity
from the Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Company by or on behalf
of such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity, provided, however, that the aggregate liability of any
-------- -------
Holder pursuant to the provisions of this paragraph shall be limited to an
amount equal to the aggregate purchase price received by the Holder from the
sale of the Shares covered by such registration statement.
This indemnity agreement will be in addition to any liability which any such
Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
2.03 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
this Section 2.03, notify the indemnifying party in writing of the
9
<PAGE>
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in
which case the indemnifying party shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
-------- -------
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel (and local counsel) if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses
available to it or other indemnified parties which are different from or
additional to those available to the indemnifying party,
(iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution
of such action or
(iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party;
provided, however, that the indemnifying party shall be obligated to pay
-------- -------
for only one such separate counsel for all indemnified parties in each
action or related group of actions. An indemnifying party
10
<PAGE>
will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect
to any pending or threatened claim, action, suit or proceeding in respect
of which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 2.03 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the registration statement which
resulted in such Losses; provided, however, that in no case shall any Holder of
-------- -------
any Common Stock be responsible, in the aggregate, for any amount in excess of
the dollar amount of the proceeds received by such Holder from the sale of such
Holder's Common Stock. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the indemnifying party and the
indemnified party shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the indemnifying party, on the one
hand, or by the indemnified party, on the other hand. The parties agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 2.03, each person who controls
a Holder common stock
11
<PAGE>
covered by a registration statement within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee and agent of such
Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company within the meaning of either the Securities Act
or the Exchange Act, each officer of the Company who shall have signed such
registration statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
(e) The provisions of this Section 2.03 will remain in full force and
effect, regardless of any investigation made by or on behalf of any holder or
the Company or any of the officers, directors or controlling persons referred to
in this Section 2.03 hereof, and will survive the sale by a Holder of Shares
covered by a registration statement.
SECTION 2.04. Drag Along Rights. (a) If, prior to the consummation of
-----------------
an underwritten registered Public Offering, the Board of Directors of the
Company and the holders of a majority of the capital stock entitled to vote
thereon approve a sale to an Independent Third Party or group of Independent
Third Parties pursuant to which such party or parties acquire:
(i) Voting Stock (whether by merger, consolidation sale,
transfer or exchange of the Company's capital stock) or
(ii) all or substantially all of the Company's assets determined
on a consolidated basis approved by the Board of Directors of the Company
and with respect to which all holders of Common Stock receive or are
generally offered the same form and amount of per share consideration,
then, upon 10 Business Days' written notice which notice shall include
reasonable details of the proposed sale, including the proposed time and place
of the closing and the consideration to be received by the holders of Common
Stock, the Company shall have the right to require the Holders of the Shares to
sell, transfer and deliver or cause to be sold, transferred and delivered, to
such Person, their Shares in the same transaction at the closing thereof;
provided that the consideration to be received by all Holders shall be the same
- --------
(in terms of price per share, terms, conditions and in all other material
respects) as that to be received by the Company's other holders of Common Stock
and, in any event, shall be cash and/or securities registered under the
Securities Act and listed on a national securities exchange
12
<PAGE>
or authorized for quotation on The Nasdaq Stock Market, Inc.; and provided
--------
further, that if a Holder of a Share has, prior to its receipt of a notice
- -------
pursuant to this Section 2.04(a), entered into a binding agreement to transfer
the Shares, such Holder shall not be prohibited from consummating such transfer,
notwithstanding anything to the contrary contained in this Section 2.04(a). Any
purchase of Shares pursuant to this Section shall be deemed a "Drag Along
Purchase". Each holder of Common Stock shall sell all of the Shares held by it.
(b) In connection with any Drag Along Purchase, each Holder will be
obligated to:
(i) consent to and raise no objections against the sale to the
Independent Third Party,
(ii) waive all dissenter's rights and other similar rights, and
(iii) take all reasonably necessary and desirable actions as
directed by the Board in connection with the consummation of such sale,
provided, that each Holder shall only be required to make customary and
reasonable representations, warranties and indemnities regarding its
title to and ownership of its Shares.
(c) The obligations of the Holders pursuant to Sections 2.04(a) and
(b), shall be subject to the receipt by the Company from a nationally recognized
investment bank of a written fairness opinion that the consideration received by
the holders of Common Stock (including the Holders) is fair and adequate, a copy
of which opinion shall be delivered to the Holders. The Company shall be liable
for the reasonable expenses of the Holders incurred in connection with a Drag
Along Purchase.
SECTION 2.05. Tag Along Rights. (a) If, prior to the consummation of
----------------
an underwritten registered Public Offering, a Permitted Holder proposes to
Transfer any shares of Common Stock, such Permitted Holder shall deliver a
written notice to the Company and registered Holders specifying in reasonable
detail the identity of the prospective transferee(s) and the terms and
conditions of the Transfer no later than 10 Business Days prior to such proposed
Transfer. Each Holder may elect to participate in the contemplated Transfer by
delivering written notice to the transferring securityholder within 10 Business
Days after delivery of the sale notice.
13
<PAGE>
(b) If any Holder has elected to participate in such Transfer pursuant
to Section 2.05(a), each such Holder shall be entitled to sell in the
contemplated Transfer, at the same price and the same terms, a number of shares
equal to the product of (i) the quotient determined by dividing the number of
Shares owned by such Holder by the aggregate number of shares of Common Stock
outstanding on a fully diluted basis prior to giving effect to such Transfer and
(ii) the aggregate number of shares of Common Stock to be sold in the
contemplated Transfer. Each Holder transferring Shares in a Transfer shall pay
its pro rata share (based on the number of shares of Common Stock to be sold) of
the expenses incurred by the securityholders in connection with such transfer.
(c) Notwithstanding the foregoing, the following Transfers shall not
be subject to the provisions of Sections 2.05(a) and (b):
(i) a Transfer by a Permitted Holder to its Affiliates,
employees and consultants,
(ii) a Transfer by a Permitted Holder to any employee,
prospective employee, director or prospective director of the Company, WEC
or any of their Affiliates,
(iii) a Transfer by a Permitted Holder to any former or
prospective employee, director or prospective director of MDP or any
Affiliate of such Affiliate,
(iv) a Transfer by a Permitted Holder to any person in order to
resolve certain regulatory issues, or
(v) a Transfer by a Permitted Holder of shares of Common Stock
representing an aggregate of 5% or less of the Company's outstanding shares
of Common Stock together with all other Transfers pursuant to this clause
(v) within the previous six months.
ARTICLE III
Miscellaneous
-------------
SECTION 3.01. Sales of Preferred Stock. The Company hereby agrees
------------------------
that, without the prior written consent of a majority of the holders of the
outstanding Shares at the time such is taken, it will not:
14
<PAGE>
(i) amend, modify or alter any of the terms of its 8%
Cumulative Redeemable Preferred Stock, par value $0.01 per share (the
"Redeemable Preferred Stock") as set forth in the Company's Restated
Certificate of Incorporation as in effect on the date of this
Securityholders Agreement;
(ii) sell to MDP or any of its Affiliates any shares of
Redeemable Preferred Stock unless, in connection with such sale of
Redeemable Preferred Stock, the sale price per share for the Redeemable
Preferred Stock is equal to $1,000.00 per share and MDP or such Affiliate
also purchases shares of Common Stock having an aggregate purchase price of
at least $356.00 for each share of Redeemable Preferred Stock purchased by
MDP or the Affiliate; or
(iii) sell any shares of the preferred stock of the Company to
MDP or any of its Affiliates.
SECTION 3.02. Rule 144A. The Company hereby agrees with each Holder,
---------
for so long as any Transfer Restricted Securities remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, to make available, upon request of any Holder, to any Holder
or beneficial owner of Transfer Restricted Securities in connection with any
sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 3.03. Persons Benefitting. Nothing in this Agreement is
-------------------
intended or shall be construed to confer upon any Person other than the Company,
MDP and the Holders from time to time of the Shares any right, remedy or claim
under or by reason of this agreement or any part hereof.
SECTION 3.04. Amendment. This Agreement may be amended by the parties
---------
hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company may deem necessary or
desirable; provided, however, that such action shall not affect adversely the
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rights of the Holders. Any amendment or supplement to this Agreement that has
an adverse effect on the interests of the Holders shall require the written
consent of the Holders of a majority of the then outstanding common stock.
15
<PAGE>
In determining whether the Holders of the required number of shares of
common stock have concurred in any direction, waiver or consent, common stock
owned by the Company or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company shall
be disregarded and deemed not to be outstanding. Also, subject to the
foregoing, only common stock outstanding at the time shall be considered in any
such determination.
SECTION 3.05. Notices. Any notice or communication shall be in
-------
writing and delivered by hand or overnight courier service, mailed by certified
or registered mail or sent by telecopy, as follows:
if to the Company:
Woods Equipment Company
6944 Newburg Road
Rockford, IL 61108
Facsimile No.: (815) 381-6047
Telephone: (815) 381-6000
Attn:
if to MDP:
Madison Dearborn Partners, Inc.
Three First National Plaza
Suite 3800
Chicago, IL 60602
Facsimile No: (312) 895-1156
Telephone: (312) 895-1000
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 3.04 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 3.04.
The Company or MDP by notice to the other may designate additional or
different addresses for subsequent notices or communications.
16
<PAGE>
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears in the register of the Company and
shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 3.06. Governing Law. The laws of the State of New York shall
-------------
govern this Agreement without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 3.07. Successors. All agreements of the Company and MDP in
----------
this Agreement shall bind their successors.
SECTION 3.08. Multiple Originals. The parties may sign any number of
------------------
copies of this Agreement. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Agreement.
SECTION 3.09. Table of Contents. The table of contents and headings
-----------------
of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 3.10. Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
17
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
WOODS EQUIPMENT COMPANY
By: /s/ Thomas J. Laird
-----------------------------------
Name: Thomas J. Laird
Title: President and CEO
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By: MADISON DEARBORN PARTNERS II, L.P.
Its: General Partner
By: MADISON DEARBORN PARTNERS, INC.
Its: General Partner
By: /s/ Thomas R. Reusche
-----------------------------------
Name: Thomas R. Reusche
Title: Managing Director
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Joseph Fashano
-----------------------------------
Name: Joseph Fashano
Title:
18
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EXHIBIT 4.3
WEC Company
$130,000,000
12% Senior Notes due July 15, 2009
Woods Equipment Company
$51,927,000
51,927 Units Each Consisting of
15% Senior Discount Debentures due 2011
and .8745 Shares of Common Stock
REGISTRATION RIGHTS AGREEMENT
-----------------------------
July 28, 1999
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
WEC Company, a Delaware corporation ("WEC"), proposes, subject to the terms
and conditions stated herein, to issue and sell to Credit Suisse First Boston
Corporation (the initial "Purchaser") $130,000,000 principal amount of its 12%
Senior Notes due July 15, 2009 (the "Notes") to be issued under an indenture, to
be dated as of July 28, 1999 (the "Notes Indenture"), between WEC, Woods
Equipment Company, a Delaware Corporation and parent of WEC ("Woods" or the
"Parent Guarantor", together with WEC, the "Issuers") and United States Trust
Company of New York, as Trustee, which Notes will be unconditionally guaranteed
by Woods. Woods proposes, subject to the terms and conditions stated herein, to
issue and sell to the Purchaser 51,927 Units (the "Units"), each Unit consisting
of (i) one 15% Senior Discount Debenture due 2011 (the "Debentures" and together
with the Notes, the "Initial Securities") with a principal amount at maturity of
$1,000 to be issued under an indenture, to be dated as of July 28, 1999 (the
"Debenture Indenture" and together with the Notes Indenture, the "Indentures")
between Woods and United States Trust Company of Texas, N.A., as Trustee and
(ii) .8745 shares of common stock, $.01 par value per share (the "Common Stock")
of Woods. As an inducement to the Purchaser, WEC and Woods agree with the
Purchaser, for the benefit of the holders of the Initial Securities (including,
without limitation, the Purchaser), the Exchange Securities (as defined below)
and the Private Exchange Securities (as
<PAGE>
defined below) (collectively the "Holders"), as follows:
1. Registered Exchange Offer. The Issuers shall, at their own cost,
prepare and, not later than 90 days after (or if the 90th day is not a business
day, the first business day thereafter) the date of original issue of the
Initial Securities (the "Issue Date"), file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Notes Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to a proposed offer
(the "Notes Registered Exchange Offer") to the Holders of Notes that are
Transfer Restricted Securities (as defined in Section 6 hereof), who are not
prohibited by any law or policy of the Commission from participating in the
Notes Registered Exchange Offer, to issue and deliver to such Holders, in
exchange for the Notes, a like aggregate principal amount of debt securities
(the "Exchange Notes") of WEC issued under the Notes Indenture and identical in
all material respects to the Notes, including the guaranty by the Parent
Guarantor (except for the transfer restrictions relating to the Notes and the
provisions relating to the matters described in Section 6 hereof) that would be
registered under the Securities Act.
Woods shall, at its own cost, prepare and, not later than 90 days after (or
if the 90th day is not a business day, the first business day thereafter) the
Issue Date, file with the Commission a registration statement (the "Debenture
Exchange Offer Registration Statement" and together with the Notes Exchange
Offer Registration Statement, the "Exchange Offer Registration Statements") on
an appropriate form under the Securities Act, with respect to a proposed offer
(the "Debenture Registered Exchange Offer" and together with the Notes
Registered Exchange Offer, the "Registered Exchange Offers") to the Holders of
Debentures that are Transfer Restricted Securities (as defined in Section 6
hereof), who are not prohibited by any law or policy of the Commission from
participating in the Debenture Registered Exchange Offer, to issue and deliver
to such Holders, in exchange for the Debentures, a like aggregate principal
amount of debt securities (the "Exchange Debentures" and together with the
Exchange Notes, the "Exchange Securities") of WEC issued under the Debenture
Indenture and identical in all material respects to the Debentures (except for
the transfer restrictions relating to the Debentures and the provisions relating
to the matters described in Section 6 hereof) that would be registered under the
Securities Act.
The Issuers shall use their reasonable best efforts to cause such Exchange
Offer Registration Statements to become effective under the Securities Act
within 180 days (or if the 180th day is not a business day, the first business
day thereafter) after the Issue Date of the Initial Securities and shall keep
the Exchange Offer Registration Statements effective for not less than 30 days
(or longer, if required by applicable law) after the date notice of a Registered
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period").
2
<PAGE>
If the Issuers effect any Registered Exchange Offer, the Issuers will be
entitled to close the Registered Exchange Offer 30 days after the commencement
thereof provided that the Issuers have accepted all the Initial Securities
theretofore validly tendered in accordance with the terms of any Registered
Exchange Offer.
Following the declaration of the effectiveness of any Exchange Offer
Registration Statement, the Issuers shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Initial Securities electing to exchange the Initial
Securities for Exchange Securities (assuming that such Holder is not an
affiliate of either of the Issuers within the meaning of the Securities Act,
acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements with any person to participate in the
distribution of the Exchange Securities and is not prohibited by any law or
policy of the Commission from participating in the Registered Exchange Offer) to
trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States.
The Issuers acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Securities, acquired for its own account as a result of
market making activities or other trading activities, for Exchange Securities
(an "Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and (c) Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Securities received by
such Exchanging Dealer pursuant to any Registered Exchange Offer and (ii) if the
Purchaser elects to sell Exchange Securities acquired in exchange for Securities
constituting any portion of an unsold allotment, the Purchaser is required to
deliver a prospectus containing the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in connection with such
sale.
The Issuers shall use their reasonable best efforts to keep any Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided, however, that
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(i) in the case where such prospectus and any amendment or supplement thereto
must be delivered by an Exchanging Dealer or the Purchaser, such period shall be
the lesser of 180 days and the date on which all Exchanging Dealers and the
Purchaser has sold all Exchange Securities held by them (unless such period is
extended pursuant to Section 3(j) below) and (ii) the Issuers shall make such
prospectus and any
3
<PAGE>
amendment or supplement thereto, available to any broker-dealer for use in
connection with any resale of any Exchange Securities for a period of not less
than 90 days after the consummation of the Registered Exchange Offer.
If, upon consummation of any Registered Exchange Offer, the Purchaser holds
any Initial Securities acquired by it as part of its initial distribution, the
Issuers, simultaneously with the delivery of the Exchange Securities pursuant to
the relevant Registered Exchange Offer, shall issue and deliver to the Purchaser
upon the written request of the Purchaser, in exchange (each a "Private
Exchange" and collectively, the "Private Exchanges") for the Initial Securities
held by the Purchaser, a like principal amount of debt securities of the
applicable Issuer issued under the applicble Indenture and identical in all
material respects (including the guaranty by the Parent Guarantor (in the case
of the Notes) and the existence of restrictions on transfer under the Securities
Act and the securities laws of the several states of the United States, but
excluding provisions relating to the matters described in Section 6 hereof) to
the Initial Securities (the "Private Exchange Securities") exchanged. The
Initial Securities, the Exchange Securities and the Private Exchange Securities
are herein collectively called the "Securities".
In connection with each Registered Exchange Offer, the Issuers shall:
(a) mail to each Holder a copy of the prospectus forming part of the
applicable Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as reasonably practicable after the close of a Registered Exchange
Offer or a Private Exchange, as the case may be, the Issuers shall:
4
<PAGE>
(x) accept for exchange all the Securities validly tendered and not
withdrawn pursuant to such Registered Exchange Offers and such Private
Exchange, as the case may be;
(y) deliver to the applicable Trustee for cancellation all the
Initial Securities so accepted for exchange; and
(z) cause the applicable Trustee to authenticate and deliver promptly
to each Holder of the Initial Securities, Exchange Securities or Private
Exchange Securities, as the case may be, equal in principal amount to the
Initial Securities of such Holder so accepted for exchange.
The Indentures will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in such Indenture and that all
the Securities issued pursuant to such Indenture will vote and consent together
on all matters as one class and that none of such Securities will have the right
to vote or consent as a class separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to a Registered Exchange Offer or Private Exchange will accrue from the
last interest payment date on which interest was paid on the Initial Security
surrendered in exchange therefor or, if no interest has been paid on the Initial
Security, from the date of original issue of the Initial Security.
Each Holder participating in a Registered Exchange Offer shall be required
to represent to the Issuers that at the time of the consummation of the
applicable Registered Exchange Offer (i) any Exchange Securities received by
such Holder will be acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understanding with any person to participate
in the distribution of the Securities or the Exchange Securities within the
meaning of the Securities Act, (iii) such Holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Issuers or if it is an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.
Notwithstanding any other provisions hereof, the Issuers will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer
5
<PAGE>
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Issuers
are not permitted to effect any Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) a Registered Exchange Offer is not consummated within 210
days of the Issue Date, (iii) the Purchaser so requests with respect to the
Initial Securities (or the Private Exchange Securities) not eligible to be
exchanged for Exchange Securities in any Registered Exchange Offer and held by
it following consummation of any Registered Exchange Offer or (iv) any Holder
(other than an Exchanging Dealer) is not eligible to participate in the
applicable Registered Exchange Offers or, in the case of any Holder (other than
an Exchanging Dealer) that participates in a Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Securities on the date of the
exchange, the Issuers shall take the following actions:
(a) The Issuers shall, at their own cost, as promptly as reasonably
practicable (but in no event more than 60 days after so required or
requested pursuant to this Section 2) file with the Commission and
thereafter shall use its reasonable best efforts to cause to be declared
effective a registration statement or statements (a "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statements, a
"Registration Statement") on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Securities (as
defined in Section 6 hereof) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act (hereinafter,
the "Shelf Registration"); provided, however, that no Holder (other than
-------- -------
the Purchaser) shall be entitled to have the Securities held by it covered
by such Shelf Registration Statement unless such Holder agrees in writing
to be bound by all the provisions of this Agreement applicable to such
Holder.
(b) The Issuers shall use their reasonable best efforts to keep any
Shelf Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years (or for such longer period
if extended pursuant to Section 3(j) below) from the Issue Date or such
shorter period that will terminate when all the Securities covered by the
Shelf Registration Statement (i) have been sold
6
<PAGE>
pursuant thereto or (ii) are no longer restricted securities (as defined in
Rule 144 under the Securities Act, or any successor rule thereof). The
Issuers shall be deemed not to have used their reasonable best efforts to
keep the Shelf Registration Statement effective during the requisite period
if it voluntarily takes any action that would result in Holders of
Securities covered thereby not being able to offer and sell such Securities
during that period, unless such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Issuers shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offers contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Issuers shall (i) furnish to the Purchaser, prior to the
filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and, in the event that the Purchaser (with respect to any
portion of an unsold allotment from the original offerings) is
participating in a Registered Exchange Offer or a Shelf Registration
Statement, the Issuers shall use their reasonable best efforts to reflect
in each such document, when so filed with the Commission, such comments as
the Purchaser reasonably may propose; (ii) include the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange
Offer Procedures" section and the "Purpose of the Exchange Offer" section
and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement and
include the information set forth in Annex D hereto in the Letter of
Transmittal delivered pursuant to such Registered Exchange Offer; (iii) if
requested by the Purchaser, include the information required by Items 507
or 508 of Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement;
(iv) include within the prospectus contained in the Exchange Offer
Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the
Commission with respect to the potential
7
<PAGE>
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of Exchange Securities received by such broker-dealer
in any Registered Exchange Offer (a "Participating Broker-Dealer"), whether
such positions or policies have been publicly disseminated by the staff of
the Commission or such positions or policies, in the reasonable judgment of
the Purchaser based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in
the case of a Shelf Registration Statement, include the names of the
Holders, who propose to sell Securities pursuant to the Shelf Registration
Statement, as selling securityholders.
(b) The Issuers shall give written notice to the Purchaser, the
Holders of the Securities and any Participating Broker-Dealer from whom the
Issuers have received prior written notice that it will be a Participating
Broker-Dealer in a Registered Exchange Offer (which notice pursuant to
clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend
the use of the prospectus until the requisite changes have been made):
(i) when the Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information (after the date the Registration
Statement has been declared effective);
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Issuers or their legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event that requires the Issuers to
make changes in the Registration Statement or the prospectus in order that
the Registration Statement or the prospectus do not contain an untrue
statement of a material fact nor omit to state a material fact required to
be stated therein or necessary to make the statements therein (in the case
of the prospectus, in light of the circumstances under which they were
made) not misleading.
8
<PAGE>
(c) The Issuers shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Issuers shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder
so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Issuers shall deliver to each Exchanging Dealer and the
Purchaser, and to any other Holder who so request in writing, without
charge, at least one copy of the Exchange Offer Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules, and, if the Purchaser or any such Holder requests, all exhibits
thereto (including those incorporated by reference).
(f) The Issuers shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably
request. The Issuers consent, subject to the provisions of this Agreement,
to the use of the prospectus or any amendment or supplement thereto by each
of the selling Holders of the Securities in connection with the offering
and sale of the Securities covered by the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
(g) The Issuers shall deliver to the Purchaser, any Exchanging
Dealer, any Participating Broker-Dealer and such other persons required to
deliver a prospectus following any Registered Exchange Offer, without
charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement and any amendment or supplement thereto as
such persons may reasonably request. The Issuers consent, subject to the
provisions of this Agreement, to the use of the prospectus or any amendment
or supplement thereto by the Purchaser, if necessary, any Participating
Broker-Dealer and such other persons required to deliver a prospectus
following any Registered Exchange Offer in connection with the offering and
sale of the Exchange Securities covered by the prospectus, or any amendment
or supplement thereto, included in such Exchange Offer Registration
Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Issuers shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection
9
<PAGE>
with the registration or qualification of the Securities for offer and sale
under the securities or "blue sky" laws of such states of the United States
as any Holder of the Securities reasonably requests in writing and do any
and all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Securities covered by such Registration
Statement; provided, however, that the Issuers shall not be required to (i)
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qualify generally to do business in any jurisdiction where it is not then
so qualified or (ii) take any action which would subject it to general
service of process or to taxation in any jurisdiction where it is not then
so subject.
(i) the Issuers shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Shelf Registration Statement free
of any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales
of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Issuers
are required to maintain an effective Registration Statement, the Issuers
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Issuers notify the Purchaser, the Holders of the Securities and any
known Participating Broker-Dealer in accordance with paragraphs (ii)
through (v) of Section 3(b) above to suspend the use of the prospectus
until the requisite changes to the prospectus have been made, then the
Purchaser, the Holders of the Securities and any such Participating Broker-
Dealers shall suspend use of such prospectus, and the period of
effectiveness of the Shelf Registration Statement provided for in Section
2(b) above and the Exchange Offer Registration Statement provided for in
Section 1 above shall each be extended by the number of days from and
including the date of the giving of such notice to and including the date
when the Purchaser, the Holders of the Securities and any known
Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Issuers will provide CUSIP numbers for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the applicable trustee with certificates for
the Initial Securities, the
10
<PAGE>
Exchange Securities or the Private Exchange Securities, as the case may be,
in a form eligible for deposit with The Depository Trust Company.
(l) The Issuers will comply in all material respects with all rules
and regulations of the Commission to the extent and so long as they are
applicable to any Registered Exchange Offer or any Shelf Registration and
will make generally available to its security holders (or otherwise provide
in accordance with Section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act,
no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the
Issuers' first fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such 12-month period.
(m) The Issuers shall cause the Indentures to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under either the Notes Indenture or the Debenture Indenture, the
Issuers shall appoint a new trustee thereunder pursuant to the applicable
provisions of the applicable Indenture.
(n) The Issuers may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Issuers such
information regarding the Holder and the distribution of the Securities as
the Issuers may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Issuers may exclude from such
registration the Securities of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(o) The Issuers shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and
take all such other action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Issuers shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained
by the Holders of the Securities or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties
of the Issuers (provided that the Holders or their agents execute a
customary confidentiality agreement with regard to such information) and
(ii) cause the Issuers' officers, directors, employees, accountants and
auditors to supply all relevant information reasonably requested by the
Holders of the Securities or any such underwriter, attorney, accountant or
agent in connection with
11
<PAGE>
the Shelf Registration Statement, in each case, as shall be reasonably
necessary to enable such persons to conduct a reasonable investigation
within the meaning of Section 11 of the Securities Act; provided, however,
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that the foregoing inspection and information gathering shall be
coordinated on behalf of the Purchaser by you and on behalf of the other
parties, by one counsel designated by and on behalf of such other parties
as described in Section 4 hereof.
(q) In the case of any Shelf Registration, the Issuers, if requested
by any Holder of Securities covered thereby, shall use their reasonable
best efforts to cause (i) their counsel to deliver an opinion and updates
thereof relating to the Securities in customary form addressed to such
Holders and the managing underwriters, if any, thereof and dated, in the
case of the initial opinion, the effective date of such Shelf Registration
Statement (it being agreed that the matters to be covered by such opinion
shall include, without limitation, the due incorporation and good standing
of the Issuers and their subsidiaries; the qualification of the Issuers and
their subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 3(o) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the absence of material legal or governmental
proceedings involving the Issuers and their subsidiaries; the absence of
governmental approvals required to be obtained in connection with the Shelf
Registration Statement, the offering and sale of the applicable Securities,
or any agreement of the type referred to in Section 3(o) hereof; the
compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indentures with the
requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and as of the effective
date of such Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then amended
or supplemented, and from any documents incorporated by reference therein
of an untrue statement of a material fact or the omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents, in
the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act); (ii) its officers
to execute and deliver all customary documents and certificates and updates
thereof requested by any underwriters of the applicable Securities and
(iii) its independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Shelf Registration Statement to provide to
the selling Holders of the applicable Securities and any underwriter
therefor a comfort letter in customary form and covering matters of the
type customarily covered in comfort letters in connection with primary
underwritten offerings,
12
<PAGE>
subject to receipt of appropriate documentation as contemplated, and only
if permitted, by Statement of Auditing Standards No. 72.
(r) In the case of any Registered Exchange Offer, if requested by the
Purchaser (provided that the Purchaser holds any Initial Securities) or any
known Participating Broker-Dealer, the Issuers shall cause (i) their
counsel to deliver to the Purchaser or such Participating Broker-Dealer a
signed opinion in the form set forth in Section 6(c)-(d) of the Purchase
Agreement with such changes as are customary in connection with the
preparation of a Registration Statement and (ii) its independent public
accountants and the independent public accountants with respect to any
other entity for which financial information is provided in the
Registration Statement to deliver to the Purchaser or such Participating
Broker-Dealer a comfort letter, in customary form, meeting the requirements
as to the substance thereof as set forth in Section 6(a) and (b) of the
Purchase Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Issuers (or to such other Person as directed by the Issuers) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Issuers shall mark, or caused to be marked, on the Initial
Securities so exchanged that such Initial Securities are being canceled in
exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall the Initial Securities be marked as paid
or otherwise satisfied.
(t) The Issuers will use their reasonable best efforts to (i) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the Securities
covered by a Registration Statement, or (ii) if the Initial Securities were
not previously rated, cause the Securities covered by a Registration
Statement to be rated with the appropriate rating agencies, if so requested
by Holders of a majority in aggregate principal amount of Securities
covered by such Registration Statement, or by the managing underwriters, if
any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Issuers will
assist such broker-dealer in complying with the requirements of such Rules,
including, without limitation, by (i) if such Rules, including Rule 2720,
shall so require, engaging a "qualified independent underwriter" (as
defined in Rule 2720) to participate in the preparation of the Registration
Statement relating to such
13
<PAGE>
Securities, to exercise usual standards of due diligence in respect thereto
and, if any portion of the offering contemplated by such Registration
Statement is an underwritten offering or is made through a placement or
sales agent, to recommend the yield of such Securities, (ii) indemnifying
any such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof and (iii)
providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Rules.
(v) The Issuers shall use their reasonable best efforts to take all
other steps necessary to effect the registration of the Securities covered
by a Registration Statement contemplated hereby.
4. Registration Expenses. The Issuers shall bear all fees and expenses
incurred in connection with the performance of their obligations under Sections
1 through 3 hereof (including the reasonable fees and expenses, if any, of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Purchaser, incurred in
connection with any Registered Exchange Offer), whether or not any Registered
Exchange Offer or any Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear or reimburse the Holders of the
Securities covered thereby for the reasonable fees and disbursements of one firm
of counsel designated by the Holders of a majority in principal amount of the
Initial Securities covered thereby to act as counsel for the Holders of the
Initial Securities in connection therewith.
5. Indemnification. (a) The Issuers agree to indemnify and hold harmless
each Holder of the Securities, any Participating Broker-Dealer and each person,
if any, who controls such Holder or such Participating Broker-Dealer within the
meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action
14
<PAGE>
in respect thereof; provided, however, that (i) the Issuers shall not be liable
-------- -------
in any such case to the extent that such loss, claim, damage or liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in a Registration Statement or prospectus or
in any amendment or supplement thereto or in any preliminary prospectus relating
to a Shelf Registration in reliance upon and in conformity with written
information pertaining to such Holder and furnished to the Issuers by or on
behalf of such Holder specifically for inclusion therein and (ii) with respect
to any untrue statement or omission or alleged untrue statement or omission made
in any preliminary prospectus relating to a Shelf Registration Statement, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Holder or Participating Broker-Dealer from whom the person
asserting any such losses, claims, damages or liabilities purchased the
Securities concerned, to the extent that a prospectus relating to such
Securities was required to be delivered by such Holder or Participating Broker-
Dealer under the Securities Act in connection with such purchase and any such
loss, claim, damage or liability of such Holder or Participating Broker-Dealer
results from the fact that there was not sent or given to such person, at or
prior to the written confirmation of the sale of such Securities to such person,
a copy of the final prospectus if the Issuers had previously furnished copies
thereof to such Holder or Participating Broker-Dealer; provided further,
-------- -------
however, that this indemnity agreement will be in addition to any liability
- -------
which the Issuers may otherwise have to such Indemnified Party. The Issuers
shall also indemnify underwriters, their officers and directors and each person
who controls such underwriters within the meaning of the Securities Act or the
Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Issuers and each person, if any, who controls
the Issuers within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Issuers or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Issuers by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Issuers for any legal or other expenses reasonably incurred by the
Issuers or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any
15
<PAGE>
liability which such Holder may otherwise have to the Issuers or any of their
controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above unless and to the extent it
did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses. In
case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section 5 is unavailable
or insufficient to hold harmless an indemnified party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the exchange of the relevant Initial
Securities, pursuant to the relevant Registered Exchange Offer, or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof) as well
as any other relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
16
<PAGE>
omission or alleged omission to state a material fact relates to information
supplied by the Issuers on the one hand or such Holder or such other indemnified
party, as the case may be, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this Section 5(d), the Holders of the
Securities shall not be required to contribute any amount in excess of the
amount by which the net proceeds received by such Holders from the sale of the
Securities pursuant to a Registration Statement exceeds the amount of damages
which such Holders have otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph (d),
each person, if any, who controls such indemnified party within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as such indemnified party and each person, if any, who controls the
Issuers within the meaning of the Securities Act or the Exchange Act shall have
the same rights to contribution as the Issuers.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Initial Securities
shall be assessed as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Registration Default":
(i) If by October 26, 1999, neither an Exchange Offer
Registration Statement nor a Shelf Registration Statement with respect to
such Initial Securities has been filed with the Commission;
(ii) If by February 23, 2000, neither a Registered Exchange
Offer is consummated nor, if required in lieu thereof, a Shelf Registration
Statement is declared effective by the Commission with respect to such
Initial Securities; or
(iii) If after either an Exchange Offer Registration Statement or
a Shelf Registration Statement with respect to such Initial Securities is
declared effective (A) such Registration Statement thereafter ceases to be
effective; or (B) such
17
<PAGE>
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Securities during the periods specified herein because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Initial Securities over and above the
interest set forth in the title of the Securities from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 0.50% per
annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Issuers where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Issuers that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Issuers are proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
- -------- -------
continuous period in excess of 90 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) of Section 6(a) above will be payable in cash on the regular interest
payment dates with respect to the Initial Securities (to the extent that cash is
required to be paid on the Initial Securities). The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Initial Securities, multiplied by a
fraction, the numerator of which is the number of days such Additional Interest
rate was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Transfer Restricted Security has been exchanged by a person
other than a broker-dealer for a freely transferable Exchange Security in any
Registered Exchange Offer, (ii) following the exchange by a broker-dealer in a
Registered Exchange Offer, the date on
18
<PAGE>
which such Exchange Securities are sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Initial Security has been effectively registered under the Securities Act
and disposed of in accordance with a Shelf Registration Statement or (iv) the
date on which such Initial Securities are distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act.
7. Rules 144 and 144A. The Issuers shall use their reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Issuers are not
required to file such reports, it will, upon the request of any Holder of
Initial Securities, make publicly available other information so long as
necessary to permit sales of their securities pursuant to Rules 144 and 144A.
The Issuers covenant that they will take such further action as any Holder of
Initial Securities may reasonably request, all to the extent required from time
to time to enable such Holder to sell Initial Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Issuers
will provide a copy of this Agreement to prospective purchasers of Initial
Securities identified to the Issuers by the Purchaser upon request. Upon the
request of any Holder of Initial Securities, the Issuers shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Issuers to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
19
<PAGE>
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Issuers and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Issuers.
(2) if to the Purchaser;
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Gregory A. Fernicola
(3) if to the Issuers, at its address as follows:
Woods Equipment Company
6944 Newbury Road
Rockford, Illinois 61108
Attention: Chief Financial Officer
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Michael H. Kerr
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by
20
<PAGE>
recipient's facsimile machine operator, if sent by facsimile transmission; and
on the day delivered, if sent by overnight air courier guaranteeing next day
delivery.
(c) No Inconsistent Agreements. The Issuers have not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon WEC,
Woods and their successors and assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(i) Securities Held by the Issuers. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Issuers or their affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
21
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Issuer a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Purchaser, WEC and Woods in accordance with its terms.
Very truly yours,
WEC COMPANY
By: /s/ D. Stephen Crider
-------------------------------
Name: D. Stephen Crider
Title: VP & CFO
WOODS EQUIPMENT COMPANY
By: /s/ D. Stephen Crider
-------------------------------
Name: D. Stephen Crider
Title: VP & CFO
22
<PAGE>
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
Credit Suisse First Boston Corporation
By: /s/ Joseph Fashano
----------------------------------
Name: Joseph Fashano
Title:
23
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Initial Securities where such Initial Securities were acquired by such broker-
dealer as a result of market-making activities or other trading activities. The
Issuers have agreed that, for a period of 180 days after the Expiration Date (as
defined herein), it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Securities, where such Initial Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Issuers have
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until ________________,
1999 , all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
The Issuers will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuers have agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: _____________________________________________
Address: ___________________________________________
___________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 4.4
WOODS EQUIPMENT COMPANY,
as Issuer
and
UNITED STATES TRUST COMPANY OF TEXAS, N.A.,
as Trustee
______________
DEBENTURE INDENTURE
Dated as of July 28, 1999
______________
15% Senior Discount Debentures due July 15, 2011
<PAGE>
TABLE OF CONTENTS
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<TABLE>
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<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions................................................ 1
SECTION 1.02. Incorporation by Reference of TIA.......................... 25
SECTION 1.03. Rules of Construction...................................... 25
SECTION 1.04. One Class of Securities.................................... 26
ARTICLE TWO
THE DEBENTURES
SECTION 2.01. Form and Dating............................................ 26
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount... 26
SECTION 2.03. Registrar and Paying Agent................................. 27
SECTION 2.04. Paying Agent To Hold Assets in Trust....................... 28
SECTION 2.05. Debentureholder Lists...................................... 28
SECTION 2.06. [Intentionally Omitted].................................... 28
SECTION 2.07. Replacement Debentures..................................... 28
SECTION 2.08. Outstanding Debentures..................................... 29
SECTION 2.09. Treasury Debentures........................................ 29
SECTION 2.10. Temporary Debentures....................................... 29
SECTION 2.11. Cancellation............................................... 30
SECTION 2.12. Defaulted Interest......................................... 30
SECTION 2.13. CUSIP Number............................................... 30
SECTION 2.14. Deposit of Moneys.......................................... 31
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee......................................... 31
SECTION 3.02. Selection of Debentures To Be Redeemed..................... 31
SECTION 3.03. Notice of Redemption....................................... 32
SECTION 3.04. Effect of Notice of Redemption............................. 33
</TABLE>
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<TABLE>
<S> <C>
SECTION 3.05. Deposit of Redemption Price................................ 33
SECTION 3.06. Debentures Redeemed in Part................................ 33
SECTION 3.07. Optional Redemption........................................ 33
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Debentures...................................... 34
SECTION 4.02. Maintenance of Office or Agency............................ 34
SECTION 4.03. Corporate Existence........................................ 35
SECTION 4.04. Payment of Taxes and Other Claims.......................... 35
SECTION 4.05. Maintenance of Properties and Insurance.................... 35
SECTION 4.06. Compliance Certificate; Notice of Default.................. 36
SECTION 4.07. Compliance with Laws....................................... 37
SECTION 4.08. SEC Reports................................................ 37
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.................... 37
SECTION 4.10. Limitation on Restricted Payments.......................... 37
SECTION 4.11. Limitation on Restrictions on Distributions from
Restricted Subsidiaries.................................. 40
SECTION 4.12. Limitation on Affiliate Transactions....................... 42
SECTION 4.13. Limitation on Indebtedness............................... 43
SECTION 4.14. Limitation on the Sale or Issuance of Preferred Stock of
Restricted Subsidiaries.................................. 46
SECTION 4.15. Change of Control.......................................... 47
SECTION 4.16. Limitation on Sales of Assets and Subsidiary Stock......... 49
SECTION 4.17. Limitation on Liens........................................ 52
SECTION 4.18. Limitation on Sale/Leaseback Transactions.................. 53
SECTION 4.19. Limitations on Status as Investment Company................ 53
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets of the Company.... 53
</TABLE>
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<TABLE>
<S> <C>
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.......................................... 54
SECTION 6.02. Acceleration............................................... 55
SECTION 6.03. Other Remedies............................................. 56
SECTION 6.04. Waiver of Past Defaults.................................... 56
SECTION 6.05. Control by Majority........................................ 56
SECTION 6.06. Limitation on Suits........................................ 57
SECTION 6.07. Rights of Holders To Receive Payment....................... 57
SECTION 6.08. Collection Suit by Trustee................................. 58
SECTION 6.09. Trustee May File Proofs of Claim........................... 58
SECTION 6.10. Priorities................................................. 58
SECTION 6.11. Undertaking for Costs...................................... 59
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.......................................... 59
SECTION 7.02. Rights of Trustee.......................................... 60
SECTION 7.03. Individual Rights of Trustee............................... 62
SECTION 7.04. Trustee's Disclaimer....................................... 62
SECTION 7.05. Notice of Default.......................................... 62
SECTION 7.06. Reports by Trustee to Holders.............................. 62
SECTION 7.07. Compensation and Indemnity................................. 63
SECTION 7.08. Replacement of Trustee..................................... 64
SECTION 7.09. Successor Trustee by Merger, Etc........................... 65
SECTION 7.10. Eligibility; Disqualification.............................. 65
SECTION 7.11. Preferential Collection of Claims Against Company.......... 65
ARTICLE EIGHT
DISCHARGE OF DEBENTURE INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Debentures; Defeasance........... 66
SECTION 8.02. Conditions to Defeasance................................... 67
SECTION 8.03. Application of Trust Money................................. 68
SECTION 8.04. Repayment to Company....................................... 68
</TABLE>
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<TABLE>
<S> <C>
SECTION 8.05. Indemnity for Government Obligations....................... 69
SECTION 8.06. Reinstatement.............................................. 69
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders................................. 69
SECTION 9.02. With Consent of Holders.................................... 70
SECTION 9.03. Compliance with TIA........................................ 71
SECTION 9.04. Revocation and Effect of Consents.......................... 71
SECTION 9.05. Notation on or Exchange of Debentures...................... 72
SECTION 9.06. Trustee To Sign Amendments, Etc............................ 72
SECTION 9.07. Payment for Consent........................................ 73
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. TIA Controls............................................... 73
SECTION 10.02. Notices.................................................... 73
SECTION 10.03. Communications by Holders with Other Holders............... 74
SECTION 10.04. Certificate and Opinion as to Conditions Precedent......... 75
SECTION 10.05. Statements Required in Certificate or Opinion.............. 75
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar.................. 75
SECTION 10.07. Legal Holidays............................................. 76
SECTION 10.08. Governing Law.............................................. 76
SECTION 10.09. No Adverse Interpretation of Other Agreements.............. 76
SECTION 10.10. No Recourse Against Others................................. 76
SECTION 10.11. Successors................................................. 76
SECTION 10.12. Duplicate Originals........................................ 77
SECTION 10.13. Severability............................................... 77
Appendix ........................................................... I
Exhibit A Form of Initial Debenture and Guarantee...................... A-1
Exhibit B - Form of Exchange Debenture and Private Exchange Debenture
and Guarantee................................................ B-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of this Debenture Indenture.
<PAGE>
DEBENTURE INDENTURE, dated as of July 28, 1999, among WOODS
EQUIPMENT COMPANY, a Delaware corporation (the "Company") and United States
Trust Company of Texas, N.A., a Texas banking corporation, as Trustee (the
"Trustee").
The Company has duly authorized the creation of an issue of
$52,204,000 aggregate principal amount at maturity of 15% Senior Discount
Debentures due July 15, 2011 in the form of Initial Debentures (as defined
below) and, if and when issued in connection with a registered exchange for such
Initial Debentures, 15% Senior Discount Debentures due July 15, 2011 in the form
of Exchange Debentures (as defined below) and, if and when issued in connection
with a private exchange for such Initial Debentures, 15% Senior Discount
Debentures due July 15, 2011 in the form of Private Exchange Debentures (as
defined below).
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Debentures.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Accreted Value" means, as of any date prior to July 15, 2004, an
--------------
amount per $1,000 principal amount at maturity of Debentures that is equal to
the sum of (a) the initial offering price ($481.45 per $1,000 principal amount
at maturity of Debentures) of such Debentures and (b) the portion of the excess
of the principal amount of such Debentures over such initial offering price
which shall have been amortized through such date, such amount to be so
amortized on a daily basis and compounded quarterly on each January 15/th/ and
April 15/th/, July 15/th/ and October 15/th/ (commencing October 15,1999) at the
rate of 15% per annum from the date of original issue of the Debentures through
the date of determination computed on the basis of a 360-day year of twelve 30-
day months, and as of any date on or after July 15, 2004, the principal amount
of each Debenture.
"Additional Assets" means
-----------------
(i) any property or assets (other than Indebtedness and Capital
Stock) in a Related Business;
(ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the
Company or another Restricted Subsidiary or
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(iii) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary; provided, however, that any
such Restricted Subsidiary described in clauses (ii) or (iii) above is
primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person which,
---------
directly or indirectly, is in control of, is controlled by or is under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under Sections 4.10, 4.12
and 4.16 only, "Affiliate" will also mean any beneficial owner of the Company's
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Appendix" has the meaning provided in Section 2.01.
--------
"Asset Disposition" means any sale, lease, transfer or other
-----------------
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of:
(i) any shares of Capital Stock of a Restricted Subsidiary (other
than directors' qualifying shares or shares required by applicable law to
be held by a Person other than the Company or a Restricted Subsidiary),
(ii) all or substantially all the assets of any division or line of
business of the Company's or any Restricted Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary
outside of the Company's ordinary course of business or such Restricted
Subsidiary.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Dispositions:
(i) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(ii) a transfer of assets between or among the Company and its Wholly
Owned Subsidiaries,
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(iii) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary;
(iv) the sale, license or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business;
(v) the sale or other disposition of cash or Cash Equivalents or
Marketable Securities;
(vi) a Restricted Payment that is permitted by the covenant described
above under Section 4.10.
"Attributable Debt" when used with respect to any Sale/Leaseback
-----------------
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Debentures, compounded annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Authenticating Agent" has the meaning provided in Section 2.02.
--------------------
"Average Life" means, as of the date of determination, with respect to
------------
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Banks" has the meaning specified in the Senior Credit Facility.
-----
"Bank Indebtedness" means all Obligations pursuant to the Senior
-----------------
Credit Facility.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or
------------------
any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each day which is not a Legal Holiday.
------------
"Capital Lease Obligations" of a Person means any obligation which is
-------------------------
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with
3
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GAAP; the amount of such obligation shall be the capitalized amount thereof,
determined in accordance with GAAP; and the Stated Maturity thereof shall be the
date of the last payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
-------------
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Cash Equivalents" means:
----------------
(i) United States dollars;
(ii) securities issued or directly and fully guaranteed or insured by
the Untied States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of no more than six months from the date
of acquisition;
(iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding twelve months and overnight bank
deposits, in each case, with any lender party to the Credit Agreement or
with any domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of "B" or better;
(iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institutions meeting the
qualifications specified in clause (iii) above;
(v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in
each case maturing within twelve months after the date of acquisition; and
(vi) money marked funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through
(v) of this definition.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commodity Agreement" means in respect of a Person, any commodity
-------------------
futures contract, commodity option or other similar agreement or arrangement
designed to protect such Person against fluctuations in the price of energy,
commodities and raw materials.
"Company" means the party named as such in this Debenture Indenture
-------
until a successor replaces it pursuant to this Debenture Indenture and
thereafter means such successor.
4
<PAGE>
"Consolidated Coverage Ratio" as of any date of determination means
---------------------------
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters prior to the date of such determination
to (ii) Consolidated Interest Expense for such four fiscal quarters; provided,
however, that
(i) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period will be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period,
(ii) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for
such period will be calculated on a pro forma basis as if such discharge
had occurred on the first day of such period and as the Company or such
Restricted Subsidiary has not earned the interest income actually earned
during such period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such Indebtedness,
(iii) if since the beginning of such period the Company or any
Restricted Subsidiary will have made any Asset Disposition, the EBITDA for
such period will be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period will be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to the
Company's Indebtedness or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its
continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale),
(iv) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) will have made an Investment
in any Restricted Subsidiary (or any person which becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction requiring a calculation
to be
5
<PAGE>
made hereunder, which constitutes all or substantially all of an operating
unit of a business, EBITDA and Consolidated Interest Expense for such
period will be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness or any cost saving permitted to be
adjusted in accordance with Article 11 of Regulation S-X) as if such
Investment or acquisition occurred on the first day of such period and
(v) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
will have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (iii) or
(iv) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period will be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such
period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations will be determined
by the Company in good faith by a responsible financial or accounting Officer.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest of such Indebtedness will be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"Consolidated Interest Expense" means, for any period, the Company's
-----------------------------
total interest expense and that of the Company's consolidated Restricted
Subsidiaries, plus, to the extent not included in such total interest expense,
and to the extent incurred by the Company or its Restricted Subsidiaries,
without duplication,
(i) interest expense attributable to capital leases and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction,
(ii) amortization of debt discount and debt issuance cost,
(iii) capitalized interest,
(iv) non-cash interest expenses,
(v) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(vi) net costs associated with Hedging Obligations (including
amortization of fees),
6
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(vii) preferred Stock dividends in respect of all Preferred Stock
held by Persons other than the Company or a Wholly Owned Subsidiary,
(viii) interest incurred in connection with Investments in
discontinued operations,
(ix) interest accruing on any Indebtedness of any other Person to
the extent such Indebtedness is Guaranteed by (or secured by the assets of)
the Company or any Restricted Subsidiary and
(x) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the Company's net
-----------------------
income and that of the Company's consolidated Subsidiaries; provided, however,
that there will not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that
(A) subject to the exclusion contained in clause (iv) below,
the Company's equity in the net income of any such Person for such
period will be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during
such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and
(B) the Company's equity in a net loss of any such Person for
such period will be included in determining such Consolidated Net
Income;
(ii) any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that
(A) this clause (iii) shall not apply to the restrictions
contained in the Notes Indenture or the Senior Credit Facility,
(B) subject to the exclusion contained in clause (iv) below,
the Company's equity in the net income of any such Restricted
Subsidiary for such period will be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
7
<PAGE>
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution paid to another
Restricted Subsidiary, to the limitation contained in this clause) and
(C) the Company's equity in a net loss of any such Restricted
Subsidiary for such period will be included in determining such
Consolidated Net Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any of the Company's assets, the Company's consolidated
Subsidiaries or any other Person (including pursuant to any sale-and-
leaseback arrangement) which is not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss) realized upon the
sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
Section 4.10 only, there will be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant.
"covenant defeasance option" has the meaning provided in Section 8.01.
--------------------------
"Credit Facilities" means, one or more debt facilities or commercial
-----------------
paper facilities, in each case with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables), working
capital loans, swing lines, advances or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced, restructured or
refinanced in whole or in part from time to time.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Debentures" means the Initial Debentures, the Exchange Debentures and
----------
the Private Exchange Debentures treated as a single class of securities, as
amended or supplemented from time to time in accordance with the terms hereof,
that are issued pursuant to this Debenture Indenture.
8
<PAGE>
"Debenture Indenture" means this Debenture Indenture, as amended or
-------------------
supplemented from time to time in accordance with the terms hereof.
"Default" means any event which is, or after notice or passage of time
-------
or both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and
----------
their respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital
------------------
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified
Stock or
(iii) is redeemable or must be purchased, upon the occurrence of
certain events or otherwise, by such Person at the option of the holder
thereof, in whole or in part,
in each case on or prior to the first anniversary of the Stated Maturity of the
Debentures; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Debentures will not constitute
Disqualified Stock if (x) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Debentures and described under
Sections 4.15 and 4.16 and (y) any such requirement only becomes operative after
compliance with such terms applicable to the Debentures, including the purchase
of any Debentures tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
------
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income:
(i) all the Company's income tax expense and that of the Company's
consolidated Restricted Subsidiaries,
(ii) the Company's depreciation expense and that of the Company's
consolidated Restricted Subsidiaries,
9
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(iii) the Company's amortization expense and that of the Company's
consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid cash item that was paid in a prior period),
(iv) all the Company's other non-cash charges and those of the
Company's consolidated Restricted Subsidiaries (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for cash
expenditures in any future period), in each case for such period, and
(v) all one-time compensation payments made in connection with the
Recapitalization.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary will be added to Consolidated Net Income to compute EBITDA
only to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income and
only if a corresponding amount would be permitted at the date of determination
to be dividended to the Company by such Restricted Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders. If since the beginning of the relevant period, the Company or any
Restricted Subsidiary will have made an Investment in any Restricted Subsidiary
(or any person which becomes a Restricted Subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction requiring a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, EBITDA for such period
will be calculated after giving pro forma effect thereto (including any cost
saving permitted to be adjusted in accordance with Article 11 of Regulation S-
X).
"Equity Interest" means Capital Stock and all warrants, options or
---------------
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Equity Offering" means an offering of stock of the Company.
---------------
"Event of Default" has the meaning provided in Section 6.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor statute or statutes thereto.
"Exchange Debentures" has the meaning provided in the Appendix.
-------------------
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect as of the Issue Date, including those set forth
in
10
<PAGE>
(i) the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants,
(ii) statements and pronouncements of the Financial Accounting
Standards Board,
(iii) such other statements by such other entity as approved by a
significant segment of the accounting profession and
(iv) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
---------
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-
pay or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" will not include endorsements for
collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" will mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
-------------------
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Debentureholder" means the Person in whose name a
------ ---------------
Debenture is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
-----
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes the Company's Subsidiary
(whether by merger, consolidation, acquisition or otherwise) will be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun will have a correlative meaning. The accretion
of principal of a non-interest bearing or other discount security will be deemed
the Incurrence of Indebtedness.
11
<PAGE>
"Indebtedness" means, with respect to any Person on any date of
------------
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into by
such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(v) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date will be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
12
<PAGE>
"Initial Debentures" has the meaning provided in the Appendix.
------------------
"Initial Purchaser" has the meaning provided in the Appendix.
-----------------
"Interest Payment Date" means the stated maturity of an installment of
---------------------
cash interest on the Debentures.
"Investment" in any Person means any direct or indirect advance, loan
----------
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under Section 4.10,
(i) "Investment" will include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of
the net assets of any Subsidiary of the Company at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary,
the Company will be deemed to continue to have a permanent "Investment" in
an Unrestricted Subsidiary equal to an amount (if positive) equal to (x)
the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of
such Subsidiary at the time of such redesignation; and
(ii) any property transferred to or from an Unrestricted Subsidiary
will be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"issue" means issue, assume, Guarantee, Incur or otherwise become
-----
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary; and the term "issuance" has a
corresponding meaning.
"Issue Date" means the date of original issuance of the Debentures.
----------
"legal defeasance option" has the meaning provided in Section 8.01.
-----------------------
"Legal Holiday" has the meaning provided in Section 10.07.
-------------
13
<PAGE>
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Marketable Securities" means publicly traded debt or equity
---------------------
securities that are listed for trading on a national securities exchange and
that were issued by a corporation whose debt securities are rated in one of the
three highest categories by either Standard & Poor's Corporation or Moody's
Investors Service, Inc.
"Maturity Date" means July 15, 2011.
-------------
"Net Available Cash" from an Asset Disposition means cash payments,
------------------
cash equivalents and Marketable Securities received therefrom (including any
cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise and proceeds from the sale or other
disposition of any securities received as consideration, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form), in each
case net of
(i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be accrued as a liability under GAAP,
as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of
the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such
Asset Disposition and
(iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds" with respect to any issuance or sale of Capital
-----------------
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
14
<PAGE>
"Non-Recourse Debt" means Indebtedness
-----------------
(i) as to which neither the Company nor any Restricted Subsidiary
(A) provides any guarantee or credit support of any kind
(including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or
(B) is directly or indirectly liable (as a guarantor or
otherwise) and
(ii) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
the Company's other Indebtedness or that of any Restricted Subsidiary to
declare a default under such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity.
"Notes" means the Notes of WEC issued pursuant to the Notes Indenture.
-----
"Notes Indenture" means the indenture dated as of July 28, 1999, among
---------------
WEC, as issuer, the Company, as guarantor, and United States Trust Company of
New York, as trustee.
"Obligations" means with respect to any Indebtedness all obligations
-----------
for principal, premium, interest (including, without limitation, interest after
the commencement of any bankruptcy, reorganization, insolvency or similar
proceeding against the Company or any of its Subsidiaries, whether or not
allowed in any such proceeding), penalties, fees, indemnifications,
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.
"Offer" has the meaning provided in Section 4.16.
-----
"Offer Amount" has the meaning provided in Section 4.16.
------------
"Offer Period" has the meaning provided in Section 4.16.
------------
"Offering Circular" means with respect to the Initial Debentures
-----------------
issued on July 28, 1999, the Offering Circular dated July 26, 1999, pursuant to
which the $52,204,000 principal amount at maturity of 15% Senior Discount
Debentures due July 15, 2011 in the form of Initial Debentures were offered, and
any supplement thereto.
"Officer" means, with respect to any Person, the Chairman of the
-------
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Controller, the Treasurer, or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.
15
<PAGE>
"Officers' Certificate" means, with respect to any Person, a
---------------------
certificate signed by two Officers or by an Officer and either a Treasurer or
Assistant Treasurer or an Assistant Secretary of such Person and otherwise
complying with the requirements of Sections 10.04 and 10.05, to the extent they
relate to the making of an Officers' Certificate.
"Opinion of Counsel" means a written opinion from legal counsel, who
------------------
may be counsel for the Company, and who is reasonably acceptable to the Trustee
complying with the requirements of Sections 10.04 and 10.05, to the extent they
relate to the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
------------
"Permitted Holders" means Madison Dearborn Partners, Inc. and any
-----------------
affiliate thereof.
"Permitted Investment" means an Investment by the Company or any
--------------------
Restricted Subsidiary in
(i) the Company, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a
Related Business;
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related
Business;
(iii) Investments in Cash Equivalents and Marketable Securities;
(iv) receivables owing to the Company or any Restricted Subsidiary,
including negotiable interests held for deposit or collecting, if created
or acquired in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms; provided, however, that such
trade terms may include such concessionary trade terms as the Company or
any such Restricted Subsidiary deems reasonable under the circumstances;
(v) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(vi) loans or advances to employees made in the ordinary course of
business consistent with the Company's past practices or that of such
Restricted Subsidiary;
(vii) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under Section 4.16;
16
<PAGE>
(viii) any acquisition of assets to the extent acquired in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company;
(ix) Hedging Obligations permitted by Section 4.13(vii);
(x) an Investment existing on the date hereof;
(xi) any Investment in securities of trade creditors or customers
received in compromise of obligations of such persons incurred in the
ordinary course of business, including pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers; and
(xii) any Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (xii) that are at the time
outstanding not to exceed the greater of $5.0 million or 5% of Total
Tangible Assets.
"Permitted Liens" means, with respect to any Person,
---------------
(i) pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or
deposits or cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
incurred in the ordinary course of business;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanic's Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceeding or other Liens arising out of
judgments or awards against such Person with respect to which such Person
will then be proceeding with an appeal or other proceedings for review;
(iii) Liens for property taxes not yet subject to penalties for
non-payment, which are being contested in good faith by appropriate
proceedings or with respect to which adequate reserves have been recorded
in accordance with GAAP;
(iv) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business;
(v) survey exceptions, encumbrances, easements or reservations of,
or rights of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to use of real properties or liens incidental to the
conduct of the business of such Person or to the ownership of its
properties;
17
<PAGE>
(vi) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under this Debenture Indenture,
secured by a Lien on the same property securing such Hedging Obligations;
(vii) leases and subleases of real property which do not interfere
with the ordinary conduct of the Company's business or that of any of the
Company's Restricted Subsidiaries, and which are made on customary and
usual terms applicable to similar properties;
(viii) Liens existing as of the Issue Date and Liens created by this
Debenture Indenture or the Notes Indenture;
(ix) Liens created solely for the purpose of securing the payment of
all or a part of the purchase price of assets or property acquired or
constructed in the ordinary course of business after the date on which the
Debentures are originally issued; provided, however, that
(A) the aggregate principal amount of Indebtedness secured by
such Liens will not exceed the lesser of cost or fair market value of
the assets or property so acquired or constructed,
(B) the Indebtedness secured by such Liens will have otherwise
been permitted to be issued under this Debenture Indenture and
(C) such Liens will not encumber any of the Company's other
assets or property or that of any of the Company's Restricted
Subsidiaries and will attach to such assets or property within 180
days of the construction or acquisition of such assets or property;
(x) Liens on the assets or property of any of the Company's
Restricted Subsidiaries existing at the time such Restricted Subsidiary
became a Subsidiary of the Company and not incurred as a result of (or in
connection with or in anticipation of) such Restricted Subsidiary becoming
a Subsidiary of the Company; provided, however, that:
(A) any such Lien does not by its terms cover any property or
assets after the time such Restricted Subsidiary becomes a Subsidiary
which were not covered immediately prior to such transaction,
(B) the incurrence of the Indebtedness secured by such Lien
will have otherwise been permitted to be issued under this Debenture
Indenture, and
(C) such Liens do not extend to or cover any of the Company's
other property or assets or that of any of the Company's Restricted
Subsidiaries;
(xi) Liens to secure Capitalized Lease Obligations permitted to be
Incurred under this Debenture Indenture;
18
<PAGE>
(xii) Liens securing Indebtedness outstanding or committed under the
Senior Credit Facility;
(xiii) Liens extending, renewing or replacing in whole or in part a
Lien permitted by this Debenture Indenture; provided, however, that:
(A) such Liens do not extend beyond the property subject to the
existing Lien and improvements and construction on such property and
(B) the Indebtedness secured by the Lien may not exceed the
Indebtedness secured at the time by the existing Lien;
(xiv) Liens on inventory deemed to arise by reason of the
consignment of inventory in the Company's ordinary course of business and
that of the Company's Restricted Subsidiaries;
(xv) Liens on the assets or property of any of the Company's
Restricted Subsidiaries to secure Indebtedness of such Restricted
Subsidiary owing to and held by the Company; and
(xvi) Liens incurred in the ordinary course of business with respect
to obligations that do not exceed $1.0 million at any one time outstanding.
"Person" means any individual, corporation, limited liability company,
------
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
---------------
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"principal" of a Debenture means the Accreted Value of the Debenture
---------
plus the premium, if any, payable on the Debenture which is due or overdue or is
to become due at the relevant time.
"principal amount at maturity" of a Debenture means the amount
----------------------------
specified as such on the face of such Debenture.
"Private Exchange Debentures" has the meaning provided in the
---------------------------
Appendix.
"pro forma" means, with respect to any calculation made or required to
---------
be made pursuant to the terms of this Debenture Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act, as
determined by the Board of Directors of the Company.
19
<PAGE>
"Productive Assets" means assets (including Capital Stock) that are
-----------------
used or useable by the Company and its Restricted Subsidiaries in a Related
Business.
"Public Equity Offering" means an underwritten primary public offering
----------------------
of the Company's common stock pursuant to an effective registration statement
under the Securities Act.
"Purchase Date" has the meaning provided in Section 4.16.
-------------
"Record Date" means each Record Date specified in the Debentures,
-----------
whether or not a Legal Holiday.
"Redemption Date," when used with respect to any Debenture to be
---------------
redeemed, means the date fixed for such redemption pursuant to this Debenture
Indenture and the Debentures.
"Redemption Price," when used with respect to any Debenture to be
----------------
redeemed, means the price fixed for such redemption pursuant to this Debenture
Indenture and the Debentures.
"Refinance" means, in respect of any Indebtedness, to refinance,
---------
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any of
------------------------
the Company's Indebtedness or that of any Restricted Subsidiary referred to in
Section 4.13(b)(vi), including Indebtedness that Refinances Refinancing
Indebtedness; provided, however, that:
(i) such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced,
(ii) such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than
the Average Life of the Indebtedness being Refinanced and
(iii) such Refinancing Indebtedness has an aggregate principal amount
(or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided
further, however, that Refinancing Indebtedness will not include (x)
Indebtedness of a Subsidiary that Refinances the Company's Indebtedness or
(y) the Company's Indebtedness or that of a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
"Registrar" has the meaning provided in Section 2.03.
---------
20
<PAGE>
"Registration Rights Agreement" has the meaning set forth in the
-----------------------------
Appendix.
"Related Business" means any business related, ancillary or
----------------
complementary to the Company's businesses and that of the Restricted
Subsidiaries on the Issue Date.
"Restricted Investment" means an Investment other than a Permitted
---------------------
Investment.
"Restricted Payment" with respect to any Person means
------------------
(i) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of its Capital
Stock (other than dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and other than
pro rata dividends or other distributions made by a Subsidiary that is not
a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other
than a corporation)),
(ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company's (other than a Restricted Subsidiary), including the exercise of
any option to exchange any Capital Stock (other than into the Company's
Capital Stock that is not Disqualified Stock),
(iii) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a
Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is
---------------------
not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
---------
"Sale/Leaseback Transaction" means an arrangement relating to property
--------------------------
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
---
21
<PAGE>
"Securities Act" means, the Securities Act of 1933, as amended, or any
--------------
successor statute or statutes thereto.
"Senior Credit Facility" means that certain Credit Agreement, dated
----------------------
on or about July 28, 1999, among the Company, WEC, the Subsidiaries named
therein and the lenders from time to time party thereto, including any
collateral documents, instruments and agreements executed in connection
therewith, and the term Senior Credit Facility will also include any amendments,
supplements, modifications, extensions, renewals, restatements or refundings
thereof and any credit facilities that replace, refund or refinance any part of
the loans, other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility that increases the amount
borrowable thereunder or alters the maturity thereof.
"Significant Subsidiary" means any Restricted Subsidiary that would be
----------------------
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the final date
---------------
specified in such security as the fixed date on which all outstanding principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
-----------------------
(whether outstanding on July 15, 1999 or thereafter Incurred) which is
subordinate or junior in right of payment to the Debentures, as applicable,
pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
----------
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by:
(1) such Person,
(2) such Person and one or more Subsidiaries of such Person or
(3) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
--------------------------
(i) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof,
22
<PAGE>
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company's) organized and in existence under the laws of
the United States of America or any foreign country recognized by the
United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard and
Poor's Ratings Group, and
(v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
---
ss.ss. 77aaa-77bbbb), as in effect on the date of this Debenture Indenture.
"Total Tangible Assets" means the total consolidated assets of the
---------------------
Company and its Restricted Subsidiaries as set forth on the Company's most
recent balance sheet excluding goodwill, trademarks, patents and minority
interests of others and other intangible assets, all as determined in accordance
with GAAP.
"Trust Officer" means any officer within the Corporate Trust
-------------
Administration of the Trustee (or any successor group of the Trustee) or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject, or in the case of a successor trustee, an authorized officer assigned
to the department, division or group performing the corporation trust work of
such successor and assigned to administer this Debenture Indenture.
23
<PAGE>
"Trustee" means United States Trust Company of Texas, N.A. until a
-------
successor replaces it in accordance with the provisions of this Debenture
Indenture and thereafter means such successor.
"Unrestricted Subsidiary" means
-----------------------
(i) any Subsidiary of the Company that at the time of determination
will be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary.
The Company's Board of Directors may designate any of its Subsidiaries
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any of the
Company's Capital Stock or Indebtedness, or holds any Lien on the Company's
property or that of any Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under Section 4.10.
The Company's Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
Section 4.13 and (y) no Default will have occurred and be continuing. Any such
designation by the Company's Board of Directors will be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
---------------------------
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"U.S. Legal Tender" means such coin or currency of the United States
-----------------
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" of a Person means all classes of Capital Stock or other
------------
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"WEC" means WEC Company, a Delaware corporation.
---
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
-----------------------
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or one or more Wholly Owned Subsidiaries.
24
<PAGE>
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Debenture Indenture refers to a provision of the TIA,
such provision is incorporated by reference in, and made a part of, this
Debenture Indenture. The following TIA terms used in this Debenture Indenture
have the following meanings:
"Indenture securities" means the Debentures.
"Indenture security holder" means a Holder or a Debentureholder.
"Indenture to be qualified" means this Debenture Indenture.
"Indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on this Debenture Indenture securities means the Company or
any other obligor on the Debentures.
All other TIA terms used in this Debenture Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by SEC rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP as in effect on _______ __, 1999;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer to
this Debenture Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(6) reference to Sections or Articles means reference to such Section
or Article in this Debenture Indenture, unless stated otherwise.
25
<PAGE>
SECTION 1.04. One Class of Securities.
-----------------------
The Initial Debentures, the Private Exchange Debentures and the
Exchange Debentures shall vote and consent together on all matters as one class
and none of the Initial Debentures, the Private Exchange Debentures or the
Exchange Debentures shall have the right to vote or consent as a separate class
on any matter.
ARTICLE TWO
THE DEBENTURES
SECTION 2.01. Form and Dating.
---------------
(a) Provisions relating to the Initial Debentures, the Private
Exchange Debentures and the Exchange Debentures are set forth in the Rule 144A
Appendix attached hereto (the "Appendix"), which is hereby incorporated in and
--------
expressly made a part of this Debenture Indenture. The Initial Debentures and
the Trustee's certificate of authentication shall be substantially in the form
of Exhibit A hereto. The Exchange Debentures, the Private Exchange Debentures
and the Trustee's certificate of authentication shall be substantially in the
form of Exhibit B hereto. The Debentures may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject, if any, or depository rule or usage. The Company shall
approve the forms of the Debentures and any notation, legend or endorsement on
them. Each Debenture shall be dated the date of its issuance and shall show the
date of its authentication.
(b) The terms and provisions contained in the Appendix and in the
forms of the Debentures, annexed hereto as Exhibits A and B, shall constitute,
and are hereby expressly made, a part of this Debenture Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Debenture Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.02. Execution and Authentication; Aggregate Principal
-------------------------------------------------
Amount.
------
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Debentures for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Debenture
was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Debenture, the Debenture shall nevertheless be valid.
26
<PAGE>
On July 28, 1999, the Trustee shall authenticate and deliver
$52,204,000 principal amount at maturity of 15% Senior Discount Debentures due
July 15, 2011 in the form of Initial Debentures. In addition, the Trustee shall
authenticate Exchange Debentures and Private Exchange Debentures, as applicable,
for original issue in the aggregate principal amount at maturity not to exceed
$52,204,000, in each case upon receipt of a written order of the Company in the
form of an Officers' Certificate; provided that such Exchange Debentures and
Private Exchange Debentures shall be issuable only upon the valid surrender for
cancellation of such Initial Debentures of a like aggregate principal amount.
Further, at any time and from time to time thereafter, the Trustee shall
authenticate and deliver Debentures for original issue in an aggregate principal
amount specified, in each case upon receipt of a written order of the Company in
the form of an Officers' Certificate. Such order shall specify the amount of the
Debentures to be authenticated and the date on which the original issue of
Debentures is to be authenticated.
A Debenture shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Debenture. The
signature shall be conclusive evidence that the Debenture has been authenticated
under this Debenture Indenture.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Debentures. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Debentures whenever the Trustee may do so. Each reference in this Debenture
Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same rights as an Agent to
deal with the Company and Affiliates of the Company.
The Debentures shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 principal amount at maturity and any
integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain or designate an office or agency (which
shall be located in the Borough of Manhattan in the City of New York, State of
New York and which may be the office of the Trustee) where (a) Debentures may be
presented or surrendered for registration of transfer or for exchange
("Registrar"), (b) Debentures may be presented or surrendered for payment
("Paying Agent") and (c) notices and demands to or upon the Company in respect
of the Debentures and this Debenture Indenture may be served. The Registrar
shall keep a register of the Debentures and of their transfer and exchange. The
Company may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional Paying Agent. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar, except
that for purposes of Articles Three and Eight and Sections 4.15 and 4.16,
neither the Company nor any of its Subsidiaries or Affiliates shall act as
Paying Agent. The Company may change any Paying Agent or Registrar without
notice to any Holder.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Debenture Indenture, which agreement shall incorporate
the provisions of the TIA and
27
<PAGE>
implement the provisions of this Debenture Indenture that relate to such Agent.
The Company shall notify the Trustee of the name and address of any such Agent.
If the Company fails to maintain a Registrar or Paying Agent, or fails to give
the foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Debentures,
until such time as the Trustee has resigned or a successor has been appointed.
The Paying Agent or Registrar may resign upon 30 days notice to the Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, or interest on, the Debentures (whether such assets have been
distributed to it by the Company or any other obligor on the Debentures), and
the Company and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor on the Debentures) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may, and
upon direction of a majority of the Holders shall, at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company or any other obligor on the
Debentures to the Paying Agent, the Paying Agent shall have no further liability
for such assets.
SECTION 2.05. Debentureholder Lists.
---------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish or cause the Registrar to furnish
to the Trustee before each Record Date and at least seven Business Days before
each Interest Payment Date and at such other times as the Trustee may request in
writing a list as of such date and in such form as the Trustee may reasonably
require of the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee and the Company shall otherwise comply
with TIA ss. 312(a).
SECTION 2.06. [Intentionally Omitted]
-----------------------
SECTION 2.07. Replacement Debentures.
----------------------
If a mutilated Debenture is surrendered to the Trustee or if the
Holder of a Debenture claims that the Debenture has been lost, destroyed or
wrongfully taken, subject to the terms of the next succeeding sentence, the
Company shall issue and the Trustee, upon the receipt of a written
28
<PAGE>
order complying with Section 2.02, shall authenticate a replacement Debenture if
the Trustee's reasonable requirements for replacement Debentures are met. If
required by the Trustee or the Company, such Holder must provide an affidavit of
lost certificate and an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee, any Agent or any Authenticating Agent from any loss which any of them
may suffer if a Debenture is replaced. The Company and the Trustee may charge
such Holder for their out-of-pocket expenses in replacing a Debenture, including
reasonable fees and expenses of counsel, and for any tax that may be imposed in
replacing such Debentures. Every replacement Debenture shall constitute an
additional obligation of the Company.
SECTION 2.08. Outstanding Debentures.
----------------------
Debentures outstanding at any time are all the Debentures that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Debenture does not cease to be
outstanding because the Company or any of its Affiliates holds the Debenture.
If a Debenture is replaced pursuant to Section 2.07 (other than a
mutilated Debenture surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Debenture
is held by a bona fide purchaser. A mutilated Debenture ceases to be outstanding
upon surrender of such Debenture and replacement thereof pursuant to Section
2.07.
Except as otherwise provided in Article 8, if on a Redemption Date or
the Maturity Date the Paying Agent holds U.S. Legal Tender or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Debentures payable on that date and is not prohibited from paying such money to
the Holders thereof pursuant to the terms of this Debenture Indenture, then on
and after that date such Debentures cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Treasury Debentures.
-------------------
In determining whether the Holders of the required principal amount at
maturity of Debentures have concurred in any direction, waiver, consent or
notice, Debentures owned by the Company or any of its Affiliates shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver, consent or notice, only Debentures which a Trust Officer of
the Trustee actually knows are so owned shall be so considered.
SECTION 2.10. Temporary Debentures.
--------------------
Until definitive Debentures are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Debentures upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of
29
<PAGE>
temporary Debentures to be authenticated and the date on which the temporary
Debentures are to be authenticated. Temporary Debentures shall be substantially
in the form of definitive Debentures but may have variations that the Company
considers appropriate for temporary Debentures. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate upon receipt of a
written order of the Company pursuant to Section 2.02 definitive Debentures in
exchange for, and upon surrender of, temporary Debentures. Until so exchanged,
the temporary Debentures shall in all respects be entitled to the same benefits
under this Debenture Indenture as definitive Debentures authenticated and
delivered hereunder.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Debentures to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Debentures surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Debentures surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new Debentures
to replace Debentures that it has paid or delivered to the Trustee for
cancellation. If the Company shall acquire any of the Debentures, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Debentures unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of cash interest on the
Debentures (without regard to any grace period therefor), it shall pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest to the Persons who are Holders on a subsequent special Record
Date, which date shall be the fifteenth day preceding the date fixed by the
Company for the payment of defaulted interest or the next succeeding Business
Day if such date is not a Business Day. At least 15 days before the subsequent
special Record Date, the Company shall mail to each Holder, as of a recent date
selected by the Company, with a copy to the Trustee, a notice that states the
subsequent special Record Date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Debentures may use "CUSIP" numbers, and if
so, the Trustee shall use such CUSIP numbers in notices of redemption or
exchange as a convenience to Holders; provided that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of such CUSIP
numbers printed in the notice or on the Debentures, and that reliance may be
placed only on the other identification numbers printed on the Debentures. The
Company shall promptly notify the Trustee of any change in a CUSIP number.
30
<PAGE>
SECTION 2.14. Deposit of Moneys.
-----------------
Prior to 9:00 a.m. New York City time on each Interest Payment Date
and on the Maturity Date, the Company shall deposit with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Debentures pursuant to Section 3.07
and Paragraph 6 of the Debentures, it shall notify the Trustee and the Paying
Agent in writing in the form of an Officer's Certificate of the (i) Redemption
Date, (ii) the principal amount of the Debentures to be redeemed and (iii) the
redemption price.
The Company shall give each notice provided for in this Section 3.01
at least 30 days but no more than 60 days before the Redemption Date, together
with an Officers' Certificate stating that such redemption shall comply with the
conditions contained herein and in the Debentures.
SECTION 3.02. Selection of Debentures To Be Redeemed.
--------------------------------------
If fewer than all of the Debentures are to be redeemed, selection of
the Debentures to be redeemed will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Debentures are listed or, if the Debentures are not then listed on a national
securities exchange, on a pro rata basis, by lot or in such other fair and
reasonable manner chosen at the discretion of the Trustee; provided, however,
that if a partial redemption is made with the proceeds of a Public Equity
Offering pursuant to Section 3.07(b), selection of the Debentures or portion
thereof for redemption shall be made by the Trustee only on a pro rata basis,
unless such method is otherwise prohibited. The Company shall promptly notify
the Trustee and the Paying Agent in writing of the date of listing and the name
of the securities exchange if and when the Debentures are listed on a principal
national securities exchange. The Trustee shall make the selection from the
Debentures outstanding and not previously called for redemption and shall
promptly notify the Company in writing of the Debentures selected for redemption
and, in the case of any Debenture selected for partial redemption, the principal
amount at maturity thereof to be redeemed. Debentures in denominations of $1,000
principal amount at maturity may be redeemed only in whole. The Trustee may
select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal amount at maturity of Debentures that have
denominations larger than $1,000
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<PAGE>
principal amount at maturity. Provisions of this Debenture Indenture that apply
to Debentures called for redemption also apply to portions of Debentures called
for redemption.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder whose Debentures are to be redeemed,
with a copy to the Trustee and any Paying Agent. At the Company's written
request no less than 35 days prior to the Redemption Date, the Trustee shall
give the notice of redemption in the Company's name and at the Company's
expense.
Each notice for redemption shall identify the Debentures to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Debentures pursuant to which such
redemption is being made;
(5) that Debentures called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless the Company defaults in making the redemption
payment, the Accreted Value on Debentures called for redemption ceases to
accrue and interest on the Debentures cease to accrue on and after the
Redemption Date, and the only remaining right of the Holders of such
Debentures is to receive payment of the Redemption Price plus accrued
interest, if any, upon surrender to the Paying Agent of the Debentures
redeemed;
(7) if any Debenture is being redeemed in part, the portion of the
principal amount at maturity of such Debenture to be redeemed and that,
after the Redemption Date, and upon surrender of such Debenture, a new
Debenture or Debentures in the aggregate principal amount at maturity equal
to the unredeemed portion thereof will be issued;
(8) if fewer than all the Debentures are to be redeemed, the
aggregate principal amount at maturity of Debentures to be redeemed and the
aggregate principal amount at maturity of Debentures to be outstanding
after such partial redemption and, if the redemption is not made pro rata,
the identification of the particular Debentures (or portion thereof) to be
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Debentures.
32
<PAGE>
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.03,
Debentures called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Debentures called for redemption shall be paid at
the Redemption Price and the amount of accrued interest payable thereon,
provided that if a Debenture is redeemed on or after a Record Date for an
interest payment but on or prior to the related Interest Payment Date, then any
accrued and unpaid interest shall be paid to the Holder of record at the close
of business on such Record Date. Failure to give notice or any defect in the
notice to any Holder shall not affect the validity of the notice to any other
Holder.
Except in connection with a defeasance pursuant to Section 8.02, at
any time prior to the mailing of a notice of redemption to the Holders pursuant
to Section 3.03, the Company may withdraw, revoke or rescind any notice of
redemption delivered to the Trustee without any continuing obligation to redeem
the Debentures.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before 9:00 a.m. New York City time on the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Debentures to be
redeemed on that date (other than Debentures or portions of Debentures called
for redemption which have been delivered by the Company to the Trustee for
cancellation). The Paying Agent shall promptly return to the Company any U.S.
Legal Tender so deposited which is not required for that purpose, except with
respect to monies owed as obligations to the Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, the Accreted Value on the Debentures to be redeemed will cease to accrue
on and after the applicable Redemption Date, whether or not such Debentures are
presented for payment.
SECTION 3.06. Debentures Redeemed in Part.
---------------------------
Upon surrender of a Debenture that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate for the Holder a new
Debenture or Debentures equal in principal amount to the unredeemed portion of
the Debenture surrendered.
SECTION 3.07. Optional Redemption.
-------------------
(a) The Debentures will be redeemable at the Company's option, in
whole or in part, at any time on or after July 15, 2004, at the respective
redemption price (expressed as a percentage of Accreted Value) set forth below,
plus accrued and unpaid interest to the redemption date
33
<PAGE>
(subject to the right of Holders of record on the relevant Record Date to
receive interest due on the relevant Interest Payment Date), if redeemed during
the 12-month period beginning on July 15 of the year indicated below:
Redemption
Period Price
------ ----------
2004 ....................... 107.500%
2005 ....................... 105.000%
2006 ....................... 102.500%
2007 and thereafter ........ 100.000%
(b) Notwithstanding the foregoing, before July 15, 2002, the Company
may at its option redeem all of the outstanding Debentures with the proceeds of
one or more Public Equity Offerings, at a redemption price (expressed as a
percentage of Accreted Value) of 115% plus accrued interest to the redemption
date (subject to the right of Holders of record on the relevant Record Date to
receive interest due on the relevant Interest Payment Date); provided that such
redemption must occur within 60 days of the Public Equity Offering.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Debentures.
---------------------
The Company shall pay or cause to be paid the principal of and
interest on the Debentures on the dates and in the manner provided in the
Debentures and in this Debenture Indenture. An installment of principal of or
interest on the Debentures shall be considered paid on the date it is due if the
Trustee or Paying Agent (other than the Company or an Affiliate of the Company)
holds on that date U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Debenture Indenture.
Notwithstanding anything to the contrary contained in this Debenture
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such
34
<PAGE>
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 10.02.
SECTION 4.03. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done, at its own cost and expense, all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate
existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of each of them (as the same may be amended
from time to time) and the material rights (charter and statutory) and
franchises of the Company and each such Restricted Subsidiary; provided,
however, that neither the Company nor any Restricted Subsidiary shall be
required to preserve any right or franchise, or the corporate, partnership or
other existence of any Restricted Subsidiary, if the Board of Directors of the
Company shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole.
SECTION 4.04. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all lawful claims for
labor, materials and supplies that, if unpaid, might by law become a Lien upon
the property of it or any of its Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings properly
instituted and diligently conducted for which reserves, to the extent required
under and in accordance with GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its material properties in good working order and
condition (subject to ordinary wear and tear) and make all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto and
actively conduct and carry on its business; provided, however, that nothing in
this Section 4.05 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the operation and maintenance of any of its
properties, if such discontinuance is, in the reasonable good faith judgment of
the Company or the Restricted Subsidiary, as the case may be, desirable in the
conduct of the business of the Company and its Restricted Subsidiaries, taken as
a whole.
(b) The Company shall provide or cause to be provided, for itself and
each of its Restricted Subsidiaries, insurance (including reasonably appropriate
self-insurance consistent
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with past practice) against loss or damage of the kinds that, in the good faith
judgment of the Board of Directors of the Company, are adequate and appropriate
for the conduct of the business of the Company and such Restricted Subsidiaries
in a prudent manner, with reputable insurers or with the government of the
United States of America or an agency or instrumentality thereof, in such
amounts, with such deductibles, and by such methods as shall be customary, in
the reasonable good faith judgment of the Board of Directors of the Company, for
companies similarly situated in the industry.
SECTION 4.06. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, an Officers' Certificate stating that a
review of its activities and the activities of its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Debenture Indenture and
further stating, as to each such Officer signing such certificate, that to the
best of such Officer's knowledge, based on such review, the Company during such
preceding fiscal year has kept, observed, performed and fulfilled each and every
such covenant contained in this Debenture Indenture and no Default or Event of
Default occurred during such year and at the date of such certificate there is
no Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end. Such Officer's
Certificate shall comply with TIA Section 314(a)(4).
(b) So long as not contrary to the then-current recommendations of
the American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.08 shall be accompanied by a written
report of the Company's independent accountants (who shall be a firm of
established national reputation) that in conducting their audit of such
financial statements nothing has come to their attention that would lead them to
believe that the Company has violated any provisions of Article Four or Five of
this Debenture Indenture or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Debenture Indenture or the Debentures,
the Company shall deliver to the Trustee, at its address set forth in Section
10.02, by registered or certified mail or by telegram, telex or facsimile
transmission followed by hard copy by registered or certified mail an Officers'
Certificate specifying such event, notice or other action within five Business
Days of its becoming aware of such occurrence.
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SECTION 4.07. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as are not in the aggregate
reasonably likely to have a material adverse effect on the financial condition
or results of operations of the Company and its Restricted Subsidiaries, taken
as a whole.
SECTION 4.08. SEC Reports.
-----------
Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15 (d) of the Exchange Act, the Company
will file with the SEC (to the extent the SEC will accept such filings) and
provide the Trustee and Debentureholders with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections.
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Debentures as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Debenture Indenture;
and (to the extent that it may lawfully do so) the Company hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
---------------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to make a Restricted Payment if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment:
(i) a Default will have occurred and be continuing (or would result
therefrom);
(ii) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
Section 4.13; or
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(iii) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from July 3, 1999 to the end of the
most recent fiscal quarter ending at least 45 days prior to the date
of such Restricted Payment (or, in case such Consolidated Net Income
will be a deficit, minus 100% of such deficit);
(B) 100% of the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of the Company's Capital Stock
(other than Disqualified Stock) or an equity contribution from a
holder of the Company's Capital Stock subsequent to the Issue Date
(other than an issuance or sale to any of the Company's Subsidiaries
and other than an issuance or sale to an employee stock ownership plan
or to a trust established by the Company or any of its Subsidiaries
for the benefit of their employees) or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of the Company that have been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to the
Company or a Subsidiary of the Company), together with the net
proceeds received by the Company upon such conversion or exchange, if
any, plus;
(C) an amount equal to the aggregate net proceeds (including the
fair market value (as determined in good faith by a Board Resolution
of the Company) of property other than cash that would constitute
Marketable Securities or a Related Business so long as there is no
restriction on the sale of such property) of any
(i) sale or other disposition of Investments made by the Company
and its Restricted Subsidiaries, or
(ii) dividend from, or the sale of the stock of, an Unrestricted
Subsidiary;
provided, however, that the foregoing amount shall not exceed the amount of such
Investment previously made (and treated as a Restricted Payment) by the Company
or any Restricted Subsidiary, and, in the case of any such clause (ii), the
amount of Investments previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) will not
prohibit:
(i) any acquisition of any Capital Stock of the Company made out of
the proceeds of the substantially concurrent sale of, or made by exchange
for, the Company's Capital Stock (other than Disqualified Stock and other
than Capital Stock issued or sold to any of the Company's Subsidiaries or
an employee stock ownership plan or to a trust established by the Company
or any of its Subsidiaries for the benefit of the Company or their
employees); provided,
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however, that (A) such acquisition of Capital Stock will be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale will be excluded from the calculation of amounts
under clause (iii)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted to be Incurred pursuant
to the covenant described under Section 4.13; provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value will be excluded in the calculation of the amount of
Restricted Payments;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Disqualified Stock made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Disqualified Stock of the Company which is permitted to be issued pursuant
to this Debenture Indenture; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value will be excluded in the calculation of the amount of Restricted
Payments;
(iv) dividends paid or the consummation at any irrevocable redemption
within 60 days after the date of declaration or notice of redemption
thereof if at such date of declaration or notice such dividend or
redemption would have complied with this covenant; provided, however, that
such dividend will be included in the calculation of the amount of
Restricted Payments;
(v) so long as no Default has occurred or will occur as a result of
such payment, the repurchase or other acquisition of shares of, or options to
purchase shares of, the Company's common stock or the common stock of any of the
Company's Subsidiaries from former employees or former directors of the
Company's or any of the Company's Subsidiaries (or permitted transferees of such
former employees, or former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto) approved by
the Company's Board of Directors under which such individuals purchase or sell
or are granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases and other
acquisitions will not exceed $1 million in any calendar year; provided further,
however, that such repurchases and other acquisitions will be deducted in the
calculation of the amount of Restricted Payments;
(vi) prepayments, repayments or purchases of Indebtedness pursuant to
Section 4.16(ii)(D); provided, however, that such prepayment, repayment or
purchase will be included in the calculation of the amount of Restricted
Payments;
(vii) repurchase of Equity Interests of the Company deemed to occur
upon the exercise of stock options to the extent Equity Interests represent
a portion of the Exercise Price of such options; or
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(viii) so long as no Default has occurred and is continuing or would
be caused thereby, other Restricted Payments in an aggregate amount not to
exceed $3 million since the date of this Debenture Indenture.
(c) The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant shall be determined in good faith by the Board of Directors
whose resolution with respect thereto shall be conclusive. The Board of
Directors' determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million.
(d) The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (a) of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments as the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
SECTION 4.11. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries.
-----------------------
The Company will not, and will not permit any of the Company's
Restricted Subsidiaries to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries or pay any
Indebtedness owed to the Company,
(ii) make any loans or advances to the Company or
(iii) transfer any of its property or assets to the Company,
except:
(i) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date (including restrictions under this
Debenture Indenture, the Debentures, the Notes Indenture, the Notes and the
Guarantees of the Notes);
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(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;
(iii) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(iv) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; provided that
such security agreements or mortgages constitute Permitted Liens and such
Indebtedness is permitted to be Incurred under this Debenture Indenture;
(v) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition;
(vi) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(vii) restrictions on the transfer of assets subject to any Lien
permitted under this Debenture Indenture imposed by the holder of such
Lien;
(viii) encumbrances or restrictions existing under or arising pursuant
to Credit Facilities entered into in accordance with this Debenture
Indenture; provided that the encumbrances or restrictions in such Credit
Facilities are not materially more restrictive than those contained in the
Senior Credit Agreement as in effect on the date hereof;
(ix) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (iii) of the first paragraph of this
covenant;
(x) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(xi) any agreement or instrument governing Capital Stock (other than
Disqualified Stock) of any Person that is in effect on the date such Person
is acquired by the Company or a Restricted Subsidiary; and
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(xii) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (i) through (xi) above; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of
the Board of Directors of the Company, not materially more restrictive with
respect to such dividend and other payment restrictions than those
contained in the dividends or other payment restrictions prior to such
amendment, modification, restatement, renewal, increase, supplement,
refunding, replacement or refinancing.
SECTION 4.12. Limitation on Affiliate Transactions.
------------------------------------
(a) the Company will not, and will not permit any Restricted Subsidiary
to, enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with any of the Company's Affiliates (an "Affiliate
Transaction") unless the terms thereof:
(i) are no less favorable to the Company or such Restricted Subsidiary
than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate,
(ii) if such Affiliate Transaction involves an amount in excess of $1
million, (A) are set forth in writing and (B) have been approved by a
majority of the members of the Company's Board of Directors having no
personal stake in such Affiliate Transaction; and
(iii) if such Affiliate Transaction involves as amount in excess of
$10 million, have been determined by nationally recognized investment
banking or accounting firm to be fair, from a financial standpoint, to the
Company and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) will not
prohibit:
(i) any Restricted Payment permitted to be paid pursuant to the
covenant described under Section 4.10,
(ii) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the
Company's Board of Directors,
(iii) the grant of stock options or similar rights to the Company's
employees and directors pursuant to plans approved by the Company's Board
of Directors,
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(iv) loans or advances to employees in the ordinary course of business
in accordance with the Company's past practices or past practices of the
Company's Restricted Subsidiaries, but in any event not to exceed $1
million in the aggregate outstanding at any one time,
(v) the payment of reasonable fees to the Company's directors and
directors of Restricted Subsidiaries who are not the Company's employees or
employees of Restricted Subsidiaries,
(vi) any Affiliate Transaction between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries,
(vii) the issuance or sale of any Capital Stock of the Company (other
than Disqualified Stock),
(viii) any employment agreement with reasonable terms entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Restricted Subsidiary,
(ix) transactions with a Person that is an Affiliate of the Company
solely because the Company owns an Equity Interest in such Person, so long
as no other Affiliate of the Company owns an interest in such Person,
(x) the payment of transaction, management, consulting and advisory
fees and related expenses to Madison Dearborn Partners, LLC and its
Affiliates; provided that such fees shall not, in the aggregate, exceed:
(A) in the case of a management fee, $600,000 in any twelve-
month period, and
(B) in the case of a transaction fee, 1.0% of the total equity
value of, plus the Indebtedness assumed from, the business
acquired in such transaction or series of related transactions.
(xi) reasonable fees and expenses and compensation paid to, and
indemnity provided on behalf of, officers, directors or employees of the
Company or any Subsidiary as determined in good faith by the Board of
Directors of the Company or senior management; and
(xii) any agreement as in effect as of the Issue Date or any amendment
thereto so long as such amendment is not more disadvantageous to the
Holders in any material respect.
SECTION 4.13. Limitation on Indebtedness.
--------------------------
(a) the Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur, directly or indirectly, any Indebtedness; provided,
however, that the Company and any Restricted Subsidiary may Incur Indebtedness
if, on the date of such Incurrence and after giving
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effect thereto, the Consolidated Coverage Ratio exceeds 1.75 to 1 if such
Indebtedness is Incurred prior to July 31, 2001 or 2 to 1 if such Indebtedness
in Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Senior Credit Facility;
provided, however, that, after giving effect to any such Incurrence, the
aggregate principal amount of such Indebtedness then outstanding does not
exceed $40 million less the sum of all principal payments with respect to
such Indebtedness pursuant to Section 4.16(a)(ii)(A);
(ii) Indebtedness owed to and held by the Company or any of its
Restricted Subsidiaries; provided, however, that (x) any subsequent
issuance or transfer of any Capital Stock which results in any such
Restricted Subsidiary ceasing to be a Subsidiary or any subsequent transfer
of such Indebtedness (other than to the Company or any of its Restricted
Subsidiaries) will be deemed, in each case, to constitute the Incurrence of
such Indebtedness by the obligor thereon that is not permitted to be
Incurred under this clause (ii) and (y) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the Debenture;
(iii) the Debentures, the Notes issued by WEC on the issue date and
their respective Exchange Notes;
(iv) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (i), (ii) or (iii) of this covenant);
(v) Indebtedness of a Subsidiary Incurred and outstanding on or prior
to the date on which such Subsidiary was acquired by the Company (other
than Indebtedness Incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company); provided,
however, that on the date of such acquisition and after giving effect
thereto, the Company would have been able to Incur at least $1.00 of
additional Indebtedness pursuant to clause (a) above;
(vi) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) above or pursuant to clause (iii), (iv) or (v)
above or this clause (vi);
(vii) Hedging Obligations or Commodity Agreements not entered into for
speculative purposes and directly related to Indebtedness permitted to be
Incurred by the Company or any of its Restricted Subsidiaries pursuant to
this Debenture Indenture;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
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of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiaries, in an aggregate
principal amount to not exceed $5.0 million at any time outstanding;
(ix) the guarantee by the Company of Indebtedness of a Restricted
Subsidiary that was permitted to be incurred by another provision of this
covenant;
(x) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each case, that the amount thereof is included in Consolidated
Interest Expense of the Company as accrued;
(xi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Subsidiary,
other than guarantees of Indebtedness incurred by any person acquiring all
or any portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided, however, that (a) such Indebtedness
is not reflected on the balance sheet of the Company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this clause
(a)) and (b) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including noncash
proceeds (the fair market value of such noncash proceeds being measured at
the time received and without giving effect to any subsequent changes in
value) actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(xii) the incurrence of obligations in respect of performance and
surety bonds provided by the Company or any of its Restricted Subsidiaries
in the ordinary course of business;
(xiii) the incurrence of Indebtedness consisting of guarantees of
loans made to management for the purpose of permitting management to
purchase Equity Interests of the Company, in an amount not to exceed $1.0
million at any one time outstanding;
(xiv) Indebtedness of the Company or any Restricted Subsidiary arising
from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business, provided that such Indebtedness is satisfied within five business
days of Incurrence;
(xv) Indebtedness of the Company or WEC issued to directors,
employees, officers or consultants of the Company, WEC or a Restricted
Subsidiary in connection with the redemption or purchase of Capital Stock
of the Company or WEC that, by its terms, is
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subordinated to the Debentures, is not secured by any assets of the
Company, WEC or its Restricted Subsidiaries and does not require cash
payments prior to the Stated Maturity of the Debentures and Refinancing
Indebtedness in respect thereof, in an aggregate principal amount which,
when added together with the amount of Indebtedness Incurred pursuant to
this clause (15) and then outstanding, does not exceed $1.0 million; and
(xvi) Indebtedness in an aggregate principal amount which, together
with the Company's other Indebtedness outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (i) through (xv)
above or paragraph (a)) does not exceed $10 million at any one time
outstanding.
(c) Notwithstanding the foregoing, neither the Company nor any of its
Restricted Subsidiaries will Incur any Indebtedness pursuant to the foregoing
paragraph (b) if the proceeds thereof are used, directly or indirectly, to
Refinance any of the Company's Subordinated Obligations unless such Indebtedness
will be subordinated to the Debentures to at least the same extent as such
Subordinated Obligations.
(d) For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
(e) If the Company incurs Indebtedness which is subordinate or junior
in right of payment to any other Indebtedness of the Company, the Company shall
cause such subordinate or junior Indebtedness to be subordinated to the
Debentures to the same extent as such other Indebtedness.
(f) the Company will not permit any Unrestricted Subsidiary to incur
any Indebtedness other than Non-Recourse Debt; provided, however, that if any
such Indebtedness ceases to be Non-Recourse Debt, such event will be deemed to
constitute an Incurrence of Indebtedness by the Company or any of its Restricted
Subsidiaries.
SECTION 4.14. Limitation on the Sale or Issuance of Preferred Stock
-----------------------------------------------------
of Restricted Subsidiaries.
--------------------------
The Company will not sell or otherwise dispose of any Preferred Stock
of a Restricted Subsidiary, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell or otherwise dispose of any of its
Preferred Stock except to the Company or any of its Wholly Owned Subsidiaries.
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SECTION 4.15. Change of Control.
-----------------
(a) Upon the occurrence of any of the following events (each a "Change
of Control"), each Holder will have the right to require the Company to
repurchase such Holder's Debentures at a purchase price in cash equal to 101% of
the Accreted Value thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant Record
Date to receive interest due on the relevant Interest Payment Date):
(i) prior to the first public offering of the Company's common stock,
the Permitted Holders cease to be the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of
at least 35% of the aggregate of the total voting power of the Company's
Voting Stock, whether as a result of issuance of the Company's securities,
the Company's merger, consolidation, liquidation or dissolution, any direct
or indirect transfer of securities by the Company or otherwise (for
purposes of this clause (i) and clause (ii) below, the Permitted Holders
will be deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent corporation);
(ii) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that for
purposes of this clause (ii) such person will be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Company's Voting Stock; provided, however, that the Permitted
Holders beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Company's Voting Stock than such other person and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Company's Board of Directors (for
the purposes of this clause (ii), such other person will be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as
defined in this clause (ii)), directly or indirectly, of more than 35% of
the voting power of the Voting Stock of such parent corporation and the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation);
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election by the Company's Board of
Directors or whose nomination for election by the Company's shareholders,
as applicable, was approved by a vote of a majority of the Company's
directors, as applicable, then still in office who were either directors at
the
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beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Company's Board of Directors, as applicable, then in office;
(iv) the adoption of a plan relating to the Company's liquidation or
dissolution; or
(v) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all of the Company's assets to another Person
(other than a Person that is controlled by the Permitted Holders), and, in
the case of any such merger or consolidation, the Company's securities that
are outstanding immediately prior to such transaction and which represent
100% of the aggregate voting power of the Company's Voting Stock are
changed into or exchanged for cash, securities or property, unless pursuant
to such transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the surviving
corporation.
(b) Within 30 days following any Change of Control, the Company will
mail a notice to each Holder with a copy to the Trustee (the "Change of Control
Offer") stating:
(i) that a Change of Control has occurred and that such Holder has the
right to require the Company to purchase such Holder's Debentures at a
purchase price in cash equal to 101% of the Accreted Value thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to
the right of holders of record on the relevant Record Date to receive
interest on the relevant Interest Payment Date);
(ii) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
(iii) the repurchase date (which will be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(iv) the instructions determined by the Company, consistent with the
covenant described hereunder, that a Holder must follow in order to have
its Debentures purchased.
(c) Holders electing to have a Debenture purchased will be required to
surrender the Debenture, with an appropriate form (as provided for in Exhibit A
or B, as appropriate) duly completed, to the Company at the address specified in
the notice not later than 3 p.m., New York City time, two Business Days prior to
the purchase date. Holders will be entitled to withdraw their election if the
Trustee or the Company receives not later than 3 p.m., New York City time, two
Business Days prior to the purchase date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Debenture which was delivered for
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purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Debenture purchased.
(d) On the purchase date, all Debentures purchased by the Company under
this Section shall be delivered to the Trustee for cancellation, and the Company
shall pay or cause to be paid the purchase price plus accrued and unpaid
interest, if any, to the Holders entitled thereto.
(e) At the time the Company delivers Debentures to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Debentures are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Debenture shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.
(f) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Debentures pursuant to this
covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached the Company's
obligations under the covenant described hereunder by virtue thereof.
SECTION 4.16. Limitation on Sales of Assets and Subsidiary Stock.
--------------------------------------------------
(a) The Company will not, and will not permit any of the Company's
Restricted Subsidiaries to, directly or indirectly, consummate any Asset
Disposition unless:
(i) the Company or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair market
value (including as to the value of all non-cash consideration), as
determined in good faith by the Company's Board of Directors, of the shares
and assets subject to such Asset Disposition and at least 75% of the
consideration thereof received by the Company or such Restricted Subsidiary
is in the form of cash or cash equivalents or Marketable Securities and
(ii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as
the case may be);
(A) first, to the extent the Company elects (or is required by
-----
the terms of any Indebtedness), to prepay, repay, redeem or purchase
Indebtedness under the Senior Credit Facility or Indebtedness (other
than any Disqualified Stock) of a Restricted Subsidiary required to be
repaid upon such Asset Sale, including the Notes (in each case other
than Indebtedness owed to the Company or any of its Affiliates) within
one year from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash;
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(B) second, to the extent of the balance of such Net Available
------
Cash after application in accordance with clause (A), to the extent
the Company elects, to acquire Additional Assets within one year from
the later of the date of such Asset Disposition or the receipt of such
Net Available Cash;
(C) third, to the extent of the balance of such Net Available
-----
Cash after application in accordance with clauses (A) and (B) and to
the extent the Net Available Cash is permitted to be distributed to
the Company pursuant to the terms of the Notes Indenture, to make an
offer (the "Offer") to the holders of the Debentures (and to holders
of other Indebtedness that is pari passu with the Debentures
designated by the Company) to purchase Debentures (and such other pari
passu Indebtedness) pursuant to and subject to the conditions
contained in this Debenture Indenture; and
(D) fourth, to the extent of the balance of such Net Available
------
Cash after application in accordance with clauses (A), (B) and (C) to
(x) the acquisition by the Company or any of its Restricted
Subsidiaries of Additional Assets or (y) the prepayment, repayment or
purchase of the Company's Indebtedness (other than any Disqualified
Stock and other than Indebtedness owed to any of the Company's
Affiliates) or Indebtedness of any Subsidiary (other than Indebtedness
owed to the Company or any of its Affiliates), in each case within one
year from the later of the receipt of such Net Available Cash and the
date the offer described in clause (b) below is consummated;
provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A), (C) or (D) above, the Company or any
such Restricted Subsidiary will permanently retire such Indebtedness and will
cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this paragraph, the Company and its
Restricted Subsidiaries will not be required to apply any Net Available Cash in
accordance with this paragraph except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this paragraph exceeds $1.0 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash will be invested in
Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: any liabilities (as shown on the Company or such Restricted
Subsidiary's most recent balance sheet), of the Company's or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Debentures) that are assumed by the transferee of any
such assets; and any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
converted, sold or exchanged by the Company or such Restricted Subsidiary into
cash within 30 days of the related Asset Sale (to the extent of the cash
received in that conversation).
(b) In the event of an Asset Disposition that requires the purchase of
the Debentures (and other pari passu Indebtedness) pursuant to clause (a)(ii)(C)
above, the Company will be
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required to purchase Debentures tendered pursuant to an offer by the Company for
the Debentures (and other pari passu Indebtedness) at a purchase price of 100%
of their Accreted Value (without premium) plus accrued but unpaid interest (or,
in respect of such other pari passu Indebtedness, 100% of the principal amount
or such lesser price, if any, as may be provided for by the terms of such pari
passu Indebtedness) in accordance with the procedures (including prorating in
the event of oversubscription) set forth in this Debenture Indenture. If the
aggregate purchase price of Debentures (and any other pari passu Indebtedness)
tendered pursuant to such offer is less than the Net Available Cash allotted to
the purchase thereof, the Company will be required to apply the remaining Net
Available Cash in accordance with clause (a)(ii)(D) above. The Company will not
be required to make such an offer to purchase Debentures (and other pari passu
Indebtedness) pursuant to this covenant if the Net Available Cash available
therefor is less than $5.0 million (which lesser amount will be carried forward
for purposes of determining whether such an offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
(c) Notwithstanding paragraphs (a) and (b) above, the Company and its
Restricted Subsidiaries will be permitted to consummate an Asset Disposition
with respect to assets in any transaction or series of related transactions with
a fair market value of $2.0 million or less without complying with such
paragraphs to the extent (i) at least 75% of the consideration for such Asset
Sale constitutes cash, cash equivalents, Marketable Securities or Productive
Assets and (ii) such Asset Disposition is for fair market value (as determined
in good faith by the Company's Board of Directors); provided that any
consideration not constituting Productive Assets received by the Company or any
Restricted Subsidiary in connection with an Asset Disposition permitted to be
consummated under this paragraph shall be subject to the provisions of
paragraphs (a) and (b) above and included in Net Available Cash.
(d) (1) Promptly, and in any event within 30 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Debentures purchased by the
Company either in whole or in part (subject to prorating as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
which the Company in good faith believes will enable such Holders to make an
informed decision.
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to
the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the
Asset Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.17(a). Upon
the expiration of the period for which the Offer remains open (the "Offer
Period"), the Company shall deliver to the Trustee for cancellation the
Debentures or portions thereof which have been properly tendered to and are
to be accepted by the Company. The Trustee shall, on the Purchase Date,
mail or deliver payment to each tendering Holder in the amount of the
purchase price. In the
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event that the aggregate purchase price of the Debentures delivered by the
Company to the Trustee is less than the Offer Amount, the Trustee shall
deliver the excess to the Company immediately after the expiration of the
Offer Period for application in accordance with this Section.
(3) Holders electing to have a Debenture purchased shall be required to
surrender the Debenture, with an appropriate form duly completed, to the
Company at the address specified in the notice not later than 3:00 p.m.,
New York City time, two Business Days prior to the Purchase Date. Holders
shall be entitled to withdraw their election if the Trustee or the Company
receives not later than 3:00 p.m., New York City time, two Business Days
prior to the Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Debenture which was delivered for purchase by the Holder and a statement
that such Holder is withdrawing his election to have such Debenture
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Debentures surrendered by Holders exceeds the Offer Amount, the
Company shall select the Debentures to be purchased on a pro rata basis
taking into account any other tendered Senior Subordinated Indebtedness
which is the subject of such offer (with such adjustments as may be deemed
appropriate by the Company so that only Debentures in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose
Debentures are purchased only in part shall be issued new Debentures equal
in principal amount to the unpurchased portion of the Debentures
surrendered.
(4) At the time the Company delivers Debentures to the Trustee which
are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Debentures are to be accepted by
the Company pursuant to and in accordance with the terms of this Section. A
Debenture shall be deemed to have been accepted for purchase at the time
the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(e) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Debentures pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached the Company's obligations under this clause by virtue thereof.
SECTION 4.17. Limitation on Liens.
-------------------
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or permit to exist any Lien on any of its
property or assets (including Capital Stock), whether owned on the Issue Date or
thereafter acquired, securing any obligation, other than Permitted Liens, unless
contemporaneously therewith effective provision is made to secure the Debentures
equally and ratably with (or on a senior basis to the Subordinated Obligations)
such obligation for so long as such obligation is so secured.
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SECTION 4.18. Limitation on Sale/Leaseback Transactions.
-----------------------------------------
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction with respect to any property unless
(i) the Company or such Restricted Subsidiary would be entitled to (A)
Incur Indebtedness in an amount equal to the Attributable Debt with respect
to such Sale/Leaseback Transaction pursuant to the covenant described under
Section 4.13 and (B) create a Lien on such property securing such
Attributable Indebtedness without equally and ratably securing the
Debentures pursuant to the covenant described under Section 4.17, and
(ii) the transfer of such property is permitted by, and the Company or
such Restricted Subsidiary applies the proceeds of such transaction in
compliance with, the covenant described under Section 4.16.
SECTION 4.19. Limitations on Status as Investment Company.
-------------------------------------------
The Company shall not and shall not permit its Subsidiaries from
becoming "investment companies" (as that term is defined in the Investment
Company Act of 1940, as amended), or from otherwise becoming subject to
regulation under the Investment Company Act.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets of the
-----------------------------------------------
Company.
-------
(a) The Company will not consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all the Company's assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") will be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) will expressly assume, by an
indenture supplemental thereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the Company's obligations under the
Debentures and this Debenture Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Subsidiary as a result of such
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<PAGE>
transaction as having been Incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default will have occurred
and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
Section 4.13; and
(iv) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Debenture Indenture.
(b) The Successor Company will be the Company's successor and will
succeed to, and be substituted for, and may exercise every right and power the
Company has under this Debenture Indenture, but the Company's predecessor in the
case of a conveyance, transfer or lease will not be released from the obligation
to pay the principal of and interest on the Debentures.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company defaults in the payment of cash interest on any
Debentures when the same becomes due and payable and the Default continues
for a period of 30 days; or
(2) the Company defaults in the payment of the principal on any
Debentures when such principal becomes due and payable, at maturity, upon
optional redemption, upon required repurchase, upon declaration or
otherwise (including the failure to make a payment to purchase Debentures
tendered pursuant to a Change of Control under Section 4.15 or an Offer
under Section 4.16); or
(3) the failure by the Company to comply with its obligations under
Section 5.01 above; or
(4) the failure by the Company to comply for 30 days after notice with
any of its obligations under Sections 4.08, 4.10, 4.11, 4.12, 4.13, 4.14,
4.15 (other than a failure to purchase the Debentures) and 4.16 (other than
a failure to purchase the Debentures); or
(5) the Company's failure to comply for 60 days after notice with its
other agreements contained in this Debenture Indenture; or
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(6) Indebtedness of the Company or any of its Significant Subsidiaries
is not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5 million; or
(7) the Company or any Significant Subsidiary of the Company (A)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or order
for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a Custodian of it or for
substantially all of its property, (D) consents to or acquiesces in the
institution of a bankruptcy or an insolvency proceeding against it, (E)
makes a general assignment for the benefit of its creditors, or (F) takes
any corporate action to authorize or effect any of the foregoing; or
(8) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Significant Subsidiary of
the Company in an involuntary case or proceeding under any Bankruptcy Law,
which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any such Significant Subsidiary, (B) appoint a Custodian of the
Company or any such Significant Subsidiary or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs; and
such judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(9) any judgment or decree for the payment of money in excess of $5
million is entered against the Company or any of its Significant
Subsidiaries, remains outstanding for a period of 90 days following such
judgment and is not discharged, waived or stayed within 10 days after
notice; or
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration.
------------
(a) If an Event of Default (other than an Event of Default specified in
Section 6.01(7) or (8) with respect to the Company) occurs and is continuing,
and has not been waived pursuant to Section 6.04, then the Trustee, by written
notice to the Company, or the Holders of at least 25% in principal amount at
maturity of outstanding Debentures by notice in writing to the Company and the
Trustee may declare the Accreted Value of and accrued but unpaid interest on all
the Debentures to be due and payable specifying the respective Event of Default
and that it is a "notice of acceleration."
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(b) If an Event of Default specified in Section 6.01(7) or (8) relating
to the Company occurs and is continuing with respect to the Company, the
principal of and interest on all the Debentures will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders.
(c) The Holders of a majority in principal amount of the Debentures
may, on behalf of the Holders of all of the Debentures, rescind and cancel an
acceleration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely
because of the acceleration, (iii) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (iv) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01(7) or 6.01(8), the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Debentures or to enforce the
performance of any provision of the Debentures or this Debenture Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Debentures or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority in
principal amount at maturity of the then outstanding Debentures by written
notice to the Trustee may, on behalf of the Holders of all of the Debentures,
waive an existing Default or Event of Default and its consequences, except a
Default in the payment of principal of or interest on any Debenture as specified
in clauses (1) and (2) of Section 6.01. When a Default or Event of Default is
waived, it is cured and ceases to exist for every purpose of this Debenture
Indenture.
SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of a majority in principal amount
at maturity of the then outstanding Debentures may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it, including,
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without limitation, any remedies provided for in Section 6.03. Subject to
Section 7.01, however, the Trustee may refuse to follow any direction that the
Trustee believes conflicts with any law or this Debenture Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another Holder, or
that may involve the Trustee in personal liability; provided that the Trustee
may take any other action deemed proper by the Trustee which is not inconsistent
with such direction; and provided further, that this provision shall not affect
the rights of the Trustee set forth in Section 7.01(d).
SECTION 6.06. Limitation on Suits.
-------------------
Subject to Article Seven, if an Event of Default occurs and is
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under this Debenture Indenture at the request or direction of
any of the Holders unless such Holders have offered to the Trustee indemnity or
security against any loss, liability or expense reasonably satisfactory to the
Trustee. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder of a Debenture may pursue any remedy
with respect to this Debenture Indenture or the Debentures unless (i) such
Holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) Holders of at least 25% in principal amount at maturity of the
outstanding Debentures have requested the Trustee to pursue the remedy, (iii)
such Holders have offered the Trustee security or indemnity against any loss,
liability or expense reasonably satisfactory to the Trustee, (iv) the Trustee
has not complied with such request within 60 days after the receipt thereof and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount at maturity of the outstanding Debentures have not given the
Trustee a direction inconsistent with such request within such 60-day period.
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Debenture Indenture, the
right of any Holder to receive payment of principal of and interest on a
Debenture, on or after the respective due dates expressed in such Debenture, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
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SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal, premium or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Debentures for the whole amount
of principal, premium, if any, and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest at the rate set
forth in Section 4.01 and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents, consultants and
counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Debentures, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, if
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agents, consultants and counsel, and any other amounts due the Trustee under
Section 7.07. The Company's payment obligations under this Section 6.09 shall be
secured in accordance with the provisions of Section 7.07 hereunder. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
-----
Second: if the Holders are forced to proceed against the Company
------
directly without the Trustee, to Holders for their collection costs;
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Third: to Holders for amounts due and unpaid on the Debentures for
-----
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Debentures for
principal and interest, respectively; and
Fourth: to the Company or any other obligor on the Debentures, as
------
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior notice to the Company, may fix a Record Date
and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Debenture Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in principal amount at maturity of the outstanding Debentures.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Debenture
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically set
forth in this Debenture Indenture and no covenants or obligations shall be
implied in this Debenture Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Debenture
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Indenture. However, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Debenture Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by
it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Debenture Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not assured to it.
(e) Whether or not herein expressly provided, every provision of this
Debenture Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, Debenture or
other paper or document reasonably believed by it to be genuine and to have been
signed or presented by the proper Person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate, an Opinion of Counsel or
both, which shall conform to
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Sections 10.04 and 10.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or indirectly or by or through
agents or attorneys and the Trustee shall not be responsible for the misconduct
or negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers conferred upon it by this Debenture Indenture.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled, upon reasonable notice to the Company, to examine the books,
records, and premises of the Company, personally or by agent or attorney and to
consult with the officers and representatives of the Company, including the
Company's accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Debenture Indenture at the request, order
or direction of any of the Holders pursuant to the provisions of this Debenture
Indenture, unless such Holders shall have offered to the Trustee security or
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request, order
or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) The Trustee may determine (i) the execution by any Holder of any
instrument in writing, (ii) the date of such execution or (iii) the authority of
any Person executing the same, in any manner the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(i) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Debenture Indenture and
the Debentures shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
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SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Debentures and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. However, if the Trustee acquires any
conflicting interest within the meaning of Section 3.10(b) of the TIA, it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Offering Circular and the recitals contained herein and in the
Debentures shall be taken as statements of the Company and the Trustee assumes
no responsibility for their correctness. The Trustee makes no representation as
to the validity or adequacy of this Debenture Indenture or the Debentures, and
it shall not be accountable for the Company's use of the proceeds from the
Debentures, and it shall not be responsible for any statement of the Company in
this Debenture Indenture or the Debentures other than the Trustee's certificate
of authentication.
SECTION 7.05. Notice of Default.
-----------------
If a Default occurs and is continuing and if it is actually known by
the Trustee, the Trustee shall mail to each Holder notice of the Default within
90 days after such Default occurs. Except in the case of a Default in payment of
principal of, premium, if any, or interest on, any Debenture, including an
accelerated payment and the failure to make payment on the purchase date
pursuant to a Change in Control under Section 4.15 or on the Purchase Date
pursuant to an Offer under Section 4.16 and, except in the case of a failure to
comply with Article Five hereof, the Trustee may withhold the notice if and so
long as its board of directors, the executive committee of its board of
directors or a committee of its Trust Officers in good faith reasonably
determines that withholding the notice is in the best interest of the Holders.
In addition, the Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, a certificate complying with Section 4.06 regarding
knowledge of the Company's compliance with all covenants and conditions under
this Debenture Indenture. The Company also shall deliver to the Trustee pursuant
to Section 6.01, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what action
the Company is taking or proposes to take in respect thereof.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15, beginning with the May 15 following
the date of this Debenture Indenture, the Trustee shall, to the extent that any
of the events described in TIA (S) 313(a) occurred within the previous twelve
months, but not otherwise, mail to each Holder a brief report dated as of such
date that complies with TIA (S) 313(a). The Trustee also shall comply with TIA
(S)(S) 313(b) and (c).
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The Company shall promptly notify the Trustee if the Debentures become
listed on, or delisted from, any stock exchange and the Trustee shall comply
with TIA (S) 313(d).
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable fees and
expenses, including out-of-pocket expenses incurred or made by it in connection
with the performance of its duties under this Debenture Indenture. Such expenses
shall include the reasonable fees and expenses of the Trustee's agents,
consultants, experts and counsel, except such disbursements, advances and
expenses as may be attributable to its gross negligence.
The Company shall indemnify the Trustee and its agents, employees,
stockholders and directors and officers for, and hold them harmless against, any
loss, liability or expense incurred by them, arising out of or in connection
with the administration of this trust including the reasonable costs and
expenses of defending themselves against any claim or liability in connection
with the exercise or performance of any of their rights, powers or duties
hereunder. The Company need not reimburse any expense or indemnify against any
loss, liability or expense Incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may seek
indemnity. At the Trustee's sole discretion, the Company shall defend the claim
and the Trustee shall cooperate and may participate in the defense; provided
that any settlement of a claim shall be approved in writing by the Trustee.
Alternatively, the Trustee may at its option have separate counsel of its own
choosing and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Debentures on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Debentures. The
Trustee's right to receive payment of any amounts due under this Section 7.07
shall not be subordinate to any other liability or indebtedness of the Company
(even though the Debentures may be subordinate to such other liability or
indebtedness).
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(7) or (8) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law; provided, however, that this shall not
affect the Trustee's rights as set forth in the preceding paragraph or Section
6.10.
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SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Debentures may
remove the Trustee by so notifying the Company and the Trustee and may appoint a
successor Trustee. The Company may remove the Trustee if:
(A) the Trustee fails to comply with Section 7.10;
(B) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(C) a receiver or other public officer takes charge of the Trustee or
its property; or
(D) the Trustee becomes incapable of acting.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
If the Trustee resigns or is removed as Trustee or if a vacancy exists
in the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the Debentures may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Debenture Indenture. A successor Trustee shall mail notice of its succession to
each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount at maturity of the then outstanding
Debentures may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
corporation shall be otherwise qualified and eligible under this Article Seven.
If at the time such successor or successors by merger, conversion,
consolidation or transfer of assets to the Trustee shall succeed to the trust
created by this Debenture Indenture any of the Debentures shall have been
authenticated but not delivered, any successor to the Trustee may adopt a
certificate of authentication of any predecessor Trustee, and deliver such
Debentures so authenticated; and in case at that time any of the Debentures
shall not have been authenticated, any successor to the Trustee may authenticate
such Debentures either in the name of any predecessor hereunder or in the name
of the successor to the Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Debentures or in this Debenture
Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Debenture Indenture shall always have a Trustee who satisfies the
requirements of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least $50
million as set forth in its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S)
310(b); provided, however, that there shall be excluded from the operation of
TIA (S) 310(b)(1) any Debenture Indenture or Debenture Indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310
shall apply to the Company, as obligor of the Debentures.
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
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ARTICLE EIGHT
DISCHARGE OF DEBENTURE INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Debentures; Defeasance.
------------------------------------------------
(a) When (i) the Company delivers to the Trustee all outstanding
Debentures (other than Debentures replaced pursuant to Section 2.07) for
cancellation or (ii) all outstanding Debentures have become due and payable at
maturity or will be due and payable within 60 days as a result of the mailing of
a notice of redemption pursuant to Article Three hereof, in each case, and the
Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Debentures, including interest
thereon to maturity or such redemption date (other than Debentures replaced
pursuant to Section 2.07), and if in either case the Company pays all other sums
payable hereunder by the Company, then this Debenture Indenture shall, subject
to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Debenture Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel as to the
satisfaction of all conditions to such satisfaction and discharge of this
Debenture Indenture and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all its obligations under the Debentures and this Debenture
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.10 through 4.17 and the operation of Section 6.01(4) and the limitations
contained in Section 5.01("covenant defeasance option"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Debentures may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Debentures may not be
accelerated because of an Event of Default specified in Section 6.01(4) or
because of the failure of the Company to comply with Section 5.01.
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.07, 2.08, 7.07, 7.08, 8.05, 8.06 and
the Appendix shall survive until the Debentures have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.05 and 8.06 shall
survive.
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SECTION 8.02. Conditions to Defeasance.
------------------------
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations for the payment of principal of, interest and
premium, if any, on the Debentures to maturity or redemption (including, in
the case of payment of principal, interest and premium, if any, to
redemption, under arrangements reasonably satisfactory to the Trustee
providing for redemption pursuant to irrevocable instructions delivered to
the Trustee prior to 60 days before a Redemption Date), as the case may be;
(2) the Company delivers to the Trustee a certificate from a nationally
recognized firm of independent public accountants or a nationally
recognized investment banking firm expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay principal, premium, if any, and interest when due on all
outstanding Debentures to maturity or redemption, as the case may be;
(3) (x) no Default or Event of Default with respect to the Debentures
shall have occurred and be continuing on the date of such deposit and (y)
no Event of Default under Section 6.01(7) or (8) shall occur at any time in
the period ending on the 123rd day after the date of such deposit (it being
understood that the condition set forth in the preceding clause (y) is a
condition subsequent which shall not be deemed satisfied until the
expiration of such 123-day period, but in the case of the covenant
defeasance, the covenants which are defeased under Section 8.01(b) will
cease to be in effect unless an Event of Default under Section 6.01(7) or
(8) occurs during such period);
(4) the Company delivers to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors
of the Company;
(5) neither the deposit nor the defeasance shall result in a default or
Event of Default under any other material agreement to which the Company is
a party or by which the Company is bound;
(6) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(7) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has
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been published by, the Internal Revenue Service a ruling, or (ii) since the
date of this Debenture Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Debentureholders
will not recognize income, gain or loss for Federal income tax purposes as
a result of such defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(8) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Debentureholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(9) the Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Debentures as contemplated by this Article
Eight have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Debentures at a future date in
accordance with Article Three.
SECTION 8.03. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article Eight. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Debenture Indenture to the payment of principal of
and interest on the Debentures.
SECTION 8.04. Repayment to Company.
--------------------
The Trustee and the Paying Agent shall promptly turn over to the
Company, upon delivery of an Officers' Certificate stating that such payment
does not violate the terms of this Debenture Indenture, any excess money or
securities held by them at any time, subject to Section 7.07.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon its written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Debentureholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations.
------------------------------------
The Company shall pay and shall indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
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SECTION 8.06. Reinstatement.
-------------
If the funds deposited with the Trustee to effect legal defeasance or
covenant defeasance are insufficient to pay the principal of, premium, if any,
and interest on the Debentures when due, then the obligations of the Company
under this Debenture Indenture will be revived and no such defeasance will be
deemed to have occurred.
If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender
or U.S. Government Obligations in accordance with this Article Eight by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Debenture Indenture and the
Debentures shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Eight until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with this Article Eight; provided, however, that, if the Company has
made any payment of interest on or principal of any Debentures because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Debentures to receive such payment from the U.S. Legal
Tender or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Debenture Indenture or the Debentures
without notice to or consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency; provided
that such amendment or supplement does not, in the reasonable opinion of
the Trustee, adversely affect the rights of any Holder in any material
respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Debentures in addition to or in place
of certificated Debentures (provided that the uncertificated Debentures are
issued in registered form for purposes of Section 163(f) of the Code, or in
a manner such that the uncertificated Debentures are described in Section
163(f)(2)(B) of the Code);
(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Debenture Indenture under the TIA;
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(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder; or to surrender any right or power conferred upon the Company;
(6) to add Guarantees with respect to the Debentures;
(7) to secure the Debentures; or
(8) to make any other change that does not adversely affect in any
material respect the rights of any Holders hereunder;
provided that the Company has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 9.01.
After an amendment, supplement or waiver under this Section 9.01
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
SECTION 9.02. With Consent of Holders.
-----------------------
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the then
outstanding Debentures, may amend or supplement this Debenture Indenture or the
Debentures, without notice to any other Holders. Subject to Section 6.07, the
Holder or Holders of at least a majority in aggregate principal amount at
maturity of the then outstanding Debentures may waive compliance by the Company
with any provision of this Debenture Indenture or the Debentures without notice
to any other Holder. No amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, shall, without the consent of each Holder of each
Debenture affected thereby:
(1) reduce amount of Debentures whose Holders must consent to an
amendment or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Debenture or make any change to the calculation of the Accreted Value
of the Debentures;
(3) reduce the principal of or change or have the effect of changing
the Stated Maturity of any Debenture, or change the date on which any
Debentures may be subject to repurchase, or reduce the premium payable upon
the redemption of any Debenture or change the time at which any Debenture
may be redeemed in accordance with Article Three, or alter the provisions
(including definitions) set forth in Section 4.15 in a manner adverse to
the Holders;
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(4) make any Debentures payable in money or payable in a place other
than that stated in the Debentures;
(5) make any change in Section 6.04 or Section 6.07 or the second
sentence of this Section;
(6) amend, modify, change or waive any provision of this Section 9.02.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
SECTION 9.03. Compliance with TIA.
-------------------
If at the time of an amendment to this Debenture Indenture or the
Debentures, this Debenture Indenture shall be qualified under the TIA, every
amendment, waiver or supplement of this Debenture Indenture or the Debentures
shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Debenture or portion of a Debenture that evidences the same debt as
the consenting Holder's Debenture, even if notation of the consent is not made
on any Debenture. Subject to the following paragraph, any such Holder or
subsequent Holder may revoke the consent as to such Holder's Debenture or
portion of such Debenture by notice to the Trustee or the Company received
before the date the amendment, supplement or waiver becomes effective.
The Company may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be (i) the later of 30 days prior
to the first solicitation of such consent or the date of the most recent list of
Holders furnished to the Trustee prior to such solicitation pursuant to Section
2.05 above or (ii) such other date as the Company may designate. If a Record
Date is fixed, then notwithstanding the last sentence of the immediately
preceding paragraph, those Persons who were Holders at such Record Date (or
their duly designated proxies), and only those Persons, shall be entitled to
revoke any consent previously given, whether or not such Persons
71
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continue to be Holders after such Record Date. No such consent shall be valid or
effective for more than 180 days after such Record Date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it makes a change described in any of clauses (1) through
(7) of Section 9.02, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Debenture who has consented to it and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
same debt as the consenting Holder's Debenture; provided that, without the
consent of a Holder, any such waiver shall not impair or affect the right of
such Holder to receive payment of principal of and interest on a Debenture, on
or after the respective due dates expressed in such Debenture, or to bring suit
for the enforcement of any such payment on or after such respective dates.
SECTION 9.05. Notation on or Exchange of Debentures.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Debenture, the
Trustee may require the Holder of such Debenture to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Debenture about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Debenture shall issue and the
Trustee shall authenticate a new Debenture that reflects the changed terms. Any
such notation or exchange shall be made at the sole cost and expense of the
Company. Failure to make the appropriate notation or to issue a new Debenture
shall not affect the validity of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Debenture Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel and an Officers' Certificate each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article Nine is authorized or permitted by this Debenture Indenture. Such
Opinion of Counsel shall not be an expense of the Trustee.
SECTION 9.07. Payment for Consent.
-------------------
Neither the Company nor any Affiliate of the Company shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Debenture
Indenture or the Debentures, unless such consideration is offered to be paid to
all Holders that so consent, waive or agree to amend in the time frame set forth
in solicitation documents relating to such consent, waiver or agreement.
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ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. TIA Controls.
------------
If any provision of this Debenture Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Debenture Indenture by the TIA, the required provision shall control.
SECTION 10.02. Notices.
-------
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
commercial courier service, by telex, by telecopier or registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company:
Woods Equipment Company
6944 Newburg Road
Rockford, IL 61108
Facsimile No.: (815) 381-6047
Telephone: (815) 381-6000
Attn: D. Stephen Crider
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Facsimile No.: (312) 861-2200
Telephone: (312) 861-2000
Attn: Michael Kerr, Esq.
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if to the Trustee:
United States Trust Company of Texas, N.A.
c/o United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036-1532
Facsimile No.: (212) 852-1626
Attn: Corporate Trust Administration
Each of the Company and the Trustee by written notice to each other
such Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company and the Trustee shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when receipt is confirmed if delivered by commercial courier service;
when receipt is acknowledged, if faxed; and five (5) calendar days after mailing
if sent by registered or certified mail, postage prepaid (except that a notice
of change of address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar and shall be sufficiently given to him
if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 10.03. Communications by Holders with Other Holders.
--------------------------------------------
Holders may communicate pursuant to the TIA (S) 312(b) with other
Holders with respect to their rights under this Debenture Indenture or the
Debentures. The Company, the Trustee, the Registrar and any other Person shall
have the protection of the TIA (S) 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Debenture Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Debenture Indenture relating to the proposed action have been complied
with; and
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(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Debenture Indenture relating to the proposed
action have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Debenture Indenture, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition and the definitions relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is reasonably necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with;
provided, that with respect to matters of fact, an Opinion of Counsel
may rely on an Officers' Certificate or a certificate of an appropriate public
official.
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 10.07. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 10.08. Governing Law.
-------------
75
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THIS DEBENTURE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS DEBENTURE INDENTURE.
SECTION 10.09. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Debenture Indenture may not be used to interpret another
Debenture Indenture, loan or debt agreement of the Company or any of its
Subsidiaries or of any other Person. Any such Debenture Indenture, loan or debt
agreement may not be used to interpret this Debenture Indenture.
SECTION 10.10. No Recourse Against Others.
--------------------------
No past, present or future director, officer, employee,
stockholder or incorporator, as such, of the Company or of the Trustee shall
have any liability for any obligations of the Company under the Debentures or
this Debenture Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. Each Holder by accepting a Debenture
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Debentures.
SECTION 10.11. Successors.
----------
All agreements of the Company in this Debenture Indenture and
the Debentures shall bind their respective successors. All agreements of the
Trustee in this Debenture Indenture shall bind its successors.
SECTION 10.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Debenture
Indenture. Each signed copy shall be an original, but all of them together shall
represent the same agreement.
SECTION 10.13. Severability.
------------
In case any one or more of the provisions in this Debenture
Indenture or in the Debentures shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
76
<PAGE>
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Debenture Indenture have been inserted for
convenience of reference only, are not to be considered a part of this Debenture
Indenture and shall in no way modify or restrict any of the terms of provisions
hereof.
77
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Debenture
Indenture to be duly executed, all as of the date first written above.
Issuer:
WOODS EQUIPMENT COMPANY
By: /s/ D. Stephen Crider
----------------------------------------
Name: D. Stephen Crider
Title: VP & CFO
Trustee:
UNITED STATES TRUST COMPANY
OF TEXAS, N.A.,
By: /s/ Glenn E. Mitchell
----------------------------------------
Name: Glenn E. Mitchell
Authorized Signatory
<PAGE>
RULE 144A APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS
PURSUANT TO RULE 144A
PROVISIONS RELATING TO INITIAL DEBENTURES,
-----------------------------------------
PRIVATE EXCHANGE DEBENTURES
---------------------------
AND EXCHANGE DEBENTURES
-----------------------
1. Definitions.
-----------
1.1 Definitions.
-----------
For the purposes of this Appendix the following terms shall have the
meanings indicated below, provided that all capitalized terms used but not
defined shall have the meanings given such terms in the Debenture Indenture:
"Depositary" means The Depository Trust Company, its nominees and
their respective successors and assigns.
"Exchange Debentures" means the 15% Senior Discount Debentures due
July 15, 2011 to be issued pursuant to the Debenture Indenture in connection
with a Registered Exchange Offer pursuant to a Registration Rights Agreement.
"Initial Purchaser" means with respect to the Initial Debentures
issued on July 28, 1999, Credit Suisse First Boston Corporation.
"Initial Debentures" means (i) $52,204,000 principal amount at
maturity of 15% Senior Discount Debentures due July 15, 2011, issued on July 28,
1999.
"principal"of a Debenture means the Accreted Value of the Debenture
plus the premium, if any, payable on the Debenture which is due or overdue or is
to become due at the relevant time.
"principal amount at maturity" of a Debenture means the amount
specified as such on the face of such Debenture.
"Private Exchange" means the offer by the Company, pursuant to a
Registration Rights Agreement, to the Initial Purchaser to issue and deliver to
each Initial Purchaser, in exchange for the Initial Debentures held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Debentures.
<PAGE>
"Private Exchange Debentures" means the 15% Senior Private Exchange
Debentures due July 15, 2011, if any, to be issued pursuant to the Debenture
Indenture to the Initial Purchaser in a Private Exchange.
"Purchase Agreement" means with respect to the Initial Debentures
issued on July 28, 1999, the Purchase Agreement dated July 23, 1999, between the
Company and the Initial Purchaser named therein.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to a Registration Rights Agreement, to certain Holders of Initial Debentures, to
issue and deliver to such Holders, in exchange for such Initial Debentures, a
like aggregate principal amount of Exchange Debentures registered under the
Securities Act.
"Registration Rights Agreement" means with respect to the Initial
Debentures issued on July 28, 1999, the Registration Rights Agreement dated July
28, 1999 among the Company and the Initial Purchaser named therein.
"Securities" means the Initial Debentures, the Exchange Debentures and
the Private Exchange Debentures, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the shelf registration statement
issued by the Company, in connection with the offer and sale of Initial
Debentures, Exchange Debentures or Private Exchange Debentures, pursuant to a
Registration Rights Agreement.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.3(b) hereto.
1.2 Other Definitions
-----------------
Term Defined in Section:
---- ------------------
"Agent Members"...................................... 2.1(b)
"Global Security".................................... 2.1(a)
"Rule 144A".......................................... 2.1(a)
<PAGE>
2. The Securities.
--------------
2.1 Form and Dating.
---------------
On July 28, 1999, $52,204,000 principal amount at maturity of the
Initial Debentures are being offered and sold by the Company pursuant to the
Purchase Agreement.
(a) Global Securities. Initial Debentures offered and sold to a QIB
-----------------
in reliance on Rule 144A under the Securities Act ("Rule 144A") as provided in
the Purchase Agreement issued in the form of Exchange Debentures, shall be
issued initially in the form of one or more permanent global Securities in
definitive, fully registered form without interest coupons with the global
securities legend and restricted securities legend set forth in Exhibit 1 hereto
(each, a "Global Security"), which shall be deposited on behalf of the
purchasers of the Initial Debentures represented thereby with the Trustee as
custodian for the Depositary (or with such other custodian as the Depositary may
direct), and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Securities
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
---------------------
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary for such
Global Security or Global Securities or the nominee of such Depositary and (b)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under the Debenture Indenture with respect to any Global Security
held on their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in this Section 2.1
-----------------------
or Section 2.3 or 2.4 of this Appendix, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of certificated
Securities.
<PAGE>
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
--------------
On July 28, 1999, $52,204,000 principal amount at maturity of 15% Discount
Debentures due July 15, 2011, and (2) Exchange Debentures or Private Exchange
Debentures for issue in a Registered Exchange Offer or a Private Exchange,
respectively, in exchange for a like principal amount of Initial Debentures, in
each case upon a written order of the Company in the form of an Officers'
Certificate. Such order shall specify the amount of the Securities to be
authenticated and the date on which the original issue of Debentures is to be
authenticated and whether the Securities are to be Initial Debentures, Exchange
Debentures or Private Exchange Debentures.
2.3 Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Global Securities.
------------------------------------------
(i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in accordance
with the Debenture Indenture (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Depositary therefor. A
transferor of a beneficial interest in a Global Security shall deliver to
the Registrar a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in the Global
Security. The Registrar shall, in accordance with such instructions
instruct the Depositary to credit to the account of the Person specified in
such instructions a beneficial interest in the Global Security and to debit
the account of the Person making the transfer the beneficial interest in
the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4 of this Appendix), a Global
Security may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
(iii) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 of this Appendix or
Section 2.10 of the Debenture Indenture, prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Securities, such Securities may be exchanged
only in accordance with such procedures as are substantially consistent
with the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Debentures intended to
ensure that such transfers comply with Rule 144A) and such other procedures
as may from time to time be adopted by the Company.
(b) Legend.
------
<PAGE>
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing Initial Debentures and Private
Exchange Debentures (and all Securities issued in exchange therefor or in
substitution thereof, other than Exchange Debentures) shall bear a legend
in substantially the following form:
"THIS DEBENTURE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS DEBENTURE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS DEBENTURE IS HEREBY NOTIFIED THAT THE SELLER OF THIS
DEBENTURE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS DEBENTURE AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS DEBENTURE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (II) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (III)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (I) THROUGH (III) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS DEBENTURE FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act, the Registrar
shall permit the Holder thereof to exchange such Transfer Restricted
Security for a certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer of such Transfer
Restricted Security, if the Holder certifies in writing to the Registrar
that its request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Security).
(iii) After a transfer of any Initial Debentures or Private Exchange
Debentures during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Debentures or Private Exchange
Debentures, as the case may be,
<PAGE>
all requirements pertaining to legends on such Initial Debentures or such
Private Exchange Debentures will cease to apply, but the requirements
requiring such Initial Debentures or such Private Exchange Debentures
issued to certain Holders be issued in global form will continue to apply,
and Initial Debentures or Private Exchange Debentures in global form
without legends will be available to the transferee of the Holder of such
Initial Debentures or Private Exchange Debentures upon exchange of such
transferring Holder's Initial Debentures or Private Exchange Debentures or
directions to transfer such Holder's interest in the Global Security, as
applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Debentures pursuant to which Holders of such Initial
Debentures are offered Exchange Debentures in exchange for their Initial
Debentures, all requirements pertaining to such Initial Debentures that
Initial Debentures issued to certain Holders be issued in global form will
continue to apply and Initial Debentures in global form with the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders of such Initial Debentures that do not exchange their Initial
Debentures, and Exchange Debentures in global form without the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders that exchange such Initial Debentures in such Registered Exchange
Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Debentures pursuant to which Holders of such Initial Debentures are
offered Private Exchange Debentures in exchange for their Initial
Debentures, all requirements pertaining to such Initial Debentures that
Initial Debentures issued to certain Holders be issued in global form will
still apply, and Private Exchange Debentures in global form with the
restricted securities legend set forth in Exhibit 1 hereto will be
available to Holders that exchange such Initial Debentures in such Private
Exchange.
(c) Cancellation or Adjustment of Global Security. At such time as
---------------------------------------------
all beneficial interests in a Global Security have either been exchanged for
certificated Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depositary for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for certificated Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities Custodian for such
Global Security) with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
(d) Obligations with Respect to Transfers and Exchanges of
------------------------------------------------------
Securities.
- ----------
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall, upon receipt of a written order
complying with Section 2.2 of this Debenture Indenture, authenticate
certificated Securities and Global Securities at the Registrar's or any co-
registrar's request.
<PAGE>
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.06, 4.15 and Section 9.06 of the
Debenture Indenture).
(iii) The Registrar or any co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated Security
selected for redemption in whole or in part pursuant to Article Three of
the Debenture Indenture, except the unredeemed portion of any certificated
Security being redeemed in part, or (b) any Security for a period beginning
15 Business Days before the mailing of a notice of an offer to repurchase
or redeem Securities or 15 Business Days before an Interest Payment Date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of the Debenture Indenture shall evidence the same debt and shall
be entitled to the same benefits under the Debenture Indenture as the
Securities surrendered upon such transfer or exchange.
(e) No Obligation of the Trustee.
----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or other Person with respect to the accuracy of the records of
the Depositary or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be
the Depositary or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security shall be exercised only through
the Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in relying
upon information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
<PAGE>
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under the Debenture Indenture or under applicable law with respect
to any transfer of any interest in any Security (including any transfers
between or among Depositary participants, members or beneficial owners in
any Global Security) other than to require delivery of such certificates
and other documentation or evidence as are expressly required by, and to do
so if and when expressly required by, the terms of the Debenture Indenture,
and to examine the same to determine substantial compliance as to form with
the express requirements hereof.
2.4 Certificated Securities,
-----------------------
(a) A Global Security deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under the Debenture Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depositary to the
Trustee, to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Security, an equal aggregate principal amount of
certificated Securities of authorized denominations. Any portion of a Global
Security transferred pursuant to this Section shall be executed, authenticated
and delivered only in denominations of $1,000 principal amount at maturity and
any integral multiple thereof and registered in such names as the Depositary
shall direct. Any certificated Initial Debenture delivered in exchange for an
interest in the Global Security shall, except as otherwise provided by Section
2.3(b), bear the restricted securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under the
Debenture Indenture or the Securities.
(d) In the event of the occurrence of either of the events specified
in Section 2.4(a) above, the Company will promptly make available to the Trustee
a reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
<PAGE>
EXHIBIT 1
TO RULE 144A
APPENDIX
[GLOBAL SECURITIES LEGEND]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THIS
DEBENTURE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[RESTRICTED SECURITIES LEGEND]
THIS DEBENTURE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS DEBENTURE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS DEBENTURE IS HEREBY NOTIFIED THAT
THE SELLER OF THIS DEBENTURE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS DEBENTURE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS
DEBENTURE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A
<PAGE>
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (II) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (III) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(III) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS DEBENTURE FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of this Global Signature of authorized
Principal Amount of this Principal Amount of this Security following such decrease officer of Trustee or
Date of Exchange Global Security Global Security or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
---------
FORM OF INITIAL DEBENTURE
-------------------------
CUSIP No.:
WOODS EQUIPMENT COMPANY
15% SENIOR DISCOUNT DEBENTURE DUE JULY 15, 2011
No. $
WOODS EQUIPMENT COMPANY, a Delaware corporation (the "Company," which
term includes any successor entity), for value received promises to pay to
_______ or registered assigns, the principal sum of ______ Dollars, on _____ __,
2011.
Interest Payment Dates: January 15, April 15, July 15 and October 15
Record Dates: January 1, April 1, July 1 and October 1
Reference is made to the further provisions of this Debenture
contained herein, which will for all purposes have the same effect as if set
forth at this place.
This Debenture was issued on July 28, 1999 with original issue
discount ("OID") for federal income tax purposes. For further
information, please contact D. Stephen Crider, Chief Financial
Officer, Woods Equipment Company, 6944 Newburg Road, Rockford, IL
61108, (815) 381-6000.
IN WITNESS WHEREOF, WOODS EQUIPMENT COMPANY has caused this Debenture
to be signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.
WOODS EQUIPMENT COMPANY
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
Dated: _____________
<PAGE>
Certificate of Authentication
This is one of the 15% Senior Discount Debentures due July 15, 2011
referred to in the within-mentioned Debenture Indenture.
________________________________,
as Trustee
Dated: ____________ By:__________________________________________
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
15% SENIOR DISCOUNT DEBENTURE DUE JULY 15, 2011
1. Interest. WOODS EQUIPMENT COMPANY, a Delaware corporation (the
--------
"Company"), promises to pay interest on this Debentures as set forth below. This
Debenture will accrete at a rate of 15% per annum, compounded quarterly from an
initial Accreted Value of $481.45 per $1,000 principal amount at Stated Maturity
on the Issue Date to a principal amount in arrears of $1,000 principal amount at
Stated Maturity by July 15, 2004.
The Company shall pay interest at a rate of 15% per annum, from July
15, 2004, or from the most recent date on which interest has been paid or, if no
interest has been paid, from July 15, 2004. The Company will pay interest
quarterly in arrears on each Interest Payment Date, commencing October 15, 2004.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
[Notwithstanding the foregoing, if a Registration Default (as defined
in the Registration Rights Agreement) occurs, additional interest will accrue on
this Debenture at a rate of 0.50% per annum, from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all Registration Defaults have been cured, calculated on the principal
amount of this Debenture as of the date on which such interest is payable. Such
interest is payable in addition to any other interest payable from time to time
with respect to this Debenture. The Trustee will not be deemed to have notice of
a Registration Default until it shall have received actual notice of such
Registration Default.]/1/
The Company shall pay interest on overdue principal at the rate borne
by the Debentures plus 2% per annum and will pay cash interest on overdue
installments of cash interest (without regard to any applicable grace periods)
at such higher rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
-----------------
Debentures (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Debentures are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Debentures to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal and interest by
its check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
_______________________
/1/ To be included in the Initial Debentures.
<PAGE>
3. Paying Agent and Registrar. Initially, United States Trust
--------------------------
Company of Texas, a Texas banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
4. Debenture Indenture. The Company issued the Debentures under an
-------------------
Indenture, dated as of July 28, 1999 (the "Debenture Indenture"), among the
Company and the Trustee. This Debenture is one of a duly authorized issue of
Initial Debentures of the Company designated as its 15% Senior Discount
Debentures due July 15, 2011. The Initial Debentures issued on July 28, 1999 and
any Private Exchange Debentures and Exchange Debentures issued pursuant to the
Debenture Indenture are treated as a single class of securities under the
Debenture Indenture. Capitalized terms herein are used as defined in the
Debenture Indenture unless otherwise defined herein. The terms of the Debentures
include those stated in the Debenture Indenture and those made part of the
Debenture Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Debenture
Indenture. Notwithstanding anything to the contrary herein, the Debentures are
subject to all such terms, and Holders of Debentures are referred to the
Debenture Indenture and the TIA Act for a statement of them. The Debentures are
general unsecured obligations of the Company. To the extent of any conflict
between the terms of the Debentures and the Debenture Indenture, the applicable
terms of the Debenture Indenture shall govern.
5. Redemption.
----------
(a) The Debentures will be redeemable at the Company's option, in whole
or in part, at any time on or after July 15, 2004, at the respective redemption
price (expressed as a percentage of Accreted Value) set forth below, plus
accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date), if redeemed during the 12-month period
beginning on July 15 of the year indicated below:
Redemption
Period Price
------ ----------
2004 ............................................... 107.500%
2005 ............................................... 105.000%
2006 ............................................... 102.500%
2007 and thereafter ................................ 100.000%
(b) Notwithstanding the foregoing, before July 15, 2002, the Company may
at its option redeem all of the outstanding Debentures with the proceeds of one
or more Public Equity Offerings, at a redemption price (expressed as a
percentage of Accreted Value) of 115% plus accrued interest to the redemption
date (subject to the right of Holders of record on the relevant Record Date to
receive interest due on the relevant Interest Payment Date); provided that such
redemption must occur within 60 days of the Public Equity Offering.
<PAGE>
6. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Debentures to be redeemed at such Holder's registered address.
Debentures in denominations of $1,000 principal amount at maturity may be
redeemed only in whole. Debentures in denominations larger than $1,000 principal
amount at maturity may be redeemed in part but only in multiples of $1,000
principal amount at maturity.
Except as set forth in the Debenture Indenture, if monies for the
redemption of the Debentures called for redemption shall have been deposited
with the Paying Agent for redemption on such Redemption Date, then, unless the
Company defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Debentures called for redemption will cease to bear
interest from and after such Redemption Date and the only right of the Holders
of such Debentures will be to receive payment of the Redemption Price plus
accrued and unpaid interest, if any.
7. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement (as defined in the Debenture Indenture), the Company will be obligated
to consummate an exchange offer pursuant to which the Holder of this Debenture
shall have the right to exchange this Debenture for the Company's 15% Senior
Discount Debentures due July 15, 2011 in the form of Exchange Debentures, which
shall have been registered under the Securities Act, or the Company's 15% Senior
Private Exchange Debentures due July 15, 2011 (the "Private Exchange
Debentures"), in each case in like principal amount and having terms identical
in all material respects to the Initial Debentures. The Holders of the Initial
Debentures shall be entitled to receive certain additional interest payments if
such exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement. The Company shall notify the Trustee of the amount of any such
payments./2/
8. Denominations; Transfer; Exchange. The Debentures are in
---------------------------------
registered form, without coupons, in denominations of $1,000 principal amount at
maturity and integral multiples of $1,000 principal amount at maturity. A Holder
shall register the transfer of or exchange of Debentures in accordance with the
Debenture Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Debenture Indenture. The Registrar need not register the
transfer of or exchange of any Debentures or portions thereof selected for
redemption (except, in the case of Debentures to be redeemed in part, the
portion of such Debentures not to be redeemed) or any Debenture for a period
beginning 15 Business Days before the mailing of a notice of an offer to
repurchase or a notice of redemption or 15 Business Days before any Interest
Payment Date.
___________________
/2/ To be included in the Initial Debentures issued on the Issue Date and, to
the extent applicable.
<PAGE>
9. Persons Deemed Owners. The registered Holder of a Debenture
---------------------
shall be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company (subject to any applicable abandoned property
law). After that, all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Debentures to redemption
or maturity and complies with the other provisions of the Debenture Indenture
relating thereto, the Company will be discharged from certain provisions of the
Debenture Indenture and the Debentures (including certain covenants, but
excluding its obligation to pay the principal of and interest on the
Debentures).
12. Amendment; Supplement; Waiver. Subject to certain exceptions,
-----------------------------
the Debenture Indenture or the Debentures may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate principal
amount of the Debentures then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the
Debentures then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Debenture Indenture or the
Debentures to, among other things, cure any ambiguity, omission, defect or
inconsistency, provide for uncertificated Debentures in addition to or in place
of certificated Debentures, or comply with Article Five of the Debenture
Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Debenture.
13. Restrictive Covenants. This Debenture Indenture imposes certain
---------------------
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
14. Successors. When a successor assumes, in accordance with the
----------
Debenture Indenture, all the obligations of its predecessor under the Debentures
and the Debenture Indenture, the predecessor will be released from those
obligations.
15. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount at maturity of Debentures then outstanding may declare all the Debentures
to be due and payable in the manner, at the time and with the effect provided in
the Debenture Indenture. Certain events of bankruptcy and insolvency are Events
of Default which will result in the Debentures being due
<PAGE>
and payable immediately upon the occurrence of such Events of Default. Holders
of Debentures may not enforce the Debenture Indenture or the Debentures except
as provided in the Debenture Indenture. The Trustee is not obligated to enforce
the Debenture Indenture or the Debentures unless it has received indemnity
reasonably satisfactory to it. This Debenture Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Debentures then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of
Debentures notice of any continuing Default or Event of Default (except a
Default in payment of principal, premium, if any, or interest) if it determines
that withholding notice is in their interest.
16. Trustee Dealings with Company. The Trustee under the Debenture
-----------------------------
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Debentures and may otherwise deal with the Company, its Subsidiaries
or their respective Affiliates as if it were not the Trustee.
17. No Recourse Against Others. No past, present or future
--------------------------
stockholder, director, officer, employee or incorporator, as such, of the
Company, shall have any liability for any obligation of the Company under the
Debentures or the Debenture Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Debenture
by accepting a Debenture waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Debentures.
18. Authentication. This Debenture shall not be valid until the
--------------
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Debenture.
19. Governing Law. The Laws of the State of New York shall govern
-------------
this Debenture and the Debenture Indenture, without regard to principles of
conflict of laws.
20. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Debenture or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Debentures as a convenience to the Holders of
the Debentures. No representation is made as to the accuracy of such numbers as
printed on the Debentures and reliance may be placed only on the other
identification numbers printed hereon.
22. Debenture Indenture. Each Holder, by accepting a Debenture,
-------------------
agrees to be bound by all of the terms and provisions of the Debenture
Indenture, as the same may be amended from time to time.
23. Holders' Compliance with Registration Rights Agreement. Each
------------------------------------------------------
Holder of a Debenture, by acceptance hereof, acknowledges and agrees to the
provisions of the
<PAGE>
Registration Rights Agreement, including, without limitation, the obligations of
the Holders with respect to a registration and the indemnification of the
Company to the extent provided therein./3/
The Company will furnish to any Holder of a Debenture upon written
request and without charge a copy of the Debenture Indenture. Requests may be
made to: Woods Equipment Company, 6944 Newburg Road, Rockford, IL 61108, Attn.:
D. Stephen Crider.
_______________
/3/ To be included in the Initial Debentures issued on the Issue Date and, to
the extent applicable.
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Debenture, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Debenture to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _____________________, agent to transfer this Debenture
on the books of the Company. The agent may substitute another to act for him.
Date: ____________ Signed: ____________________________________________________
(Sign exactly as your name
appears on the other side of
this Debenture)
Signature Guarantee: ___________________
(Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended).
In connection with any transfer of this Debenture occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") covering resales of this Debenture (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) [two years from date of original issuance], the undersigned
confirms that it has not utilized any general solicitation or general
advertising in connection with the transfer and that this Debenture is being
transferred:
<PAGE>
[Check One]
---------
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act;
or
(3) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act; or
(4) __ pursuant to an effective registration statement under the Securities
Act; or
(5) __ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Debentures evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided that if box (3) or (5) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Debentures, in its sole discretion, such legal opinions, certifications
and other information as the Trustee or the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Debenture in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in the Appendix to the Debenture Indenture
shall have been satisfied.
Dated: _______________ Signed: ________________________________________________
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee: ___________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Debenture for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________ _______________________________________________________
NOTICE: To be executed by
an executive officer
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Debenture Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Debenture purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Debenture Indenture,
state the amount you elect to have purchased:
$_________________________
Dated: __________________ ____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Debenture in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: ___________________________
(Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended).
<PAGE>
EXHIBIT B
---------
FORM OF EXCHANGE DEBENTURE AND PRIVATE EXCHANGE DEBENTURE
---------------------------------------------------------
CUSIP No.:__________
WOODS EQUIPMENT COMPANY
15% SENIOR [PRIVATE EXCHANGE] DISCOUNT DEBENTURE DUE JULY 15, 2011
No. $
WOODS EQUIPMENT COMPANY, a Delaware corporation (the "Company," which
term includes any successor entity), for value received promises to pay to
____________ or registered assigns, the principal sum of ______ Dollars, on July
15, 2011.
Interest Payment Dates: January 15, April 15, July 15 and October 15.
Record Dates: January 1, April 1, July 1 and October 1.
Reference is made to the further provisions of this Debenture
contained herein, which will for all purposes have the same effect as if set
forth at this place.
This Debenture was issued on July 28, 1999 with original issue
discount ("OID") for federal income tax purposes. For further
information, contact D. Stephen Crider, Chief Financial Officer, Woods
Equipment Company, 6944 Newburg Road, Rockford, IL 61108, (815) 381-
6000.
IN WITNESS WHEREOF, WOODS EQUIPMENT COMPANY has caused this Debenture
to be signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.
WOODS EQUIPMENT COMPANY
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
Dated: ____________________
<PAGE>
Certificate of Authentication
This is one of the 15% Senior [Private Exchange] Debentures due July
15, 2011 referred to in the within-mentioned Debenture Indenture.
____________________________________,
as Trustee
Dated: __________________ By:__________________________________________
Authorized Signatory
[If the Debenture is to be issued in global form add the Global Securities
Legend from Exhibit 1 to the Appendix and the attachment from such Exhibit 1
captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".]
[If the Debenture is a Private Exchange Debenture issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the restricted securities legend from Exhibit 1 to Appendix A and replace the
Assignment Form with that included in Exhibit A.]
<PAGE>
(REVERSE OF SECURITY)
15% SENIOR [PRIVATE EXCHANGE] DISCOUNT DEBENTURE DUE JULY 15, 2011
1. Interest. WOODS EQUIPMENT COMPANY, a Delaware corporation (the
--------
"Company"), promises to pay interest on this Debentures as set forth below. This
Debenture will accrete at a rate of 15% per annum, compounded quarterly from an
initial Accreted Value of $481.45 per $1,000 principal amount at Stated Maturity
on the Issue Date to a principal amount in arrears of $1,000 principal amount at
Stated Maturity by July 15, 2004.
The Company shall pay interest at a rate of 15% per annum, from July
15, 2004, or from [the most recent date on which interest has been paid on the
Initial Debenture in exchange for which this [Exchange Debenture] [Private
Exchange Debenture] was issued]. The Company will pay interest quarterly in
arrears on each Interest Payment Date, commencing October 15, 1999. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
[Notwithstanding the foregoing, if a Registration Default (as defined
in the Registration Rights Agreement) occurs, additional interest will accrue on
this Debenture at a rate of 0.50% per annum, from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all Registration Defaults have been cured, calculated on the principal
amount of this Debenture as of the date on which such interest is payable. Such
interest is payable in addition to any other interest payable from time to time
with respect to this Debenture. The Trustee will not be deemed to have notice of
a Registration Default until it shall have received actual notice of such
Registration Default.]/4/
The Company shall pay interest on overdue principal at the rate borne
by the Debentures plus 2% per annum and will pay cash interest on overdue
installments of cash interest (without regard to any applicable grace periods)
at such higher rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
-----------------
Debentures (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Debentures are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Debentures to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal and interest by
its check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
_____________________
/4/ To be included in the Initial Debentures issued on the Issue Date and, to
the extent applicable.
<PAGE>
3. Paying Agent and Registrar. Initially, United States Trust
--------------------------
Company of Texas, a Texas banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
4. Debenture Indenture. The Company issued the Debentures under an
-------------------
Indenture, dated as of July 28, 1999 (the "Debenture Indenture"), among the
Company and the Trustee. [This Debenture is one of a duly authorized issue of
Exchange Debentures of the Company designated as its 15% Senior Discount
Debentures due July 15, 2011.] [This Debenture is one of a duly authorized issue
of Private Exchange Debentures of the Company designated as its 15% Senior
Private Exchange Debentures due July 15, 2011.] The Initial Debentures issued on
July 28, 1999 and any Private Exchange Debentures and Exchange Debentures issued
pursuant to the Debenture Indenture are treated as a single class of securities
under the Debenture Indenture. Capitalized terms herein are used as defined in
the Debenture Indenture unless otherwise defined herein. The terms of the
Debentures include those stated in the Debenture Indenture and those made part
of the Debenture Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Debenture Indenture. Notwithstanding anything to the contrary herein, the
Debentures are subject to all such terms, and Holders of Debentures are referred
to the Debenture Indenture and the TIA for a statement of them. The Debentures
are general unsecured obligations of the Company. To the extent of any conflict
between the terms of the Debentures and the Debenture Indenture, the applicable
terms of the Debenture Indenture shall govern.
5. Redemption.
----------
(a) The Debentures will be redeemable at the Company's option, in whole or
in part, at any time on or after July 15, 2004, at the respective redemption
price (expressed as a percentage of Accreted Value) set forth below, plus
accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date), if redeemed during the 12-month period
beginning on July 15 of the year indicated below:
Redemption
Period Price
------ ----------
2004 ............................................... 107.500%
2005 ............................................... 105.000%
2006 ............................................... 102.500%
2007 and thereafter ................................ 100.000%
(b) Notwithstanding the foregoing, before July 15, 2002, the Company may
at its option redeem all of the outstanding Debentures with the proceeds of one
or more Public Equity Offerings, at a redemption price (expressed as a
percentage of Accreted Value) of 115% plus accrued interest to the redemption
date (subject to the right of Holders of record on
<PAGE>
the relevant Record Date to receive interest due on the relevant Interest
Payment Date); provided that such redemption must occur within 60 days of the
Public Equity Offering.
6. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Debentures to be redeemed at such Holder's registered address.
Debentures in denominations of $1,000 principal amount at maturity may be
redeemed only in whole. Debentures in denominations larger than $1,000 principal
amount at maturity may be redeemed in part but only in multiples of $1,000
principal amount at maturity.
Except as set forth in the Debenture Indenture, if monies for the
redemption of the Debentures called for redemption shall have been deposited
with the Paying Agent for redemption on such Redemption Date, then, unless the
Company defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Debentures called for redemption will cease to bear
interest from and after such Redemption Date and the only right of the Holders
of such Debentures will be to receive payment of the Redemption Price plus
accrued and unpaid interest, if any.
7. Denominations; Transfer; Exchange. The Debentures are in
---------------------------------
registered form, without coupons, in denominations of $1,000 principal amount at
maturity and integral multiples of $1,000 principal amount at maturity. A Holder
shall register the transfer of or exchange of Debentures in accordance with the
Debenture Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Debenture Indenture. The Registrar need not register the
transfer of or exchange of any Debentures or portions thereof selected for
redemption (except, in the case of Debentures to be redeemed in part, the
portion of such Debentures not to be redeemed) or any Debenture for a period
beginning 15 Business Days before the mailing of a notice of an offer to
repurchase or a notice of redemption or 15 Business Days before any Interest
Payment Date.
8. Persons Deemed Owners. The registered Holder of a Debenture
---------------------
shall be treated as the owner of it for all purposes.
9. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company (subject to any applicable abandoned property
law). After that, all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Debentures to redemption
or maturity and complies with the other provisions of the Debenture Indenture
relating thereto, the Company will be discharged from certain provisions of the
Debenture Indenture and the Debentures (including certain covenants, but
excluding its obligation to pay the principal of and interest on the
Debentures).
<PAGE>
11. Amendment; Supplement; Waiver. Subject to certain exceptions,
-----------------------------
the Debenture Indenture or the Debentures may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate principal
amount of the Debentures then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the
Debentures then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Debenture Indenture or the
Debentures to, among other things, cure any ambiguity, omission, defect or
inconsistency, provide for uncertificated Debentures in addition to or in place
of certificated Debentures, or comply with Article Five of the Debenture
Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Debenture.
12. Restrictive Covenants. This Debenture Indenture imposes certain
---------------------
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
13. Successors. When a successor assumes, in accordance with the
----------
Debenture Indenture, all the obligations of its predecessor under the Debentures
and the Debenture Indenture, the predecessor will be released from those
obligations.
14. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount at maturity of Debentures then outstanding may declare all the Debentures
to be due and payable in the manner, at the time and with the effect provided in
the Debenture Indenture. Certain events of bankruptcy and insolvency are Events
of Default which will result in the Debentures being due and payable immediately
upon the occurrence of such Events of Default. Holders of Debentures may not
enforce the Debenture Indenture or the Debentures except as provided in the
Debenture Indenture. The Trustee is not obligated to enforce the Debenture
Indenture or the Debentures unless it has received indemnity reasonably
satisfactory to it. This Debenture Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Debentures then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Debentures
notice of any continuing Default or Event of Default (except a Default in
payment of principal, premium, if any, or interest) if it determines that
withholding notice is in their interest.
15. Trustee Dealings with Company. The Trustee under the Debenture
-----------------------------
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Debentures and may otherwise deal with the Company, its Subsidiaries
or their respective Affiliates as if it were not the Trustee.
<PAGE>
16. No Recourse Against Others. No past, present or future
--------------------------
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Debentures or the Debenture Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Debenture
by accepting a Debenture waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Debentures.
17. Authentication. This Debenture shall not be valid until the
--------------
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Debenture.
18. Governing Law. The Laws of the State of New York shall govern
-------------
this Debenture and the Debenture Indenture, without regard to principles of
conflict of laws.
19. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Debenture or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
20. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Debentures as a convenience to the Holders of
the Debentures. No representation is made as to the accuracy of such numbers as
printed on the Debentures and reliance may be placed only on the other
identification numbers printed hereon.
21. Debenture Indenture. Each Holder, by accepting a Debenture,
-------------------
agrees to be bound by all of the terms and provisions of the Debenture
Indenture, as the same may be amended from time to time.
[22. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement (as defined in the Debenture Indenture), the Company will have certain
obligations to the Holders of the Exchange Debentures and the Private Exchange
Debentures. The Holders of the Exchange Debentures and the Private Exchange
Debentures shall be entitled to receive certain additional interest payments
upon certain conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement. The Company shall notify the Trustee of the
amount of any such payments.]/5/
The Company will furnish to any Holder of a Debenture upon written
request and without charge a copy of the Debenture Indenture. Requests may be
made to: Woods Equipment Company, 6944 Newburg Road, Rockford, IL 61108, Attn.:
D. Stephen Crider.
_______________________
/5/ To be included if applicable.
<PAGE>
ASSIGNMENT FORM/6/
If you the Holder want to assign this Debenture, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Debenture to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ________________________, agent to transfer this
Debenture on the books of the Company. The agent may substitute another to act
for him.
Date: _________________ Signed: _____________________________________________
(Sign exactly as your name
appears on the other side of
this Debenture)
Signature Guarantee: _____________
(Signature must be guaranteed by an "eligible guarantor institution," that is, a
bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended).
_______________________
/6/ If the Debenture is a Private Exchange Debenture, replace the Assignment
Form with that included in Exhibit A to this Debenture Indenture.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Debenture Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Debenture purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the Debenture Indenture,
state the amount you elect to have purchased:
$______________________
Dated: __________________ ___________________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Debenture in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: _____________________
(Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended).
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Debenture Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1) ....................................................... 7.10
(a)(2) ....................................................... 7.10
(a)(3) .......................................................
N.A.
(a)(4) ....................................................... N.A.
(a)(5) ....................................................... 7.08; 7.10
(b) ....................................................... 7.08; 7.10; 10.02
(c) ....................................................... N.A.
311(a) .......................................................
7.11
(b) ....................................................... 7.11
(c) ....................................................... N.A.
312(a) .......................................................
2.05
(b) ....................................................... 10.03
(c) ....................................................... 10.03
313(a) .......................................................
7.06
(b)(1) ....................................................... N.A.
(b)(2) ....................................................... 7.06
(c) ....................................................... 7.06; 10.02
(d) ....................................................... 7.06
314(a) ....................................................... 4.07; 4.08; 10.02
(b) ....................................................... N.A.
(c)(1) ....................................................... 10.04
(c)(2) ....................................................... 10.04
(c)(3) ....................................................... N.A.
(d) ....................................................... N.A.
(e) ....................................................... 10.05
(f) ....................................................... N.A.
315(a) ....................................................... 7.01(b)
(b) ....................................................... 7.05; 10.02
(c) ....................................................... 7.01(a)
(d) ....................................................... 7.01(c)
(e) ....................................................... 6.11
316(a)(last sentence)...................................................... 2.09
(a)(1)(A) ....................................................... 6.05
(a)(1)(B) ....................................................... 6.04
(a)(2) ....................................................... N.A.
(b) ....................................................... 6.07
(c) ....................................................... 9.04
</TABLE>
<PAGE>
<TABLE>
<S> <C>
317(a)(1) ....................................................... 6.08
(a)(2) ....................................................... 6.09
(b) ....................................................... 2.04
318(a) ....................................................... 10.01
(c) ....................................................... 10.01
</TABLE>
_________
N.A. means Not Applicable
Debenture: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of this Debenture Indenture.
<PAGE>
Exhibit 4.5
WEC COMPANY,
as Issuer
WOODS EQUIPMENT COMPANY,
as Parent Guarantor
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
_________
NOTES INDENTURE
Dated as of July 28, 1999
_________
12% Senior Notes due July 15, 2009
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
SECTION 1.01. Definitions................................................................................... 1
SECTION 1.02. Incorporation by Reference of TIA............................................................. 26
SECTION 1.03. Rules of Construction......................................................................... 26
SECTION 1.04. One Class of Securities....................................................................... 27
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating............................................................................... 27
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount...................................... 27
SECTION 2.03. Registrar and Paying Agent.................................................................... 28
SECTION 2.04. Paying Agent To Hold Assets in Trust.......................................................... 29
SECTION 2.05. Noteholder Lists.............................................................................. 29
SECTION 2.06. [Intentionally Omitted]....................................................................... 29
SECTION 2.07. Replacement Notes............................................................................. 30
SECTION 2.08. Outstanding Notes............................................................................. 30
SECTION 2.09. Treasury Notes................................................................................ 30
SECTION 2.10. Temporary Notes............................................................................... 31
SECTION 2.11. Cancellation.................................................................................. 31
SECTION 2.12. Defaulted Interest............................................................................ 31
SECTION 2.13. CUSIP Number.................................................................................. 31
SECTION 2.14. Deposit of Moneys............................................................................. 32
SECTION 2.15. Issuance of Additional Notes.................................................................. 32
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee............................................................................ 32
SECTION 3.02. Selection of Notes To Be Redeemed............................................................. 33
SECTION 3.03. Notice of Redemption.......................................................................... 33
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.04. Effect of Notice of Redemption................................................................ 34
SECTION 3.05. Deposit of Redemption Price................................................................... 34
SECTION 3.06. Notes Redeemed in Part........................................................................ 35
SECTION 3.07. Optional Redemption........................................................................... 35
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.............................................................................. 36
SECTION 4.02. Maintenance of Office or Agency............................................................... 36
SECTION 4.03. Corporate Existence........................................................................... 36
SECTION 4.04. Payment of Taxes and Other Claims............................................................. 36
SECTION 4.05. Maintenance of Properties and Insurance....................................................... 37
SECTION 4.06. Compliance Certificate; Notice of Default..................................................... 38
SECTION 4.07. Compliance with Laws.......................................................................... 38
SECTION 4.08. SEC Reports................................................................................... 39
SECTION 4.09. Waiver of Stay, Extension or Usury Laws....................................................... 39
SECTION 4.10. Limitation on Restricted Payments............................................................. 39
SECTION 4.11. Limitation on Restrictions on Distributions from Restricted Subsidiaries...................... 42
SECTION 4.12. Limitation on Affiliate Transactions.......................................................... 44
SECTION 4.13. Limitation on Indebtedness.................................................................... 46
SECTION 4.14. Limitation on the Sale or Issuance of Preferred Stock of
Restricted Subsidiaries..................................................... 49
SECTION 4.15. Change of Control............................................................................. 49
SECTION 4.16. Limitation on Sales of Assets and Subsidiary Stock............................................ 52
SECTION 4.17. Limitation on Liens........................................................................... 55
SECTION 4.18. Future Guarantors............................................................................. 55
SECTION 4.19. Limitation on Issuances of Guarantees of and Pledges for Debt:
Subsidiary Guarantors....................................................... 55
SECTION 4.20. Limitation on Sale/Leaseback Transactions..................................................... 56
SECTION 4.21. Limitations on Status as Investment Company................................................... 56
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets of the Company....................................... 56
</TABLE>
<PAGE>
<TABLE>
ARTICLE SIX
DEFAULT AND REMEDIES
<S> <C>
SECTION 6.01. Events of Default............................................................................. 59
SECTION 6.02. Acceleration.................................................................................. 60
SECTION 6.03. Other Remedies................................................................................ 61
SECTION 6.04. Waiver of Past Defaults....................................................................... 61
SECTION 6.05. Control by Majority........................................................................... 61
SECTION 6.06. Limitation on Suits........................................................................... 62
SECTION 6.07. Rights of Holders To Receive Payment.......................................................... 62
SECTION 6.08. Collection Suit by Trustee.................................................................... 62
SECTION 6.09. Trustee May File Proofs of Claim.............................................................. 62
SECTION 6.10. Priorities.................................................................................... 63
SECTION 6.11. Undertaking for Costs......................................................................... 63
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee............................................................................. 64
SECTION 7.02. Rights of Trustee............................................................................. 65
SECTION 7.03. Individual Rights of Trustee.................................................................. 66
SECTION 7.04. Trustee's Disclaimer.......................................................................... 66
SECTION 7.05. Notice of Default............................................................................. 66
SECTION 7.06. Reports by Trustee to Holders................................................................. 67
SECTION 7.07. Compensation and Indemnity.................................................................... 67
SECTION 7.08. Replacement of Trustee........................................................................ 68
SECTION 7.09. Successor Trustee by Merger, Etc.............................................................. 69
SECTION 7.10. Eligibility; Disqualification................................................................. 69
SECTION 7.11. Preferential Collection of Claims Against Company............................................. 70
ARTICLE EIGHT
DISCHARGE OF NOTES INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Notes; Defeasance................................................... 70
SECTION 8.02. Conditions to Defeasance...................................................................... 71
SECTION 8.03. Application of Trust Money.................................................................... 72
SECTION 8.04. Repayment to Company.......................................................................... 72
SECTION 8.05. Indemnity for Government Obligations.......................................................... 73
SECTION 8.06. Reinstatement................................................................................. 73
</TABLE>
<PAGE>
<TABLE>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
<S> <C>
SECTION 9.01. Without Consent of Holders.................................................................... 74
SECTION 9.02. With Consent of Holders....................................................................... 75
SECTION 9.03. Compliance with TIA........................................................................... 76
SECTION 9.04. Revocation and Effect of Consents............................................................. 76
SECTION 9.05. Notation on or Exchange of Notes.............................................................. 76
SECTION 9.06. Trustee To Sign Amendments, Etc............................................................... 77
SECTION 9.07. Payment for Consent........................................................................... 77
ARTICLE TEN
GUARANTEES
SECTION 10.01. Unconditional Guarantee....................................................................... 77
SECTION 10.02. Severability.................................................................................. 79
SECTION 10.03. Release of Subsidiary Guarantor from the Subsidiary Guarantee................................. 79
SECTION 10.04. Limitation on Amount Guaranteed; Contribution by
Subsidiary Guarantors................................................................ 79
SECTION 10.05. Waiver of Subrogation......................................................................... 80
SECTION 10.06. Execution of Subsidiary Guarantee............................................................. 81
SECTION 10.07. Waiver of Stay, Extension or Usury Laws....................................................... 81
SECTION 10.08. Effectiveness of Subsidiary Guarantee......................................................... 82
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.................................................................................. 82
SECTION 11.02. Notices....................................................................................... 83
SECTION 11.03. Communications by Holders with Other Holders.................................................. 84
SECTION 11.04. Certificate and Opinion as to Conditions Precedent............................................ 84
SECTION 11.05. Statements Required in Certificate or Opinion................................................. 84
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar..................................................... 85
SECTION 11.07. Legal Holidays................................................................................ 85
SECTION 11.08. Governing Law................................................................................. 85
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 11.09. No Adverse Interpretation of Other Agreements................................................. 85
SECTION 11.10. No Recourse Against Others.................................................................... 85
SECTION 11.11. Successors.................................................................................... 86
SECTION 11.12. Duplicate Originals........................................................................... 86
SECTION 11.13. Severability.................................................................................. 86
Appendix ..................................................................................... I
Exhibit A - Form of Initial Note and Guarantee.................................................................. A-1
Exhibit B - Form of Exchange Note and Private Exchange Note and Guarantee....................................... B-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of this Notes Indenture.
<PAGE>
NOTES INDENTURE, dated as of July 28, 1999, among WEC COMPANY,
a Delaware corporation (the "Company"), WOODS EQUIPMENT COMPANY, a Delaware
corporation (the "Parent Guarantor") and United States Trust Company of New
York, a New York banking corporation, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of
$130,000,000 12% Senior Notes due July 15, 2009 in the form of Initial Notes (as
defined below) and, if and when issued in connection with a registered exchange
for such Initial Notes, 12% Senior Notes due July 15, 2009 in the form of
Exchange Notes (as defined below) and, if and when issued in connection with a
private exchange for such Initial Notes, 12% Senior Notes due July 15, 2009 in
the form of Private Exchange Notes (as defined below), and such Additional Notes
(as defined below) that the Company may from time to time choose to issue
pursuant to the Notes Indenture, and, to provide therefor, the Company and each
of the Subsidiary Guarantors has duly authorized the execution and delivery of
this Notes Indenture. The Parent Guarantor has agreed to guarantee the Notes on
a senior basis.
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Additional Assets" means
-----------------
(i) any property or assets (other than Indebtedness and Capital Stock)
in a Related Business;
(ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the
Company or another Restricted Subsidiary or
(iii) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary; provided, however, that any
such Restricted Subsidiary described in clauses (ii) or (iii) above is
primarily engaged in a Related Business.
"Additional Notes" means, subject to the Company's compliance with
Section 4.13, any series of Senior Notes in an aggregate principal amount of $50
million issued from time to time after July 28, 1999 under the terms of this
Indenture which shall have identical terms as the Notes issued on July 28, 1999,
other than with respect to the date of issuance, issue price and amount of
interest payable on the first payment date applicable thereto (other than
pursuant to Section
1
<PAGE>
2.07, 2.10, 3.06, 4.15, 4.16 or 9.06 of this Indenture or
Section 2.03 of the Appendix and other than Exchange Notes or Private Exchange
Notes issued pursuant to an exchange offer for other Notes outstanding under
this Indenture).
"Adjusted Maximum Amount" has the meaning provided in Section 10.04.
-----------------------
"Affiliate" of any specified Person means any other Person which,
---------
directly or indirectly, is in control of, is controlled by or is under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under Sections 4.10, 4.12
and 4.16 only, "Affiliate" will also mean any beneficial owner of the Company's
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Aggregate Payments" has the meaning provided in Section 10.04.
------------------
"Appendix" has the meaning provided in Section 2.01.
--------
"Asset Disposition" means any sale, lease, transfer or other
-----------------
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of:
(i) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law to be
held by a Person other than the Company or a Restricted Subsidiary),
(ii) all or substantially all the assets of any division or line of
business of the Company's or any Restricted Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary
outside of the Company's ordinary course of business or such Restricted
Subsidiary.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Dispositions:
(i) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
2
<PAGE>
(ii) a transfer of assets between or among the Company and its Wholly
Owned Subsidiaries,
(iii) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary;
(iv) the sale, license or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business;
(v) the sale or other disposition of cash or Cash Equivalents or
Marketable Securities;
(vi) a Restricted Payment that is permitted by the covenant described
above under Section 4.10.
"Attributable Debt" when used with respect to any Sale/Leaseback
-----------------
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Notes, compounded annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Authenticating Agent" has the meaning provided in Section 2.02.
--------------------
"Average Life" means, as of the date of determination, with respect to
------------
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Banks" has the meaning specified in the Senior Credit Facility.
-----
"Bank Indebtedness" means all Obligations pursuant to the Senior Credit
-----------------
Facility.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
------------------
committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
3
<PAGE>
"Business Day" means each day which is not a Legal Holiday.
------------
"Capital Lease Obligations" of a Person means any obligation which is
-------------------------
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP; the amount of such obligation shall
be the capitalized amount thereof, determined in accordance with GAAP; and the
Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock"of any Person means any and all shares, interests,
-------------
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Cash Equivalents" means:
----------------
(i) United States dollars;
(ii) securities issued or directly and fully guaranteed or insured by
the Untied States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of no more than six months from the date
of acquisition;
(iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding twelve months and overnight bank
deposits, in each case, with any lender party to the Credit Agreement or
with any domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of "B" or better;
(iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institutions meeting the
qualifications specified in clause (iii) above;
(v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within twelve months after the date of acquisition; and
(vi) money marked funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (i) through (v) of this
definition.
"Code" means the Internal Revenue Code of 1986, as amended.
----
4
<PAGE>
"Commodity Agreement" means in respect of a Person, any commodity
-------------------
futures contract, commodity option or other similar agreement or arrangement
designed to protect such Person against fluctuations in the price of energy,
commodities and raw materials.
"Company" means the party named as such in this Notes Indenture until a
-------
successor replaces it pursuant to this Notes Indenture and thereafter means such
successor.
"Consolidated Coverage Ratio" as of any date of determination means the
---------------------------
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters prior to the date of such determination to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that
(i) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period will be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period,
(ii) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for
such period will be calculated on a pro forma basis as if such discharge
had occurred on the first day of such period and as the Company or such
Restricted Subsidiary has not earned the interest income actually earned
during such period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such Indebtedness,
(iii) if since the beginning of such period the Company or any
Restricted Subsidiary will have made any Asset Disposition, the EBITDA for
such period will be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period will be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to the
Company's Indebtedness or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its
continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and
5
<PAGE>
its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale),
(iv) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) will have made an Investment
in any Restricted Subsidiary (or any person which becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction requiring a calculation
to be made hereunder, which constitutes all or substantially all of an
operating unit of a business, EBITDA and Consolidated Interest Expense for
such period will be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness or any cost saving permitted
to be adjusted in accordance with Article 11 of Regulation S-X) as if such
Investment or acquisition occurred on the first day of such period and
(v) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
will have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (iii) or
(iv) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period will be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such
period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations will be determined
by the Company in good faith by a responsible financial or accounting Officer.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest of such Indebtedness will be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"Consolidated Interest Expense" means, for any period, the Company's
-----------------------------
total interest expense and that of the Company's consolidated Restricted
Subsidiaries, plus, to the extent not included in such total interest expense,
and to the extent incurred by the Company or its Restricted Subsidiaries,
without duplication,
(i) interest expense attributable to capital leases and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction,
(ii) amortization of debt discount and debt issuance cost,
(iii) capitalized interest,
6
<PAGE>
(iv) non-cash interest expenses,
(v) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(vi) net costs associated with Hedging Obligations (including
amortization of fees),
(vii) preferred Stock dividends in respect of all Preferred Stock held
by Persons other than the Company or a Wholly Owned Subsidiary,
(viii) interest incurred in connection with Investments in
discontinued operations,
(ix) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by (or secured by the assets of) the
Company or any Restricted Subsidiary and
(x) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the Company's net
-----------------------
income and that of the Company's consolidated Subsidiaries; provided, however,
that there will not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that
(A) subject to the exclusion contained in clause (iv) below, the
Company's equity in the net income of any such Person for such period
will be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period
to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and
(B) the Company's equity in a net loss of any such Person for
such period will be included in determining such Consolidated Net
Income;
(ii) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that
7
<PAGE>
(A) subject to the exclusion contained in clause (iv) below, the
Company's equity in the net income of any such Restricted Subsidiary
for such period will be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Restricted
Subsidiary during such period to the Company or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause) and
(B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period will be included in determining such
Consolidated Net Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any of the Company's assets, the Company's consolidated
Subsidiaries or any other Person (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed of
in the ordinary course of business and any gain (but not loss) realized
upon the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
Section 4.10 only, there will be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant.
"Consolidated Net Worth" means the total of the amounts shown on our
balance sheet and that of our consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of our most recent
fiscal quarter ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as
(i) the par or stated value of all our outstanding Capital Stock; plus
(ii) paid-in capital or capital surplus relating to such Capital Stock;
plus
(iii) any retained earnings or earned surplus less (A) any accumulated
deficit and (B) any amounts attributable to Disqualified Stock.
"covenant defeasance option" has the meaning provided in Section 8.01.
--------------------------
"Credit Facilities" means, one or more debt facilities or commercial
-----------------
paper facilities, in each case with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables), working
capital
8
<PAGE>
loans, swing lines, advances or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced, restructured or refinanced in
whole or in part from time to time.
"Currency Agreement" means in respect of a Person any foreign exchange
------------------
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Debentures" means the Initial Debentures, the Exchange Debentures and
----------
the Private Exchange Debentures of Woods treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to the Debenture Indenture.
"Debenture Indenture" means the indenture dated as of July 28, 1999
-------------------
among Woods, as issuer, and United States Trust Company of Texas, N.A., as
trustee.
"Default" means any event which is, or after notice or passage of time
-------
or both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and their
----------
respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital
------------------
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified
Stock or
(iii) is redeemable or must be purchased, upon the occurrence of
certain events or otherwise, by such Person at the option of the holder
thereof, in whole or in part,
in each case on or prior to the first anniversary of the Stated Maturity of the
Notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes will not constitute
Disqualified Stock if (x) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Notes and described under
Sections 4.15 and 4.16 and (y) any such requirement only becomes operative after
9
<PAGE>
compliance with such terms applicable to the Notes, including the purchase of
any Notes tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
------
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income:
(i) all the Company's income tax expense and that of the Company's
consolidated Restricted Subsidiaries,
(ii) the Company's depreciation expense and that of the Company's
consolidated Restricted Subsidiaries,
(iii) the Company's amortization expense and that of the Company's
consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid cash item that was paid in a prior period),
(iv) all the Company's other non-cash charges and those of the
Company's consolidated Restricted Subsidiaries (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for cash
expenditures in any future period), in each case for such period, and
(v) all one-time compensation payments made in connection with the
Recapitalization.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary will be added to Consolidated Net Income to compute EBITDA
only to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income and
only if a corresponding amount would be permitted at the date of determination
to be dividended to the Company by such Restricted Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders. If since the beginning of the relevant period, the Company or any
Restricted Subsidiary will have made an Investment in any Restricted Subsidiary
(or any person which becomes a Restricted Subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction requiring a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, EBITDA for such period
will be calculated after giving pro forma effect thereto (including any cost
saving permitted to be adjusted in accordance with Article 11 of Regulation
S-X).
"Equity Interest" means Capital Stock and all warrants, options or
---------------
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
10
<PAGE>
"Equity Offering" means an offering of common stock of the Company or
---------------
Parent.
"Event of Default" has the meaning provided in Section 6.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor statute or statutes thereto.
"Exchange Notes" has the meaning provided in the Appendix.
--------------
"Fair Share" has the meaning provided in Section 10.04.
----------
"Fair Share Shortfall" has the meaning provided in Section 10.04.
--------------------
"Fraudulent Transfer Laws" has the meaning provided in Section 10.04.
------------------------
"Funding Subsidiary Guarantor" has the meaning provided in Section
10.04.
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect as of the Issue Date, including those set forth
in
(i) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants,
(ii) statements and pronouncements of the Financial Accounting
Standards Board,
(iii) such other statements by such other entity as approved by a
significant segment of the accounting profession and
(iv) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
---------
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof
11
<PAGE>
(in whole or in part); provided, however, that the term "Guarantee" will
not include endorsements for collection or deposit in the ordinary course
of business.
The term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" will mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
-------------------
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
------ ----------
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
-----
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes the Company's Subsidiary
(whether by merger, consolidation, acquisition or otherwise) will be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun will have a correlative meaning. The accretion
of principal of a non-interest bearing or other discount security will be deemed
the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
------------
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment
of which such Person is responsible or liable, including, in each case, any
premium on such indebtedness to the extent such premium has become due and
payable;
(ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into by
such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such
12
<PAGE>
Person, the liquidation preference with respect to, any Preferred Stock
(but excluding, in each case, any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(v) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date will be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Initial Notes" has the meaning provided in the Appendix.
-------------
"Initial Purchaser" has the meaning provided in the Appendix.
-----------------
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Notes.
"Investment" in any Person means any direct or indirect advance, loan
----------
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under Section 4.10,
(i) "Investment" will include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of
the net assets of any Subsidiary of the Company at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary,
the Company will be deemed to continue to have a permanent "Investment" in
an Unrestricted Subsidiary equal to an amount (if positive) equal to (x)
the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in
13
<PAGE>
such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and
(ii) any property transferred to or from an Unrestricted Subsidiary
will be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"issue" means issue, assume, Guarantee, Incur or otherwise become
-----
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary; and the term "issuance" has a
corresponding meaning.
"Issue Date" means the date of original issuance of the Notes.
----------
"legal defeasance option" has the meaning provided in Section 8.01.
-----------------------
"Legal Holiday" has the meaning provided in Section 11.07.
-------------
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
----
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Marketable Securities" means publicly traded debt or equity
---------------------
securities that are listed for trading on a national securities exchange and
that were issued by a corporation whose debt securities are rated in one of the
three highest categories by either Standard & Poor's Corporation or Moody's
Investors Service, Inc.
"Maturity Date" means July 15, 2009.
-------------
"Net Available Cash" from an Asset Disposition means cash payments,
------------------
cash equivalents and Marketable Securities received therefrom (including any
cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise and proceeds from the sale or other
disposition of any securities received as consideration, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form), in each
case net of
(i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be accrued as a liability under GAAP,
as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement
14
<PAGE>
of any kind with respect to such assets, or which must by its terms, or in
order to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such
Asset Disposition and
(iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds" with respect to any issuance or sale of Capital
-----------------
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Debt" means Indebtedness
-----------------
(i) as to which neither the Company nor any Restricted Subsidiary
(A) provides any guarantee or credit support of any kind
(including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or
(B) is directly or indirectly liable (as a guarantor or
otherwise) and
(ii) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
the Company's other Indebtedness or that of any Restricted Subsidiary to
declare a default under such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity.
"Notes" means the Initial Notes, the Exchange Notes, the Private
-----
Exchange Notes and any Additional Notes treated as a single class of securities,
as amended or supplemented from time to time in accordance with the terms
hereof, that are issued pursuant to this Notes Indenture.
"Notes Indenture" means this Notes Indenture, as amended or
---------------
supplemented from time to time in accordance with the terms hereof.
"Obligations" means with respect to any Indebtedness all obligations
-----------
for principal, premium, interest (including, without limitation, interest after
the commencement of any bankruptcy, reorganization, insolvency or similar
proceeding against the Company or any of its Subsidiaries, whether or not
allowed in any such proceeding), penalties, fees, indemnifications,
15
<PAGE>
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.
"Offer" has the meaning provided in Section 4.16.
-----
"Offer Amount" has the meaning provided in Section 4.16.
-----
"Offer Period" has the meaning provided in Section 4.16.
-----
"Offering Circular" means (i) with respect to the Initial Notes issued
-----------------
on July 28, 1999, the Offering Circular dated July 26, 1999, pursuant to which
the $130.0 million of 12% Senior Notes due July 15, 2009 in the form of Initial
Notes were offered, and any supplement thereto and (ii) with respect to each
issuance of Additional Notes, the offering circular, prospectus or other similar
offering document pursuant to which such Additional Notes were offered, and any
supplement thereto.
"Officer" means, with respect to any Person, the Chairman of the Board,
-------
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Controller, the Treasurer, or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"Officers' Certificate" means, with respect to any Person, a
---------------------
certificate signed by two Officers or by an Officer and either a Treasurer or
Assistant Treasurer or an Assistant Secretary of such Person and otherwise
complying with the requirements of Sections 11.04 and 11.05, to the extent they
relate to the making of an Officers' Certificate.
"Opinion of Counsel" means a written opinion from legal counsel, who
------------------
may be counsel for the Company, and who is reasonably acceptable to the Trustee
complying with the requirements of Sections 11.04 and 11.05, to the extent they
relate to the giving of an Opinion of Counsel.
"Parent Guaranty" means the Guarantee of the Notes by Parent.
---------------
"Parent Subordinated Obligation" means any Indebtedness of Parent
------------------------------
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the obligations of Parent under the
Parent Guaranty pursuant to a written agreement.
"Paying Agent" has the meaning provided in Section 2.03.
------------
"Permitted Holders" means Madison Dearborn Partners, Inc. and any
-----------------
affiliate thereof.
"Permitted Investment" means an Investment by the Company or any
--------------------
Restricted Subsidiary in
16
<PAGE>
(i) the Company, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a
Related Business;
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related
Business;
(iii) Investments in Cash Equivalents and Marketable Securities;
(iv) receivables owing to the Company or any Restricted Subsidiary,
including negotiable interests held for deposit or collecting, if created
or acquired in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms; provided, however, that such
trade terms may include such concessionary trade terms as the Company or
any such Restricted Subsidiary deems reasonable under the circumstances;
(v) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(vi) loans or advances to employees made in the ordinary course of
business consistent with the Company's past practices or that of such
Restricted Subsidiary;
(vii) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under Section 4.16;
(viii) any acquisition of assets to the extent acquired in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company;
(ix) Hedging Obligations permitted by Section 4.13(vii);
(x) an Investment existing on the date hereof;
(xi) any Investment in securities of trade creditors or customers
received in compromise of obligations of such persons incurred in the
ordinary course of business, including pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers; and
(xii) any Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (xii) that are at the time
outstanding not to exceed the greater of $5.0 million or 5% of Total
Assets.
17
<PAGE>
"Permitted Liens" means, with respect to any Person,
---------------
(i) pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or
deposits or cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
incurred in the ordinary course of business;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanic's Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceeding or other Liens arising out of
judgments or awards against such Person with respect to which such Person
will then be proceeding with an appeal or other proceedings for review;
(iii) Liens for property taxes not yet subject to penalties for
non-payment, which are being contested in good faith by appropriate
proceedings or with respect to which adequate reserves have been recorded
in accordance with GAAP;
(iv) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business;
(v) survey exceptions, encumbrances, easements or reservations of,
or rights of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to use of real properties or liens incidental to the
conduct of the business of such Person or to the ownership of its
properties;
(vi) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under the Notes Indenture, secured
by a Lien on the same property securing such Hedging Obligations;
(vii) leases and subleases of real property which do not interfere
with the ordinary conduct of the Company's business or that of any of the
Company's Restricted Subsidiaries, and which are made on customary and
usual terms applicable to similar properties;
(viii) Liens existing as of the Issue Date and Liens created by the
Notes Indenture;
(ix) Liens created solely for the purpose of securing the payment of
all or a part of the purchase price of assets or property acquired or
constructed in the ordinary course of business after the date on which the
Notes are originally issued; provided, however, that
(A) the aggregate principal amount of Indebtedness secured by
such Liens will not exceed the lesser of cost or fair market value of
the assets or property so acquired or constructed,
18
<PAGE>
(B) the Indebtedness secured by such Liens will have otherwise
been permitted to be issued under the Notes Indenture and
(C) such Liens will not encumber any of the Company's other
assets or property or that of any of the Company's Restricted
Subsidiaries and will attach to such assets or property within 180
days of the construction or acquisition of such assets or property;
(x) Liens on the assets or property of any of the Company's
Restricted Subsidiaries existing at the time such Restricted Subsidiary
became a Subsidiary of the Company and not incurred as a result of (or in
connection with or in anticipation of) such Restricted Subsidiary becoming
a Subsidiary of the Company; provided, however, that:
(A) any such Lien does not by its terms cover any property or
assets after the time such Restricted Subsidiary becomes a Subsidiary
which were not covered immediately prior to such transaction,
(B) the incurrence of the Indebtedness secured by such Lien will
have otherwise been permitted to be issued under the Notes Indenture,
and
(C) such Liens do not extend to or cover any of the Company's
other property or assets or that of any of the Company's Restricted
Subsidiaries;
(xi) Liens to secure Capitalized Lease Obligations permitted to be
Incurred under the Notes Indenture;
(xii) Liens securing Indebtedness outstanding or committed under the
Senior Credit Facility;
(xiii) Liens extending, renewing or replacing in whole or in part a
Lien permitted by this Notes Indenture; provided, however, that:
(A) such Liens do not extend beyond the property subject to the
existing Lien and improvements and construction on such property and
(B) the Indebtedness secured by the Lien may not exceed the
Indebtedness secured at the time by the existing Lien;
(xiv) Liens on inventory deemed to arise by reason of the consignment
of inventory in the Company's ordinary course of business and that of the
Company's Restricted Subsidiaries;
(xv) Liens on the assets or property of any of the Company's
Restricted Subsidiaries to secure Indebtedness of such Restricted
Subsidiary owing to and held by the Company; and
19
<PAGE>
(xvi) Liens incurred in the ordinary course of business with respect
to obligations that do not exceed $1.0 million at any one time outstanding.
"Person" means any individual, corporation, limited liability company,
------
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
---------------
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"principal" of a Note means the principal of the Note plus the premium,
---------
if any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Private Exchange Notes" has the meaning provided in the Appendix.
----------------------
"pro forma" means, with respect to any calculation made or required to
---------
be made pursuant to the terms of this Notes Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act, as
determined by the Board of Directors of the Company.
"Productive Assets" means assets (including Capital Stock) that are
-----------------
used or useable by WEC and its Restricted Subsidiaries in a Related Business.
"Public Equity Offering" means an underwritten primary public offering
----------------------
of the Company's common stock or that of Parent pursuant to an effective
registration statement under the Securities Act.
"Purchase Date" has the meaning provided in Section 4.16.
-------------
"Record Date" means each Record Date specified in the Notes, whether or
-----------
not a Legal Holiday.
"Redemption Date," when used with respect to any Note to be redeemed,
---------------
means the date fixed for such redemption pursuant to this Notes Indenture and
the Notes.
"Redemption Price," when used with respect to any Note to be redeemed,
----------------
means the price fixed for such redemption pursuant to this Notes Indenture and
the Notes.
"Refinance" means, in respect of any Indebtedness, to refinance,
---------
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
20
<PAGE>
"Refinancing Indebtedness" means Indebtedness that Refinances any of
------------------------
the Company's Indebtedness or that of any Restricted Subsidiary referred to in
Section 4.13(b)(vi), including Indebtedness that Refinances Refinancing
Indebtedness; provided, however, that:
(i) such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced,
(ii) such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than
the Average Life of the Indebtedness being Refinanced and
(iii) such Refinancing Indebtedness has an aggregate principal amount
(or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided
further, however, that Refinancing Indebtedness will not include (x)
Indebtedness of a Subsidiary that Refinances the Company's Indebtedness,
(y) the Company's Indebtedness or that of a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary or (z) the Company's
Indebtedness or that of a Subsidiary Guarantor that Refinances Indebtedness
of a Restricted Subsidiary that is not a Subsidiary Guarantor.
"Registrar" has the meaning provided in Section 2.03.
---------
"Registration Rights Agreement" has the meaning set forth in the
-----------------------------
Appendix.
"Regulation S" means Regulation S under the Securities Act.
------------
"Related Business" means any business related, ancillary or
----------------
complementary to the Company's businesses and that of the Restricted
Subsidiaries on the Issue Date.
"Restricted Investment" means an Investment other than a Permitted
---------------------
Investment.
"Restricted Payment" with respect to any Person means
------------------
(i) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of its Capital
Stock (other than dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and other than
pro rata dividends or other distributions made by a Subsidiary that is not
a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other
than a corporation)),
21
<PAGE>
(ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company's (other than a Restricted Subsidiary), including the exercise of
any option to exchange any Capital Stock (other than into the Company's
Capital Stock that is not Disqualified Stock),
(iii) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a
Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not
---------------------
an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
---------
"Sale/Leaseback Transaction" means an arrangement relating to property
--------------------------
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means, the Securities Act of 1933, as amended, or any
--------------
successor statute or statutes thereto.
"Senior Credit Facility" means that certain Credit Agreement, dated
----------------------
on or about July 28, 1999, among the Company, Parent, the Subsidiaries named
therein and the lenders from time to time party thereto, including any
collateral documents, instruments and agreements executed in connection
therewith, and the term Senior Credit Facility will also include any amendments,
supplements, modifications, extensions, renewals, restatements or refundings
thereof and any credit facilities that replace, refund or refinance any part of
the loans, other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility that increases the amount
borrowable thereunder or alters the maturity thereof.
"Significant Subsidiary" means any Restricted Subsidiary that would be
----------------------
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the final date
---------------
specified in such security as the fixed date on which all outstanding principal
of such security is due and payable,
22
<PAGE>
including pursuant to any mandatory redemption provision (but excluding any
provision providing for the repurchase of such security at the option of the
holder thereof upon the happening of any contingency unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company
-----------------------
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement to that effect, it being understood that any accrued but unpaid fees
or expenses not permitted to be paid to Madison Dearborn Partners LLC or its
Affiliates due to restriction under the covenant described under Section 4.12
shall be considered Subordinated Obligations.
"Subsidiary" means, in respect of any Person, any corporation,
----------
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by:
(1) such Person,
(2) such Person and one or more Subsidiaries of such Person or
(3) one or more Subsidiaries of such Person.
"Subsidiary Guarantee" means a Guarantee by a Subsidiary Guarantor of
--------------------
the Company's Obligations with respect to the Notes.
"Subsidiary Guarantor" means each Subsidiary of the Company that is a
--------------------
Subsidiary on the Issue Date and any other Subsidiary that Guarantees the
Company's obligations with respect to the Notes.
"Temporary Cash Investments" means any of the following:
--------------------------
(i) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit
and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America, any state thereof or any
foreign country recognized by the United States, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of
$50,000,000 (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor,
23
<PAGE>
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company's) organized and in existence under the laws of
the United States of America or any foreign country recognized by the
United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard and
Poor's Ratings Group, and
(v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
---
ss.ss. 77aaa-77bbbb), as in effect on the date of this Notes Indenture.
"Total Assets" means the total consolidated assets of the Company and
------------
its Restricted Subsidiaries as set forth on the Company's most recent balance
sheet.
"Trust Officer" means any officer within the Corporate Trust
-------------
Administration of the Trustee (or any successor group of the Trustee) or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject, or in the case of a successor trustee, an authorized officer assigned
to the department, division or group performing the corporation trust work of
such successor and assigned to administer this Notes Indenture.
"Trustee" means the United States Trust Company of New York until a
-------
successor replaces it in accordance with the provisions of this Notes Indenture
and thereafter means such successor.
"Unrestricted Subsidiary" means
-----------------------
(i) any Subsidiary of the Company that at the time of determination
will be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary.
The Company's Board of Directors may designate any of its Subsidiaries
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any of the
Company's Capital Stock or Indebtedness,
24
<PAGE>
or holds any Lien on the Company's property or that of any Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the Subsidiary to be so designated has total
assets of $1,000 or less or (B) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the covenant described under
Section 4.10.
The Company's Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
Section 4.13 and (y) no Default will have occurred and be continuing. Any such
designation by the Company's Board of Directors will be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
---------------------------
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"U.S. Legal Tender" means such coin or currency of the United States of
-----------------
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" of a Person means all classes of Capital Stock or other
------------
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
-----------------------
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
25
<PAGE>
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Notes Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Notes
Indenture. The following TIA terms used in this Notes Indenture have the
following meanings:
"Indenture securities" means the Notes.
"Indenture security holder" means a Holder or a Noteholder.
"Indenture to be qualified" means this Notes Indenture.
"Indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Notes Indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Notes Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer to this
Notes Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) reference to Sections or Articles means reference to such Section
or Article in this Notes Indenture, unless stated otherwise.
26
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SECTION 1.04. One Class of Securities.
-----------------------
The Initial Notes, the Private Exchange Notes, the Exchange Notes and
any Additional Notes shall vote and consent together on all matters as one class
and none of the Initial Notes, the Private Exchange Notes or the Exchange Notes
shall have the right to vote or consent as a separate class on any matter.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
---------------
(a) Provisions relating to the Initial Notes, the Private Exchange
Notes, the Exchange Notes and any Additional Notes are set forth in the Rule
144A/Regulation S Appendix attached hereto (the "Appendix"), which is hereby
--------
incorporated in and expressly made a part of this Notes Indenture. The Initial
Notes and the Trustee's certificate of authentication shall be substantially in
the form of Exhibit A hereto. The Exchange Notes, the Private Exchange Notes and
the Trustee's certificate of authentication shall be substantially in the form
of Exhibit B hereto. The Notes may have notations, legends or endorsements
required by law, stock exchange rule, agreements to which the Company is
subject, if any, or depository rule or usage. The Company shall approve the
forms of the Notes and any notation, legend or endorsement on them. Each Note
shall be dated the date of its issuance and shall show the date of its
authentication.
(b) The terms and provisions contained in the Appendix and in the
forms of the Notes, annexed hereto as Exhibits A and B, shall constitute, and
are hereby expressly made, a part of this Notes Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Notes Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.02. Execution and Authentication; Aggregate Principal
-------------------------------------------------
Amount.
- ------
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
27
<PAGE>
On July 28, 1999, the Trustee shall authenticate and deliver $130.0
million of 12% Senior Notes due July 15, 2009 in the form of Initial Notes. In
addition, the Trustee shall authenticate Exchange Notes and Private Exchange
Notes, as applicable, for original issue in the aggregate principal amount not
to exceed $130.0 million, in each case upon receipt of a written order of the
Company in the form of an Officers' Certificate, provided that such Exchange
Notes and Private Exchange Notes shall be issuable only upon the valid surrender
for cancellation of such Initial Notes of a like aggregate principal amount.
Further, at any time and from time to time thereafter, the Trustee shall
authenticate and deliver Notes for original issue in an aggregate principal
amount specified, in each case upon receipt of a written order of the Company in
the form of an Officers' Certificate. Such order shall specify the amount of the
Notes to be authenticated and the date on which the original issue of Notes is
to be authenticated and, in the case of an issuance of Additional Notes pursuant
to Section 2.15 after July 28, 1999, shall certify that such issuance will not
be prohibited by Section 4.13.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Notes Indenture.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Notes Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain or designate an office or agency (which
shall be located in the Borough of Manhattan in the City of New York, State of
New York and which may be the office of the Trustee) where (a) Notes may be
presented or surrendered for registration of transfer or for exchange
("Registrar"), (b) Notes may be presented or surrendered for payment ("Paying
Agent") and (c) notices and demands to or upon the Company in respect of the
Notes and this Notes Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may have
one or more co-Registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional Paying Agent. The Company or any of its
Subsidiaries may act as Paying Agent or Registrar, except that for purposes of
Articles Three and Eight and Sections 4.15 and 4.16, neither the Company nor any
of its Subsidiaries or Affiliates shall act as Paying Agent. The Company may
change any Paying Agent or Registrar without notice to any Holder.
28
<PAGE>
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Notes Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Notes Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. The
Paying Agent or Registrar may resign upon 30 days notice to the Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, or interest on, the Notes (whether such assets have been
distributed to it by the Company or any other obligor on the Notes), and the
Company and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may, and
upon direction of a majority of the Holders shall, at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company or any other obligor on the
Notes to the Paying Agent, the Paying Agent shall have no further liability for
such assets.
SECTION 2.05. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish or cause the Registrar to furnish
to the Trustee before each Record Date and at least seven Business Days before
each Interest Payment Date and at such other times as the Trustee may request in
writing a list as of such date and in such form as the Trustee may reasonably
require of the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee and the Company shall otherwise comply
with TIA ss. 312(a).
SECTION 2.06. [Intentionally Omitted]
-----------------------
29
<PAGE>
SECTION 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, subject
to the terms of the next succeeding sentence, the Company shall issue and the
Trustee, upon the receipt of a written order complying with Section 2.02, shall
authenticate a replacement Note if the Trustee's reasonable requirements for
replacement Notes are met. If required by the Trustee or the Company, such
Holder must provide an affidavit of lost certificate and an indemnity bond or
other indemnity, sufficient in the judgment of both the Company and the Trustee,
to protect the Company, the Trustee, any Agent or any Authenticating Agent from
any loss which any of them may suffer if a Note is replaced. The Company and the
Trustee may charge such Holder for their out-of-pocket expenses in replacing a
Note, including reasonable fees and expenses of counsel, and for any tax that
may be imposed in replacing such Notes. Every replacement Note shall constitute
an additional obligation of the Company.
SECTION 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07.
Except as otherwise provided in Article 8, if on a Redemption Date or
the Maturity Date the Paying Agent holds U.S. Legal Tender or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the Notes
payable on that date and is not prohibited from paying such money to the Holders
thereof pursuant to the terms of this Notes Indenture, then on and after that
date such Notes cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Notes.
--------------
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company or any of its Affiliates shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver, consent or notice,
only Notes which a Trust Officer of the Trustee actually knows are so owned
shall be so considered.
30
<PAGE>
SECTION 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company considers appropriate for temporary Notes. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate upon receipt
of a written order of the Company pursuant to Section 2.02 definitive Notes in
exchange for, and upon surrender of, temporary Notes. Until so exchanged, the
temporary Notes shall in all respects be entitled to the same benefits under
this Notes Indenture as definitive Notes authenticated and delivered hereunder.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Notes surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Notes to replace Notes
that it has paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Notes (without
regard to any grace period therefor), it shall pay the defaulted interest, plus
(to the extent lawful) any interest payable on the defaulted interest to the
Persons who are Holders on a subsequent special Record Date, which date shall be
the fifteenth day preceding the date fixed by the Company for the payment of
defaulted interest or the next succeeding Business Day if such date is not a
Business Day. At least 15 days before the subsequent special Record Date, the
Company shall mail to each Holder, as of a recent date selected by the Company,
with a copy to the Trustee, a notice that states the subsequent special Record
Date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use "CUSIP" numbers, and if so,
the Trustee shall use such CUSIP numbers in notices of redemption or exchange as
a convenience to Holders; provided that no representation is hereby deemed to be
made by the Trustee as to the correctness or accuracy of such CUSIP numbers
printed in the notice or on the Notes, and that reliance may
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<PAGE>
be placed only on the other identification numbers printed on the Notes. The
Company shall promptly notify the Trustee of any change in a CUSIP number.
SECTION 2.14. Deposit of Moneys.
-----------------
Prior to 9:00 a.m. New York City time on each Interest Payment Date and
on the Maturity Date, the Company shall deposit with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15. Issuance of Additional Notes.
----------------------------
With respect to any Additional Notes, the Company shall set forth in a
Board Resolution and in an Officers' Certificate, a copy of each which shall be
delivered to the Trustee, the following information:
(1) the aggregate principal amount of such Additional Notes to be
authenticated and delivered pursuant to this Notes Indenture;
(2) the issue price, the issue date and the CUSIP number of such
Additional Notes and the amount of interest payable on the first payment
date applicable thereto; provided, however, that no Additional Notes may be
issued at a price that would cause such Additional Notes to have "original
issue discount" within the meaning of Section 1273 of the Code; and
(3) whether such Additional Notes shall be transfer restricted
securities and issued in the form of Initial Notes or shall be registered
securities issued in the form of Exchange Notes as set forth in the
Appendix.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to Section 3.07 and
Paragraph 6 of the Notes, it shall notify the Trustee and the Paying Agent in
writing in the form of an Officer's Certificate of the (i) Redemption Date, (ii)
the principal amount of the Notes to be redeemed and (iii) the redemption price.
The Company shall give each notice provided for in this Section 3.01 at
least 30 days but no more than 60 days before the Redemption Date, together with
an Officers' Certificate stating that such redemption shall comply with the
conditions contained herein and in the Notes.
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<PAGE>
SECTION 3.02. Selection of Notes To Be Redeemed.
---------------------------------
If fewer than all of the Notes are to be redeemed, selection of the
Notes to be redeemed will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not then listed on a national securities
exchange, on a pro rata basis, by lot or in such other fair and reasonable
manner chosen at the discretion of the Trustee; provided, however, that if a
partial redemption is made with the proceeds of a Public Equity Offering or
other Equity Offering pursuant to Section 3.07(b), selection of the Notes or
portion thereof for redemption shall be made by the Trustee only on a pro rata
basis, unless such method is otherwise prohibited. The Company shall promptly
notify the Trustee and the Paying Agent in writing of the date of listing and
the name of the securities exchange if and when the Notes are listed on a
principal national securities exchange. The Trustee shall make the selection
from the Notes outstanding and not previously called for redemption and shall
promptly notify the Company in writing of the Notes selected for redemption and,
in the case of any Note selected for partial redemption, the principal amount
thereof to be redeemed. Notes in denominations of $1,000 may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Notes that have denominations
larger than $1,000. Provisions of this Notes Indenture that apply to Notes
called for redemption also apply to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder whose Notes are to be redeemed, with
a copy to the Trustee and any Paying Agent. At the Company's written request no
less than 35 days prior to the Redemption Date, the Trustee shall give the
notice of redemption in the Company's name and at the Company's expense.
Each notice for redemption shall identify the Notes to be redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption is
being made;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date, and the only
33
<PAGE>
remaining right of the Holders of such Notes is to receive payment of the
Redemption Price plus accrued interest, if any, upon surrender to the
Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Note, a new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(8) if fewer than all the Notes are to be redeemed, the aggregate
principal amount of Notes to be redeemed and the aggregate principal amount
of Notes to be outstanding after such partial redemption and, if the
redemption is not made pro rata, the identification of the particular Notes
(or portion thereof) to be redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price and the amount of accrued interest payable thereon, provided
that if a Note is redeemed on or after a Record Date for an interest payment but
on or prior to the related Interest Payment Date, then any accrued and unpaid
interest shall be paid to the Holder of record at the close of business on such
Record Date. Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder.
Except in connection with a defeasance pursuant to Section 8.02, at any
time prior to the mailing of a notice of redemption to the Holders pursuant to
Section 3.03, the Company may withdraw, revoke or rescind any notice of
redemption delivered to the Trustee without any continuing obligation to redeem
the Notes.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before 9:00 a.m. New York City time on the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Notes to be redeemed
on that date (other than Notes or portions of Notes called for redemption which
have been delivered by the Company to the Trustee for cancellation). The Paying
Agent shall promptly return to the Company any U.S. Legal Tender so deposited
which is not required for that purpose, except with respect to monies owed as
obligations to the Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Notes to be
34
<PAGE>
redeemed will cease to accrue on and after the applicable Redemption Date,
whether or not such Notes are presented for payment.
SECTION 3.06. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is to be redeemed in part, the Company
shall execute and the Trustee shall authenticate for the Holder a new Note or
Notes equal in principal amount to the unredeemed portion of the Note
surrendered.
SECTION 3.07. Optional Redemption.
-------------------
(a) Except as set forth in the subsection (b) below, the Notes will
be redeemable at the Company's option, in whole or in part, at any time on or
after July 15, 2004, at the respective redemption price (expressed as a
percentage of principal amount) set forth below, plus accrued and unpaid
interest to the redemption date (subject to the right of Holders of record on
the relevant Record Date to receive interest due on the relevant Interest
Payment Date), if redeemed during the 12-month period beginning on July 15 of
the year indicated below:
Redemption
Period Price
------ ----------
2004 .......................... 106.000%
2005 .......................... 104.000%
2006 .......................... 102.000%
2007 and thereafter ........... 100.000%
(b) Notwithstanding the foregoing, before July 15, 2002, the
Company may at its option on one or more occasions redeem up to 35% of the
original principal amount of the Notes (including the original principal amount
of any Additional Notes) with the proceeds of (i) one or more Public Equity
Offerings or (ii) any other Equity Offering so long as the gross proceeds to the
Company or Parent from such offering exceeds $50 million, at a redemption price
(expressed as a percentage of principal amount) of 112% plus accrued interest to
the redemption date (subject to the right of Holders of record on the relevant
Record Date to receive interest due on the relevant Interest Payment Date);
provided that at least 65% of the aggregate principal amount of the Notes
(including the original principal amount of any Additional Notes) initially
issued must remain outstanding after each such redemption; provided, further,
that such redemption must occur within 120 days of the Public Equity Offering or
Equity Offering, as the case may be.
35
<PAGE>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
----------------
The Company shall pay or cause to be paid the principal of and interest
on the Notes on the dates and in the manner provided in the Notes and in this
Notes Indenture. An installment of principal of or interest on the Notes shall
be considered paid on the date it is due if the Trustee or Paying Agent (other
than the Company or an Affiliate of the Company) holds on that date U.S. Legal
Tender designated for and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders pursuant to the terms of this
Notes Indenture.
Notwithstanding anything to the contrary contained in this Notes
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
SECTION 4.03. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done, at its own cost and expense, all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate
existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of each of them (as the same may be amended
from time to time) and the material rights (charter and statutory) and
franchises of the Company and each such Restricted Subsidiary; provided,
however, that neither the Company nor any Restricted Subsidiary shall be
required to preserve any right or franchise, or the corporate, partnership or
other existence of any Restricted Subsidiary, if the Board of Directors of the
Company shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole.
SECTION 4.04. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges
36
<PAGE>
(including withholding taxes and any penalties, interest and additions to taxes)
levied or imposed upon it or any of its Subsidiaries or properties of it or any
of its Subsidiaries and (ii) all lawful claims for labor, materials and supplies
that, if unpaid, might by law become a Lien upon the property of it or any of
its Subsidiaries; provided, however, that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings properly instituted and diligently
conducted for which reserves, to the extent required under and in accordance
with GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its material properties in good working order and
condition (subject to ordinary wear and tear) and make all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto and
actively conduct and carry on its business; provided, however, that nothing in
this Section 4.05 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the operation and maintenance of any of its
properties, if such discontinuance is, in the reasonable good faith judgment of
the Company or the Restricted Subsidiary, as the case may be, desirable in the
conduct of the business of the Company and its Restricted Subsidiaries, taken as
a whole.
(b) The Company shall provide or cause to be provided, for itself and
each of its Restricted Subsidiaries, insurance (including reasonably appropriate
self-insurance consistent with past practice) against loss or damage of the
kinds that, in the good faith judgment of the Board of Directors of the Company,
are adequate and appropriate for the conduct of the business of the Company and
such Restricted Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the reasonable good faith judgment of the
Board of Directors of the Company, for companies similarly situated in the
industry.
37
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SECTION 4.06. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, an Officers' Certificate stating that a
review of its activities and the activities of its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Notes Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
such Officer's knowledge, based on such review, the Company during such
preceding fiscal year has kept, observed, performed and fulfilled each and every
such covenant contained in the Notes Indenture and no Default or Event of
Default occurred during such year and at the date of such certificate there is
no Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end. Such Officer's
Certificate shall comply with TIA Section 314(a)(4).
(b) So long as not contrary to the then-current recommendations of the
American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.08 shall be accompanied by a written
report of the Company's independent accountants (who shall be a firm of
established national reputation) that in conducting their audit of such
financial statements nothing has come to their attention that would lead them to
believe that the Company has violated any provisions of Article Four or Five of
this Notes Indenture or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Notes Indenture or the Notes, the
Company shall deliver to the Trustee, at its address set forth in Section 11.02,
by registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action within five Business Days of its
becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as are not in the aggregate
reasonably likely to have a material adverse effect on the financial condition
or results of operations of the Company and its Restricted Subsidiaries, taken
as a whole.
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SECTION 4.08. SEC Reports.
-----------
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15 (d) of the Exchange Act, the Company will file
with the SEC (to the extent the SEC will accept such filings) and provide the
Trustee and Noteholders with such annual reports and such information, documents
and other reports as are specified in Sections 13 and 15(d) of the Exchange Act
and applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections.
The requirement under this paragraph will be satisfied by filings made by Parent
pursuant to the Exchange Act containing the required information relating to the
Company to the extent permitted by SAB 53.
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Notes Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
---------------------------------
(a) the Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to make a Restricted Payment if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment:
(i) a Default will have occurred and be continuing (or would result
therefrom);
(ii) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under Section
4.13; or
(iii) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from July 3, 1999 to the end of
the most recent fiscal quarter ending at least 45 days prior to the
date of such Restricted Payment (or, in case such Consolidated Net
Income will be a deficit, minus 100% of such deficit);
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(B) 100% of the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of the Company's Capital Stock (other than
Disqualified Stock) or an equity contribution from a holder of the
Company's Capital Stock subsequent to the Issue Date (other than an
issuance or sale to any of the Company's Subsidiaries and other than an
issuance or sale to an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries for the benefit of
their employees) or from the issue or sale of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt securities of the
Company that have been converted into or exchanged for such Equity
Interests (other than Equity Interests (or Disqualified Stock or debt
securities) sold to Parent or a Subsidiary of Parent or the Company),
together with the net proceeds received by the Company upon such conversion
or exchange, if any, plus;
(C) an amount equal to the aggregate net proceeds (including the fair
market value (as determined in good faith by a Board Resolution of the
Company) of property other than cash that would constitute Marketable
Securities or a Related Business so long as there is no restriction on the
sale of such property) of any
(i) sale or other disposition of Investments made by the Company and
its Restricted Subsidiaries, or
(ii) dividend from, or the sale of the stock of, an Unrestricted
Subsidiary;
provided, however, that the foregoing amount shall not exceed the amount of such
Investment previously made (and treated as a Restricted Payment) by the Company
or any Restricted Subsidiary, and, in the case of any such clause (ii), the
amount of Investments previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) will not
prohibit:
(i) any acquisition of any Capital Stock of the Company made out of
the proceeds of the substantially concurrent sale of, or made by exchange
for, the Company's Capital Stock (other than Disqualified Stock and other
than Capital Stock issued or sold to any of the Company's Subsidiaries or
an employee stock ownership plan or to a trust established by the Company
or any of its Subsidiaries for the benefit of the Company or their
employees); provided, however, that (A) such acquisition of Capital Stock
will be excluded in the calculation of the amount of Restricted Payments
and (B) the Net Cash Proceeds from such sale will be excluded from the
calculation of amounts under clause (iii)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted to be Incurred pursuant
to the covenant described under Section 4.13; provided, however, that such
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purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value will be excluded in the calculation of the amount of
Restricted Payments;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Disqualified Stock made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Disqualified Stock of the Company which is permitted to be issued pursuant
to the Notes Indenture; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value will be
excluded in the calculation of the amount of Restricted Payments;
(iv) dividends paid or the consummation at any irrevocable
redemption within 60 days after the date of declaration or notice of
redemption thereof if at such date of declaration or notice such dividend
or redemption would have complied with this covenant; provided, however,
that such dividend will be included in the calculation of the amount of
Restricted Payments;
(v) so long as no Default has occurred or will occur as a result of
such payment, the repurchase or other acquisition of shares of, or options
to purchase shares of, Parent's common stock or the common stock of any of
Parent's Subsidiaries from employees, former employees, consultants,
directors or former directors of Parent's or any of Parent's Subsidiaries
(or permitted transferees of such employees, former employees, directors or
former directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by the
Company's Board of Directors under which such individuals purchase or sell
or are granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases and other
acquisitions will not exceed $2 million in any calendar year; provided
further, however, that such repurchases and other acquisitions will be
deducted in the calculation of the amount of Restricted Payments;
(vi) repurchase of Equity Interests of the Company deemed to occur
upon the exercise of stock options to the extent Equity Interests represent
a portion of the Exercise Price of such options; or
(vii) cash payments, advances, loans or expense reimbursements made
to Parent to permit Parent to pay its general operating expenses, franchise
tax obligations, accounting, legal, corporate reporting and administrative
expenses incurred in the ordinary course of its business in an amount not
to exceed $250,000 in the aggregate in any fiscal year;
(viii) prepayments, repayments or purchases of Indebtedness pursuant
to Section 4.16(ii)(D); provided, however, that such prepayment, repayment
or purchase will be included in the calculation of the amount of Restricted
Payments;
(ix) cash payments to Parent from and after October 15, 2004, to
enable Parent to make required interest payments on the Debentures
provided, in each case, such cash payments are
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used for interest payments, as applicable, within 30 days of such payment;
provided, further, that (i) no Default or Event of Default shall have
occurred and be continuing; (ii) that such payment will be included in the
calculation of the amount of Restricted Payments; and (iii) that the
Consolidated Coverage Ratio after giving effect to such payments exceeds
2.5 to 1;
(x) so long as no Default has occurred and is continuing or would be
caused thereby, other Restricted Payments in an aggregate amount not to
exceed $3 million since the date of this Notes Indenture.
(c) The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant shall be determined in good faith by the Board of Directors
whose resolution with respect thereto shall be conclusive. The Board of
Directors' determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million.
(d) The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (a) of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments as the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
SECTION 4.11. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries.
-----------------------
The Company will not, and will not permit any of the Company's
Restricted Subsidiaries to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital
Stock to the Company or any of its Restricted Subsidiaries or pay any
Indebtedness owed to the Company,
(ii) make any loans or advances to the Company or
(iii) transfer any of its property or assets to the Company,
except:
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(i) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date (including restrictions under the Notes
Indenture, the Notes, the Debenture Indenture, the Discount Notes and the
Guarantees of the Notes);
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by
such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date;
(iii) any such encumbrance or restriction consisting of customary non-
assignment provisions in leases governing leasehold interests to the extent such
provisions restrict the transfer of the lease or the property leased thereunder;
(iv) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements or mortgages; provided that such security agreements or
mortgages constitute Permitted Liens and such Indebtedness is permitted to be
Incurred under this Notes Indenture;
(v) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition;
(vi) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business; (vii)
restrictions on the transfer of assets subject to any Lien permitted under this
Notes Indenture imposed by the holder of such Lien;
(viii) encumbrances or restrictions existing under or arising pursuant to
Credit Facilities entered into in accordance with this Notes Indenture; that the
encumbrances or restrictions in such Credit Facilities are not materially more
restrictive than those contained in the Senior Credit Agreement as in effect on
the date hereof;
(ix) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of the
nature described in clause (iii) of the first paragraph of this covenant;
(x) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements entered
into in the ordinary course of business;
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(xi) any agreement or instrument governing Capital Stock (other than
Disqualified Stock) of any Person that is in effect on the date such Person
is acquired by the Company or a Restricted Subsidiary; and
(xii) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (i) through (xi) above; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of
the Board of Directors of the Company, not materially more restrictive with
respect to such dividend and other payment restrictions than those
contained in the dividends or other payment restrictions prior to such
amendment, modification, restatement, renewal, increase, supplement,
refunding, replacement or refinancing.
SECTION 4.12. Limitation on Affiliate Transactions.
------------------------------------
(a) the Company will not, and will not permit any Restricted
Subsidiary to, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any of the Company's
Affiliates (an "Affiliate Transaction") unless the terms thereof:
(i) are no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an
Affiliate,
(ii) if such Affiliate Transaction involves an amount in excess of $1
million, (A) are set forth in writing and (B) have been approved by a
majority of the members of the Company's Board of Directors having no
personal stake in such Affiliate Transaction;
(iii) if such Affiliate Transaction involves as amount in excess of
$10 million, have been determined by nationally recognized investment
banking or accounting firm to be fair, from a financial standpoint, to the
Company and its Restricted Subsidiaries; and
(iv) with respect to any transaction, management, consulting and
advisory fees and related expenses to Madison Dearborn Partners, LLC and
its Affiliates, WEC would be able to incur $1.00 of Indebtedness pursuant
to Section 4.13(a); provided, however, for the purposes of this clause (iv)
only, the Consolidated Coverage Ratio shall not exceed 1.75 to 1 prior to
July 31, 2001 or 2.25 to 1 thereafter.
(b) The provisions of the foregoing paragraph (a) will not
prohibit:
(i) any Restricted Payment permitted to be paid pursuant to the
covenant described under Section 4.10,
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(ii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Company's
Board of Directors,
(iii) the grant of stock options or similar rights to the Company's
employees and directors pursuant to plans approved by the Company's Board of
Directors,
(iv) loans or advances to employees in the ordinary course of business in
accordance with the Company's past practices or past practices of the Company's
Restricted Subsidiaries, but in any event not to exceed $1 million in the
aggregate outstanding at any one time,
(v) the payment of reasonable fees to the Company's or Parent's
directors and directors of Restricted Subsidiaries who are not the Company's or
Parent's employees or employees of Restricted Subsidiaries,
(vi) any Affiliate Transaction between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries,
(vii) the issuance or sale of any Capital Stock of the Company (other
than Disqualified Stock),
(viii) any employment agreement with reasonable terms entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary,
(ix) transactions with a Person that is an Affiliate of the Company
solely because the Company owns an Equity Interest in such Person, so long as no
other Affiliate of the Company owns an interest in such Person,
(x) the payment of transaction, management, consulting and advisory fees
and related expenses to Madison Dearborn Partners, LLC and its Affiliates;
provided that such fees shall not, in the aggregate, exceed:
(A) in the case of a management fee, $600,000 in any twelve-month
period, and
(B) in the case of a transaction fee, 1.0% of the total equity
value of, plus the Indebtedness assumed from, the business acquired
in such transaction or series of related transactions.
(xi) reasonable fees and expenses and compensation paid to, and indemnity
provided on behalf of, officers, directors or employees of the Company, Parent
or any Subsidiary as determined in good faith by the Board of Directors of the
Company or senior management,
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(xii) any agreement as in effect as of the Issue Date or any
amendment thereto so long as such amendment is not more disadvantageous to
the Holders in any material respect, and
(xiii) payments made to Parent for the purpose of allowing to pay its
general operating expenses, franchise tax obligations, accounting, legal
corporate reporting and administrative expenses incurred in the ordinary
course of its business in an amount not to exceed $250,000 in the aggregate
in any fiscal year.
SECTION 4.13. Limitation on Indebtedness.
--------------------------
(a) the Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur, directly or indirectly, any Indebtedness; provided,
however, that the Company may Incur Indebtedness if, on the date of such
Incurrence and after giving effect thereto, the Consolidated Coverage Ratio
exceeds 2 to 1 if such Indebtedness is Incurred prior to July 31, 2001 or 2.25
to 1 if such Indebtedness in Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Senior Credit Facility;
provided, however, that, after giving effect to any such Incurrence, the
aggregate principal amount of such Indebtedness then outstanding does not
exceed $40 million less the sum of all principal payments with respect to
such Indebtedness pursuant to Section 4.16(a)(ii)(A);
(ii) Indebtedness owed to and held by the Company or any of its
Restricted Subsidiaries; provided, however, that (x) any subsequent
issuance or transfer of any Capital Stock which results in any such
Restricted Subsidiary ceasing to be a Subsidiary or any subsequent transfer
of such Indebtedness (other than to the Company or any of its Restricted
Subsidiaries) will be deemed, in each case, to constitute the Incurrence of
such Indebtedness by the obligor thereon that is not permitted to be
Incurred under this clause (ii) and (y) if the Company and/or a Subsidiary
Guarantor is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
obligations with respect to the Note and/or the Subsidiary Guaranty of such
Subsidiary Guarantor, as the case may be;
(iii) the Notes (other than Additional Notes) and the Exchange Notes;
(iv) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (i), (ii) or (iii) of this covenant);
(v) Indebtedness of a Subsidiary Incurred and outstanding on or
prior to the date on which such Subsidiary was acquired by the Company
(other than Indebtedness Incurred in connection with, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company); provided,
however, that on the date of such
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acquisition and after giving effect thereto, the Company would have been able to
Incur at least $1.00 of additional Indebtedness pursuant to clause (a) above;
(vi) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) above or pursuant to clause (iii), (iv) or (v) above
or this clause (vi); provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary
Incurred pursuant to clause (v), such Refinancing Indebtedness will be Incurred
only by such Subsidiary;
(vii) Hedging Obligations or Commodity Agreements not entered into for
speculative purposes and directly related to Indebtedness permitted to be
Incurred by the Company or any of its Restricted Subsidiaries pursuant to this
Notes Indenture;
(viii) the Subsidiary Guaranties of the Subsidiary Guarantors with respect
to the Notes and the Debentures;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case, incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiaries, in an aggregate principal amount to not exceed the
greater of 5% of Total Assets as of the date of incurrence and $2.5 million at
any time outstanding;
(x) the guarantee by the Company or any of the Subsidiary Guarantors of
the Company's Indebtedness or Indebtedness of a Restricted Subsidiary that was
permitted to be incurred by another provision of this covenant;
(xi) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant; provided, in each
case, that the amount thereof is included in Consolidated Interest Expense of
the Company as accrued;
(xii) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or a Subsidiary, other than guarantees of
Indebtedness incurred by any person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such acquisition;
provided, however, that (a) such Indebtedness is not reflected on the balance
sheet of the Company or any Restricted Subsidiary (contingent obligations
referred to in a footnote to financial statements and not otherwise reflected on
the balance sheet will not be deemed to be reflected on such balance sheet for
purposes of this clause (a)) and (b) the maximum assumable
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liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds including noncash proceeds (the fair market value of such
noncash proceeds being measured at the time received and without giving
effect to any subsequent changes in value) actually received by the Company
and its Restricted Subsidiaries in connection with such disposition;
(xiii) the incurrence of obligations in respect of performance and
surety bonds provided by the Company or any of its Restricted Subsidiaries
in the ordinary course of business;
(xiv) the incurrence of Indebtedness consisting of guarantees of
loans made to management for the purpose of permitting management to
purchase Equity Interests of Parent, in an amount not to exceed $1.0
million at any one time outstanding;
(xv) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary
course of business, provided that such Indebtedness is satisfied within
five business days of Incurrence;
(xvi) Indebtedness of the Company issued to directors, employees,
officers or consultants of the Company or a Restricted Subsidiary in
connection with the redemption or purchase of Capital Stock of the Company
or Parent that, by its terms, is subordinated to the Notes, is not secured
by any assets of the the Company or its Restricted Subsidiaries and does
not require cash payments prior to the Stated Maturity of the Notes and
Refinancing Indebtedness in respect thereof, in an aggregate principal
amount which, when added together with the amount of Indebtedness Incurred
pursuant to this clause (16) and then outstanding, does not exceed $1.0
million; and
(xvii) Indebtedness in an aggregate principal amount which, together
with the Company's other Indebtedness outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (i) through (xvi)
above or paragraph (a)) does not exceed $10 million at any one time
outstanding.
(c) Notwithstanding the foregoing, neither the Company nor any of its
Restricted Subsidiaries will Incur any Indebtedness pursuant to the foregoing
paragraph (b) if the proceeds thereof are used, directly or indirectly, to
Refinance any of the Company's Subordinated Obligations unless such Indebtedness
will be subordinated to the Notes to at least the same extent as such
Subordinated Obligations. No Subsidiary Guarantor will Incur any Indebtedness
pursuant to the foregoing paragraph (b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subsidiary Guarantor Subordinated
Obligation of such Subsidiary Guarantor unless such Indebtedness will be
subordinated to the obligations of such Subsidiary Guarantor under the
applicable Subsidiary Guaranty to at least the same extent as such Subsidiary
Guarantor Subordinated Obligation.
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(d) For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
(e) the Company will not permit any Unrestricted Subsidiary to incur any
Indebtedness other than Non-Recourse Debt; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt, such event will be deemed to
constitute an Incurrence of Indebtedness by the Company or any of its Restricted
Subsidiaries.
SECTION 4.14. Limitation on the Sale or Issuance of Preferred Stock of
--------------------------------------------------------
Restricted Subsidiaries.
-----------------------
The Company will not sell or otherwise dispose of any Preferred Stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell or otherwise dispose of any of its Preferred
Stock except to the Company or any of its Wholly Owned Subsidiaries.
SECTION 4.15. Change of Control.
-----------------
(a) Upon the occurrence of any of the following events (each a "Change
of Control"), each Holder will have the right to require the Company to
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant Record
Date to receive interest due on the relevant Interest Payment Date):
(i) prior to the earlier to occur of (A) the first public offering of
common stock of Parent or (B) the first public offering of the Company's
common stock, the Permitted Holders cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of at least 35% of the aggregate of the total voting power of
the Company's Voting Stock or that of Parent, whether as a result of
issuance of the Company's securities or that of Parent, the Company's
merger, consolidation, liquidation or dissolution or that of Parent, any
direct or indirect transfer of securities by Parent or otherwise (for
purposes of this clause (i) and clause (ii) below, the Permitted Holders
will be deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent corporation);
(ii) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that for
purposes of this clause (ii) such person will be deemed to have
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<PAGE>
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the Company's Voting Stock or that of Parent; provided,
however, that the Permitted Holders beneficially own (as defined in clause
(i) above), directly or indirectly, in the aggregate a lesser percentage of
the total voting power of the Company's Voting Stock or that of Parent than
such other person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Company's Board of Directors or that of Parent (for the purposes of this
clause (ii), such other person will be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if
such other person is the beneficial owner (as defined in this clause (ii)),
directly or indirectly, of more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders beneficially own
(as defined in clause (i) above), directly or indirectly, in the aggregate
a lesser percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation);
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Company's Board of Directors
or that of Parent (together with any new directors whose election by the
Company's Board of Directors or that of Parent or whose nomination for
election by the Company's shareholders or that of Parent, as applicable,
was approved by a vote of a majority of the Company's directors or that of
Parent, as applicable, then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Company's Board of Directors or that of Parent, as applicable, then
in office;
(iv) the adoption of a plan relating to the Company's liquidation or
dissolution or that of Parent; or
(v) the merger or consolidation of the Company or Parent with or
into another Person or the merger of another Person with or into the
Company or Parent, or the sale of all or substantially all of the Company's
assets or that of Parent to another Person (other than a Person that is
controlled by the Permitted Holders), and, in the case of any such merger
or consolidation, the Company's securities or that of Parent that are
outstanding immediately prior to such transaction and which represent 100%
of the aggregate voting power of the Company's Voting Stock or that of
Parent are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
(b) Within 30 days following any Change of Control, the Company will
mail a notice to each Holder with a copy to the Trustee (the "Change of Control
Offer") stating:
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(i) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to
the right of holders of record on the relevant Record Date to receive
interest on the relevant Interest Payment Date);
(ii) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
(iii) the repurchase date (which will be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(iv) the instructions determined by the Company, consistent with the
covenant described hereunder, that a Holder must follow in order to have
its Notes purchased.
(c) Holders electing to have a Note purchased will be required to
surrender the Note, with an appropriate form (as provided for in Exhibit A or B,
as appropriate) duly completed, to the Company at the address specified in the
notice not later than 3 p.m., New York City time, two Business Days prior to the
purchase date. Holders will be entitled to withdraw their election if the
Trustee or the Company receives not later than 3 p.m., New York City time, two
Business Days prior to the purchase date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Note
purchased.
(d) On the purchase date, all Notes purchased by the Company under
this Section shall be delivered to the Trustee for cancellation, and the Company
shall pay or cause to be paid the purchase price plus accrued and unpaid
interest, if any, to the Holders entitled thereto.
(e) At the time the Company delivers Notes to the Trustee which are
to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Notes are to be accepted by the Company pursuant
to and in accordance with the terms of this Section. A Note shall be deemed to
have been accepted for purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the surrendering Holder.
(f) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached the Company's
obligations under the covenant described hereunder by virtue thereof.
SECTION 4.16. Limitation on Sales of Assets and Subsidiary Stock.
--------------------------------------------------
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(a) the Company will not, and will not permit any of the Company's
Restricted Subsidiaries to, directly or indirectly, consummate any Asset
Disposition unless:
(i) the Company or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair market
value (including as to the value of all non-cash consideration), as
determined in good faith by the Company's Board of Directors, of the shares
and assets subject to such Asset Disposition and at least 75% of the
consideration thereof received by the Company or such Restricted Subsidiary
is in the form of cash or cash equivalents or Marketable Securities and
(ii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be);
(A) first, to the extent the Company elects (or is required by
-----
the terms of any Indebtedness), to prepay, repay, redeem or purchase
Indebtedness under the Senior Credit Facility or Indebtedness (other
than any Disqualified Stock) of a Restricted Subsidiary required to be
repaid upon such Asset Sale (in each case other than Indebtedness owed
to the Company or any of its Affiliates) within one year from the
later of the date of such Asset Disposition or the receipt of such Net
Available Cash;
(B) second, to the extent of the balance of such Net Available
------
Cash after application in accordance with clause (A), to the extent
the Company elects, to acquire Additional Assets within one year from
the later of the date of such Asset Disposition or the receipt of such
Net Available Cash;
(C) third, to the extent of the balance of such Net Available
-----
Cash after application in accordance with clauses (A) and (B), to make
an offer (the "Offer") to the holders of the Notes (and to holders of
other Indebtedness that is pari passu with the Notes designated by the
Company) to purchase Notes (and such other pari passu Indebtedness)
pursuant to and subject to the conditions contained in this Notes
Indenture; and
(D) fourth, to the extent of the balance of such Net Available
------
Cash after application in accordance with clauses (A), (B) and (C) to
(x) the acquisition by the Company or any of its Restricted
Subsidiaries of Additional Assets or (y) the prepayment, repayment or
purchase of the Company's Indebtedness (other than any Disqualified
Stock and other than Indebtedness owed to any of the Company's
Affiliates) or Indebtedness of any Subsidiary (other than Indebtedness
owed to the Company or any of its Affiliates), in each case within one
year from the later of the receipt of such Net Available Cash and the
date the offer described in clause (b) below is consummated;
provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A), (C) or (D) above, the Company or any
such Restricted Subsidiary will permanently retire such Indebtedness and will
cause the related loan commitment
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(if any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this
paragraph, the Company and its Restricted Subsidiaries will not be required to
apply any Net Available Cash in accordance with this paragraph except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
are not applied in accordance with this paragraph exceeds $1.0 million. Pending
application of Net Available Cash pursuant to this covenant, such Net Available
Cash will be invested in Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: any liabilities (as shown on the Company or such Restricted
Subsidiary's most recent balance sheet), of the Company's or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by
the transferee of any such assets; and any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are converted, sold or exchanged by the Company or such
Restricted Subsidiary into cash within 30 days of the related Asset Sale (to the
extent of the cash received in that conversation).
(b) In the event of an Asset Disposition that requires the purchase
of the Notes (and other pari passu Indebtedness) pursuant to clause (a)(ii)(C)
above, the Company will be required to purchase Notes tendered pursuant to an
offer by the Company for the Notes (and other pari passu Indebtedness) at a
purchase price of 100% of their principal amount (without premium) plus accrued
but unpaid interest (or, in respect of such other pari passu Indebtedness, such
lesser price, if any, as may be provided for by the terms of such pari passu
Indebtedness) in accordance with the procedures (including prorating in the
event of oversubscription) set forth in this Notes Indenture. If the aggregate
purchase price of Notes (and any other pari passu Indebtedness) tendered
pursuant to such offer is less than the Net Available Cash allotted to the
purchase thereof, the Company will be required to apply the remaining Net
Available Cash in accordance with clause (a)(ii)(D) above. The Company will not
be required to make such an offer to purchase Notes (and other pari passu
Indebtedness) pursuant to this covenant if the Net Available Cash available
therefor is less than $5.0 million (which lesser amount will be carried forward
for purposes of determining whether such an offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
(c) Notwithstanding paragraphs (a) and (b) above, the Company and its
Restricted Subsidiaries will be permitted to consummate an Asset Disposition
with respect to assets in any transaction or series of related transactions with
a fair market value of $2.0 million or less without complying with such
paragraphs to the extent (i) at least 75% of the consideration for such Asset
Sale constitutes cash, cash equivalents, Marketable Securities or Productive
Assets and (ii) such Asset Disposition is for fair market value (as determined
in good faith by the Company's Board of Directors); provided that any
consideration not constituting Productive Assets received by the Company or any
Restricted Subsidiary in connection with an Asset Disposition permitted to be
consummated under this paragraph shall be subject to the provisions of
paragraphs (a) and (b) above and included in Net Available Cash.
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<PAGE>
(d) (1) Promptly, and in any event within 30 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Notes purchased by the Company
either in whole or in part (subject to prorating as hereinafter described in the
event the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date of such notice
(the "Purchase Date") and shall contain such information which the Company in
good faith believes will enable such Holders to make an informed decision.
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to
the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the
Asset Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.17(a). Upon
the expiration of the period for which the Offer remains open (the "Offer
Period"), the Company shall deliver to the Trustee for cancellation the
Notes or portions thereof which have been properly tendered to and are to
be accepted by the Company. The Trustee shall, on the Purchase Date, mail
or deliver payment to each tendering Holder in the amount of the purchase
price. In the event that the aggregate purchase price of the Notes
delivered by the Company to the Trustee is less than the Offer Amount, the
Trustee shall deliver the excess to the Company immediately after the
expiration of the Offer Period for application in accordance with this
Section.
(3) Holders electing to have a Note purchased shall be required to
surrender the Note, with an appropriate form duly completed, to the Company
at the address specified in the notice not later than 3:00 p.m., New York
City time, two Business Days prior to the Purchase Date. Holders shall be
entitled to withdraw their election if the Trustee or the Company receives
not later than 3:00 p.m., New York City time, two Business Days prior to
the Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note
which was delivered for purchase by the Holder and a statement that such
Holder is withdrawing his election to have such Note purchased. If at the
expiration of the Offer Period the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall select
the Notes to be purchased on a pro rata basis taking into account any other
tendered Senior Subordinated Indebtedness which is the subject of such
offer (with such adjustments as may be deemed appropriate by the Company so
that only Notes in denominations of $1,000, or integral multiples thereof,
shall be purchased). Holders whose Notes are purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
(4) At the time the Company delivers Notes to the Trustee which are
to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Notes are to be accepted by the Company
pursuant to and in accordance with the terms of this Section.
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<PAGE>
A Note shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment therefor
to the surrendering Holder.
(e) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached the Company's obligations under this clause by virtue thereof.
SECTION 4.17. Limitation on Liens.
-------------------
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or permit to exist any Lien on any of its
property or assets (including Capital Stock), whether owned on the Issue Date or
thereafter acquired, securing any obligation, other than Permitted Liens, unless
contemporaneously therewith effective provision is made to secure the Notes or
such Subsidiary Guarantor's Subsidiary Guarantee, as applicable, equally and
ratably with (or on a senior basis to, in the case of Subordinated Obligations
or Subsidiary Guarantor Subordinated Obligations, as applicable) such obligation
for so long as such obligation is so secured.
SECTION 4.18. Future Guarantors.
-----------------
The Company will cause each domestic Restricted Subsidiary (including
each domestic Restricted Subsidiary created or acquired following the Issue
Date) to Guarantee the Notes pursuant to a Subsidiary Guaranty on the terms and
conditions set forth in Article Ten of this Notes Indenture.
SECTION 4.19. Limitation on Issuances of Guarantees of and Pledges
----------------------------------------------------
for Debt: Subsidiary Guarantors.
-------------------------------
The Company will not permit any Subsidiary that is not a Subsidiary
Guarantor, directly or indirectly, to secure the payment of, guarantee, assume
or in any manner become liable with respect to any Indebtedness of the Company,
Parent or any other Subsidiary of the Company ("Subsidiary Guaranteed Debt") or
pledge any intercompany note representing obligations of any Subsidiary that is
not a Subsidiary Guarantor to secure the payment of any Subsidiary Guaranteed
Debt unless such Subsidiary simultaneously executes and delivers a supplemental
indenture to this Notes Indenture providing for a Guarantee of payment of the
Notes by such Subsidiary, and, if the Subsidiary Guaranteed Debt is by its terms
expressly subordinated to the Notes, the Parent Guaranty or any Subsidiary
Guaranty, as applicable, any such assumption, Guarantee or other liability of
such Subsidiary with respect to such Subsidiary Guaranteed Debt will be
subordinated to such Subsidiary's assumption, Guarantee or other liability with
respect to the Subsidiary Guaranty to the same extent as such Subsidiary
Guaranteed Debt is subordinated to the Notes, the Parent Guaranty or any
Subsidiary Guaranty, as applicable.
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<PAGE>
SECTION 4.20. Limitation on Sale/Leaseback Transactions.
-----------------------------------------
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction with respect to any property unless
(1) the Company or such Restricted Subsidiary would be entitled to (A)
Incur Indebtedness in an amount equal to the Attributable Debt with respect
to such Sale/Leaseback Transaction pursuant to the covenant described under
Section 4.13 and (B) create a Lien on such property securing such
Attributable Indebtedness without equally and ratably securing the Notes
pursuant to the covenant described under Section 4.17, and
(2) the transfer of such property is permitted by, and the Company or
such Restricted Subsidiary applies the proceeds of such transaction in
compliance with, the covenant described under Section 4.16.
SECTION 4.21. Limitations on Status as Investment Company.
-------------------------------------------
The Company shall not and shall not permit its Subsidiaries from
becoming "investment companies" (as that term is defined in the Investment
Company Act of 1940, as amended), or from otherwise becoming subject to
regulation under the Investment Company Act.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets of the
-----------------------------------------------
Company.
-------
(a) The Company will not consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all the Company's assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") will be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) will expressly assume, by an
indenture supplemental thereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the Company's obligations under the
Notes and this Notes Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary as a result of such
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<PAGE>
transaction as having been Incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default will have occurred
and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
Section 4.13;
(iv) immediately after giving effect to such transaction, the
Successor Company will have Consolidated Net Worth in an amount that is not
less than the Consolidated Net Worth of the Company immediately prior to
such transaction; and
(v) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Notes Indenture.
(b) The Company will not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all of its assets
to any Person (other than in a transaction or transactions resulting in a
release of such Subsidiary Guarantor as described under Section 10.03 provided
that the Company certifies to the Trustee that the Company will comply with the
covenant described under Section 4.16) unless:
(i) the resulting, surviving or transferee Person (if not such
Subsidiary) (the "Successor Guarantor") will be a Person organized and
existing under the laws of the United States of America, or any State
thereof or the District of Columbia, and such Person will expressly assume,
by a Guaranty Agreement, in form satisfactory to the Trustee, all the
obligations of such Subsidiary, if any, under its Subsidiary Guaranty;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the resulting,
surviving or transferee Person as a result of such transaction as having
been Incurred by such Person at the time of such transaction), no Default
will have occurred and be continuing; and
(iii) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel addressed to the Trustee with respect to the
foregoing matters.
(c) The Successor Company will be the Company's successor and will
succeed to, and be substituted for, and may exercise every right and power the
Company has under this Notes Indenture, but the Company's predecessor in the
case of a conveyance, transfer or lease will not be released from the obligation
to pay the principal of and interest on the Notes. The Successor Guarantor will
be the successor to such Subsidiary Guarantor and will succeed to, and be
substituted for, and may exercise every right and power of, such Subsidiary
Guarantor under this Notes Indenture, but such predecessor Subsidiary Guarantor
in the case of a conveyance, transfer or lease will not be released from the
obligation to pay the principal of and interest on the Notes.
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Notes when
the same becomes due and payable (whether or not such payment shall be
prohibited by Article Ten of this Notes Indenture) and the Default
continues for a period of 30 days; or
(2) the Company defaults in the payment of the principal on any Notes
when such principal becomes due and payable (whether or not such payment
shall be prohibited by Article Ten), at maturity, upon optional redemption,
upon required repurchase, upon declaration or otherwise (including the
failure to make a payment to purchase Notes tendered pursuant to a Change
of Control under Section 4.15 or an Offer under Section 4.16); or
(3) the failure by the Company to comply with its obligations under
Section 5.01 above; or
(4) the failure by the Company to comply for 30 days after notice
with any of its obligations under Sections 4.08, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15 (other than a failure to purchase the Notes) and 4.16 (other
than a failure to purchase the Notes); or
(5) the Company's failure to comply for 60 days after notice with its
other agreements contained in this Notes Indenture; or
(6) Indebtedness of the Company or any of its Significant
Subsidiaries is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $5
million; or
(7) the Company or any Significant Subsidiary of the Company (A)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or order
for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a Custodian of it or for
substantially all of its property, (D) consents to or acquiesces in the
institution of a bankruptcy or an insolvency proceeding against it, (E)
makes a general assignment for the benefit of its creditors, or (F) takes
any corporate action to authorize or effect any of the foregoing; or
(8) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Significant Subsidiary of
the Company in an involuntary case
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or proceeding under any Bankruptcy Law, which shall (A) approve as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition in respect of the Company or any such Significant Subsidiary,
(B) appoint a Custodian of the Company or any such Significant Subsidiary
or for substantially all of its property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(9) any judgment or decree for the payment of money in excess of $5
million is entered against the Company or any of its Significant
Subsidiaries, remains outstanding for a period of 90 days following such
judgment and is not discharged, waived or stayed within 10 days after
notice; or
(10) any Subsidiary Guaranty of a Significant Subsidiary ceases to be
in full force and effect (except as contemplated by the terms of this Notes
Indenture) or any Subsidiary Guarantor denies or disaffirms its obligations
under this Notes Indenture or its Subsidiary Guaranty and such Default
continues for 10 days. However, a default under clauses (4), (5) and (9)
will not constitute an Event of Default until the Trustee or the holders of
25% in principal amount of the outstanding Notes notify the Company of the
default and the Company does not cure such default within the time
specified after receipt of such notice.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration.
------------
(a) If an Event of Default (other than an Event of Default specified
in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing,
and has not been waived pursuant to Section 6.04, then the Trustee, by written
notice to the Company, or the Holders of at least 25% in principal amount of
outstanding Notes by notice in writing to the Company and the Trustee may
declare the principal of and accrued but unpaid interest on all the Notes to be
due and payable specifying the respective Event of Default and that it is a
"notice of acceleration."
(b) If an Event of Default specified in Section 6.01(7) or (8)
relating to the Company occurs and is continuing with respect to the Company,
the principal of and interest on all the Notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders.
(c) The Holders of a majority in principal amount of the Notes may,
on behalf of the Holders of all of the Notes, rescind and cancel an acceleration
and its consequences (i) if the rescission would not conflict with any judgment
or decree, (ii) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely
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because of the acceleration, (iii) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (iv) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01(7) or 6.01(8), the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Notes Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority in
principal amount of the then outstanding Notes by written notice to the Trustee
may, on behalf of the Holders of all of the Notes, waive an existing Default or
Event of Default and its consequences, except a Default in the payment of
principal of or interest on any Note as specified in clauses (1) and (2) of
Section 6.01. When a Default or Event of Default is waived, it is cured and
ceases to exist for every purpose of this Notes Indenture.
SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of a majority in principal amount
of the then outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it, including, without limitation, any remedies
provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that the Trustee believes conflicts with any law
or this Notes Indenture, that the Trustee determines may be unduly prejudicial
to the rights of another Holder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction; and provided further,
that this provision shall not affect the rights of the Trustee set forth in
Section 7.01(d).
SECTION 6.06. Limitation on Suits.
-------------------
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Subject to Article Seven, if an Event of Default occurs and is
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under this Notes Indenture at the request or direction of any
of the Holders unless such Holders have offered to the Trustee indemnity or
security against any loss, liability or expense reasonably satisfactory to the
Trustee. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder of a Note may pursue any remedy with
respect to this Notes Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee security or indemnity against any loss, liability or expense reasonably
satisfactory to the Trustee, (iv) the Trustee has not complied with such request
within 60 days after the receipt thereof and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within
such 60-day period.
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Notes Indenture, the right
of any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal, preimum or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Notes for the whole amount of
principal, premium, if any, and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest at the rate set forth in
Section 4.01 and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, consultants and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such
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judicial proceedings is hereby authorized by each Holder to make such payments
to the Trustee and, if the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agents, consultants and counsel, and any other amounts due the
Trustee under Section 7.07. The Company's payment obligations under this Section
6.09 shall be secured in accordance with the provisions of Section 7.07
hereunder. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
-----
Second: if the Holders are forced to proceed against the Company
------
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Notes for
-----
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively; and
Fourth: to the Company or any other obligor on the Notes, as their
------
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a Record Date
and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this Notes
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Notes.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this Notes
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Notes Indenture and no covenants or obligations shall be
implied in this Notes Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Notes Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this Notes
Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Notes Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not assured to it.
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(e) Whether or not herein expressly provided, every provision of this
Notes Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document reasonably believed by it to be genuine and to have been
signed or presented by the proper Person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate, an Opinion of Counsel or
both, which shall conform to Sections 11.04 and 11.05. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or indirectly or by or through
agents or attorneys and the Trustee shall not be responsible for the misconduct
or negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers conferred upon it by this Notes Indenture.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled, upon reasonable notice to the Company, to examine the books,
records, and premises of the Company, personally or by agent or attorney and to
consult with the officers and representatives of the Company, including the
Company's accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Notes Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Notes
Indenture, unless such Holders shall have offered to the
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Trustee security or indemnity satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in compliance with such
request, order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) The Trustee may determine (i) the execution by any Holder of any
instrument in writing, (ii) the date of such execution or (iii) the authority of
any Person executing the same, in any manner the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(i) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Notes Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. However, if the Trustee acquires any
conflicting interest within the meaning of Section 3.10(b) of the TIA, it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Offering Circular and the recitals contained herein and in the
Notes shall be taken as statements of the Company and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representation as to
the validity or adequacy of this Notes Indenture or the Notes, and it shall not
be accountable for the Company's use of the proceeds from the Notes, and it
shall not be responsible for any statement of the Company in this Notes
Indenture or the Notes other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
-----------------
If a Default occurs and is continuing and if it is actually known by
the Trustee, the Trustee shall mail to each Holder notice of the Default within
90 days after such Default occurs. Except in the case of a Default in payment of
principal of, premium, if any, or interest on, any Note, including an
accelerated payment and the failure to make payment on the purchase date
pursuant to a Change in Control under Section 4.15 or on the Purchase Date
pursuant to an Offer under Section 4.16 and, except in the case of a failure to
comply with Article Five hereof, the Trustee may withhold the notice if and so
long as its board of directors, the executive committee of its
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board of directors or a committee of its Trust Officers in good faith reasonably
determines that withholding the notice is in the best interest of the Holders.
In addition, the Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, a certificate complying with Section 4.06 regarding
knowledge of the Company's compliance with all covenants and conditions under
this Notes Indenture. The Company also shall deliver to the Trustee pursuant to
Section 6.01, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action the
Company is taking or proposes to take in respect thereof.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15, beginning with the May 15 following
the date of this Notes Indenture, the Trustee shall, to the extent that any of
the events described in TIA (S) 313(a) occurred within the previous twelve
months, but not otherwise, mail to each Holder a brief report dated as of such
date that complies with TIA (S) 313(a). The Trustee also shall comply with TIA
(S)(S) 313(b) and (c).
The Company shall promptly notify the Trustee if the Notes become
listed on, or delisted from, any stock exchange and the Trustee shall comply
with TIA (S) 313(d).
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable fees and
expenses, including out-of-pocket expenses incurred or made by it in connection
with the performance of its duties under this Notes Indenture. Such expenses
shall include the reasonable fees and expenses of the Trustee's agents,
consultants, experts and counsel, except such disbursements, advances and
expenses as may be attributable to its gross negligence.
The Company shall indemnify the Trustee and its agents, employees,
stockholders and directors and officers for, and hold them harmless against, any
loss, liability or expense incurred by them, arising out of or in connection
with the administration of this trust including the reasonable costs and
expenses of defending themselves against any claim or liability in connection
with the exercise or performance of any of their rights, powers or duties
hereunder. The Company need not reimburse any expense or indemnify against any
loss, liability or expense Incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may seek
indemnity. At the Trustee's sole discretion, the Company shall defend the claim
and the Trustee shall cooperate and may participate in the defense; provided
that any settlement of a claim shall be approved in writing by the Trustee.
Alternatively, the Trustee may at its option have separate counsel of its own
choosing and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
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reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes. The Trustee's
right to receive payment of any amounts due under this Section 7.07 shall not be
subordinate to any other liability or indebtedness of the Company (even though
the Notes may be subordinate to such other liability or indebtedness).
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(7) or (8) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law; provided, however, that this shall not
affect the Trustee's rights as set forth in the preceding paragraph or Section
6.10.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee and may appoint a
successor Trustee. The Company may remove the Trustee if:
(A) the Trustee fails to comply with Section 7.10;
(B) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(C) a receiver or other public officer takes charge of the Trustee or
its property; or
(D) the Trustee becomes incapable of acting.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
If the Trustee resigns or is removed as Trustee or if a vacancy exists
in the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all
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property held by it as Trustee to the successor Trustee, subject to the lien
provided in Section 7.07, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Notes Indenture. A successor Trustee
shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
corporation shall be otherwise qualified and eligible under this Article Seven.
If at the time such successor or successors by merger, conversion,
consolidation or transfer of assets to the Trustee shall succeed to the trust
created by this Notes Indenture any of the Notes shall have been authenticated
but not delivered, any successor to the Trustee may adopt a certificate of
authentication of any predecessor Trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Notes Indenture provided that the
certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Notes Indenture shall always have a Trustee who satisfies the
requirements of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least $50
million as set forth in its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S)
310(b); provided, however, that there shall be excluded from the operation of
TIA (S) 310(b)(1) any Notes Indenture or Notes Indentures under
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which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310
shall apply to the Company, as obligor of the Notes.
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF NOTES INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Notes; Defeasance.
-------------------------------------------
(a) When (i) the Company delivers to the Trustee all outstanding
Notes (other than Notes replaced pursuant to Section 2.07) for cancellation or
(ii) all outstanding Notes have become due and payable at maturity or will be
due and payable within 60 days as a result of the mailing of a notice of
redemption pursuant to Article Three hereof, in each case, and the Company
irrevocably deposits with the Trustee funds sufficient to pay at maturity or
upon redemption all outstanding Notes, including interest thereon to maturity or
such redemption date (other than Notes replaced pursuant to Section 2.07), and
if in either case the Company pays all other sums payable hereunder by the
Company, then this Notes Indenture shall, subject to Section 8.01(c), cease to
be of further effect. The Trustee shall acknowledge satisfaction and discharge
of this Notes Indenture on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel as to the satisfaction of all conditions
to such satisfaction and discharge of this Notes Indenture and at the cost and
expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all its obligations under the Notes and this Notes Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.10 through
4.18 and the operation of Section 6.01(4) and the limitations contained in
Section 5.01("covenant defeasance option"). The Company may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant defeasance
option.
If the Company exercises its legal defeasance option, payment of the
Notes may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in Section 6.01(4) or
because of the failure of the Company to comply with Section 5.01. If the
Company exercises its legal defeasance option or its covenant defeasance option,
each Subsidiary Guarantor, if any, shall be released from all its obligations
under its Subsidiary Guarantee.
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Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.07, 2.08, 7.07, 7.08, 8.05, 8.06 and
the Appendix shall survive until the Notes have been paid in full. Thereafter,
the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive.
SECTION 8.02. Conditions to Defeasance.
------------------------
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal of, interest
and premium, if any, on the Notes to maturity or redemption (including, in
the case of payment of principal, interest and premium, if any, to
redemption, under arrangements reasonably satisfactory to the Trustee
providing for redemption pursuant to irrevocable instructions delivered to
the Trustee prior to 60 days before a Redemption Date), as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent public accountants or a
nationally recognized investment banking firm expressing their opinion that
the payments of principal and interest when due and without reinvestment on
the deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay principal, premium, if any, and interest when due on all
outstanding Notes to maturity or redemption, as the case may be;
(3) (x) no Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit and (y)
no Event of Default under Section 6.01(7) or (8) shall occur at any time in
the period ending on the 123rd day after the date of such deposit (it being
understood that the condition set forth in the preceding clause (y) is a
condition subsequent which shall not be deemed satisfied until the
expiration of such 123-day period, but in the case of the covenant
defeasance, the covenants which are defeased under Section 8.01(b) will
cease to be in effect unless an Event of Default under Section 6.01(7) or
(8) occurs during such period);
(4) the Company delivers to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors
of the Company;
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(5) neither the deposit nor the defeasance shall result in a default
or Event of Default under any other material agreement to which the Company
is a party or by which the Company is bound;
(6) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(7) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Notes Indenture
there has been a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Noteholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred;
(8) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Noteholders will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(9) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Notes as contemplated by this Article Eight
have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date in
accordance with Article Three.
SECTION 8.03. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article Eight. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Notes Indenture to the payment of principal of and
interest on the Notes. Money and securities so held in trust are not subject to
Article 10.
SECTION 8.04. Repayment to Company.
--------------------
The Trustee and the Paying Agent shall promptly turn over to the
Company, upon delivery of an Officers' Certificate stating that such payment
does not violate the terms of this Notes Indenture, any excess money or
securities held by them at any time, subject to Section 7.07.
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Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon its written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Noteholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations.
------------------------------------
The Company shall pay and shall indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
SECTION 8.06. Reinstatement.
-------------
If the funds deposited with the Trustee to effect legal defeasance or
covenant defeasance are insufficient to pay the principal of, premium, if any,
and interest on the Notes when due, then the obligations of the Company under
this Notes Indenture will be revived and no such defeasance will be deemed to
have occurred.
If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender
or U.S. Government Obligations in accordance with this Article Eight by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Notes Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article Eight until such time as the Trustee or Paying Agent is permitted
to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance
with this Article Eight; provided, however, that, if the Company has made any
payment of interest on or principal of any Notes because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Notes Indenture or the Notes without
notice to or consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
provided that such amendment or supplement does not, in the reasonable
opinion of the Trustee, adversely affect the rights of any Holder in any
material respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of
the Code);
(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Notes Indenture under the TIA;
(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder; or to surrender any right or power conferred upon the Company;
(6) to add Guarantees with respect to the Notes;
(7) to secure the Notes; or
(8) to make any other change that does not adversely affect in any
material respect the rights of any Holders hereunder;
provided that the Company has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 9.01.
After an amendment, supplement or waiver under this Section 9.01
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
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SECTION 9.02. With Consent of Holders.
-----------------------
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the then
outstanding Notes, may amend or supplement this Notes Indenture or the Notes,
without notice to any other Holders. Subject to Section 6.07, the Holder or
Holders of at least a majority in aggregate principal amount of the then
outstanding Notes may waive compliance by the Company with any provision of this
Notes Indenture or the Notes without notice to any other Holder. No amendment,
supplement or waiver, including a waiver pursuant to Section 6.04, shall,
without the consent of each Holder of each Note affected thereby:
(1) reduce the amount of Notes whose Holders must consent to an
amendment or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Notes;
(3) reduce the principal of or change or have the effect of changing
the Stated Maturity of any Note, or change the date on which any Notes may
be subject to repurchase, or reduce the premium payable upon the redemption
of any Note or change the time at which any Note may be redeemed in
accordance with Article Three, or alter the provisions (including
definitions) set forth in Section 4.15 in a manner adverse to the Holders;
(4) make any Notes payable in money or payable in a place other than
that stated in the Notes;
(5) make any change in Section 6.04 or Section 6.07 or the second
sentence of this Section;
(6) amend, modify, change or waive any provision of this
Section 9.02; or
(7) make any change in any Subsidiary Guarantee that would adversely
affect the Holders.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
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SECTION 9.03. Compliance with TIA.
-------------------
If at the time of an amendment to this Notes Indenture or the Notes,
this Notes Indenture shall be qualified under the TIA, every amendment, waiver
or supplement of this Notes Indenture or the Notes shall comply with the TIA as
then in effect.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date the amendment,
supplement or waiver becomes effective.
The Company may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be (i) the later of 30 days prior
to the first solicitation of such consent or the date of the most recent list of
Holders furnished to the Trustee prior to such solicitation pursuant to Section
2.05 above or (ii) such other date as the Company may designate. If a Record
Date is fixed, then notwithstanding the last sentence of the immediately
preceding paragraph, those Persons who were Holders at such Record Date (or
their duly designated proxies), and only those Persons, shall be entitled to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such Record Date. No such consent shall be valid or effective for
more than 180 days after such Record Date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (7) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; provided that, without the consent of a Holder,
any such waiver shall not impair or affect the right of such Holder to receive
payment of principal of and interest on a Note, on or after the respective due
dates expressed in such Note, or to bring suit for the enforcement of any such
payment on or after such respective dates.
SECTION 9.05. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Any such notation
or exchange shall be made at the sole cost and expense of the Company. Failure
to make the
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appropriate notation or to issue a new Note shall not affect the validity of
such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this Notes
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Notes Indenture. Such Opinion of Counsel shall not be an expense of the Trustee.
SECTION 9.07. Payment for Consent.
-------------------
Neither the Company nor any Affiliate of the Company shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Notes
Indenture or the Notes, unless such consideration is offered to be paid to all
Holders that so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
ARTICLE TEN
GUARANTEES
SECTION 10.01. Unconditional Guarantee.
-----------------------
Each of the Subsidiary Guarantors hereby unconditionally jointly and
severally guarantees (such guarantee to be referred to herein as the "Subsidiary
Guarantee") to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, that: (i) the principal of
and interest on the Notes will be promptly paid in full when due, subject to any
applicable grace period, whether at maturity, by acceleration or otherwise and
interest on the overdue principal, if any, and interest on any interest, to the
extent lawful, of the Notes and all other obligations of the Company to the
Holders or the Trustee under this Notes Indenture or the Notes will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (ii) in case of any extension of time of payment or renewal of any Notes or
of any such other obligations, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, subject
to any applicable grace period, whether at stated maturity, by acceleration or
otherwise.
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Each Subsidiary Guarantor further agrees that, as between such
Subsidiary Guarantor on one hand, and the Holders and the Trustee on the other
hand, (x) the maturity of the obligations guaranteed hereby may be accelerated
as provided in Article Six for the purposes of the Subsidiary Guaranty,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Six, such
obligations (whether or not due and payable) shall forthwith become due and
payable by such Subsidiary Guarantor for the purposes of the Subsidiary
Guaranty.
Each of the Subsidiary Guarantors hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Notes Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Notes with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor.
Each of the Subsidiary Guarantors hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that the
Subsidiary Guarantee will not be discharged except by complete performance of
the obligations contained in the Notes, this Notes Indenture and in the
Subsidiary Guarantee. If any Noteholder or the Trustee is required by any court
or otherwise to return to the Company, any Subsidiary Guarantor, or any
Custodian acting in relation to the Company or any Subsidiary Guarantor, any
amount paid by the Company or such Subsidiary Guarantor to the Trustee or such
Noteholder, the Subsidiary Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
Each of the Subsidiary Guarantors hereby agrees that, in the Event of
Default in the payment of principal (or premium, if any) or interest on such
Notes, whether at their Stated Maturity, by acceleration, called for redemption,
purchase or otherwise, legal proceedings may be instituted by the Trustee on
behalf of, or by, the Holder of such Notes, subject to the terms and conditions
set forth in this Notes Indenture, directly against each of the Subsidiary
Guarantors to enforce the Subsidiary Guarantee without first proceeding against
the Company. Each Subsidiary Guarantor agrees that if, after the occurrence and
during the continuance of an Event of Default, the Trustee or any Holders are
prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Notes, to collect interest on the Notes, or to
enforce any other right or remedy with respect to the Notes, the Subsidiary
Guarantors agree to pay to the Trustee for the account of the Holders, upon
demand therefor, the amount that would otherwise have been due and payable had
such rights and remedies been permitted to be exercised by the Trustee or any of
the Holders.
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SECTION 10.02. Severability.
------------
In case any provision of the Subsidiary Guarantee shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.03. Release of Subsidiary Guarantor from the
----------------------------------------
Subsidiary Guarantee.
--------------------
Each Subsidiary Guarantor may consolidate with or merge into or sell
its assets to the Company or another Subsidiary Guarantor without limitation.
Upon the sale or disposition (by merger or otherwise) of a Subsidiary Guarantor
(or all or substantially all of its assets) to a Person (whether or not an
Affiliate of the Subsidiary Guarantor) which is not a Subsidiary of the Company,
which sale or disposition is otherwise in compliance with this Notes Indenture
(including the covenant described under Section 4.16), such Subsidiary Guarantor
will be deemed released from all its obligations under this Notes Indenture and
its Subsidiary Guaranty and such Subsidiary Guaranty will terminate; provided,
however, that any such termination will occur only to the extent that all
obligations of such Subsidiary Guarantor under the Senior Credit Facility and
all of its Guarantees of, and under all of its pledges of assets or other
security interests which secure, any other Indebtedness of the Company's or any
of its Restricted Subsidiaries will also terminate upon such release, sale or
transfer.
The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Company accompanied by an Officers'
Certificate certifying as to the compliance with this Section 10.03.
SECTION 10.04. Limitation on Amount Guaranteed; Contribution by
------------------------------------------------
Subsidiary Guarantors.
---------------------
(a) Anything contained in this Notes Indenture or the Subsidiary
Guaranty to the contrary notwithstanding, if any Fraudulent Transfer Law (as
hereinafter defined) is determined by a court of competent jurisdiction to be
applicable to the obligations of any Subsidiary Guarantor under the Subsidiary
Guarantee, such obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee shall be limited to a maximum aggregate amount equal to the largest
amount that would not render its obligations under the Subsidiary Guarantee
subject to avoidance as a fraudulent transfer or conveyance under Section 548 of
Title 11 of the United States Code or any applicable provisions of comparable
state law (collectively, the "Fraudulent Transfer Laws"), in each case after
giving effect to all other liabilities of such Subsidiary Guarantor, contingent
or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically
excluding, however, any liabilities of such Subsidiary Guarantor (x) in respect
of intercompany Indebtedness to Company or other Affiliates of Company to the
extent that such Indebtedness would be discharged in an amount equal to the
amount paid by such Subsidiary Guarantor under the Subsidiary Guaranty and (y)
under any Guarantee of Subordinated Obligations which Guarantee contains a
limitation as to maximum amount similar to that set forth in this subsection
10.04(a), pursuant to which the liability of such Subsidiary Guarantor under the
Subsidiary Guarantee is included in the
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liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or contribution of such Subsidiary Guarantor
pursuant to applicable law or pursuant to the terms of any agreement (including
without limitation any such right of contribution under subsection 10.04(b)).
(b) The Subsidiary Guarantors together desire to allocate among
themselves in a fair and equitable manner, their obligations arising under the
Subsidiary Guarantee. Accordingly, if any payment or distribution is made on any
date by any Subsidiary Guarantor under the Subsidiary Guarantee (a "Funding
Subsidiary Guarantor") that exceeds its Fair Share (as defined below) as of such
date, that Funding Subsidiary Guarantor shall be entitled to a contribution from
each of the other Subsidiary Guarantors in the amount of such other Subsidiary
Guarantor's Fair Share Shortfall (as defined below) as of such date, with the
result that all such contributions will cause each Subsidiary Guarantor's
Aggregate Payments (as defined below) to equal its Fair Share as of such date.
"Fair Share" means, with respect to a Subsidiary Guarantor as of any date of
determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum
Amount (as defined below) with respect to such Subsidiary Guarantor to (y) the
aggregate of the Adjusted Maximum Amounts with respect to all Subsidiary
Guarantors, multiplied by (ii) the aggregate amount paid or distributed on or
before such date by all Funding Subsidiary Guarantors under the Subsidiary
Guarantee in respect of the obligations guarantied. "Fair Share Shortfall"
means, with respect to a Subsidiary Guarantor as of any date of determination,
the excess, if any, of the Fair Share of such Subsidiary Guarantor over the
Aggregate Payments of such Subsidiary Guarantor. "Adjusted Maximum Amount"
means, with respect to a Subsidiary Guarantor as of any date of determination,
the maximum aggregate amount of the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee, determined as of such date in accordance with
subsection 10.04(a); provided that, solely for purposes of calculating the
Adjusted Maximum Amount with respect to any Subsidiary Guarantor for purposes of
this subsection 10.04(b), any assets or liabilities of such Subsidiary Guarantor
arising by virtue of any rights to subrogation, reimbursement or indemnification
or any rights to or obligations of contribution hereunder shall not be
considered as assets or liabilities of such Subsidiary Guarantor. "Aggregate
Payments" means, with respect to a Subsidiary Guarantor as of any date of
determination, an amount equal to (i) the aggregate amount of all payments and
distributions made on or before such date by such Subsidiary Guarantor in
respect of the Subsidiary Guarantee (including, without limitation, in respect
of this subsection 10.04(b) minus (ii) the aggregate amount of all payments
received on or before such date by such Subsidiary Guarantor from the other
Subsidiary Guarantors as contributions under this subsection 10.04(b)). The
amounts payable as contributions hereunder shall be determined as of the date on
which the related payment or distribution is made by the applicable Funding
Subsidiary Guarantor. The allocation among Subsidiary Guarantors of their
obligations as set forth in this subsection 10.04(b) shall not be construed in
any way to limit the liability of any Subsidiary Guarantor under this Notes
Indenture or under the Subsidiary Guaranty.
SECTION 10.05. Waiver of Subrogation.
---------------------
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Until payment in full is made of the Notes and all other obligations of
the Company to the Holders or the Trustee hereunder and under the Notes, each
Subsidiary Guarantor hereby irrevocably waives any claim or other rights which
it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Subsidiary Guarantor's
obligations under the Subsidiary Guarantee and this Notes Indenture, including
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes against the Company, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or any other manner, payment
or security on account of such claim or other rights. If any amount shall be
paid to any Subsidiary Guarantor in violation of the preceding sentence and the
Notes shall not have been paid in full, such amount shall have been deemed to
have been paid to such Subsidiary Guarantor for the benefit of, and held in
trust for the benefit of, the Holders of the Notes, and shall forthwith be paid
to the Trustee for the benefit of such Holders to be credited and applied upon
the Notes, whether matured or unmatured, in accordance with the terms of this
Notes Indenture. Each Subsidiary Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
this Notes Indenture and that the waiver set forth in this Section 10.05 is
knowingly made in contemplation of such benefits.
SECTION 10.06. Execution of Subsidiary Guarantee.
---------------------------------
To evidence its guarantee to the Noteholders set forth in this Article
Ten, each Subsidiary Guarantor hereby agrees to execute the Subsidiary Guarantee
in substantially the form included in Exhibits A and Exhibit B, which shall be
endorsed on such Note ordered to be authenticated and delivered by the Trustee.
Each Subsidiary Guarantor hereby agrees that the Subsidiary Guarantee set forth
in this Article Ten shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of the Subsidiary Guarantee. The
Subsidiary Guarantee shall be signed on behalf of each Subsidiary Guarantor by
one Officer of such Subsidiary Guarantor (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) prior to the
authentication of the Note on which it is endorsed, and the delivery of such
Note by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of the Subsidiary Guarantee on behalf of such Subsidiary
Guarantor. Such signatures upon the Subsidiary Guarantee may be by manual or
facsimile signature of such officers and may be imprinted or otherwise
reproduced on the Subsidiary Guarantee, and in case any such Officer who shall
have signed the Subsidiary Guarantee shall cease to be such officer before the
Note on which the Subsidiary Guarantee is endorsed shall have been authenticated
and delivered by the Trustee or disposed of by the Company, such Note
nevertheless may be authenticated and delivered or disposed of as though the
person who signed the Subsidiary Guarantee had not ceased to be such Officer of
such Subsidiary Guarantor.
SECTION 10.07. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
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Each Subsidiary Guarantor jointly and severally covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law that would prohibit or
forgive such Subsidiary Guarantor from performing the Subsidiary Guarantee as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Notes Indenture; and
(to the extent that it may lawfully do so) each Subsidiary Guarantor hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 10.08. Effectiveness of Subsidiary Guarantee.
-------------------------------------
The Subsidiary Guarantee shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Company
for liquidation or reorganization, should the Company become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Notes, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee on the Notes, whether as a "voidable
preference," "fraudulent transfer," or otherwise, all as though such a payment
or performance had not been made. If any payments, or any part thereof, is
rescinded, reduced, restored or returned, the Notes shall, to the fullest extent
permitted by law, be reinstituted and deemed reduced only by such amount paid
and not so rescinded, reduced, restored or returned.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
------------
If any provision of this Notes Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this Notes
Indenture by the TIA, the required provision shall control.
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SECTION 11.02. Notices.
-------
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by commercial courier service, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company Guarantor:
Woods Equipment Company
6944 Newburg Road
Rockford, IL 61108
Facsimile No.: (815) 381-6047
Telephone: (815) 381-6000
Attn: D. Stephen Crider
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Facsimile No.: (312) 861-2200
Telephone: (312) 861-2000
Attn: Michael Kerr, Esq.
if to the Trustee:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036-1532
Facsimile No.: (212) 852-1626
Attn: Corporate Trust Administration
Each of the Company, the Guarantors and the Trustee by written
notice to each other such Person may designate additional or different addresses
for notices to such Person. Any notice or communication to the Company, the
Guarantors and the Trustee shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is confirmed if
delivered by commercial courier service; when receipt is acknowledged, if faxed;
and five (5) calendar days after mailing if sent by registered or certified
mail, postage prepaid (except that a notice of change of address shall not be
deemed to have been given until actually received by the addressee).
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Any notice or communication mailed to a Holder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other
------------------------------------
Holders.
-------
Holders may communicate pursuant to the TIA (S) 312(b) with
other Holders with respect to their rights under this Notes Indenture or the
Notes. The Company, the Subsidiary Guarantors, the Trustee, the Registrar and
any other Person shall have the protection of the TIA (S) 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions
----------------------------------------
Precedent.
---------
Upon any request or application by the Company to the Trustee
to take or refrain from taking any action under this Notes Indenture, the
Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be performed by the Company, if
any, provided for in this Notes Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent to be performed by the
Company, if any, provided for in this Notes Indenture relating to the
proposed action have been complied with.
SECTION 11.05. Statements Required in Certificate or
-------------------------------------
Opinion.
-------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Notes Indenture, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition and the definitions
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an
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informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of
each such Person, such condition or covenant has been complied with;
provided, that with respect to matters of fact, an Opinion of
Counsel may rely on an Officers' Certificate or a certificate of an appropriate
public official.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York or at such place of payment are not required to be open. If a
payment date is a Legal Holiday at such place, payment may be made at such place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 11.08. Governing Law.
-------------
THIS NOTES INDENTURE AND THE NOTES (AND THE SUBSIDIARY
GUARANTEES RELATING THERETO) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT
OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTES INDENTURE.
SECTION 11.09. No Adverse Interpretation of Other
----------------------------------
Agreements.
----------
This Notes Indenture may not be used to interpret another
Notes Indenture, loan or debt agreement of the Company or any of its
Subsidiaries or of any other Person. Any such Notes Indenture, loan or debt
agreement may not be used to interpret this Notes Indenture.
SECTION 11.10. No Recourse Against Others.
--------------------------
No past, present or future director, officer, employee,
stockholder or incorporator, as such, of the Company, any Subsidiary Guarantor
or of the Trustee shall have any liability for
85
<PAGE>
any obligations of the Company under the Notes or this Notes Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
SECTION 11.11. Successors.
----------
All agreements of the Company and the Subsidiary Guarantors in
this Notes Indenture and the Notes shall bind their respective successors. All
agreements of the Trustee in this Notes Indenture shall bind its successors.
SECTION 11.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Notes
Indenture. Each signed copy shall be an original, but all of them together shall
represent the same agreement.
SECTION 11.13. Severability.
------------
In case any one or more of the provisions in this Notes
Indenture or in the Notes shall be held invalid, illegal or unenforceable, in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Notes Indenture have been inserted for
convenience of reference only, are not to be considered a part of this Notes
Indenture and shall in no way modify or restrict any of the terms of provisions
hereof.
86
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Notes
Indenture to be duly executed, all as of the date first written above.
Issuer:
WEC COMPANY
By: /s/ D. Stephen Crider
-----------------------------------
Name: D. Stephen Crider
Title: VP & CFO
Parent Guarantor:
WOODS EQUIPMENT COMPANY
By: /s/ D. Stephen Crider
-----------------------------------
Name: D. Stephen Crider
Title: VP & CFO
Trustee:
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Glenn E. Mitchell
-----------------------------------
Name: Glenn E. Mitchell
Title: Vice President
<PAGE>
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT
TO RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE
TRANSACTIONS IN RELIANCE ON REGULATION S
PROVISIONS RELATING TO INITIAL NOTES,
------------------------------------
PRIVATE EXCHANGE NOTES
----------------------
AND EXCHANGE NOTES
------------------
1. Definitions.
-----------
1.1 Definitions.
-----------
For the purposes of this Appendix the following terms shall
have the meanings indicated below, provided that all capitalized terms used but
not defined shall have the meanings given such terms in the Notes Indenture:
"Depositary" means The Depository Trust Company, its nominees
and their respective successors and assigns.
"Exchange Notes" means (i) the 12% Senior Notes due July 15,
2009 to be issued pursuant to the Notes Indenture in connection with a
Registered Exchange Offer pursuant to a Registration Rights Agreement and (ii)
Additional Notes, if any, issued in the form of 12% Senior Notes due July 15,
2009 pursuant to a registration statement filed with the SEC under the
Securities Act.
"Initial Purchaser" means (i) with respect to the Initial
Notes issued on July 28, 1999, Credit Suisse First Boston Corporation and (ii)
with respect to each issuance of Additional Notes, the Persons purchasing such
Additional Notes under the related Purchase Agreement.
"Initial Notes" means (i) $130,000,000 principal amount of 12%
Senior Notes due July 15, 2009, issued on July 28, 1999 and (ii) Additional
Notes, if any, issued in the form of 12% Senior Notes due July 15, 2009 in a
transaction exempt from the registration requirements of the Securities Act.
"Private Exchange" means the offer by the Company, pursuant to
a Registration Rights Agreement, to the Initial Purchaser to issue and deliver
to each Initial Purchaser, in exchange for the Initial Notes held by the Initial
Purchaser as part of its initial distribution, a like aggregate principal amount
of Private Exchange Notes.
<PAGE>
"Private Exchange Notes" means the 12% Senior Private Exchange
Notes due July 15, 2009, if any, to be issued pursuant to the Notes Indenture to
the Initial Purchaser in a Private Exchange.
"Purchase Agreement" means (i) with respect to the Initial
Notes issued on July 28, 1999, the Purchase Agreement dated July 23, 1999, among
the Company, the Subsidiary Guarantors and the Initial Purchaser named therein
and (ii) with respect to each issuance of Additional Notes, the purchase
agreement or underwriting agreement among the Company, the Subsidiary Guarantors
and the Persons purchasing such Additional Notes.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to a Registration Rights Agreement, to certain Holders of Initial
Notes, to issue and deliver to such Holders, in exchange for such Initial Notes,
a like aggregate principal amount of Exchange Notes registered under the
Securities Act.
"Registration Rights Agreement" means (i) with respect to the
Initial Notes issued on July 28, 1999, the Registration Rights Agreement dated
July 28, 1999 among the Company, the Parent Guarantor and the Initial Purchaser
named therein, and (ii) with respect to each issuance of Additional Notes issued
in a transaction exempt from the registration requirements of the Securities
Act, the registration rights agreement, if any, among the Company, the
guarantors thereunder and the Persons purchasing such Additional Notes under the
related Purchase Agreement.
"Securities" means the Initial Notes, the Exchange Notes and
the Private Exchange Notes, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depositary), or any successor person
thereto and shall initially be the Trustee.
"Shelf Registration Statement" means the shelf registration
statement issued by the Company, in connection with the offer and sale of
Initial Notes, Exchange Notes or Private Exchange Notes, pursuant to a
Registration Rights Agreement.
"Transfer Restricted Securities" means Securities that bear or
are required to bear the legend set forth in Section 2.3(b) hereto.
<PAGE>
1.2 Other Definitions
-----------------
<TABLE>
<CAPTION>
Term Defined in Section:
---- ------------------
<S> <C>
"Agent Members"................................. 2.1(b)
"Global Security"............................... 2.1(a)
"Regulation S".................................. 2.1(a)
"Rule 144A"..................................... 2.1(a)
</TABLE>
2. The Securities.
--------------
2.1 Form and Dating.
---------------
On July 28, 1999, $130,000,000 of the Initial Notes are being
offered and sold by the Company pursuant to the Purchase Agreement.
(a) Global Securities. Initial Notes offered and sold to
-----------------
a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
as provided in the Purchase Agreement, and Additional Notes, if any, issued in
the form of Exchange Notes, shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be
deposited on behalf of the purchasers of the Initial Notes or Additional Notes,
as applicable, represented thereby with the Trustee as custodian for the
Depositary (or with such other custodian as the Depositary may direct), and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Securities may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
---------------------
only to a Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary for such
Global Security or Global Securities or the nominee of such Depositary and (b)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under the Notes Indenture with respect to any
Global Security held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Security, and the Depositary
may be treated by the Company, the Trustee and any agent of the
<PAGE>
Company or the Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices of such Depositary governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in this
Section 2.1 or Section 2.3 or 2.4 of this Appendix, owners of beneficial
interests in Global Securities will not be entitled to receive physical delivery
of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and deliver:
--------------
(1) On July 28, 1999, $130.0 million 12% Senior Notes due July 15, 2009, (2) any
Additional Notes for original issue in an aggregate principal amount specified
in the written order of the Company pursuant to Section 2.2 of the Notes
Indenture and (3) Exchange Notes or Private Exchange Notes for issue in a
Registered Exchange Offer or a Private Exchange, respectively, in exchange for a
like principal amount of Initial Notes, in each case upon a written order of the
Company in the form of an Officers' Certificate. Such order shall specify the
amount of the Securities to be authenticated and the date on which the original
issue of Notes is to be authenticated and whether the Securities are to be
Initial Notes, Exchange Notes or Private Exchange Notes and in the case of an
issuance of Additional Notes pursuant to Section 2.15 of the Notes Indenture,
shall certify, among other things that such issuance will not be prohibited by
Section 4.13 of the Notes Indenture.
2.3 Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Global Securities.
------------------------------------------
(i) The transfer and exchange of Global Securities or
beneficial interests therein shall be effected through the Depositary,
in accordance with the Notes Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures
of the Depositary therefor. A transferor of a beneficial interest in a
Global Security shall deliver to the Registrar a written order given in
accordance with the Depositary's procedures containing information
regarding the participant account of the Depositary to be credited with
a beneficial interest in the Global Security. The Registrar shall, in
accordance with such instructions instruct the Depositary to credit to
the account of the Person specified in such instructions a beneficial
interest in the Global Security and to debit the account of the Person
making the transfer the beneficial interest in the Global Security
being transferred.
(ii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4 of this Appendix),
a Global Security may not be transferred as a whole except by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or
<PAGE>
by the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 of
this Appendix or Section 2.10 of the Notes Indenture, prior to the
consummation of a Registered Exchange Offer or the effectiveness of a
Shelf Registration Statement with respect to such Securities, such
Securities may be exchanged only in accordance with such procedures as
are substantially consistent with the provisions of this Section 2.3
(including the certification requirements set forth on the reverse of
the Initial Notes intended to ensure that such transfers comply with
Rule 144A or Regulation S, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(b) Legend.
------
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Security certificate evidencing Initial Notes and
Private Exchange Notes (and all Securities issued in exchange therefor
or in substitution thereof, other than Exchange Notes) shall bear a
legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER
THAT (A) THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) INSIDE THE UNITED STATES TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii)
OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
<PAGE>
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM
IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Securities Act, the
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a certificated Security that does not bear the
legend set forth above and rescind any restriction on the transfer of
such Transfer Restricted Security, if the Holder certifies in writing
to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set forth on
the reverse of the Security).
(iii) After a transfer of any Initial Notes or Private
Exchange Notes during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Notes or Private
Exchange Notes, as the case may be, all requirements pertaining to
legends on such Initial Notes or such Private Exchange Notes will cease
to apply, but the requirements requiring such Initial Notes or such
Private Exchange Notes issued to certain Holders be issued in global
form will continue to apply, and Initial Notes or Private Exchange
Notes in global form without legends will be available to the
transferee of the Holder of such Initial Notes or Private Exchange
Notes upon exchange of such transferring Holder's Initial Notes or
Private Exchange Notes or directions to transfer such Holder's interest
in the Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer
with respect to the Initial Notes pursuant to which Holders of such
Initial Notes are offered Exchange Notes in exchange for their Initial
Notes, all requirements pertaining to such Initial Notes that Initial
Notes issued to certain Holders be issued in global form will continue
to apply and Initial Notes in global form with the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders of such Initial Notes that do not exchange their Initial Notes,
and Exchange Notes in global form without the restricted securities
legend set forth in Exhibit 1 hereto will be available to Holders that
exchange such Initial Notes in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with
respect to the Initial Notes pursuant to which Holders of such Initial
Notes are offered Private Exchange Notes in exchange for their Initial
Notes, all requirements pertaining to such Initial Notes that Initial
Notes issued to certain Holders be issued in global form will still
apply, and Private Exchange Notes in global form with the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders that exchange such Initial Notes in such Private Exchange.
(c) Cancellation or Adjustment of Global Security. At such
---------------------------------------------
time as all beneficial interests in a Global Security have either been exchanged
for certificated Securities,
<PAGE>
redeemed, repurchased or canceled, such Global Security shall be returned to the
Depositary for cancellation or retained and canceled by the Trustee. At any time
prior to such cancellation, if any beneficial interest in a Global Security is
exchanged for certificated Securities, redeemed, repurchased or canceled, the
principal amount of Securities represented by such Global Security shall be
reduced and an adjustment shall be made on the books and records of the Trustee
(if it is then the Securities Custodian for such Global Security) with respect
to such Global Security, by the Trustee or the Securities Custodian, to reflect
such reduction.
(d) Obligations with Respect to Transfers and Exchanges of
------------------------------------------------------
Securities.
- ----------
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall, upon receipt of a written
order complying with Section 2.2 of the Notes Indenture, authenticate
certificated Securities and Global Securities at the Registrar's or any
co-registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 2.10, 3.6, 4.15 and
Section 9.6 of the Notes Indenture).
(iii) The Registrar or any co-registrar shall not be required
to register the transfer of or exchange of (a) any certificated
Security selected for redemption in whole or in part pursuant to
Article Three of the Notes Indenture, except the unredeemed portion of
any certificated Security being redeemed in part, or (b) any Security
for a period beginning 15 Business Days before the mailing of a notice
of an offer to repurchase or redeem Securities or 15 Business Days
before an Interest Payment Date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the person in
whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving payment of principal of and
interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange
pursuant to the terms of the Notes Indenture shall evidence the same
debt and shall be entitled to the same benefits under the Notes
Indenture as the Securities surrendered upon such transfer or exchange.
(e) No Obligation of the Trustee.
----------------------------
<PAGE>
(i) The Trustee shall have no responsibility or obligation
to any beneficial owner of a Global Security, a member of, or a
participant in the Depositary or other Person with respect to the
accuracy of the records of the Depositary or its nominee or of any
participant or member thereof, with respect to any ownership interest
in the Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the Depositary) of
any notice (including any notice of redemption) or the payment of any
amount, under or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be made
to Holders under the Securities shall be given or made only to or upon
the order of the registered Holders (which shall be the Depositary or
its nominee in the case of a Global Security). The rights of beneficial
owners in any Global Security shall be exercised only through the
Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depositary with respect to
its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on
transfer imposed under the Notes Indenture or under applicable law with
respect to any transfer of any interest in any Security (including any
transfers between or among Depositary participants, members or
beneficial owners in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly required
by, the terms of the Notes Indenture, and to examine the same to
determine substantial compliance as to form with the express
requirements hereof.
2.4 Certificated Securities,
-----------------------
(a) A Global Security deposited with the Depositary or with
the Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under the Notes Indenture.
(b) Any Global Security that is transferable to the
beneficial owners thereof pursuant to this Section shall be surrendered by the
Depositary to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security, an equal aggregate
principal amount of certificated Securities of authorized denominations. Any
portion
<PAGE>
of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the Depositary shall
direct. Any certificated Initial Note delivered in exchange for an interest in
the Global Security shall, except as otherwise provided by Section 2.3(b), bear
the restricted securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under the
Notes Indenture or the Securities.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a) above, the Company will promptly make available to
the Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
<PAGE>
EXHIBIT 1
TO RULE 144A/REGULATION S
APPENDIX
[GLOBAL SECURITIES LEGEND]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THIS NOTES INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[RESTRICTED SECURITIES LEGEND]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE
SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER
THAT (A) THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION
<PAGE>
MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED STATES IN A
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO
IN (A) ABOVE.
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of this Global Signature of authorized
Principal Amount of this Principal Amount of this Security following such decrease officer of Trustee or
Date of Exchange Global Security Global Security or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
---------
FORM OF INITIAL NOTE
--------------------
CUSIP No.:
WEC COMPANY
12% SENIOR NOTE DUE JULY 15, 2009
No. $
WEC COMPANY, a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to _______ or
registered assigns, the principal sum of ______ Dollars, on _____ __, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, WEC COMPANY has caused this Note to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto or imprinted hereon.
WEC COMPANY
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Dated: ____________ Title:
<PAGE>
Certificate of Authentication
This is one of the 12% Senior Notes due July 15, 2009 referred
to in the within-mentioned Notes Indenture.
_________________________,
as Trustee
Dated: ____________ By:___________________________________
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
12% SENIOR NOTE DUE JULY 15, 2009
1. Interest. WEC COMPANY, a Delaware corporation (the
--------
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above; [provided, however, that if a Registration Default
(as defined in the Registration Rights Agreement) occurs, additional interest
will accrue on this Note at a rate of 0.50% per annum, from and including the
date on which any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured, calculated on the
principal amount of this Note as of the date on which such interest is payable.
Such interest is payable in addition to any other interest payable from time to
time with respect to this Note. The Trustee will not be deemed to have notice of
a Registration Default until it shall have received actual notice of such
Registration Default.]/1/ Interest on the Notes will accrue from the most recent
date on which interest has been paid or, if no interest has been paid, from
[______ __, 1999] [date of issuance of Additional Notes]. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
[_____ __, 1999] [first Interest Payment Date after issuance of Additional
Notes]. Interest will be computed on the basis of a 360-day year of twelve 30-
day months.
The Company shall pay interest on overdue principal at the rate
borne by the Notes plus 1% per annum and on overdue installments of interest
(without regard to any applicable grace periods) at such higher rate to the
extent lawful.
2. Method of Payment. The Company shall pay interest on the
-----------------
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United States Trust
--------------------------
Company of New York, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
___________________
/1/ To be included in the Initial Notes issued on the Issue Date and, to the
extent applicable, any Additional Notes issued in the form of Initial
Notes.
<PAGE>
4. Notes Indenture and Guarantee. The Company issued the Notes
-----------------------------
under an Indenture, dated as of July 28, 1999 (the "Notes Indenture"), among the
Company, the Guarantor named therein and the Trustee. This Note is one of a duly
authorized issue of Initial Notes of the Company designated as its 12% Senior
Notes due July 15, 2009. The Company shall be entitled to issue Additional Notes
pursuant to Section 2.15 of the Notes Indenture; provided, that such issuance is
not prohibited by Section 4.13 of the Notes Indenture. The Initial Notes issued
on July 28, 1999, any Additional Notes, and any Private Exchange Notes and
Exchange Notes issued pursuant to the Notes Indenture are treated as a single
class of securities under the Notes Indenture. Capitalized terms herein are used
as defined in the Notes Indenture unless otherwise defined herein. The terms of
the Notes include those stated in the Notes Indenture and those made part of the
Notes Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Notes
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Notes
Indenture and the TIA Act for a statement of them. The Notes are general
unsecured obligations of the Company. Payment on each Note is guaranteed on a
senior basis by the Subsidiary Guarantors pursuant to Article Ten of the Notes
Indenture. To the extent of any conflict between the terms of the Notes and the
Notes Indenture, the applicable terms of the Notes Indenture shall govern.
5. Redemption.
----------
(a) Except as set forth in the subsection (b) below, the Notes will
be redeemable at the Company's option, in whole or in part, at any time on or
after July 15, 2004, at the respective redemption price (expressed as a
percentage of principal amount) set forth below, plus accrued and unpaid
interest to the redemption date (subject to the right of Holders of record on
the relevant Record Date to receive interest due on the relevant Interest
Payment Date), if redeemed during the 12-month period beginning on July 15 of
the year indicated below:
Redemption
Period Price
------ ----------
2004 ......................... 106.000%
2005 ......................... 104.000%
2006 ......................... 102.000%
2007 and thereafter .......... 100.000%
(b) Notwithstanding the foregoing, before July 15, 2002, the Company
may at its option on one or more occasions redeem up to 35% of the original
principal amount of the Notes (including the original principal amount of any
Additional Notes) with the proceeds of (i) one or more Public Equity Offerings
or (ii) any other Equity Offering so long as the gross proceeds to the Company
or Parent from such offering exceeds $50 million, at a redemption price
(expressed as a percentage of principal amount) of 112% plus accrued interest to
the redemption date (subject to the right of Holders of record on the relevant
Record Date to receive interest due on the relevant Interest Payment Date);
provided that at least 65% of the
<PAGE>
aggregate principal amount of the Notes (including the original principal amount
of any Additional Notes) initially issued must remain outstanding after each
such redemption; provided, further, that such redemption must occur within 120
days of the Public Equity Offering or Equity Offering, as the case may be.
6. Notice of Redemption. Notice of redemption will be mailed
--------------------
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations of $1,000 may be redeemed only in whole. Notes in denominations
larger than $1,000 may be redeemed in part but only in multiples of $1,000.
Except as set forth in the Notes Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Notes called for redemption will cease to bear interest
from and after such Redemption Date and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price plus accrued and unpaid
interest, if any.
7. Offers to Purchase. Section 4.15 of the Notes Indenture
------------------
provides that, in the event of the occurrence of a Change of Control (as defined
in the Notes Indenture), and subject to further limitations contained therein,
the Company will make an offer to purchase certain amounts of the Notes in
accordance with the procedures set forth in the Notes Indenture.
8. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement (as defined in the Notes Indenture), the Company will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company's 12% Senior Notes due July
15, 2009 in the form of Exchange Notes, which shall have been registered under
the Securities Act, or the Company's 12% Senior Private Exchange Notes due July
15, 2009 (the "Private Exchange Notes"), in each case in like principal amount
and having terms identical in all material respects to the Initial Notes. The
Holders of the Initial Notes shall be entitled to receive certain additional
interest payments if such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement. The Company shall notify the Trustee of the
amount of any such payments./2/
9. Denominations; Transfer; Exchange. The Notes are in
---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange of
Notes in accordance with the Notes Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and
__________________
/2/ To be included in the Initial Notes issued on the Issue Date and, to the
extent applicable, any Additional Notes issued in the form of Initial
Notes.
<PAGE>
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Notes Indenture. The
Registrar need not register the transfer of or exchange of any Notes or portions
thereof selected for redemption (except, in the case of Notes to be redeemed in
part, the portion of such Notes not to be redeemed) or any Note for a period
beginning 15 Business Days before the mailing of a notice of an offer to
repurchase or a notice of redemption or 15 Business Days before any Interest
Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note shall
---------------------
be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company (subject to any applicable abandoned property
law). After that, all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company
-----------------------------------------
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Notes
Indenture relating thereto, the Company will be discharged from certain
provisions of the Notes Indenture and the Notes (including certain covenants,
but excluding its obligation to pay the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain
-----------------------------
exceptions, the Notes Indenture or the Notes may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Notes Indenture or the Notes to, among other
things, cure any ambiguity, omission, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Notes Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Notes Indenture imposes certain
---------------------
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with
----------
the Notes Indenture, all the obligations of its predecessor under the Notes and
the Notes Indenture, the predecessor will be released from those obligations.
<PAGE>
16. Defaults and Remedies. If an Event of Default occurs and
---------------------
is continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Notes Indenture.
Certain events of bankruptcy and insolvency are Events of Default which will
result in the Notes being due and payable immediately upon the occurrence of
such Events of Default. Holders of Notes may not enforce the Notes Indenture or
the Notes except as provided in the Notes Indenture. The Trustee is not
obligated to enforce the Notes Indenture or the Notes unless it has received
indemnity reasonably satisfactory to it. The Notes Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Notes then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of Notes
notice of any continuing Default or Event of Default (except a Default in
payment of principal, premium, if any, or interest) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Notes
-----------------------------
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No past, present or future
--------------------------
stockholder, director, officer, employee or incorporator, as such, of the
Company or any Subsidiary Guarantor shall have any liability for any obligation
of the Company under the Notes or the Notes Indenture or for any claim based on,
in respect of or by reason of, such obligations or their creation. Each Holder
of a Note by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid until the
--------------
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
20. Governing Law. The Laws of the State of New York shall
-------------
govern this Note and the Notes Indenture (and the Subsidiary Guarantees relating
thereto), without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations
-------------------------------
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by
-------------
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
<PAGE>
23. Notes Indenture. Each Holder, by accepting a Note, agrees to
---------------
be bound by all of the terms and provisions of the Notes Indenture, as the same
may be amended from time to time.
24. Holders' Compliance with Registration Rights Agreement.
------------------------------------------------------
Each Holder of a Note, by acceptance hereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, including, without limitation,
the obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein./3/
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Notes Indenture. Requests may be made
to: Woods Equipment Company, 6944 Newburg Road, Rockford, IL 61108, Attn: D.
Stephen Crider.
_____________
/3/ To be included in the Initial Notes issued on the Issue Date and, to the
extent applicable, any Additional Notes issued in the form of Initial
Notes.
<PAGE>
[FORM OF NOTATION ON NOTE RELATING TO SUBSIDIARY GUARANTEE]
GUARANTEE
Woods Equipment Company (the "Guarantor"), has unconditionally
guaranteed on a senior basis (such guarantee by the Guarantor being referred to
herein as the "Guarantee") (i) the due and punctual payment of the principal of
and interest on the Notes, subject to any applicable grace period, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal and interest, if any, on the Notes, to the extent
lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set forth
in Article Ten of the Notes Indenture and (ii) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, subject to any
applicable grace period, by acceleration or otherwise.
The obligations of each Guarantor to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Notes Indenture are expressly set
forth and are senior obligations of each Guarantor, to the extent and in the
manner provided, in Article Ten of the Notes Indenture, and reference is hereby
made to such Notes Indenture for the precise terms of the Guarantee therein
made.
No stockholder, officer, director, employee or incorporator, as such,
past, present or future, of the Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director,
employee or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Notes Indenture by the manual
signature of one of its authorized officers.
WOODS EQUIPMENT COMPANY
By:________________________________
Name:
Title:
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________, agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
Date:___________________ Signed:_______________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:_________________
(Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended).
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) [two years from date of original issuance], the undersigned
confirms that it has not utilized any general solicitation or general
advertising in connection with the transfer and that this Note is being
transferred:
<PAGE>
[Check One]
-----------
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act;
or
(3) __ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(4) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act; or
(5) __ pursuant to an effective registration statement under the Securities
Act; or
(6) __ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4) or (6) is checked, the
Company or the Trustee may require, prior to registering any such transfer of
the Notes, in its sole discretion, such legal opinions, certifications and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in the Appendix to the Notes Indenture shall have been
satisfied.
Dated:______________ Signed:___________________________________________________
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee:____________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:__________________________ _____________________________________________
NOTICE: To be executed by
an executive officer
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Notes Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Notes Indenture, state
the amount you elect to have purchased:
$__________________
Dated: __________________ ________________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee:_____________________
(Signature must be guaranteed by an "eligible guarantor
institution," that is, a bank, stockbroker, savings and loan association or
credit union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended).
<PAGE>
EXHIBIT B
---------
FORM OF EXCHANGE NOTE AND PRIVATE EXCHANGE NOTE
-----------------------------------------------
CUSIP No.:__________
WEC COMPANY
12% SENIOR [PRIVATE EXCHANGE] NOTE DUE JULY 15, 2009
No. $
WEC COMPANY, a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to or
registered assigns, the principal sum of ______ Dollars, on _____ __, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, WEC COMPANY has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
WEC COMPANY
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Dated: ________________ Title:
<PAGE>
Certificate of Authentication
This is one of the 12% Senior [Private Exchange] Notes due July 15,
2009 referred to in the within-mentioned Notes Indenture.
_______________________________,
as Trustee
Dated:______________________ By:__________________________________
Authorized Signatory
[If the Note is to be issued in global form add the Global Securities Legend
from Exhibit 1 to the Appendix and the attachment from such Exhibit 1 captioned
"[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR DECREASES IN
GLOBAL SECURITY".]
[If the Note is a Private Exchange Note issued in a Private Exchange to an
Initial Purchaser holding an unsold portion of its initial allotment, add the
restricted securities legend from Exhibit 1 to Appendix A and replace the
Assignment Form with that included in Exhibit A.]
<PAGE>
(REVERSE OF SECURITY)
12% SENIOR [PRIVATE EXCHANGE] NOTE DUE JULY 15, 2009
1. Interest. WEC COMPANY, a Delaware corporation (the "Company"),
--------
promises to pay interest on the principal amount of this Note at the rate per
annum shown above; [provided, however, that if a Registration Default (as
defined in the Registration Rights Agreement) occurs, additional interest will
accrue on this Note at a rate of 0.50% per annum from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all Registration Defaults have been cured, calculated on the principal
amount of this Note as of the date on which such interest is payable. Such
interest is payable in addition to any other interest payable from time to time
with respect to this Note. The Trustee will not be deemed to have notice of a
Registration Default until it shall have received actual notice of such
Registration Default]./4/ Interest on the Notes will accrue from [the most
recent date on which interest has been paid on the Initial Note in exchange for
which this [Exchange Note] [Private Exchange Note] was issued] [date of issuance
of Additional Notes]. The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing [______ __, 1999] [first Interest Payment
Date after issuance of Additional Notes]. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal at the rate borne
by the Notes plus 1% per annum and on overdue installments of interest (without
regard to any applicable grace periods) at such higher rate to the extent
lawful.
2. Method of Payment. The Company shall pay interest on the
-----------------
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United States Trust
--------------------------
Company of New York, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
____________________
/4/ Insert if at the time of issuance of the Exchange Note or Private Exchange
Note (as the case may be) neither the Registered Exchange Offer has been
consummated nor a Shelf Registration Statement has been declared effective
in accordance with a Registration Rights Agreement.
<PAGE>
4. Notes Indenture and Guarantee. The Company issued the Notes
-----------------------------
under an Indenture, dated as of July 28, 1999 (the "Notes Indenture"), among the
Company, the Subsidiary Guarantors named therein and the Trustee. [This Note is
one of a duly authorized issue of Exchange Notes of the Company designated as
its 12% Senior Notes due July 15, 2009.] [This Note is one of a duly authorized
issue of Private Exchange Notes of the Company designated as its 12% Senior
Private Exchange Notes due July 15, 2009.] The Company shall be entitled to
issue Additional Notes pursuant to Section 2.15 of the Notes Indenture;
provided, that such issuance is not prohibited by Section 4.13 of the Notes
Indenture. The Initial Notes issued on July 28, 1999, any Additional Notes, and
any Private Exchange Notes and Exchange Notes issued pursuant to the Notes
Indenture are treated as a single class of securities under the Notes Indenture.
Capitalized terms herein are used as defined in the Notes Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Notes Indenture and those made part of the Notes Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Notes Indenture. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Notes Indenture and the TIA for a statement of them. The
Notes are general unsecured obligations of the Company. Payment on each Note is
guaranteed on a senior basis by the Subsidiary Guarantors pursuant to Article
Eleven of the Notes Indenture. To the extent of any conflict between the terms
of the Notes and the Notes Indenture, the applicable terms of the Notes
Indenture shall govern.
5. Redemption.
----------
(a) Except as set forth in the subsection (b) below, the Notes will be
redeemable at the Company's option, in whole or in part, at any time on or after
July 15, 2004, at the respective redemption price (expressed as a percentage of
principal amount) set forth below, plus accrued and unpaid interest to the
redemption date (subject to the right of Holders of record on the relevant
Record Date to receive interest due on the relevant Interest Payment Date), if
redeemed during the 12-month period beginning on July 15 of the year indicated
below:
Redemption
Period Price
------ ----------
2004 .......................... 106.000%
2005 .......................... 104.000%
2006 .......................... 102.000%
2007 and thereafter ........... 100.000%
(b) Notwithstanding the foregoing, before July 15, 2002, the Company may
at its option on one or more occasions redeem up to 35% of the original
principal amount of the Notes (including the original principal amount of any
Additional Notes) with the proceeds of (i) one or more Public Equity Offerings
or (ii) any other Equity Offering so long as the gross proceeds to the Company
or Parent from such offering exceeds $50 million, at a redemption price
(expressed as a percentage of principal amount) of 112% plus accrued interest to
the redemption date (subject to the right of Holders of record on the relevant
Record Date to receive interest due on the relevant Interest Payment Date);
provided that at least 65% of the aggregate principal amount of the Notes
<PAGE>
(including the original principal amount of any Additional Notes) initially
issued must remain outstanding after each such redemption; provided, further,
that such redemption must occur within 120 days of the Public Equity Offering or
Equity Offering, as the case may be.
6. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations of $1,000 may be redeemed only in whole. Notes in denominations
larger than $1,000 may be redeemed in part but only in multiples of $1,000.
Except as set forth in the Notes Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Notes called for redemption will cease to bear interest
from and after such Redemption Date and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price plus accrued and unpaid
interest, if any.
7. Offers to Purchase. Section 4.15 of the Notes Indenture
------------------
provides that, in the event of the occurrence of a Change of Control (as defined
in the Notes Indenture), and subject to further limitations contained therein,
the Company will make an offer to purchase certain amounts of the Notes in
accordance with the procedures set forth in the Notes Indenture.
8. Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange of Notes in
accordance with the Notes Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Notes Indenture. The Registrar need not register
the transfer of or exchange of any Notes or portions thereof selected for
redemption (except, in the case of Notes to be redeemed in part, the portion of
such Notes not to be redeemed) or any Note for a period beginning 15 Business
Days before the mailing of a notice of an offer to repurchase or a notice of
redemption or 15 Business Days before any Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company (subject to any applicable abandoned property
law). After that, all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Notes Indenture relating
thereto, the Company will be discharged from certain
<PAGE>
provisions of the Notes Indenture and the Notes (including certain covenants,
but excluding its obligation to pay the principal of and interest on the Notes).
12. Amendment; Supplement; Waiver. Subject to certain exceptions, the
-----------------------------
Notes Indenture or the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Notes Indenture or the Notes to, among other things,
cure any ambiguity, omission, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Notes Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
13. Restrictive Covenants. The Notes Indenture imposes certain
---------------------
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
14. Successors. When a successor assumes, in accordance with the
----------
Notes Indenture, all the obligations of its predecessor under the Notes and the
Notes Indenture, the predecessor will be released from those obligations.
15. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Notes Indenture.
Certain events of bankruptcy and insolvency are Events of Default which will
result in the Notes being due and payable immediately upon the occurrence of
such Events of Default. Holders of Notes may not enforce the Notes Indenture or
the Notes except as provided in the Notes Indenture. The Trustee is not
obligated to enforce the Notes Indenture or the Notes unless it has received
indemnity reasonably satisfactory to it. The Notes Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Notes then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of Notes
notice of any continuing Default or Event of Default (except a Default in
payment of principal, premium, if any, or interest) if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company. The Trustee under the Notes
-----------------------------
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
<PAGE>
17. No Recourse Against Others. No past, present or future
--------------------------
stockholder, director, officer, employee or incorporator, as such, of the
Company or any Subsidiary Guarantor shall have any liability for any obligation
of the Company under the Notes or the Notes Indenture or for any claim based on,
in respect of or by reason of, such obligations or their creation. Each Holder
of a Note by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
18. Authentication. This Note shall not be valid until the Trustee or
--------------
Authenticating Agent manually signs the certificate of authentication on this
Note.
19. Governing Law. The Laws of the State of New York shall govern
-------------
this Note and the Notes Indenture (and the Subsidiary Guarantees relating
thereto), without regard to principles of conflict of laws.
20. Abbreviations and Defined Terms. Customary abbreviations
-------------------------------
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
22. Notes Indenture. Each Holder, by accepting a Note, agrees to be
---------------
bound by all of the terms and provisions of the Notes Indenture, as the same may
be amended from time to time.
[23. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement (as defined in the Notes Indenture), the Company will have certain
obligations to the Holders of the Exchange Notes and the Private Exchange Notes.
The Holders of the Exchange Notes and the Private Exchange Notes shall be
entitled to receive certain additional interest payments upon certain
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement. The Company shall notify the Trustee of the amount of any such
payments.]/5/
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Notes Indenture. Requests may be made to: Woods
Equipment Company, 6944 Newburg Road, Rockford, IL 61108, Attn: D. Stephen
Crider.
_______________
/5/ To be included if applicable.
<PAGE>
FORM OF NOTATION ON NOTE RELATING TO GUARANTEE
GUARANTEE
Woods Equipment Company (the "Guarantor"), has unconditionally
guaranteed on a senior basis (such guarantee by the Guarantor being referred to
herein as the "Guarantee") (i) the due and punctual payment of the principal of
and interest on the Notes, subject to any applicable grace period, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal and interest, if any, on the Notes, to the extent
lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set forth
in Article Ten of the Notes Indenture and (ii) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, subject to any
applicable grace period, by acceleration or otherwise.
The obligations of each Guarantor to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Notes Indenture are expressly set
forth and are senior obligations of each Guarantor, to the extent and in the
manner provided, in Article Ten of the Notes Indenture, and reference is hereby
made to such Notes Indenture for the precise terms of the Guarantee therein
made.
No stockholder, officer, director, employee or incorporator, as such,
past, present or future, of the Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director,
employee or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Notes Indenture by the manual
signature of one of its authorized officers.
WOODS EQUIPMENT COMPANY
By:___________________________
Name:
Title:
<PAGE>
ASSIGNMENT FORM /6/
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint __________________, agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
Date:_________________ Signed:__________________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:__________________
(Signature must be guaranteed by an "eligible guarantor institution," that is, a
bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended).
____________________
/6/ If the Note is a Private Exchange Note, replace the Assignment Form with
that included in Exhibit A to this Notes Indenture.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Notes Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Notes Indenture, state
the amount you elect to have purchased:
$___________________
Dated: __________________ _________________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee:________________________
(Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended).
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Notes Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1) ....................................................... 7.10
(a)(2) ....................................................... 7.10
(a)(3) .......................................................
N.A.
(a)(4) ....................................................... N.A.
(a)(5) ....................................................... 7.08; 7.10
(b) ....................................................... 7.08; 7.10; 11.02
(c) ....................................................... N.A.
311(a) ....................................................... 7.11
(b) ....................................................... 7.11
(c) ....................................................... N.A.
312(a) ....................................................... 2.05
(b) ....................................................... 11.03
(c) ....................................................... 11.03
313(a) ....................................................... 7.06
(b)(1) ....................................................... N.A.
(b)(2) ....................................................... 7.06
(c) ....................................................... 7.06; 11.02
(d) ....................................................... 7.06
314(a) ....................................................... 4.07; 4.08; 11.02
(b) ....................................................... N.A.
(c)(1) ....................................................... 11.04
(c)(2) ....................................................... 11.04
(c)(3) ....................................................... N.A.
(d) ....................................................... N.A.
(e) ....................................................... 11.05
(f) ....................................................... N.A.
315(a) ....................................................... 7.01(b)
(b) ....................................................... 7.05; 11.02
(c) ....................................................... 7.01(a)
(d) ....................................................... 7.01(c)
(e) ....................................................... 6.11
316(a)(last sentence) ....................................................... 2.09
(a)(1)(A) ....................................................... 6.05
(a)(1)(B) ....................................................... 6.04
(a)(2) ....................................................... N.A.
(b) ....................................................... 6.07
(c) ....................................................... 9.04
317(a)(1) ....................................................... 6.08
(a)(2) ....................................................... 6.09
(b) ....................................................... 2.04
</TABLE>
<PAGE>
<TABLE>
<S> <C>
318(a) ....................................................... 11.01
(c) ....................................................... 11.01
</TABLE>
__________________
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of this Notes Indenture.
<PAGE>
Exhibit 4.6
EXECUTION
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JULY 28, 1999
AMONG
WEC COMPANY,
as Company,
WOODS EQUIPMENT COMPANY,
as Guarantor,
THE LENDERS LISTED HEREIN,
as Lenders,
and
CREDIT SUISSE FIRST BOSTON,
as Lead Arranger,
Syndication Agent and Administrative Agent
<PAGE>
WEC COMPANY
CREDIT AGREEMENT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. DEFINITIONS............................................................................................... 2
1.1 Certain Defined Terms..................................................................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement........................ 36
1.3 Other Definitional Provisions and Rules of Construction................................................... 37
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS................................................................ 37
2.1 Commitments; Making of Loans; the Register; Notes......................................................... 37
2.2 Interest on the Loans..................................................................................... 44
2.3 Fees...................................................................................................... 48
2.4 Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding
Payments; Application of Proceeds of Collateral and Payments Under Guaranties............................. 49
2.5 Use of Proceeds........................................................................................... 54
2.6 Special Provisions Governing Eurodollar Rate Loans........................................................ 55
2.7 Increased Costs; Taxes; Capital Adequacy.................................................................. 57
2.8 Obligation of Lenders and Issuing Lenders to Mitigate..................................................... 61
2.9 Removal or Replacement of a Lender........................................................................ 62
Section 3. LETTERS OF CREDIT......................................................................................... 63
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein............................. 63
3.2 Letter of Credit Fees..................................................................................... 67
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit........................................ 67
3.4 Obligations Absolute...................................................................................... 70
3.5 Indemnification; Nature of Issuing Lenders' Duties........................................................ 71
3.6 Increased Costs and Taxes Relating to Letters of Credit................................................... 72
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT................................................................. 73
4.1 Conditions to Existing Term Loans, Existing Revolving Loans and Letters of Credit......................... 73
4.2 Conditions to Revolving Loans to be made on the Effective Date............................................ 73
4.3 Conditions to All Loans................................................................................... 80
4.4 Conditions to Letters of Credit........................................................................... 82
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 5. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND COMPANY.................................................... 82
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries............................. 82
5.2 Authorization of Borrowing, etc........................................................................... 83
5.3 Financial Condition....................................................................................... 85
5.4 No Material Adverse Change; No Restricted Payments........................................................ 85
5.5 Title to Properties; Liens; Real Property................................................................. 85
5.6 Litigation; Adverse Facts................................................................................. 86
5.7 Payment of Taxes.......................................................................................... 86
5.8 Performance of Agreements; Materially Adverse Agreements; Material Contracts.............................. 87
5.9 Governmental Regulation................................................................................... 87
5.10 Securities Activities..................................................................................... 87
5.11 Employee Benefit Plans.................................................................................... 88
5.12 Certain Fees.............................................................................................. 88
5.13 Environmental Protection.................................................................................. 89
5.14 Employee Matters.......................................................................................... 89
5.15 Solvency.................................................................................................. 90
5.16 Matters Relating to Collateral............................................................................ 90
5.17 Related Agreements........................................................................................ 91
5.18 Disclosure................................................................................................ 91
Section 6. AFFIRMATIVE COVENANTS OF HOLDINGS AND COMPANY............................................................. 91
6.1 Financial Statements and Other Reports.................................................................... 91
6.2 Corporate Existence, etc.................................................................................. 97
6.3 Payment of Taxes and Claims; Tax Consolidation............................................................ 97
6.4 Maintenance of Properties; Insurance...................................................................... 98
6.5 Inspection Rights; Lender Meeting......................................................................... 99
6.6 Compliance with Laws, etc................................................................................. 99
6.7 Environmental Review and Investigation, Disclosure, Etc.; Company's Actions Regarding
Hazardous Materials Activities, Environmental Claims and Violations of Environmental Laws................. 99
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Certain
Subsidiaries and Future Subsidiaries...................................................................... 102
6.9 Conforming Leasehold Interests; Matters Relating to Additional Real Property Collateral................... 103
6.10 Year 2000 Compliance...................................................................................... 106
6.11 Alitec Acquisition........................................................................................ 106
Section 7. NEGATIVE COVENANTS OF HOLDINGS AND COMPANY................................................................ 106
7.1 Indebtedness.............................................................................................. 106
7.2 Liens and Related Matters................................................................................. 107
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
7.3 Investments; Joint Ventures............................................................................... 109
7.4 Contingent Obligations.................................................................................... 109
7.5 Restricted Payments....................................................................................... 110
7.6 Financial Covenants....................................................................................... 111
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions.......................................... 113
7.8 Consolidated Capital Expenditures......................................................................... 115
7.9 Sales and Lease-Backs..................................................................................... 116
7.10 Sale or Discount of Receivables........................................................................... 116
7.11 Transactions with Shareholders and Affiliates............................................................. 116
7.12 Disposal of Subsidiary Stock.............................................................................. 117
7.13 Conduct of Business....................................................................................... 117
7.14 Amendments or Waivers of Certain Existing Agreements and Related Agreements;
Amendments of Documents Relating to Holdings Discount Debentures, Senior Notes and
Subordinated Indebtedness................................................................................. 117
7.15 Fiscal Year............................................................................................... 118
Section 8. HOLDINGS GUARANTY......................................................................................... 118
8.1 Guaranty of the Obligations............................................................................... 118
8.2 Limitation on Amount Guarantied........................................................................... 118
8.3 Payment by Holdings....................................................................................... 119
8.4 Liability of Holdings Absolute............................................................................ 119
8.5 Waivers by Holdings....................................................................................... 121
8.6 Holdings' Rights of Subrogation, Contribution, Etc........................................................ 122
8.7 Subordination of Other Obligations........................................................................ 123
8.8 Continuing Guaranty....................................................................................... 123
8.9 Authority of Holdings or Company.......................................................................... 123
8.10 Financial Condition of Company............................................................................ 123
8.11 Bankruptcy, Etc........................................................................................... 123
Section 9. EVENTS OF DEFAULT......................................................................................... 124
9.1 Failure to Make Payments When Due......................................................................... 124
9.2 Default in Other Agreements............................................................................... 125
9.3 Breach of Certain Covenants............................................................................... 125
9.4 Breach of Warranty........................................................................................ 125
9.5 Other Defaults Under Loan Documents....................................................................... 125
9.6 Involuntary Bankruptcy; Appointment of Receiver, etc...................................................... 125
9.7 Voluntary Bankruptcy; Appointment of Receiver, etc........................................................ 126
9.8 Judgments and Attachments................................................................................. 126
9.9 Dissolution............................................................................................... 127
9.10 Employee Benefit Plans.................................................................................... 127
9.11 Change in Control......................................................................................... 127
9.12 Invalidity of Guaranties; Failure of Security; Repudiation of Obligations................................. 127
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 10. Administrative Agent...................................................................................... 129
10.1 Appointment............................................................................................... 129
10.2 Powers and Duties; General Immunity....................................................................... 129
10.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness....................... 131
10.4 Right to Indemnity........................................................................................ 131
10.5 Successor Administrative Agent and Swing Line Lender...................................................... 132
10.6 Collateral Documents and Guaranties....................................................................... 132
Section 11. MISCELLANEOUS............................................................................................. 133
11.1 Assignments and Participations in Loans and Letters of Credit............................................. 133
11.2 Expenses.................................................................................................. 137
11.3 Indemnity................................................................................................. 138
11.4 Set-Off; Security Interest in Deposit Accounts............................................................ 139
11.5 Ratable Sharing........................................................................................... 139
11.6 Amendments and Waivers.................................................................................... 140
11.7 Independence of Covenants................................................................................. 141
11.8 Notices................................................................................................... 141
11.9 Survival of Representations, Warranties and Agreements.................................................... 141
11.10 Failure or Indulgence Not Waiver; Remedies Cumulative..................................................... 142
11.11 Marshalling; Payments Set Aside........................................................................... 142
11.12 Severability.............................................................................................. 142
11.13 Obligations Several; Independent Nature of Lenders' Rights................................................ 142
11.14 Headings.................................................................................................. 143
11.15 Applicable Law............................................................................................ 143
11.16 Successors and Assigns.................................................................................... 143
11.17 Consent to Jurisdiction and Service of Process............................................................ 143
11.18 Waiver of Jury Trial...................................................................................... 144
11.19 Confidentiality........................................................................................... 145
11.20 Counterparts; Effectiveness............................................................................... 145
Signature pages ........................................................................................................... S-1
</TABLE>
-iv-
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV INTENTIONALLY OMITTED
V INTENTIONALLY OMITTED
VI INTENTIONALLY OMITTED
VII FORM OF REVOLVING NOTE
VIII FORM OF SWING LINE NOTE
IX FORM OF COMPLIANCE CERTIFICATE
X FORM OF OPINION OF COUNSEL TO LOAN PARTIES
XI FORM OF OPINION OF ADMINISTRATIVE AGENT'S COUNSEL
XII FORM OF ASSIGNMENT AGREEMENT XIII FORM OF CERTIFICATE OF NON-BANK STATUS
XIV FORM OF FINANCIAL CONDITION CERTIFICATE XV FORM OF COLLATERAL ACCOUNT AGREEMENT
XVI FORM OF HOLDINGS PLEDGE AGREEMENT
XVII FORM OF COMPANY PLEDGE AGREEMENT XVIII FORM OF COMPANY SECURITY AGREEMENT
XIX FORM OF COMPANY PATENT AND TRADEMARK SECURITY AGREEMENT
XX FORM OF SUBSIDIARY GUARANTY
XXI FORM OF SUBSIDIARY PLEDGE AGREEMENT
XXII FORM OF SUBSIDIARY SECURITY AGREEMENT
XXIII FORM OF SUBSIDIARY PATENT AND TRADEMARK SECURITY AGREEMENT
</TABLE>
-v-
<PAGE>
SCHEDULES
1.1(i) CERTAIN ADJUSTMENTS TO EBITDA
2.1 EXISTING REVOLVING LOANS; LENDERS' COMMITMENTS AND PRO RATA SHARES
3.1 EXISTING LETTERS OF CREDIT
4.2C CORPORATE AND CAPITAL STRUCTURE; OWNERSHIP; MANAGEMENT
5.1 SUBSIDIARIES OF COMPANY
5.5 REAL PROPERTY
5.8 MATERIAL CONTRACTS
5.11 CERTAIN EMPLOYEE BENEFIT PLANS
6.9C SCHEDULED POST-EFFECTIVE DATE MORTGAGED PROPERTIES
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
-vi-
<PAGE>
EXECUTION
WEC COMPANY
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 28, 1999,
is entered into by and among WEC COMPANY, a Delaware corporation ("Company"), as
borrower, WOODS EQUIPMENT COMPANY, a Delaware corporation ("Holdings"), as
guarantor, THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to herein as a "Lender" and collectively as "Lenders"), as
lenders, and CREDIT SUISSE FIRST BOSTON ("CSFB"), as lead arranger, syndication
agent and administrative agent for Lenders (in such respective capacities, "Lead
Arranger", "Syndication Agent" or "Administrative Agent").
R E C I T A L S
- - - - - - - -
WHEREAS, capitalized terms used herein having the meanings assigned to
those terms in subsection 1.1;
WHEREAS, Company and certain financial institutions (the "Existing
Lenders"), and Lead Arranger, Syndication Agent and Administrative Agent are
parties to that certain Credit Agreement dated as of August 7, 1998 (as
heretofore amended, supplemented or otherwise modified, the "Existing Credit
Agreement"), pursuant to which the Existing Lenders agreed to extend certain
credit facilities to Company, the proceeds of which were used to consummate the
recapitalization transactions contemplated by the Recapitalization Agreement, to
pay certain related transaction fees and expenses, to refinance certain
indebtedness of Company and to provide financing for working capital and for
other general corporate purposes;
WHEREAS, on the Effective Date, the Company (i) intends (a) to acquire (the
"Central Fabricators Acquisition") all of the capital stock of Central
Fabricators, Inc., a Wisconsin corporation ("Central Fabricators"), and
immediately upon the consummation of the Central Fabricators Acquisition,
Central Fabricators will be merged with and into Company pursuant to the Central
Fabricators Acquisition Agreement, with Company being the surviving corporation
in such merger; and (b) to acquire (the "Tisco Acquisition") substantially all
of the assets of Tru-Part Manufacturing Corporation, a Minnesota corporation,
and its principal subsidiary, Tractor Implement Supply Company (collectively,
"Tisco");
WHEREAS, Company desires that Lenders agree to amend and restate the
Existing Credit Agreement in its entirety (i) to extend credit facilities to
Company in an aggregate principal amount of $40,000,000 through a $15,000,000
increase in the Revolving Loan
<PAGE>
Commitments, the proceeds of which will be used, together with (a) approximately
$25,000,000 million of proceeds from the purchase by MDCP and the Management
Investors of newly-issued Holdings Common Stock and newly-issued New Holdings
Preferred (the "Effective Date Investment"), (b) approximately $130,000,000 of
gross proceeds from the sale by the Company of the Senior Notes and (c)
approximately $25,000,000 of gross proceeds from the sale by Holdings of the
Holdings Units, (1) to repay in full the outstanding principal amount of the
Existing Term Loans and the PIK Sub Debt, together, in each case, with all
interest and fees due and owing in respect thereof, (2) to fund the Acquisition
Financing Requirements, (3) to pay Transaction Costs, and (4) to provide
financing for working capital and other general corporate purposes of Company
and its Subsidiaries, and (ii) to make certain other changes as more fully set
forth herein, which amendment and restatement shall become effective upon
satisfaction of the conditions precedent set forth herein;
WHEREAS, it is the intent of the parties hereto that this Agreement not
constitute a novation of the obligations and liabilities of the parties under
the Existing Credit Agreement and that this Agreement amend and restate in its
entirety the Existing Credit Agreement and re-evidence the Obligations of
Company outstanding thereunder; and
WHEREAS, it is the intent of Loan Parties to confirm that all Obligations
of Loan Parties under the other Loan Documents, as amended hereby, shall
continue in full force and effect and that, from and after the Effective Date,
all references to the "Credit Agreement" contained therein shall be deemed to
refer to this Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Holdings, Company, Lenders and Agents
agree that, on the Effective Date, the Existing Credit Agreement shall be
amended and restated in its entirety as follows:
Section. DEFINITIONS
1.1 Certain Defined Terms.
---------------------
The following terms used in this Agreement shall have the following
meanings:
"Acknowledgment and Consent" means that certain Acknowledgment and
Consent executed by Holdings, the Company, and the Subsidiary Guarantors dated
as of the Effective Date and substantially in the form of Exhibit XXV annexed
-----------
hereto, as such Acknowledgment and Consent may be amended, restated,
supplemented or otherwise modified from time to time.
"Acquisition" means the acquisition, by purchase, direct merger or
otherwise, of all or substantially all of the business, property or fixed assets
of, or stock or other evidence of
2
<PAGE>
beneficial ownership of, any Person or any division, business unit or line of
business of any Person.
"Acquisition Financing Requirements" means, with respect to each of
the Effective Date Acquisitions, the aggregate of all amounts necessary to
finance the purchase price payable in connection with such Acquisition.
"Additional Mortgage" has the meaning assigned to that term in
subsection 6.9.
"Additional Mortgage Policy" has the meaning assigned to that term in
subsection 6.9.
"Additional Mortgaged Property" has the meaning assigned to that term
in subsection 6.9.
"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 10.5A.
"Affected Lender" has the meaning assigned to that term in subsection
2.6C.
"Affiliate", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agents" means Lead Arranger, Syndication Agent and Administrative
Agent.
"Agreement" means prior to the Effective Date, the Existing Credit
Agreement and on and after the Effective Date this Amended and Restated Credit
Agreement dated as of July 28, 1999, as it may be amended, supplemented or
otherwise modified from time to time.
"Alamo Acquisition" means the proposed acquisition by Company of all
the outstanding shares of capital stock of Alamo Group, Inc.
"Alitec" means Alitec Corporation, an Indiana corporation.
"Alitec Acquisition" means the acquisition by Company of all of the
capital stock of Alitec.
3
<PAGE>
"Alitec Acquisition Agreement" means that certain Stock Purchase
Agreement by and among Company and the shareholders of Alitec providing for the
purchase of all the capital stock of Alitec by Company for aggregate
consideration not in excess of $11,000,000, and otherwise in substantially the
form as delivered to the Agents and Lenders on or before the Effective Date.
"Applicable Base Rate Margin" means, on and after the Effective Date,
a percentage per annum determined by reference to the Leverage Ratio as set
forth below:
<TABLE>
<CAPTION>
==========================================================
Applicable
Leverage Ratio Base Rate Margin
==========================================================
<S> <C>
greater than or equal to 5.00:1.00 1.50%
----------------------------------------------------------
less than 5.00:1.00
greater than or equal to 4.00:1.00 1.25%
----------------------------------------------------------
less than 4.00:1.00
greater than or equal to 3.00:1.00 1.00%
----------------------------------------------------------
less than 3.00:1.00
greater than or equal to 2.50:1.00 0.75%
----------------------------------------------------------
less than 2.50:1.00 0.50%
==========================================================
</TABLE>
From and after the Effective Date, the Applicable Base Rate Margin shall be
determined by reference to the Leverage Ratio as of the last day of the most-
recently ended Fiscal Quarter; provided that (x) no change in any Applicable
--------
Base Rate Margin shall be effective until three Business Days after the date on
which Administrative Agent receives the financial statements for such Fiscal
Quarter as and when required under subsection 6.1(ii), together with an
Officer's Certificate calculating the applicable Leverage Ratio, and (y) the
Applicable Base Rate Margin shall be 1.50%, per annum, for so long (but only for
so long) as Company has not submitted to Administrative Agent the information
described in clause (x) of this proviso as and when required under subsection
6.1(ii).
"Applicable Eurodollar Rate Margin" means, on and after the Effective
Date, a percentage per annum determined by reference to the Leverage Ratio as
set forth below:
<TABLE>
<CAPTION>
==========================================================
Applicable
Eurodollar
Leverage Ratio Base Rate Margin
==========================================================
<S> <C>
greater than or equal to 5.00:1.00 2.50%
----------------------------------------------------------
less than 5.00:1.00
greater than or equal to 4.00:1.00 2.25%
----------------------------------------------------------
less than 4.00:1.00
greater than or equal to 3.00:1.00 2.00%
==========================================================
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
==========================================================
Applicable
Eurodollar
Leverage Ratio Base Rate Margin
==========================================================
<S> <C>
less than 3.00:1.00
greater than or equal to 2.50:1.00 1.75%
----------------------------------------------------------
less than 2.50:1.00 1.50%
==========================================================
</TABLE>
From and after the Effective Date, the Applicable Eurodollar Rate Margin shall
be determined by reference to the Leverage Ratio as of the last day of the most-
recently ended Fiscal Quarter; provided that (x) no change in any Applicable
--------
Eurodollar Rate Margin shall be effective until three Business Days after the
date on which Administrative Agent receives the financial statements for such
Fiscal Quarter as and when required under subsection 6.1(ii), together with an
Officer's Certificate calculating the applicable Leverage Ratio, and (y) the
Applicable Eurodollar Rate Margin shall be 2.50%, per annum for so long (but
only for so long) as Company has not submitted to Administrative Agent the
information described in clause (x) of this proviso as and when required under
subsection 6.1(ii).
"Approved Fund" means, with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Asset Sale" means the sale by Holdings or any of its Subsidiaries to
any Person (other than Company or any of its wholly-owned Subsidiaries) of (i)
any of the stock of any of Holdings' Subsidiaries, (ii) all or substantially all
of the assets of any division, business unit or line of business of Holdings or
any of its Subsidiaries, or (iii) any other assets (whether tangible or
intangible) of Holdings or any of its Subsidiaries outside of the ordinary
course of business (other than any such other assets to the extent that the
aggregate Net Asset Sale Proceeds in respect of such assets sold in any single
transaction or related series of transactions is equal to $750,000 or less).
"Assigned Rights and Obligations" has the meaning assigned to that
term in subsection 4.2V.
"Assignment Agreement" means an Assignment Agreement in substantially
the form of Exhibit XII annexed hereto.
-----------
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
5
<PAGE>
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by law to
close; provided that, with respect to matters relating to Eurodollar Loans, the
--------
term "Business Day" shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in New York City or London, England, are authorized or
required by law to close.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $250,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Central Fabricators" has the meaning assigned to that term in the
recitals hereto.
"Central Fabricators Acquisition" has the meaning assigned to that
term in the recitals hereto.
6
<PAGE>
"Central Fabricators Acquisition Agreement" means that certain
agreement with respect to the Central Fabricators Acquisition by and among
Company and the shareholders of Central Fabricators, dated as of July 6, 1999 as
in effect on the Effective Date.
"Certificate of Non-Bank Status" means a certificate substantially in
the form of Exhibit XIII annexed hereto delivered by a Lender to Administrative
------------
Agent pursuant to subsection 2.7B(iii).
"CHSLLC" means Code, Hennessy & Simmons L.L.C., as trustee on behalf
of the "Stockholders" (as defined in the Recapitalization Agreement).
"Closing Date" means August 7, 1998.
"Collateral" means, collectively, all of the real, personal and mixed
property (including capital stock) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for the Obligations.
"Collateral Access Agreement" means any landlord waiver, mortgagee
waiver, bailee letter or any similar acknowledgment or agreement of any landlord
or mortgagee in respect of any Real Property Asset where any Collateral is
located or any warehouseman or processor in possession of any Inventory of any
Loan Party, substantially in the form of Exhibit XXIV annexed hereto with such
------------
changes thereto as may be agreed to by Administrative Agent in the reasonable
exercise of its discretion.
"Collateral Account" has the meaning assigned to that term in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement
executed and delivered by Company and Administrative Agent on the Closing Date,
substantially in the form of Exhibit XV annexed hereto, pursuant to which
----------
Company may pledge cash to Administrative Agent to secure the obligations of
Company to reimburse Issuing Lenders for payments made under one or more Letters
of Credit as provided in Section 9, as such Collateral Account Agreement may
hereafter be amended, restated, supplemented or otherwise modified from time to
time.
"Collateral Documents" means the Holdings Pledge Agreement, the
Company Pledge Agreement, the Company Security Agreement, the Company Patent and
Trademark Security Agreement, the Collateral Account Agreement, the Subsidiary
Pledge Agreements, the Subsidiary Security Agreements, the Subsidiary Patent and
Trademark Security Agreements, the Mortgages and all other instruments or
documents delivered by any Loan Party pursuant to this Agreement or any of the
other Loan Documents in order to grant to Administrative Agent, on behalf of
Lenders, a Lien on any real, personal or mixed property of that Loan Party as
security for the Obligations.
7
<PAGE>
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Company or
any of its Subsidiaries in the ordinary course of business of Company or such
Subsidiary.
"Commitments" means (i) with respect to the period prior to the
Effective Date, the commitments of Lenders to make Loans as set forth in
subsection 2.1A of the Existing Credit Agreement, and (ii) on and after the
Effective Date, the commitments of Lenders to make Loans as set forth in
subsection 2.1A of this Agreement.
"Company" has the meaning assigned to that term in the introduction to
this Agreement.
"Company Pledge Agreement" means the Company Pledge Agreement executed
and delivered by Company on the Closing Date, substantially in the form of
Exhibit XVII annexed hereto, as such Company Pledge Agreement may thereafter be
- ------------
amended, supplemented or otherwise modified from time to time.
"Company Security Agreement" means the Company Security Agreement
executed and delivered by Company on the Closing Date, substantially in the form
of Exhibit XVIII annexed hereto, as such Company Security Agreement may
-------------
thereafter be amended, supplemented or otherwise modified from time to time.
"Company Patent and Trademark Security Agreement" means the Company
Patent and Trademark Security Agreement executed and delivered by Company on the
Closing Date, substantially in the form of Exhibit XIX annexed hereto, as such
-----------
Company Patent and Trademark Security Agreement may thereafter be amended,
supplemented or otherwise modified from time to time.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit IX annexed hereto delivered to Administrative Agent and Lenders by
----------
Company pursuant to subsection 6.1(iv).
"Confidential Information Memorandum" means that certain Confidential
Information Memorandum relating to Company dated July 1999.
"Conforming Leasehold Interest" means any Recorded Leasehold Interest
as to which the lessor has agreed in writing for the benefit of Administrative
Agent (which writing has been delivered to Administrative Agent), whether under
the terms of the applicable lease, under the terms of a Landlord Consent and
Estoppel, or otherwise, to the matters described in the definition of "Landlord
Consent and Estoppel," which interest, if a subleasehold or sub-subleasehold
interest, is not subject to any contrary restrictions contained in a superior
lease or sublease.
8
<PAGE>
"Consolidated Adjusted EBITDA" means, for any period, the sum of the
amounts of such period of (i) Consolidated Adjusted Net Income, (ii)
Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv)
total depreciation expense, (v) total amortization expense, (vi) Management Fees
paid in accordance with subsection 7.5, (vii) other non-cash items reducing
Consolidated Adjusted Net Income, (viii) to the extent deducted in determining
Consolidated Adjusted Net Income, legal fees and other expenses incurred with
respect to the Alamo Acquisition; provided that such legal fees and expenses do
--------
not exceed $1,700,000 in the aggregate, and (ix) those items set forth on
Schedule 1.1(i) annexed hereto, less other non-cash items increasing
- --------------- ----
Consolidated Adjusted Net Income, all of the foregoing as determined on a
consolidated basis for Holdings and its Subsidiaries in conformity with GAAP.
"Consolidated Adjusted Net Income" means, for any period, the net
income (or loss) of Holdings and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (i) the income (or loss) of any
--------
Person (other than a Subsidiary of Holdings) in which any other Person (other
than Holdings or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to
Holdings or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of Holdings or is merged into or consolidated with Holdings or any of its
Subsidiaries or that Person's assets are acquired by Holdings or any of its
Subsidiaries, (iii) the income of any Subsidiary of Holdings to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (iv) any after-
tax gains or losses attributable to Asset Sales or returned surplus assets of
any Pension Plan, and (v) (to the extent not included in clauses (i) through
(iv) above) any net extraordinary gains or net non-cash extraordinary losses.
"Consolidated Capital Expenditures" means, for any period, the sum of
(i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of Holdings and
its Subsidiaries) by Holdings and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of Holdings and its Subsidiaries plus (ii) to the extent not covered by
----
clause (i) of this definition, the aggregate of all expenditures by Holdings and
its Subsidiaries during that period to acquire (by purchase or otherwise) the
stock or other evidence of beneficial ownership of any Person that, as a result
of such acquisition, becomes a Subsidiary of Holdings; provided that, in
--------
connection with the repair or replacement of any asset by Company or any of its
Subsidiaries with insurance proceeds received by Company or any of its
Subsidiaries in respect of any damage to such asset or the actual or
constructive loss of or any damage to any similar asset, there shall be included
in Consolidated Capital Expenditures only the excess of the gross amount of the
purchase price or repair costs over the amount of such insurance proceeds; and
provided, further that in no event
- -------- -------
9
<PAGE>
shall Consolidated Capital Expenditures include any expenditures in connection
with any Permitted Acquisition.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense for such period excluding, however, any interest
--------- -------
expense not payable in Cash (including amortization of discount and amortization
of debt issuance costs).
"Consolidated Current Assets" means, as at any date of determination,
the total assets of Holdings and its Subsidiaries on a consolidated basis which
may properly be classified as current assets in conformity with GAAP, excluding
---------
Cash and Cash Equivalents.
"Consolidated Current Liabilities" means, as at any date of
determination, the total liabilities of Holdings and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in
conformity with GAAP, excluding the current portions of Funded Debt and Capital
---------
Leases.
"Consolidated Fixed Charges" means for any period, the sum (without
duplication) of the amounts for such period of (i) Consolidated Cash Interest
Expense, (ii) the portion of taxes based on income actually paid in cash or
provision for cash income taxes (excluding any such cash taxes payable with
respect to the operations of any of the businesses acquired pursuant to the 1999
Acquisitions for any date prior to the consummation of the acquisition of such
businesses by Company), (iii) scheduled repayments of Consolidated Total Debt,
(iv) Management Fees paid in accordance with subsection 7.5, and (v) payments
made to redeem all or any portion of the PIK Sub Debt in accordance with
subsection 7.5, all of the foregoing as determined on a consolidated basis for
Holdings and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Holdings and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Holdings and
its Subsidiaries, including all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements, but excluding, however, any
amounts referred to in subsection 2.3 payable to Administrative Agent and
Lenders on or before the Effective Date.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Holdings and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, less
----
all cash and Cash Equivalents on hand at Holdings and its Subsidiaries; provided
--------
that, if at any such date of determination there are outstanding Revolving
Loans, then the amount of cash and Cash Equivalents on hand shall be deemed not
to exceed the lesser of (a) the actual amount of cash and Cash Equivalents on
hand and (b) $5,000,000; and, provided further, that for purposes of calculating
-------- -------
the Leverage Ratio as of the last day of any four-Fiscal Quarter period, the
amount of Revolving Loans included in
10
<PAGE>
determining Consolidated Total Debt as of such date shall be the average amount
of Revolving Loans outstanding on each day during the four-Fiscal Quarter period
ending on such date.
"Consolidated Working Capital" means, as at any date of determination,
the excess (or deficit) of Consolidated Current Assets over Consolidated Current
Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.
"Contingent Obligation", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Hedge Agreements. Contingent Obligations shall include (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other 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.
"CSFB" has the meaning assigned to that term in the introduction to
this Agreement.
11
<PAGE>
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement to which Holdings or any of its Subsidiaries is
a party.
"Defaulting Lender" means any Lender with respect to which a Lender
Default is in effect.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Dollars" and the sign "$" mean the lawful money of the United States
of America.
"Domestic Subsidiary" means a Subsidiary of Company organized under
the laws of the United States of America or any state or territory thereof.
"Effective Date" means the date on or before July 28, 1999 on which
the conditions precedent set forth in subsections 4.2 and 4.3 shall be satisfied
or waived in accordance with the terms hereof.
"Effective Date Acquisitions" means, collectively, the Central
Fabricators Acquisition and the Tisco Acquisition.
"Effective Date Acquisition Agreements" means, collectively, the
Central Fabricators Acquisition Agreement and the Tisco Acquisition Agreement.
"Effective Date Investment" has the meaning assigned to that term in
the recitals of this Agreement.
"Eligible Assignee" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
--------
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including insurance companies, mutual funds and lease
financing companies; and (B) any Lender and any Affiliate or Approved Fund of
any Lender; provided that no Affiliate of Holdings shall be an Eligible
--------
Assignee.
12
<PAGE>
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is or was maintained or contributed to by
Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates.
"Environmental Claim" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any governmental authority or
any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any
Hazardous Materials or any actual or alleged Hazardous Materials Activity, or
(iii) in connection with any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, judgments, Governmental Authorizations,
or any other legally binding requirements of governmental authorities relating
to (i) environmental matters, including those relating to any Hazardous
Materials Activity, (ii) the generation, use, storage, transportation or
disposal of Hazardous Materials, or (iii) occupational safety and health,
industrial hygiene, or the protection of human, plant or animal health or
welfare, in any manner applicable to Holdings or any of its Subsidiaries or any
Facility, including the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. (S) 9601 et seq.), the Hazardous Materials
-- ---
Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and
-- ---
Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control
-- ---
Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et
-- --- --
seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the
- --- -- ---
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 136 et seq.),
-- ---
the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.), the Oil
-- ---
Pollution Act (33 U.S.C. (S) 2701 et seq) and the Emergency Planning and
------
Community Right-to-Know Act (42 U.S.C. (S) 11001 et seq.), each as amended or
-- ---
supplemented, any analogous present or future state or local statutes or laws,
and any regulations promulgated pursuant to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a member; and (iii)
any member of an affiliated service group within the meaning of Section 414(m)
or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is a member. Any former ERISA Affiliate of Holdings or any of its
Subsidiaries shall continue to be considered an ERISA Affiliate of Holdings or
such Subsidiary within the meaning of this definition with respect to the period
such entity was an ERISA Affiliate of Holdings or such Subsidiary, but only with
respect
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to liabilities arising for which Holdings or such Subsidiary could be
liable under the Internal Revenue Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Holdings, any of its Subsidiaries or any of their respective ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Section
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal of Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by Holdings, any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the
occurrence of an act or omission which could give rise to the imposition on
Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of
material fines, penalties, taxes or related charges under Chapter 43 of the
Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or
Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the
assertion of a material claim (other than routine claims for benefits) against
any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof,
or against Holdings, any of its Subsidiaries or any of their respective ERISA
Affiliates in connection with any Employee Benefit Plan; (x) receipt from the
Internal Revenue Service of notice of the failure of any Pension Plan (or any
other Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue
Code, or the failure of any trust forming part of any Pension Plan to qualify
for exemption from taxation under Section 501(a) of the Internal Revenue Code;
or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.
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"Eurocurrency Reserve Requirements" means, for each Interest Period
for each Eurodollar Rate Loan, the highest reserve percentage applicable to any
Lender during such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System or any successor for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement), with respect to
liabilities or assets consisting of or including Eurocurrency liabilities having
a term equal to such Interest Period.
"Eurodollar Base Rate" means the rate per annum determined by the
Administrative Agent at approximately 11:00 A.M. (London time) on the date which
is two Business Days prior to the beginning of the relevant Interest Period (as
specified in the applicable Notice of Borrowing) by reference to the British
Bankers' Association Interest Settlement Rates for deposits in Dollars (as set
forth by any service selected by the Administrative Agent which has been
nominated by the British Bankers' Association as an authorized information
vendor for the purpose of displaying such rates) for a period equal to such
Interest Period; provided that, to the extent that an interest rate is not
--------
ascertainable pursuant to the foregoing provisions of this definition, the
"Eurodollar Base Rate" shall be the interest rate per annum determined by the
Administrative Agent to be the average of the rates per annum at which deposits
in Dollars are offered for such relevant Interest Period to major banks in the
London interbank market in London, England by the Reference Lenders at
approximately 11:00 A.M. (London time) on the date which is two Business Days
prior to the beginning of such Interest Period. If any of the Reference Lenders
shall be unable or shall otherwise fail to supply such rates to the
Administrative Agent upon its request, the rate of interest shall, subject to
the provisions of subsection 5.10, be determined on the basis of the quotations
of the remaining Reference Lender.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Reserve Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in Section 9.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Existing Agreements" means, collectively, the Recapitalization
Agreement, the Holdings Certificate of Designations, the Selling Shareholder
Warrant, the Existing Seller Notes, the Management Services Agreement and the
Stockholders Agreement.
"Existing Credit Agreement" has the meaning assigned to that term in
the Recitals to this Agreement.
"Existing Holdings Preferred" means the 8% Cumulative Redeemable
Preferred Stock of Holdings, par value $0.01 per share, with a liquidation
preference of $1,000
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<PAGE>
per share and with the other terms set forth in the Holdings Certificate of
Designations, and which was issued on the Closing Date.
"Existing Lenders" has the meaning assigned to that term in the
Recitals to this Agreement.
"Existing Letters of Credit" has the meaning assigned to that term in
subsection 3.1.
"Existing Mortgages" means any mortgage, deed of trust or deed
delivered pursuant to the Existing Credit Agreement including any amendments,
modifications, restatements or assignments thereof.
"Existing Revolving Loans" has the meaning assigned to that term in
subsection 2.1A(i).
"Existing Seller Notes" means (i) that certain Promissory Note Secured
by Deed of Trust dated June 30, 1994, issued by Company to Richard Dale Boucher
and certain other Persons in the original principal amount of $5,000,000, and
(ii) that certain Subordinated Term Note April 18, 1997, issued by Company to
Scott Halvorsen in the original principal amount of $700,000, in each case in
the form delivered to Administrative Agent and Lenders prior to their execution
of this Agreement and as such promissory notes may be amended from time to time
thereafter to the extent permitted under subsection 7.15B.
"Existing Term Loans" means the "Term Loans" as such term is defined
in the Existing Credit Agreement.
"Facilities" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by Holdings or any of its
Subsidiaries or any of their respective predecessors or Affiliates.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
"Fee Property" means a Real Property Asset consisting of a fee simple
interest in real property.
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<PAGE>
"Financial Plan" has the meaning assigned to that term in subsection
6.1(xiii).
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that such Lien is
the most senior Lien (other than Permitted Liens to the extent not perfected by
the filing of any UCC financing statements) to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Holdings and its Subsidiaries
ending on the Saturday closest to December 31 of each calendar year. For
purposes of this Agreement, any particular Fiscal Year shall be designated by
reference to the calendar year in which the December 31 closest to the end of
such Fiscal Year occurs.
"Flood Hazard Property" means a Mortgaged Property located in an area
designated by the Federal Emergency Management Agency as having special flood or
mud slide hazards.
"Foreign Subsidiary" means any Subsidiary of Company that is not a
Domestic Subsidiary.
"Funded Debt", as applied to any Person, means all Indebtedness of
that Person (including any current portions thereof) which by its terms or by
the terms of any instrument or agreement relating thereto matures more than one
year from, or is directly renewable or extendable at the option of that Person
to a date more than one year from (including an option of that Person under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of one year or more from), the date of the creation
thereof.
"Funding and Payment Office" means (i) the office of Administrative
Agent and Swing Line Lender located at 11 Madison Avenue, New York, New York
10010 or (ii) such other office of Administrative Agent and Swing Line Lender as
may from time to time hereafter be designated as such in a written notice
delivered by Administrative Agent and Swing Line Lender to Company and each
Lender.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set forth
in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
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<PAGE>
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Guaranties" means the Holdings Guaranty and the Subsidiary Guaranty.
"Hazardous Materials" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous waste", acutely
hazardous waste", "radioactive waste", "biohazardous waste", "pollutant", "toxic
pollutant", "contaminant", "restricted hazardous waste", "infectious waste",
"toxic substances", or any other term or expression intended to define, list or
classify substances by reason of properties harmful to health, safety or the
indoor or outdoor environment (including harmful properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, "TCLP toxicity" or "EP toxicity" or words of similar meaning and
regulatory effect under any applicable Environmental Laws); (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(iv) any flammable substances or explosives; (v) any radioactive materials; (vi)
any asbestos-containing materials; (vii) urea formaldehyde foam insulation;
(viii) electrical equipment which contains any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority under any Environmental Law.
"Hazardous Materials Activity" means any past, current, proposed or
threatened activity, event or occurrence involving any Hazardous Materials,
including the use, manufacture, possession, storage, holding, presence,
existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposal, disposition or handling of any Hazardous
Materials, and any corrective action or response action with respect to any of
the foregoing.
"Hedge Agreement" means an Interest Rate Agreement or a Currency
Agreement designed to hedge against fluctuations in interest rates or currency
values, respectively.
"Holdings" has the meaning assigned to that term in the introduction
to this Agreement.
"Holdings Certificate of Designations" means the provisions of
Holdings' Amended Certificate of Incorporation relating to the Holdings
Preferred, in the form delivered to Administrative Agent and Lenders on or prior
to the Effective Date and as such provisions may be amended from time to time
thereafter to the extent permitted under subsection 7.15A.
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"Holdings Common Stock" means the common stock of Holdings, par value
$0.01 per share.
"Holdings Discount Debenture Indenture" means the indenture pursuant
to which the Holdings Discount Debentures are issued, as such indenture may be
amended from time to time to the extent permitted under subsection 7.15A
"Holdings Discount Debentures" means the $52,204,000 aggregate
principal amount at maturity of 15% of Senior Discount Debentures due 2011 of
Holdings issued pursuant to the Holdings Discount Debenture Indenture.
"Holdings Guaranty" means the provisions of Section 8.
"Holdings Pledge Agreement" means the Holdings Pledge Agreement
executed and delivered by Holdings on the Closing Date, substantially in the
form of Exhibit XVI annexed hereto, as such Holdings Pledge Agreement may
-----------
thereafter be amended, supplemented or otherwise modified from time to time.
"Holdings Preferred" means, collectively, the Existing Holdings
Preferred and the New Holdings Preferred.
"Holdings Units" means units, each of which consists of one Holdings
Discount Debenture with a principal amount at maturity of $1,000 and 0.8699
shares of Holdings Common Stock.
"Hubbardston Property" means that certain Fee Property owned by
Company as of the Closing Date and located in Hubbardston, Massachusetts.
"Indebtedness", as applied to any Person, means (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months from the date of incurrence
of the obligation in respect thereof or (b) evidenced by a note or similar
written instrument, and (v) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute (X) in the case of Hedge Agreements, Contingent
Obligations, and (Y) in all other cases, Investments, and in neither case
constitute Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 11.3.
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<PAGE>
"Initial Syndication Period" means the period commencing on and
including the Effective Date and ending on (but excluding) the date on which
Administrative Agent notifies Company that it has concluded its primary
syndication of the Loans and the Commitments.
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of Holdings and its Subsidiaries as currently conducted
that are material to the condition (financial or otherwise), business or
operations of Holdings and its Subsidiaries, taken as a whole.
"Interest Payment Date" means (i) with respect to any Base Rate Loan,
the last Business Day in each of March, June, September and December of each
year, commencing on the first such date to occur after the Effective Date, and
(ii) with respect to any Eurodollar Rate Loan, the last day of each Interest
Period applicable to such Loan; provided that, in the case of each Interest
--------
Period of six months, "Interest Payment Date" shall also include the date that
is three months after the commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in subsection
2.2B.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which Holdings or any of its Subsidiaries is a
party.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any successor
statute.
"Inventory" means, with respect to any Person as of any date of
determination, all goods, merchandise and other personal property which are then
held by such Person for sale or lease, including raw materials and work in
process.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Holdings or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (other than a Person that prior
to such purchase or acquisition was a wholly-owned Subsidiary of Holdings), (ii)
any direct or indirect redemption, retirement, purchase or other acquisition for
value, by any Subsidiary of Holdings from any Person other than Holdings or any
of its Subsidiaries, of any equity Securities of such Subsidiary, (iii) any
direct or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by Holdings or any of
its Subsidiaries to any other Person (other than a wholly-owned Subsidiary of
Holdings), including all indebtedness and accounts receivable from that
20
<PAGE>
other Person that are not current assets or did not arise from sales to that
other Person in the ordinary course of business, or (iv) Interest Rate
Agreements or Currency Agreements not constituting Hedge Agreements. The amount
of any Investment shall be the original cost of such Investment plus the cost of
----
all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
"IP Collateral" means, collectively, the Collateral under the Company
Patent and Trademark Security Agreement and the Subsidiary Patent and Trademark
Security Agreements.
"Issuing Lender" means, with respect to any Letter of Credit, the
Lender which agrees or is otherwise obligated to issue such Letter of Credit,
determined as provided in subsection 3.1B(ii).
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
--------
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Landlord Consent and Estoppel" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease, satisfactory in form and substance to Administrative
Agent, relating to (i) the ability of the applicable Loan Party to encumber such
Leasehold Property pursuant to a Mortgage, (ii) the matters contained in a
Collateral Access Agreement, and (iii) such other matters relating to such
Leasehold Property as Administrative Agent may reasonably request.
"Leasehold Property" means any Real Property Asset consisting of a
leasehold interest in real property.
"Lender" and "Lenders" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 11.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires; provided that
--------
the term "Lenders", when used in the context of a particular Commitment, shall
mean Lenders having that Commitment.
"Lender Default" shall mean (i) the refusal (which has not been
retracted) of a Lender to make available its portion of any Loans (including any
Revolving Loans made to pay Refunded Swing Line Loans or to reimburse drawings
under Letters of Credit) in accordance with subsection 2.1A or its portion of
any unreimbursed drawing or payment under a Letter of Credit in accordance with
subsection 3.3C or (ii) a Lender having notified Company and/or Administrative
Agent in writing that it does not intend to comply with its obligations under
subsection 2.1 or subsections 3.1C, 3.3B or 3.3C, as a result of any takeover of
such Lender by any regulatory authority or agency.
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<PAGE>
"Letter of Credit" or "Letters of Credit" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the account of Company pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding plus
----
(ii) the aggregate amount of all drawings under Letters of Credit honored by
Issuing Lenders and not theretofore reimbursed by Company (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B).
"Leverage Ratio" means, as of the last day of any Fiscal Quarter, the
ratio of (i) Consolidated Total Debt as of such date to (ii) Consolidated
Adjusted EBITDA for the four-Fiscal Quarter period ending on such date.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Loan" or "Loans" means one or more of the Revolving Loans or Swing
Line Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other documents
or certificates executed by Company in favor of an Issuing Lender relating to,
the Letters of Credit), the Guaranties, the Collateral Documents and the
Acknowledgment and Consent.
"Loan Party" means each of Holdings, Company and any of Holdings'
other Subsidiaries from time to time executing a Loan Document, and "Loan
Parties" means all such Persons, collectively.
"Management Fees" means fees payable by Company to MDP at the times,
in the amounts, and otherwise in accordance with the terms set forth in the
Management Services Agreement.
"Management Investors" means the management officers and employees of
Holdings and its Subsidiaries identified as Management Investors on Schedule
--------
4.2C annexed hereto.
- ----
"Management Services Agreement" means that certain Management Services
Agreement dated as of the Closing Date by and between MDP and Company, in the
form delivered to Administrative Agent and Lenders prior to their execution of
this Agreement and as
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<PAGE>
such agreement may be amended from time to time thereafter to the extent
permitted under subsection 7.15A.
"Margin Stock" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Holdings or any of its Subsidiaries or (ii) the impairment of the
ability of any Loan Party to perform, or of Administrative Agent or Lenders to
enforce, the Obligations.
"Material Contract" means any contract or other arrangement to which
Holdings or any of its Subsidiaries is a party (other than the Loan Documents)
for which breach, nonperformance, cancellation or failure to renew could have a
Material Adverse Effect.
"Material Leasehold Property" means a Leasehold Property reasonably
determined by Administrative Agent to be of material value as Collateral or of
material importance to the operations of Holdings or any of its Subsidiaries ;
provided, however that, no Leasehold Property (i) in respect of which the
- -----------------
remaining term of the related lease (taking into account any renewal options as
if such options had been exercised) is one year or less or (ii) with respect to
which the aggregate amount of all rents payable during any one Fiscal Year never
exceeds $500,000 shall be a "Material Leasehold Property".
"MDCP" means Madison Dearborn Capital Partners II, L.P. a Delaware
limited partnership.
"MDP" means Madison Dearborn Partners, Inc., a Delaware corporation.
"Mortgage" means (i) a security instrument (whether designated as a
deed of trust or a mortgage or by any similar title) executed and delivered by
any Loan Party, in form and substance satisfactory to Administrative Agent and
as approved by its counsel with respect to each applicable jurisdiction based on
local laws or customary local mortgage or deed of trust practices, encumbering
such Loan Party's interest in a Mortgaged Property, or (ii) at Administrative
Agent's option, in the case of an Additional Mortgaged Property (as defined in
subsection 6.9), an amendment to an existing Mortgage, in form satisfactory to
Administrative Agent, adding such Additional Mortgaged Property to the Real
Property Assets encumbered by such existing Mortgage, in either case as such
security instrument or amendment may be amended, supplemented or otherwise
modified from time to time. "Mortgages" means all such instruments,
collectively.
"Mortgaged Property" means any property subject to an Existing
Mortgage, a Scheduled Post-Effective Date Mortgaged Property and/or an
Additional Mortgaged Property.
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"Multiemployer Plan" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"NAIC" has the meaning assigned to that term in subsection 11.19.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to, or
by monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale, net of any bona fide direct costs
incurred in connection with such Asset Sale, including (i) income taxes
reasonably estimated to be actually payable within two years of the date of such
Asset Sale as a result of any gain recognized in connection with such Asset Sale
and (ii) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is secured by
a Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such Asset Sale.
"Net Debt Proceeds" has the meaning assigned to that term in
subsection 2.4A(iii)(c).
"Net Insurance/Condemnation Proceeds" means any Cash payments or
proceeds received by Holdings or any of its Subsidiaries (i) under any business
interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Holdings or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of any
actual and reasonable documented costs incurred by Holdings or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
Holdings or such Subsidiary in respect thereof.
"New Holdings Preferred" means the 8% Cumulative Redeemable Preferred
Stock of Holdings, par value $0.01 per share, with a liquidation preference of
$1,000 per share and with the other terms set forth in the Holdings Certificate
of Designations, and which is to be issued on the Effective Date.
"New Lender" means any Person that becomes a Lender on the Effective
Date.
"1999 Acquisitions" means, collectively, the Alitec Acquisition and
the Effective Date Acquisitions.
"1999 Acquisition Agreements" means, collectively, the Alitec
Acquisition Agreement and the Effective Date Acquisition Agreements.
"Notes" means one or more of the Revolving Notes or Swing Line Note or
any combination thereof.
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"Notice of Borrowing" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Company to Administrative Agent pursuant
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to subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in
the form of Exhibit II annexed hereto delivered by Company to Administrative
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Agent pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice substantially
in the form of Exhibit III annexed hereto delivered by Company to Administrative
-----------
Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
"Obligations" means all obligations of every nature of each Loan Party
from time to time owed to Administrative Agent, Lenders or any of them under the
Loan Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit, fees, expenses, indemnification or otherwise.
"Officer's Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its president or its chief
financial officer; provided, that any Officer's Certificate to be delivered on
--------
the Effective Date may be executed by the chairman of such corporation; and
provided further, that every Officer's Certificate with respect to the
- -------- -------
compliance with a condition precedent to the making of any Loans hereunder shall
include (i) a statement that the officer making or giving such Officer's
Certificate has read such condition and any definitions or other provisions
contained in this Agreement relating thereto, (ii) a statement that, in the
opinion of the signer, he or she has made or has caused to be made such
examination or investigation as is necessary to enable him or her to express an
informed opinion as to whether or not such condition has been complied with, and
(iii) a statement as to whether, in the opinion of the signer, such condition
has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"Permitted Acquisition" means an Acquisition to the extent effected in
accordance with the provisions of subsection 7.7(vii).
25
<PAGE>
"Permitted Encumbrances" means the following types of Liens (excluding
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA, any such Lien relating to or imposed in connection
with any Environmental Claim, and any such Lien expressly prohibited by any
applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by subsection
6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen, mechanics,
repairmen, workmen and materialmen, and other Liens imposed by law, in each
case incurred in the ordinary course of business (a) for amounts not yet
overdue or (b) for amounts that are overdue and that (in the case of any
such amounts overdue for a period in excess of 5 days) are being contested
in good faith by appropriate proceedings, so long as (1) such reserves or
other appropriate provisions, if any, as shall be required by GAAP shall
have been made for any such contested amounts, and (2) in the case of a
Lien with respect to any portion of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any portion of the
Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event
of Default under subsection 9.8;
(v) leases or subleases granted to third parties in accordance
with any applicable terms of the Collateral Documents and not interfering
in any material respect with the ordinary conduct of the business of
Holdings or any of its Subsidiaries or resulting in a material diminution
in the value of any Collateral as security for the Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do not
and will not interfere in any material respect with the ordinary conduct of
the business of Holdings or any of its Subsidiaries or result in a material
diminution in the value of any Collateral as security for the Obligations;
26
<PAGE>
(vii) any (a) interest or title of a lessor or sublessor under
any lease permitted by subsection 7.9, (b) restriction or encumbrance that
the interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b),
so long as the holder of such restriction or encumbrance agrees to
recognize the rights of such lessee or sublessee under such lease;
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with
the importation of goods;
(x) any zoning or similar law or right reserved to or vested
in any governmental office or agency to control or regulate the use of any
real property;
(xi) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating, reciprocal
easement or similar agreements entered into in the ordinary course of
business of Company and its Subsidiaries; and
(xii) licenses of patents, trademarks and other intellectual
property rights granted by Company or any of its Subsidiaries in the
ordinary course of business and not interfering in any material respect
with the ordinary conduct of the business of Company or such Subsidiary.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"PIK Sub Debt Agreement" means that certain Subordinated Promissory
Note dated August 7, 1998 made by Company to the order of MDCP in the original
principal amount of $25,000,000, as in effect as of the Effective Date.
"PIK Sub Debt" means the Indebtedness of Company evidenced by the PIK
Sub Debt Agreement.
27
<PAGE>
"Pledged Collateral" means, collectively, the "Pledged Collateral" as
defined in the Holdings Pledge Agreement, the Company Pledge Agreement and the
Subsidiary Pledge Agreements.
"Potential Event of Default" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by CSFB as its prime commercial lending rate in effect at its
principal office in New York City. The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer. CSFB or any other Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate.
"Pro Forma Basis" means, with respect to any calculations made to
determine compliance with any of the covenants contained in subsection 7.6 on a
"Pro Forma Basis" for any four-Fiscal Quarter period, whether in connection with
any proposed Permitted Acquisition under subsection 7.7(vi) or as otherwise
provided in subsection 7.6D, that such calculations shall in each case be made:
(i) using the historical financial statements with respect to
such period for (a) the business or property to be acquired in connection
with any such proposed Permitted Acquisition and/or (b) any business or
property acquired in connection with any Permitted Acquisition actually
consummated during such period;
(ii) using the consolidated financial statements of Holdings and
its Subsidiaries with respect to such period, which financial statements
shall be reformulated (a) as if all Permitted Acquisitions referred to in
clause (i) above had been consummated at the beginning of such period, (b)
as if any such proposed Subordinated Indebtedness and/or any other
Indebtedness or other liabilities incurred in connection with any Permitted
Acquisitions referred to in clause (i) above had been incurred (and the
proceeds thereof had been applied as actually applied or proposed to be
applied) at the beginning of such period, and (c) assuming that any
Indebtedness referred to in clause (ii)(b) above that bears interest on a
floating-rate basis had borne interest during any portion of such period
occurring prior to the actual incurrence thereof at the weighted average of
the interest rates applicable to outstanding Loans during such period;
(iii) after giving effect to any other pro forma adjustments
arising out of events which (a) are directly attributable to any Permitted
Acquisitions referred to in clause (i) above or the incurrence of any
Indebtedness referred to in (ii)(b) above, (b) are factually supportable,
and (c) are expected to have a continuing impact, in each case determined
on a basis consistent with Article 11 of Regulation S-X of the Securities
Act (including cost savings resulting from head count reductions, closures
of facilities and similar restructuring charges), which pro forma
adjustments shall be certified by the chief
28
<PAGE>
financial officer of Company in the Officer's Certificate required to be
delivered in connection with such proposed Permitted Acquisition or the
incurrence of such proposed Subordinated Indebtedness or otherwise pursuant
to subsection 7.6D, as the case may be; and
(iv) otherwise in conformity with certain procedures to be agreed
upon between Administrative Agent and Company.
"Pro Rata Share" means with respect to all payments, computations and
all other matters hereunder, including any matters relating to the Revolving
Loan Commitment or the Revolving Loans of any Lender or any Letters of Credit
issued or participations therein purchased by any Lender or any participations
in any Swing Line Loans purchased by any Lender, the percentage obtained by
dividing (x) the Revolving Loan Exposure of that Lender by (y) the aggregate
- -------- --
Revolving Loan Exposure of all Lenders, in any case as the applicable percentage
may be adjusted by assignments permitted pursuant to subsection 11.1. The Pro
Rata Share of each Lender as of the Effective Date is set forth opposite the
name of that Lender in Schedule 2.1 annexed hereto.
------------
"PTO" means the United States Patent and Trademark Office or any
successor or substitute office in which filings are necessary or, in the opinion
of Administrative Agent, desirable in order to create or perfect Liens on any IP
Collateral.
"Purchasing Lender" has the meaning assigned to that term in
subsection 4.2V.
"Recapitalization Agreement" means that certain Recapitalization
Agreement by and among Holdings, MDCP and the other parties thereto, dated as of
July 28, 1998, in the form delivered to Administrative Agent and Lenders on the
Closing Date and as such agreement may be amended from time to time thereafter
to the extent permitted under subsection 7.15A.
"Recorded Leasehold Interest" means a Leasehold Property with respect
to which a Record Document (as hereinafter defined) has been recorded in all
places necessary or desirable, in Administrative Agent's reasonable judgment, to
give constructive notice of such Leasehold Property to third-party purchasers
and encumbrancers of the affected real property. For purposes of this
definition, the term "Record Document" means, with respect to any Leasehold
Property, (a) the lease evidencing such Leasehold Property or a memorandum
thereof, executed and acknowledged by the owner of the affected real property,
as lessor, or (b) if such Leasehold Property was acquired or subleased from the
holder of a Recorded Leasehold Interest, the applicable assignment or sublease
document, executed and acknowledged by such holder, in each case in form
sufficient to give such constructive notice upon recordation and otherwise in
form reasonably satisfactory to Administrative Agent.
29
<PAGE>
"Real Property Asset" means, at any time of determination, any
interest in land, buildings, improvements, and fixtures attached thereto or used
in the operation thereof, in each case that is then owned or leased (as lessee)
by any Loan Party.
"Reference Lenders" means CSFB and LaSalle Bank National Association.
"Refunded Swing Line Loans" has the meaning assigned to that term in
subsection 2.1A(iii).
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Related Agreements" means, collectively, the Effective Date
Acquisition Agreements, the Holdings Discount Debenture Indenture and the Senior
Note Indenture.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Materials), including the
movement of any Hazardous Materials through the air, soil, surface water or
groundwater.
"Requisite Lenders" means Lenders having or holding more than 50% of
the aggregate Revolving Loan Exposure of all Lenders.
"Reserve Adjusted Eurodollar Rate" means, with respect to each day
during each Interest Period pertaining to a Eurodollar Rate Loan, a rate per
annum determined for such day in accordance with the following formula:
Eurodollar Base Rate
---------------------------------
1.00 - Eurocurrency Reserve Requirements
"Restricted Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Company or
Holdings now or hereafter outstanding, except a dividend payable solely in
shares of that 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 stock of Company or
Holdings now or hereafter outstanding, (iii) any payment made to retire, or to
obtain the
30
<PAGE>
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company or Holdings now or hereafter
outstanding, (iv) any payment or prepayment of principal of, premium, if any, or
interest on, or redemption, purchase, retirement, defeasance (including in-
substance or legal defeasance), sinking fund or similar payment with respect to,
any Subordinated Indebtedness or any Indebtedness evidenced by the Existing
Seller Notes, the Holdings Discount Debentures or the Senior Notes, and (v) any
payment, direct or indirect, in respect of any Management Fees.
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(ii), and "Revolving Loan
Commitments" means such commitments of all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means the 5th anniversary
of the Effective Date.
"Revolving Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of that Lender plus (b) in
----
the event that Lender is an Issuing Lender, the aggregate Letter of Credit Usage
in respect of all Letters of Credit issued by that Lender (in each case net of
any participations purchased by other Lenders in such Letters of Credit or any
unreimbursed drawings thereunder) plus (c) the aggregate amount of all
----
participations purchased by that Lender in any outstanding Letters of Credit or
any unreimbursed drawings under any Letters of Credit plus (d) in the case of
----
Swing Line Lender, the aggregate outstanding principal amount of all Swing Line
Loans (net of any participations therein purchased by other Lenders) plus (e)
----
the aggregate amount of all participations purchased by that Lender in any
outstanding Swing Line Loans.
"Revolving Loans" means (i) the Loans made by Lenders to Company
pursuant to subsection 2.1A(iv) of the Existing Credit Agreement which remain
outstanding as of the Effective Date and (ii) any Loans made by Lenders to
Company pursuant to subsection 2.1A(ii) of this Agreement.
"Revolving Notes" means (i) the promissory notes of Company issued
pursuant to subsection 2.1E(i)(d) of the Existing Credit Agreement on the
Closing Date or subsection 2.1E(i)(d) of this Agreement on the Effective Date,
as the case may be, and (ii) any promissory notes issued by Company pursuant to
the last sentence of subsection 11.1B(i) in connection with assignments of the
Revolving Loan Commitments and Revolving Loans of any Lenders, in each case
substantially in the form of Exhibit VII annexed hereto, as they may be amended,
-----------
supplemented or otherwise modified from time to time.
31
<PAGE>
"Scheduled Post-Effective Date Mortgaged Property" has the meaning
assigned to that term in subsection 6.9.
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any profit-
sharing agreement or arrangement, options, warrants, bonds, debentures, notes,
or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" 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.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Selling Shareholder Warrant" means the Contingent Stock Purchase
Warrant issued to CHSLLC pursuant to Section 9.03(a) of the Recapitalization
Agreement, in the form of Exhibit D annexed to the Recapitalization Agreement
and as such Contingent Stock Purchase Warrant may be amended from time to time
after the Closing Date to the extent permitted under subsection 7.14A.
"Selling Lender" has the meaning assigned to that term in subsection
4.2V.
"Senior Note Indenture" means the indenture pursuant to which the
Senior Notes are issued, as such indenture may be amended from time to time to
the extent permitted under subsection 7.15B.
"Senior Notes" means the $130,000,000 aggregate principal amount of
12% Senior Notes due 2009 of Company issued pursuant to the Senior Note
Indenture.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
32
<PAGE>
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness of
Company or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers' compensation liabilities of
Company or any of its Subsidiaries, (iii) the obligations of third party
insurers of Company or any of its Subsidiaries arising by virtue of the laws of
any jurisdiction requiring third party insurers, (iv) obligations with respect
to Capital Leases or Operating Leases of Company or any of its Subsidiaries, and
(v) performance, payment, deposit or surety obligations of Company or any of its
Subsidiaries, in any case if required by law or governmental rule or regulation
or in accordance with custom and practice in the industry; provided that Standby
--------
Letters of Credit may not be issued for the purpose of supporting (a) trade
payables or (b) any Indebtedness constituting "antecedent debt" (as that term is
used in Section 547 of the Bankruptcy Code).
"Stockholders Agreement" means that certain Stockholders Agreement
dated as of the Closing Date by and among Holdings, MDCP, CHSLLC and the Persons
listed on Schedule 1 annexed thereto, in the form delivered to Administrative
Agent and Lenders prior to their execution of this Agreement and as such
agreement may be amended from time to time thereafter to the extent permitted
under subsection 7.15A.
"Subordinated Indebtedness" means (i) the Existing Seller Note
described in clause (ii) of the definition thereof and (ii) any other
Indebtedness of Holdings or Company that is subordinated in right of payment to
the Obligations pursuant to documentation containing interest rates, maturities,
sinking fund or amortization schedules, covenants, defaults, remedies,
subordination provisions and other material terms in form and substance
satisfactory to Administrative Agent.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"Subsidiary Guarantor" means any Domestic Subsidiary that executes and
delivers a counterpart of the Subsidiary Guaranty on the Closing Date or from
time to time thereafter pursuant to subsection 6.8.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and
delivered by existing Domestic Subsidiaries on the Closing Date and to be
executed and delivered by
33
<PAGE>
additional Domestic Subsidiaries from time to time thereafter in accordance with
subsection 6.8, substantially in the form of Exhibit XX annexed hereto, as such
----------
Subsidiary Guaranty may hereafter be amended, supplemented or otherwise modified
from time to time.
"Subsidiary Pledge Agreement" means each Subsidiary Pledge Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing Date
or executed and delivered by any additional Subsidiary Guarantor from time to
time thereafter in accordance with subsection 6.8, in each case substantially in
the form of Exhibit XXI annexed hereto, as such Subsidiary Pledge Agreement may
-----------
be amended, supplemented or otherwise modified from time to time, and
"Subsidiary Pledge Agreements" means all such Subsidiary Pledge Agreements,
collectively.
"Subsidiary Security Agreement" means each Subsidiary Security
Agreement executed and delivered by an existing Subsidiary Guarantor on the
Closing Date or executed and delivered by any additional Subsidiary Guarantor
from time to time thereafter in accordance with subsection 6.8, in each case
substantially in the form of Exhibit XXII annexed hereto, as such Subsidiary
------------
Security Agreement may be amended, supplemented or otherwise modified from time
to time, and "Subsidiary Security Agreements" means all such Subsidiary Security
Agreements, collectively.
"Subsidiary Patent and Trademark Security Agreement" means each
Subsidiary Patent and Trademark Security Agreement executed and delivered by an
existing Subsidiary Guarantor on the Closing Date or executed and delivered by
any additional Subsidiary Guarantor from time to time thereafter in accordance
with subsection 6.8, in each case substantially in the form of Exhibit XXIII
-------------
annexed hereto, as such Subsidiary Patent and Trademark Security Agreement may
be amended, supplemented or otherwise modified from time to time, and
"Subsidiary Patent and Trademark Security Agreements" means all such Subsidiary
Patent and Trademark Security Agreements, collectively.
"Swing Line Lender" means CSFB, or any Person serving as a successor
Administrative Agent hereunder, in its capacity as Swing Line Lender hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line Lender
to make Swing Line Loans to Company pursuant to subsection 2.1A(iii).
"Swing Line Loans" means the Loans made by Swing Line Lender to
Company pursuant to subsection 2.1A(iii).
"Swing Line Note" means (i) the promissory note of Company issued
pursuant to subsection 2.1E(ii) of the Existing Credit Agreement on the Closing
Date or subsection 2.1E(ii) of this Agreement on the Effective Date, as the case
may be, and (ii) any promissory note issued by Company to any successor
Administrative Agent and Swing Line Lender pursuant
34
<PAGE>
to the last sentence of subsection 10.5B, in each case substantially in the form
of Exhibit VIII annexed hereto, as it may be amended, supplemented or otherwise
------------
modified from time to time.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided that "Tax on the overall net income" of a Person shall be
--------
construed as a reference to a tax imposed by the jurisdiction in which that
Person is organized or in which that Person's principal office (and/or, in the
case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in
the case of a Lender, its lending office).
"Tisco" has the meaning assigned to that term in the recitals hereto.
"Tisco Acquisition" has the meaning assigned to that term in the
recitals hereto.
"Tisco Acquisition Agreement" mean that certain Asset Purchase
Agreement, dated as of July 1, 1999, with respect to the Tisco Acquisition by
and among Company, Tisco, CAL Properties and the shareholders of Tisco, as in
effect on the Effective Date.
"Title Company" means, collectively, one or more title insurance
companies reasonably satisfactory to Administrative Agent.
"Total Utilization of Revolving Loan Commitments" means, as at any
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the purpose of
repaying any Refunded Swing Line Loans or reimbursing the applicable Issuing
Lender for any amount drawn under any Letter of Credit but not yet so applied)
plus (ii) the aggregate principal amount of all outstanding Swing Line Loans
- ----
plus (iii) the Letter of Credit Usage.
- ----
"Transaction Costs" means the fees, costs and expenses payable by
Company on or before the Effective Date in connection with the transactions
contemplated by the Loan Documents and the Related Agreements.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"Unreinvested Asset Sale Proceeds" means that portion, if any, of any
Net Asset Sale Proceeds that have not, within 30 days prior to or 180 days after
the date of receipt by Holdings or any of its Subsidiaries of such Net Asset
Sale Proceeds, been invested in advance (in the case of investments during such
30-day period prior to their receipt) or reinvested by
35
<PAGE>
Company and its Subsidiaries, in each case through acquisitions of fixed assets
or other income-producing assets to be used in the business of Company and its
Subsidiaries (which assets, if acquired prior to the date of such receipt, shall
be of like kind with the assets disposed of in the applicable Asset Sale), such
reinvestment to be evidenced by an Officer's Certificate, reasonably
satisfactory in form and substance to Administrative Agent, delivered by Company
to Administrative Agent within 180 days after the date of such receipt and
demonstrating in reasonable detail the reinvestment of such Net Asset Sale
Proceeds as aforesaid; provided that, in the event a Potential Event of Default
--------
or an Event of Default shall have occurred and be continuing at the time of
receipt by Holdings or any of its Subsidiaries of any Net Asset Sale Proceeds,
such Net Asset Sale Proceeds shall be deemed to be Unreinvested Asset Sale
Proceeds at the time of receipt thereof.
"Unreinvested Insurance/Condemnation Proceeds" means that portion, if
any, of any Net Insurance/Condemnation Proceeds that have not, within 180 days
after the date of receipt by Holdings or any of its Subsidiaries of such Net
Insurance/Condemnation Proceeds, been either (i) used (or committed to be used
pursuant to a written construction contract or similar agreement) by Company and
its Subsidiaries to repair or replace the assets in respect of which such Net
Insurance/Condemnation Proceeds were received or (ii) otherwise reinvested by
Company and its Subsidiaries in fixed assets or other income-producing assets to
be used in the business of Company and its Subsidiaries, such repair or
replacement or such reinvestment to be evidenced by an Officer's Certificate,
satisfactory in form and substance to Administrative Agent, delivered by Company
to Administrative Agent prior to the expiration of such 180-day period and
demonstrating in reasonable detail such repair or replacement or the
reinvestment of such Net Insurance/Condemnation Proceeds as aforesaid; provided
--------
that, in the event a Potential Event of Default or an Event of Default shall
have occurred and be continuing at the time of receipt by Holdings or any of its
Subsidiaries of any Net Insurance/Condemnation Proceeds, such Net
Insurance/Condemnation Proceeds shall be deemed to be Unreinvested
Insurance/Condemnation Proceeds at the time of receipt thereof.
"Year 2000 Compliant" means that by October 31, 1999 all computer
systems and applications owned or controlled by Holdings or any of its
Subsidiaries that are material to the business and operations of Holdings and
its Subsidiaries will be able to properly perform date-sensitive functions for
all dates before and after January 1, 2000, except to the extent that a failure
to do so could not reasonably be expected to have a Material Adverse Effect.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
------------------------------------------------------------------------
Agreement.
---------
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and (xiii)
of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation (and delivered together with the reconciliation
36
<PAGE>
statements provided for in subsection 6.1(v)). Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 5.3.
1.3 Other Definitional Provisions and Rules of Construction.
-------------------------------------------------------
A. Any of the terms defined herein may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
B. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use in any of the Loan Documents of the word "include" or
"including", when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; the Register; Notes.
-------------------------------------------------
A. Commitments. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Company and
Holdings herein set forth, each Lender hereby severally agrees to make the
Revolving Loans described in subsection 2.1A(ii) and Swing Line Lender hereby
agrees to make the Loans described in subsection 2.1A(iii).
(i) Existing Revolving Loans. Company acknowledges and
------------------------
confirms that each Existing Lender holds Revolving Loans under the Existing
Credit Agreement in the respective principal amounts outstanding as of the
Effective Date set forth opposite its name on Schedule 2.1 annexed hereto
------------
(such Revolving Loans, the "Existing Revolving Loans"). Company hereby
represents, warrants, agrees, covenants and (1) reaffirms that it is not
aware of any defense, set off, claim or counterclaim against any Agent or
Lender in regard to its Obligations in respect of such Existing Revolving
Loans and (2) reaffirms its obligation to pay such Existing Revolving Loans
in accordance with the terms and conditions of this Agreement and the other
Loan Documents. Based on the foregoing, (A) Company and each Lender agree
that any amounts owed (whether or not presently due and payable, and
including all interest and fees accrued to the Effective Date (which shall
be payable on the next Interest Payment Date with respect to the Existing
Revolving Loans to which such interest relates)) by Company to Existing
Lenders or in respect of
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the Existing Revolving Loans, shall, as of the Effective Date, be
maintained as Revolving Loans hereunder. Amounts repaid or prepaid in
respect of Existing Revolving Loans may be repaid and reborrowed pursuant
to Section 2.1A(ii) below to but excluding the Revolving Loan Commitment
Termination Date.
(ii) Revolving Loans. Each Lender severally agrees, subject to
---------------
the limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend to
Company from time to time during the period from the Effective Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. As of the Effective Date, the amount of each Lender's
Revolving Loan Commitment is set forth opposite its name on Schedule 2.1
------------
annexed hereto and the aggregate amount of the Revolving Loan Commitments
is $40,000,000; provided that the Revolving Loan Commitments of Lenders
--------
shall be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 11.1B. Each Lender's Revolving Loan
Commitment shall expire on the Revolving Loan Commitment Termination Date
and all Revolving Loans and all other amounts owed hereunder with respect
to the Revolving Loans and the Revolving Loan Commitments shall be paid in
full no later than that date; provided that each Lender's Revolving Loan
--------
Commitment shall expire immediately and without further action on July 28,
1999 if the Effective Date has not occurred on or before that date. Amounts
borrowed under this subsection 2.1A(ii) may be repaid and reborrowed to but
excluding the Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary notwithstanding, in no
event shall the Total Utilization of Revolving Loan Commitments at any time
exceed the Revolving Loan Commitments then in effect.
(iii) Swing Line Loans. Swing Line Lender hereby agrees,
----------------
subject to the limitations set forth below with respect to the maximum
amount of Swing Line Loans permitted to be outstanding from time to time,
to make a portion of the Revolving Loan Commitments available to Company
from time to time during the period from the Effective Date to but
excluding the Revolving Loan Commitment Termination Date by making Swing
Line Loans to Company in an aggregate amount not exceeding the amount of
the Swing Line Loan Commitment to be used for the purposes identified in
subsection 2.5B, notwithstanding the fact that such Swing Line Loans, when
aggregated with Swing Line Lender's outstanding Revolving Loans and Swing
Line Lender's Pro Rata Share of the Letter of Credit Usage then in effect,
may exceed Swing Line Lender's Revolving Loan Commitment. The original
amount of the Swing Line Loan Commitment is $5,000,000; provided that the
--------
amount of the Swing Line Loan Commitment is subject to reduction as
provided in clause (b) of the next paragraph. The Swing Line Loan
Commitment shall expire on the Revolving Loan Commitment Termination Date
and all
38
<PAGE>
Swing Line Loans and all other amounts owed hereunder with respect
to the Swing Line Loans shall be paid in full no later than that date;
provided that the Swing Line Loan Commitment shall expire immediately and
--------
without further action on July 28, 1999 if the Effective Date has not
occurred on or before that date. Amounts borrowed under this subsection
2.1A(iii) may be repaid and reborrowed to but excluding the Revolving Loan
Commitment Termination Date. Anything contained herein to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment
shall be subject to the following limitations:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect;
(b) any reduction of the Revolving Loan Commitments which
reduces the aggregate Revolving Loan Commitments to an amount less
than the then current amount of the Swing Line Loan Commitment shall
result in an automatic corresponding reduction of the Swing Line Loan
Commitment such that the amount thereof equals the amount of the
Revolving Loan Commitments, as so reduced, without any further action
on the part of Company, Administrative Agent or Swing Line Lender; and
(c) Swing Line Lender shall have no obligation to make any
Swing Line Loans during any period when a Lender Default exists,
unless Swing Line Lender has entered into arrangements satisfactory to
it and Company to eliminate Swing Line Lender's risk with respect to
the Defaulting Lender, including by cash collateralizing such
Defaulting Lender's Pro Rata Share of the Revolving Loans that may be
required to be made to refund the applicable Swing Line Loan as
contemplated by the immediately following paragraph.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4A(i), Swing Line Lender
may, at any time in its sole and absolute discretion, deliver to
Administrative Agent (with a copy to Company), no later than 10:00
A.M. (New York City time) on the first Business Day in advance of the
proposed Funding Date, a notice (which shall be deemed to be a Notice
of Borrowing given by Company) requesting Lenders to make Revolving
Loans that are Base Rate Loans on such Funding Date in an amount equal
to the amount of such Swing Line Loans (the "Refunded Swing Line
Loans") outstanding on the date such notice is given which Swing Line
Lender requests Lenders to prepay. Anything contained in this
Agreement to the contrary notwithstanding, (i) the proceeds of such
Revolving Loans made by Lenders other than Swing Line Lender shall be
immediately delivered by Administrative Agent to Swing Line Lender
(and not to Company) and applied to repay a corresponding
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<PAGE>
portion of the Refunded Swing Line Loans and (ii) on the day such
Revolving Loans are made, Swing Line Lender's Pro Rata Share of the
Refunded Swing Line Loans shall be deemed to be paid with the proceeds
of a Revolving Loan made by Swing Line Lender, and such portion of the
Swing Line Loans deemed to be so paid shall no longer be outstanding
as Swing Line Loans and shall no longer be due under the Swing Line
Note of Swing Line Lender but shall instead constitute part of Swing
Line Lender's outstanding Revolving Loans and shall be due under the
Revolving Note of Swing Line Lender. Company hereby authorizes
Administrative Agent and Swing Line Lender to charge Company's
accounts with Administrative Agent and Swing Line Lender (up to the
amount available in each such account) in order to immediately pay
Swing Line Lender the amount of the Refunded Swing Line Loans to the
extent the proceeds of such Revolving Loans made by Lenders, including
the Revolving Loan deemed to be made by Swing Line Lender, are not
sufficient to repay in full the Refunded Swing Line Loans. If any
portion of any such amount paid (or deemed to be paid) to Swing Line
Lender should be recovered by or on behalf of Company from Swing Line
Lender in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared
among all Lenders in the manner contemplated by subsection 11.5.
If for any reason the Revolving Loan Commitments are terminated at a
time when any Swing Line Loans are outstanding, each Lender shall be
deemed to, and hereby agrees to, have purchased a participation in
such outstanding Swing Line Loans in an amount equal to its Pro Rata
Share (calculated immediately prior to such termination of the
Revolving Loan Commitments) of the unpaid amount of such Swing Line
Loans together with accrued interest thereon. Upon one Business Day's
notice from Swing Line Lender, each Lender shall deliver to Swing Line
Lender an amount equal to its respective participation in same day
funds at the Funding and Payment Office. In order to further evidence
such participation (and without prejudice to the effectiveness of the
participation provisions set forth above), each Lender agrees to enter
into a separate participation agreement at the request of Swing Line
Lender in form and substance reasonably satisfactory to Swing Line
Lender. In the event any Lender fails to make available to Swing Line
Lender the amount of such Lender's participation as provided in this
paragraph, Swing Line Lender shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the rate
customarily used by Swing Line Lender for the correction of errors
among banks for three Business Days and thereafter at the Base Rate.
In the event Swing Line Lender receives a payment of any amount in
which other Lenders have purchased participations as provided in this
paragraph, Swing Line Lender shall promptly distribute to each such
other Lender its Pro Rata Share of such payment.
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<PAGE>
Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of
repaying any Refunded Swing Line Loans pursuant to the second
preceding paragraph and each Lender's obligation to purchase a
participation in any unpaid Swing Line Loans pursuant to the
immediately preceding paragraph shall be absolute and unconditional
and shall not be affected by any circumstance, including (a) any set-
off, counterclaim, recoupment, defense or other right which such
Lender may have against Swing Line Lender, Company or any other Person
for any reason whatsoever; (b) the occurrence or continuation of an
Event of Default or a Potential Event of Default; (c) any adverse
change in the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Company or any of its
Subsidiaries; (d) any breach of this Agreement or any other Loan
Document by any party thereto; or (e) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing; provided that such obligations of each Lender are subject
--------
to the condition that (X) Swing Line Lender believed in good faith
that all conditions under Section 4 to the making of the applicable
Refunded Swing Line Loans or other unpaid Swing Line Loans, as the
case may be, were satisfied at the time such Refunded Swing Line Loans
or unpaid Swing Line Loans were made or (Y) the satisfaction of any
such condition not satisfied had been waived in accordance with
subsection 11.6 prior to or at the time such Refunded Swing Line Loans
or other unpaid Swing Line Loans were made.
B. Borrowing Mechanics. Revolving Loans made on any Funding Date
(other than Revolving Loans made pursuant to a request by Swing Line Lender
pursuant to subsection 2.1A(iii) for the purpose of repaying any Refunded Swing
Line Loans or Revolving Loans made pursuant to subsection 3.3B for the purpose
of reimbursing any Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it) shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $100,000 in excess of that amount; provided that Revolving
--------
Loans made on any Funding Date as Eurodollar Rate Loans with a particular
Interest Period shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $100,000 in excess of that amount. Swing Line Loans made
on any Funding Date shall be in an aggregate minimum amount of $100,000 and
integral multiples of $50,000 in excess of that amount. Whenever Company
desires that Lenders make Revolving Loans it shall deliver to Administrative
Agent a Notice of Borrowing no later than 10:00 A.M. (New York City time) at
least three Business Days in advance of the proposed Funding Date (in the case
of a Eurodollar Rate Loan) or at least one Business Day in advance of the
proposed Funding Date (in the case of a Base Rate Loan). Whenever Company
desires that Swing Line Lender make a Swing Line Loan, it shall deliver to
Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York
City time) on the proposed Funding Date. The Notice of Borrowing shall specify
(i) the proposed Funding Date (which shall be a Business Day), (ii) the
amount(s) and type(s) of Loans requested, (iii) in the case of Revolving Loans,
whether such Loans shall be Base Rate Loans or (in the case of Revolving Loans
made after the Effective Date) Eurodollar Rate Loans, and (iv) in the case of
any Revolving Loans requested to be made after the Effective Date as
41
<PAGE>
Eurodollar Rate Loans, the initial Interest Period requested therefor. Revolving
Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate
Loans in the manner provided in subsection 2.2D. In lieu of delivering the
above-described Notice of Borrowing, Company may give Administrative Agent
telephonic notice by the required time of any proposed borrowing under this
subsection 2.1B; provided that such notice shall be promptly confirmed in
--------
writing by delivery of a Notice of Borrowing to Administrative Agent on or
before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds of
any Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in accordance
therewith.
C. Disbursement of Funds. All Revolving Loans under this Agreement
shall be made by Lenders simultaneously and proportionately to their respective
Pro Rata Shares, it being understood that no Lender shall be responsible for any
default by any other Lender in that other Lender's obligation to make a Loan
requested hereunder nor shall the Commitment of any Lender to make the
particular type of Loan requested be increased or decreased as a result of a
default by any other Lender in that other Lender's obligation to make a Loan
requested hereunder. Promptly after receipt by Administrative Agent of a Notice
of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof),
Administrative Agent shall notify each Lender or Swing Line Lender, as the case
may be, of the proposed borrowing.
Each Lender shall make the amount of its Loan available to
Administrative Agent not later than 12:00 Noon (New York City time) on the
applicable Funding Date, and Swing Line Lender shall make the amount of its
Swing Line Loan available to Administrative Agent not later than 2:00 P.M.(New
York City time) on the applicable Funding Date, in each case in same day funds
in Dollars, at the Funding and Payment Office. Except as provided in subsection
2.1A(iii) or subsection 3.3B with respect to Revolving Loans used to repay
Refunded Swing Line Loans
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<PAGE>
or to reimburse any Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it, upon satisfaction or waiver of the conditions precedent
specified in subsections 4.2 (in the case of Loans made on the Effective Date)
and 4.3 (in the case of all Loans), Administrative Agent shall make the proceeds
of such Loans available to Company on the applicable Funding Date by causing an
amount of same day funds in Dollars equal to the proceeds of all such Loans
received by Administrative Agent from Lenders or Swing Line Lender, as the case
may be, to be credited to the account of Company at the Funding and Payment
Office.
Unless Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for Base Rate Loans. Nothing in this
subsection 2.1C shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Company may
have against any Lender as a result of any default by such Lender hereunder.
D. The Register.
(i) Administrative Agent shall maintain, at its address
referred to in subsection 11.8, a register for the recordation of the names
and addresses of Lenders and the Commitments and Loans of each Lender from
time to time (the "Register"). The Register shall be available for
inspection by Company or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the
Commitments and the Loans from time to time of each Lender and each
repayment or prepayment in respect of the principal amount of the Loans of
each Lender. Any such recordation shall be conclusive and binding on
Company and each Lender, absent manifest error; provided that failure to
--------
make any such recordation, or any error in such recordation, shall not
affect any Lender's Commitments or Company's Obligations in respect of any
applicable Loans.
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<PAGE>
(iii) Each Lender shall record on its internal records (including
the Notes held by such Lender) the amount of each Loan made by it and each
payment in respect thereof. Any such recordation shall be conclusive and
binding on Company, absent manifest error; provided that failure to make
--------
any such recordation, or any error in such recordation, shall not affect
any Lender's Commitments or Company's Obligations in respect of any
applicable Loans; and provided, further that in the event of any
-------- -------
inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern.
(iv) Company, Administrative Agent and Lenders shall deem and
treat the Persons listed as Lenders in the Register as the holders and
owners of the corresponding Commitments and Loans listed therein for all
purposes hereof, and no assignment or transfer of any such Commitment or
Loan shall be effective, in each case unless and until an Assignment
Agreement effecting the assignment or transfer thereof shall have been
accepted by Administrative Agent and recorded in the Register as provided
in subsection 11.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(v) Company hereby designates CSFB to serve as Company's agent
solely for purposes of maintaining the Register as provided in this
subsection 2.1D, and Company hereby agrees that, to the extent CSFB serves
in such capacity, CSFB and its officers, directors, employees, agents and
affiliates shall constitute Indemnitees for all purposes under subsection
11.3.
E. Optional Notes. If so requested by any Lender by written notice
to Company (with a copy to Administrative Agent) at least two Business Days
prior to the Effective Date or at any time thereafter, Company shall execute and
deliver to such Lender (and/or, if applicable and if so specified in such
notice, to any Person who is an assignee of such Lender pursuant to subsection
11.1) on the Effective Date (or, if such notice is delivered after the Effective
Date, promptly after Company's receipt of such notice) a promissory note or
promissory notes to evidence such Lender's Revolving Loans or Swing Line Loans,
substantially in the form of Exhibit VII or Exhibit VIII annexed hereto,
----------- ------------
respectively, with appropriate insertions.
2.2 Interest on the Loans.
---------------------
A. Rate of Interest. Subject to the provisions of subsections 2.6
and 2.7, each Revolving Loan shall bear interest on the unpaid principal amount
thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference
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to the Base Rate or the Reserve Adjusted Eurodollar Rate; provided that any
--------
Revolving Loans made on the Effective Date shall initially be made as Base Rate
Loans. Subject to the provisions of subsection 2.7, each Swing Line Loan shall
bear interest on the unpaid principal amount thereof from the date made through
maturity (whether by acceleration or otherwise) at a rate determined by
reference to the Base Rate. The applicable basis for determining the rate of
interest with respect to any Revolving Loan may be changed from time to time
pursuant to subsection 2.2D. If on any day a Revolving Loan is outstanding with
respect to which notice has not been delivered to Administrative Agent in
accordance with the terms of this Agreement specifying the applicable basis for
determining the rate of interest, then for that day that Loan shall bear
interest determined by reference to the Base Rate.
(i) Subject to the provisions of subsections 2.2E and 2.7, the
Revolving Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate plus
the Applicable Base Rate Margin; or
(b) if a Eurodollar Rate Loan, then at the sum of the Reserve
Adjusted Eurodollar Rate plus the Applicable Eurodollar Rate Margin.
----
(ii) Subject to the provisions of subsections 2.2E and 2.7, the
Swing Line Loans shall bear interest through maturity at the sum of the
Base Rate plus the Applicable Base Rate Margin for Revolving Loans.
----
B. Interest Periods. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period; provided
--------
that:
(i) the initial Interest Period for any Eurodollar Rate Loan
shall commence on the Funding Date in respect of such Loan, in the case of
a Loan initially made as a Eurodollar Rate Loan, or on the date specified
in the applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice
of Conversion/Continuation, each successive Interest Period shall commence
on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a
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<PAGE>
Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iv) no Interest Period with respect to any portion of the
Revolving Loans shall extend beyond the Revolving Loan Commitment
Termination Date;
(v) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (v) of this subsection 2.2B, end on the last
Business Day of a calendar month;
(vi) Company may not select an Interest Period of longer than
one month prior to the end of the Initial Syndication Period;
(vii) during the Initial Syndication Period, there shall be no
more than one Interest Period outstanding at any time with respect to the
Revolving Loans, individually, and thereafter there shall be no more than a
total of ten Interest Periods outstanding at any time with respect to the
Revolving Loans, collectively; and
(viii)in the event Company fails to specify an Interest Period
for any Eurodollar Rate Loan in the applicable Notice of Borrowing or
Notice of Conversion/Continuation, Company shall be deemed to have selected
an Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Swing Line Loans or any Revolving
--------
Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4A(i),
interest accrued on such Swing Line Loans or Revolving Loans through the date of
such prepayment shall be payable on the next succeeding Interest Payment Date
applicable to Base Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of
subsection 2.6, Company shall have the option (i) to convert at any time all or
any part of its outstanding Revolving Loans equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $1,000,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
--------- -------
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
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<PAGE>
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 10:00 A.M. (New York City time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan) and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has
occurred and is continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic notice
by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
--------
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date. Upon receipt of
written or telephonic notice of any proposed conversion/continuation under this
subsection 2.2D, Administrative Agent shall promptly transmit such notice by
telefacsimile or telephone to each Lender.
Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Company shall be
bound to effect a conversion or continuation in accordance therewith.
E. Post-Default Interest. Upon the occurrence and during the
continuation of any Event of Default, the outstanding principal amount of all
Loans and, to the extent permitted by applicable law, any interest payments
thereon not paid when due and any fees and other amounts then due and payable
hereunder, shall thereafter bear interest (including post-petition interest in
any proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable upon demand at a rate that is 2% per annum in excess of the interest
rate otherwise payable under this Agreement with respect to the applicable Loans
(or, in the case of any such fees and other amounts, at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the
--------
expiration of the Interest Period in effect at the time any such increase in
interest
47
<PAGE>
rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate
Loans and shall thereafter bear interest payable upon demand at a rate which is
2% per annum in excess of the interest rate otherwise payable under this
Agreement for Base Rate Loans that are Revolving Loans, as applicable. Payment
or acceptance of the increased rates of interest provided for in this subsection
2.2E is not a permitted alternative to timely payment and shall not constitute a
waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of Administrative Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be computed
(i) in the case of Base Rate Loans with respect to which the Base Rate is based
on the Prime Rate, on the basis of a 365-day or 366-day year, as the case may
be, and (ii) in all other cases, on the basis of a 360-day year, in each case
for the actual number of days elapsed in the period during which it accrues. In
computing interest on any Loan, the date of the making of such Loan or the first
day of an Interest Period applicable to such Loan or, with respect to a Base
Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of
such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be
included, and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one day's
- --------
interest shall be paid on that Loan.
2.3 Fees.
----
A. Commitment Fees. Company agrees to pay to Administrative Agent,
for distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Effective Date to and
excluding the Revolving Loan Commitment Termination Date equal to the average of
the daily excess of the Revolving Loan Commitments over the sum of (i) the
aggregate principal amount of outstanding Revolving Loans and Swing Line Loans
plus (ii) the Letter of Credit Usage multiplied by 0.50% per annum, such
- ---- -------------
commitment fees to be calculated on the basis of a 360-day year and the actual
number of days elapsed and to be payable quarterly in arrears on the last
Business Day in each of March, June, September and December of each year,
commencing on the first such date to occur after the Effective Date, and on the
Revolving Loan Commitment Termination Date.
B. Annual Administrative Fee. Company agrees to pay to
Administrative Agent an annual administrative fee in such amounts and at such
times as may be agreed upon by Company and Administrative Agent from time to
time.
C. Other Fees. Company agrees to pay such other fees as may be
agreed upon from time to time.
48
<PAGE>
2.4 Prepayments and Reductions in Revolving Loan Commitments; General
-----------------------------------------------------------------
Provisions Regarding Payments; Application of Proceeds of Collateral and
------------------------------------------------------------------------
Payments Under Guaranties.
-------------------------
A. Prepayments and Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments. Company may, upon written or
---------------------
telephonic notice to Administrative Agent on or prior to 12:00 Noon (New
York City time) on the date of prepayment, which notice, if telephonic,
shall be promptly confirmed in writing, at any time and from time to time
prepay any Swing Line Loan on any Business Day in whole or in part in an
aggregate minimum amount of $100,000 and integral multiples of $50,000 in
excess of that amount. In addition, Company may, upon not less than one
Business Day's prior written or telephonic notice, in the case of Base Rate
Loans, and three Business Days' prior written or telephonic notice, in the
case of Eurodollar Rate Loans, in each case given to Administrative Agent
by 12:00 Noon (New York City time) on the date required and, if given by
telephone, promptly confirmed in writing to Administrative Agent (which
original written or telephonic notice Administrative Agent will promptly
transmit by telefacsimile or telephone to each Lender), at any time and
from time to time prepay any Revolving Loans on any Business Day in whole
or in part in an aggregate minimum amount of $1,000,000 and integral
multiples of $100,000 in excess of that amount; provided that, in the event
--------
Company shall prepay a Eurodollar Rate Loan other than on the expiration of
the Interest Period applicable thereto, Company shall, at the time of such
prepayment, also pay any amount payable under subsection 2.6D. Notice of
prepayment having been given as aforesaid, the principal amount of the
Loans specified in such notice shall become due and payable on the
prepayment date specified therein. Any such voluntary prepayment shall be
applied as specified in subsection 2.4A(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Company
--------------------------------------------------
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to Administrative Agent (which original written
or telephonic notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from time to
time terminate in whole or permanently reduce in part, without premium or
penalty, the Revolving Loan Commitments in an amount up to the amount by
which the Revolving Loan Commitments exceed the Total Utilization of
Revolving Loan Commitments at the time of such proposed termination or
reduction; provided that any such partial reduction of the Revolving
--------
Loan Commitments shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $100,000 in excess of that amount. Company's notice
to Administrative Agent shall designate the date (which shall be a Business
Day) of such termination or reduction and the amount of any partial
reduction, and such termination or reduction of the Revolving Loan
49
<PAGE>
Commitments shall be effective on the date specified in Company's notice
and shall reduce the Revolving Loan Commitment of each Lender
proportionately to its Pro Rata Share.
(iii) Mandatory Prepayments. The Loans shall be prepaid in the
---------------------
amounts and under the circumstances set forth below (without a
corresponding reduction in the Revolving Loan Commitments), all such
prepayments to be applied as set forth below or as more specifically
provided in subsection 2.4A(iv):
(a) Prepayments From Unreinvested Asset Sale Proceeds. No later
-------------------------------------------------
than the first Business Day following the date on which any Net Asset Sale
Proceeds become Unreinvested Asset Sale Proceeds, Company shall prepay the
Loans in an aggregate amount equal to such Unreinvested Asset Sale
Proceeds.
(b) Prepayments from Unreinvested Insurance/Condemnation
----------------------------------------------------
Proceeds. No later than the first Business Day following the date on which
--------
any Net Insurance/Condemnation Proceeds become Unreinvested
Insurance/Condemnation Proceeds, Company shall prepay the Loans in an
aggregate amount equal to such Unreinvested Insurance/Condemnation
Proceeds.
(c) Prepayments Due to Issuance of Debt. On or prior to the
-----------------------------------
first Business Day after receipt by Holdings or any of its Subsidiaries of
the Cash proceeds (any such proceeds, net of underwriting discounts and
commissions and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses, being "Net Debt Proceeds")
from the issuance of any debt Securities of Holdings or any of its
Subsidiaries after the Effective Date, Company shall prepay the Loans in an
aggregate amount equal to such Net Debt Proceeds; provided that the
--------
provisions of this subsection 2.4A(iii)(c) shall not apply to the issuance
of any debt Securities permitted under subsection 7.1 as in effect on the
Effective Date; and provided, further, however, that payment or acceptance
-------- ------- -------
of any mandatory prepayment provided for in this subsection 2.4A(iii)(c) is
not a permitted alternative to compliance with the provisions of subsection
7.1 and shall not constitute a waiver of any Event of Default resulting
from noncompliance by Holdings or Company with the terms thereof or
otherwise prejudice or limit any rights or remedies of Administrative Agent
or any Lender.
(d) Prepayments Due to Issuance of Equity Securities. On or
------------------------------------------------
prior to the first Business Day after receipt by Company or Holdings of the
Cash proceeds (any such proceeds, net of underwriting discounts and
commissions and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses, being "Net Equity Proceeds")
from the issuance of any equity Securities of Company or Holdings or any
capital contributions made to
50
<PAGE>
Company or Holdings, Company shall prepay the Loans in an aggregate amount
equal to 50% of such Net Equity Proceeds; provided that the provisions of
--------
this subsection 2.4A(iii)(d) shall not apply with respect to any Net Equity
Proceeds received by Company or Holdings during any period when the
Leverage Ratio as of the last day of the most recently-ended Fiscal Quarter
is less than 3.5:1.
(e) Calculations of Net Proceeds Amounts; Additional
------------------------------------------------
Prepayments Based on Subsequent Calculations. Concurrently with any
--------------------------------------------
prepayment of the Loans pursuant to subsections 2.4A(iii)(a)-(d), Company
shall deliver to Administrative Agent an Officer's Certificate
demonstrating the calculation of the amount (the "Net Proceeds Amount") of
the applicable Unreinvested Asset Sale Proceeds, Unreinvested
Insurance/Condemnation Proceeds, Net Debt Proceeds or Net Equity Proceeds
that gave rise to such prepayment. In the event that Company shall
subsequently determine that the actual Net Proceeds Amount was greater than
the amount set forth in such Officer's Certificate, Company shall promptly
make an additional prepayment of the Loans in an amount equal to the amount
of such excess, and Company shall concurrently therewith deliver to
Administrative Agent an Officer's Certificate demonstrating the derivation
of the additional Net Proceeds Amount resulting in such excess.
(f) Prepayments Due to Reductions or Restrictions of Revolving
----------------------------------------------------------
Loan Commitments. Company shall from time to time prepay first the Swing
---------------- -----
Line Loans and second the Revolving Loans to the extent necessary so
------
that the Total Utilization of Revolving Loan Commitments shall not at
any time exceed the Revolving Loan Commitments then in effect.
(iv) Application of Prepayments.
--------------------------
(a) Application of Voluntary Prepayments by Type of Loans and
---------------------------------------------------------
Order of Maturity. Any voluntary prepayments pursuant to subsection 2.4A(i)
-----------------
shall be applied as specified by Company in the applicable notice of
prepayment; provided that in the event Company fails to specify the Loans
--------
to which any such prepayment shall be applied, such prepayment shall be
applied first to repay outstanding Swing Line Loans to the full extent
-----
thereof, and second to repay outstanding Revolving Loans to the full extent
------
thereof.
(b) Application of Mandatory Prepayments by Type of Loans. Any
-----------------------------------------------------
amount (the "Applied Amount") required to be applied as a mandatory
prepayment of the Loans pursuant to subsections 2.4A(iii)(a)-(d) shall be
applied first to prepay the Swing Line Loans to the full extent thereof,
-----
and second, to the extent of any remaining portion of the Applied Amount,
------
to prepay the Revolving Loans to the full extent thereof.
51
<PAGE>
(c) Application of Prepayments to Base Rate Loans and Eurodollar
------------------------------------------------------------
Rate Loans. Any prepayment of Revolving Loans shall be applied first
----------
to Base Rate Loans to the full extent thereof before application to
Eurodollar Rate Loans, in each case in a manner which minimizes the
amount of any payments required to be made by Company pursuant to
subsection 2.6D.
B. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of
--------------------------
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 12:00 Noon (New York City time) on the
date due at the Funding and Payment Office for the account of Lenders;
funds received by Administrative Agent after that time on such due date
shall be deemed to have been paid by Company on the next succeeding
Business Day. Company hereby authorizes Administrative Agent to charge its
accounts with Administrative Agent in order to cause timely payment to be
made to Administrative Agent of all principal, interest, fees and expenses
due hereunder (subject to sufficient funds being available in its accounts
for that purpose).
(ii) Application of Payments to Principal and Interest. Except
-------------------------------------------------
as provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in
any event, any payments in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and
-------------------------
interest payments in respect of Revolving Loans shall be apportioned among
all outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative
Agent shall promptly distribute to each Lender, at its primary address set
forth below its name on the appropriate signature page hereof or at such
other address as such Lender may request, its Pro Rata Share of all such
payments received by Administrative Agent and the commitment fees of such
Lender when received by Administrative Agent pursuant to subsection 2.3.
Notwithstanding the foregoing provisions of this subsection 2.4B(iii), if,
pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, Administrative Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day,
such payment
52
<PAGE>
shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest
hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before
-------------------
disposing of any Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation thereon
of all Loans evidenced by that Note and all principal payments previously
made thereon and of the date to which interest thereon has been paid;
provided that the failure to make (or any error in the making of) a
--------
notation of any Loan made under such Note shall not limit or otherwise
affect the obligations of Company hereunder or under such Note with respect
to any Loan or any payments of principal or interest on such Note.
C. Application of Proceeds of Collateral and Payments Under
Guaranties.
(i) Application of Proceeds of Collateral. All proceeds received
-------------------------------------
by Administrative Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral pursuant to the
terms of any Collateral Document may, in the discretion of Administrative
Agent, be held by Administrative Agent as Collateral for, and/or (then or
at any time thereafter) applied in full or in part by Administrative Agent
against, the applicable Secured Obligations (as defined in such Collateral
Document) in the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Administrative Agent and its agents and counsel, and all other
expenses, liabilities and advances made or incurred by Administrative
Agent in connection therewith, and all amounts for which
Administrative Agent is entitled to indemnification under such
Collateral Document and all advances made by Administrative Agent
thereunder for the account of the applicable Loan Party, and to the
payment of all costs and expenses paid or incurred by Administrative
Agent in connection with the exercise of any right or remedy under
such Collateral Document, all in accordance with the terms of this
Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to
the payment of all other such Secured Obligations for the ratable
benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whosoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
53
<PAGE>
(ii) Application of Payments Under Guaranties. All payments
----------------------------------------
received by Administrative Agent under either Guaranty shall be applied
promptly from time to time by Administrative Agent in the following order
of priority:
(a) To the payment of the costs and expenses of any collection
or other realization under such Guaranty, including reasonable
compensation to Administrative Agent and its agents and counsel, and
all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other Guarantied Obligations (as defined in such
Guaranty for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such payments, to
the payment to Holdings or the applicable Subsidiary Guarantor or to
whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct.
2.5 Use of Proceeds.
---------------
A. Existing Term Loans and Existing Revolving Loans. The proceeds of
the Existing Term Loans and the Existing Revolving Loans were used for the
purposes specified in the Existing Credit Agreement.
B. Revolving Loans. The proceeds of the Revolving Loans made on the
Effective Date, together with the proceeds of the Effective Date Investment and
the issuance of the Senior Notes and the Holdings Units, shall be applied by
Company to repay in full the outstanding principal amount of the Existing Term
Loans and the PIK Sub Debt, together, in each case, with all interest and fees
due and owing in respect thereof, to fund the Acquisition Financing Requirements
and to pay Transaction Costs. The proceeds of any Revolving Loans made after the
Effective Date and the proceeds of any Swing Line Loans shall be applied by
Company for working capital and other general corporate purposes, which may
include the making of inter company loans to any of Company's wholly-owned
Subsidiaries, in accordance with subsection 7.1(iv), for their own working
capital and general corporate purposes, including Permitted Acquisitions.
C. Margin Regulations. No portion of the proceeds of any borrowing
under this Agreement shall be used by Company or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation U, Regulation T or Regulation X of the Board of Governors of
the Federal Reserve System or any other regulation of such Board or to violate
the Exchange Act, in each case as in effect on the date or dates of such
borrowing and such use of proceeds.
54
<PAGE>
2.6 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable
after 10:00 A.M. (New York City time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. Inability to Determine Applicable Interest Rate. In the event
that Administrative Agent shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the London interbank market adequate and fair means do
not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Reserve Adjusted Eurodollar Rate,
Administrative Agent shall on such date give notice (by telefacsimile or by
telephone confirmed in writing) to Company and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans until such time as Administrative Agent notifies Company
and Lenders that the circumstances giving rise to such notice no longer exist
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by
Company with respect to the Loans in respect of which such determination was
made shall be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the
event that on any date any Lender shall have determined (which determination
shall be final and conclusive and binding upon all parties hereto but shall be
made only after consultation with Company and Administrative Agent) that the
making, maintaining or continuation of its Eurodollar Rate Loans (i) has become
unlawful as a result of compliance by such Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not be
unlawful) or (ii) has become impracticable, or would cause such Lender material
hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the London interbank market or
the position of such Lender in that market, then, and in any such event, such
Lender shall be an "Affected Lender" and it shall on that day give notice (by
telefacsimile or by telephone confirmed in writing) to Company and
Administrative Agent of such determination (which notice Administrative Agent
shall promptly transmit to each other Lender). Thereafter (a) the obligation of
the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate
Loans shall be suspended until such notice shall be withdrawn by the Affected
Lender,
55
<PAGE>
(b) to the extent such determination by the Affected Lender relates to a
Eurodollar Rate Loan then being requested by Company pursuant to a Notice of
Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make
such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c)
the Affected Lender's obligation to maintain its outstanding Eurodollar Rate
Loans (the "Affected Loans") shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company pursuant
to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall
have the option, subject to the provisions of subsection 2.6D, to rescind such
Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by
giving notice (by telefacsimile or by telephone confirmed in writing) to
Administrative Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest
Periods. Company shall compensate each Lender, upon written request by that
Lender (which request shall set forth the basis for requesting such amounts),
for all reasonable losses, expenses and liabilities (including any interest paid
by that Lender to lenders of funds borrowed by it to make or carry its
Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds) which
that Lender may sustain: (i) if for any reason (other than a default by that
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation or
a telephonic request for conversion or continuation, (ii) if any prepayment
(including any prepayment pursuant to subsection 2.4B(i)) or other principal
payment or any conversion of any of its Eurodollar Rate Loans occurs on a date
prior to the last day of an Interest Period applicable to that Loan, (iii) if
any prepayment of any of its Eurodollar Rate Loans is not made on any date
specified in a notice of prepayment given by Company, or (iv) as a consequence
of any other default by Company in the repayment of its Eurodollar Rate Loans
when required by the terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
56
<PAGE>
F. Assumptions Concerning Funding of Eurodollar Rate Loans.
Calculation of all amounts payable to a Lender under this subsection 2.6 and
under subsection 2.7A shall be made as though that Lender had actually funded
each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar
deposit bearing interest at the Base Eurodollar Rate in an amount equal to the
amount of such Eurodollar Rate Loan and having a maturity comparable to the
relevant Interest Period and through the transfer of such Eurodollar deposit
from an offshore office of that Lender to a domestic office of that Lender in
the United States of America; provided, however, that each Lender may fund each
-------- -------
of its Eurodollar Rate Loans in any manner it sees fit and the foregoing
assumptions shall be utilized only for the purposes of calculating amounts
payable under this subsection 2.6 and under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 Increased Costs; Taxes; Capital Adequacy.
----------------------------------------
A. Compensation for Increased Costs and Taxes. Subject to the
provisions of subsection 2.7B (which shall be controlling with respect to the
matters covered thereby), in the event that any Lender shall reasonably
determine (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) that any law, treaty or
governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof, or compliance by such Lender with any
guideline, request or directive issued or made after the date hereof by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender (other than any such
reserve
57
<PAGE>
or other requirements with respect to Eurodollar Rate Loans that are
reflected in the definition of Reserve Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Lender (or its applicable lending office)
or its obligations hereunder or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
reasonable discretion shall determine) as may be necessary to compensate such
Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Company (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
subsection 2.7A, which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company
-----------------------------
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Tax (other than a Tax on the
overall net income of any Lender) imposed, levied, collected, withheld or
assessed by or within the United States of America or any political
subdivision in or of the United States of America or any other jurisdiction
from or to which a payment is made by or on behalf of Company or by any
federation or organization of which the United States of America or any
such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person is
-----------------------
required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by Company to Administrative Agent or any
Lender under any of the Loan Documents:
(a) Company shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as Company
becomes aware of it;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to
pay is imposed on Company) for its own account or (if that liability
is imposed on
58
<PAGE>
Administrative Agent or such Lender, as the case may be) on behalf of
and in the name of Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the making of
that deduction, withholding or payment, Administrative Agent or such
Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or
payment been required or made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required by
clause (b) above to pay, Company shall deliver to Administrative Agent
evidence satisfactory to the other affected parties of such deduction,
withholding or payment and of the remittance thereof to the relevant
taxing or other authority;
provided that no such additional amount shall be required to be paid to any
--------
Lender under clause (c) above except to the extent that any change after
the Closing Date (in the case of each Existing Lender), after the Effective
Date (in the case of each New Lender) or after the date of the Assignment
Agreement pursuant to which such Lender became a Lender (in the case of
each other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the rate of
such deduction, withholding or payment from that in effect at the date of
this Agreement or at the date of such Assignment Agreement, as the case may
be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
-----------------------------------------------
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative Agent
for transmission to Company, on or prior to the Closing Date (in the
case of each Existing Lender), on or prior to the Effective Date (in
the case of each New Lender) or on or prior to the date of the
Assignment Agreement pursuant to which it becomes a Lender (in the
case of each other Lender), and at such other times as may be
necessary in the determination of Company or Administrative Agent
(each in the reasonable exercise of its discretion), (1) two original
copies of Internal Revenue Service Form 1001 or 4224 (or any successor
forms), properly completed and duly executed by such Lender, together
with any other certificate or statement of exemption required under
the Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to any payments to
such Lender of principal, interest, fees or other
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amounts payable under any of the Loan Documents or (2) if such Lender
is not a "bank" or other Person described in Section 881(c)(3) of the
Internal Revenue Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (1) above, a Certificate
of Non-Bank Status together with two original copies of Internal
Revenue Service Form W-8 (or any successor form), properly completed
and duly executed by such Lender, together with any other certificate
or statement of exemption required under the Internal Revenue Code or
the regulations issued thereunder to establish that such Lender is not
subject to deduction or withholding of United States federal income
tax with respect to any payments to such Lender of interest payable
under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, that such
Lender shall promptly (1) deliver to Administrative Agent for
transmission to Company two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate of Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as the case may
be, properly completed and duly executed by such Lender, together with
any other certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to
payments to such Lender under the Loan Documents or (2) notify
Administrative Agent and Company of its inability to deliver any such
forms, certificates or other evidence.
(c) Company shall not be required to pay any additional amount
to any Non-US Lender under clause (c) of subsection 2.7B(ii) if such
Lender shall have failed to satisfy the requirements of clause (a) or
(b)(1) of this subsection 2.7B(iii); provided that if such Lender
--------
shall have satisfied the requirements of subsection 2.7B(iii)(a) on
the Closing Date (in the case of each Existing Lender), on the
Effective Date (in the case of each New Lender) or on the date of the
Assignment Agreement pursuant to which it became a Lender (in the case
of each other Lender), nothing in this subsection 2.7B(iii)(c) shall
relieve Company of its obligation to pay any additional amounts
pursuant to clause (c) of subsection 2.7B(ii) in the event that, as a
result of any change in any applicable law, treaty or governmental
rule, regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer
properly entitled to deliver forms, certificates or other evidence at
a subsequent date establishing the fact that such Lender is not
subject to withholding as described in subsection 2.7B(iii)(a).
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C. Capital Adequacy Adjustment. If any Lender shall have determined
that the adoption, effectiveness, phase-in or applicability after the date
hereof of (i) any law, rule or regulation (or any provision thereof) regarding
capital adequacy or (ii) any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or that
compliance by any Lender (or its applicable lending office) with any guideline,
request or directive regarding capital adequacy (whether or not having the force
of law) of any such governmental authority, central bank or comparable agency
that is adopted or becomes effective or applicable after the date hereof, in any
such case has or would have the effect of reducing the rate of return on the
capital of such Lender or any corporation controlling such Lender as a
consequence of, or with reference to, such Lender's Loans or Commitments or
Letters of Credit or participations therein or other obligations hereunder with
respect to the Loans or the Letters of Credit to a level below that which such
Lender or such controlling corporation could have achieved but for such
adoption, effectiveness, phase-in, applicability, change or compliance (taking
into consideration the policies of such Lender or such controlling corporation
with regard to capital adequacy), then from time to time, within five Business
Days after receipt by Company from such Lender of the statement referred to in
the next sentence, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction. Such Lender shall deliver to Company (with a
copy to Administrative Agent) a written statement, setting forth in reasonable
detail the basis of the calculation of such additional amounts, which statement
shall be conclusive and binding upon all parties hereto absent manifest error.
2.8 Obligation of Lenders and Issuing Lenders to Mitigate.
-----------------------------------------------------
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive payments under subsection 2.7 or
subsection 3.6, it will, to the extent it is not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions and will not otherwise result in any legal, regulatory or material
economic disadvantage to such Lender, as determined by such Lender in the
exercise of its reasonable discretion, use reasonable efforts (i) to make,
issue, fund or maintain the Commitments of such Lender or the affected Loans or
Letters of Credit of such Lender or Issuing Lender through another lending or
letter of credit office of such Lender or Issuing Lender, or (ii) take such
other measures as such Lender or Issuing Lender may deem reasonable, if as a
result thereof the circumstances which would cause such Lender to be an Affected
Lender would cease to exist or the additional amounts which would otherwise be
required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7
or subsection 3.6 would be materially reduced and if, as determined by such
Lender or Issuing Lender in its sole discretion, the making, issuing, funding or
maintaining of such
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Commitments or Loans or Letters of Credit through such other lending or letter
of credit office or in accordance with such other measures, as the case may be,
would not otherwise materially adversely affect such Commitments or Loans or
Letters of Credit or the interests of such Lender or Issuing Lender; provided
--------
that such Lender or Issuing Lender will not be obligated to utilize such other
lending or letter of credit office pursuant to this subsection 2.8 unless
Company agrees to pay all incremental expenses incurred by such Lender or
Issuing Lender as a result of utilizing such other lending or letter of credit
office as described in clause (i) above. A certificate as to the amount of any
such expenses payable by Company pursuant to this subsection 2.8 (setting forth
in reasonable detail the basis for requesting such amount) submitted by such
Lender or Issuing Lender to Company (with a copy to Administrative Agent) shall
be conclusive absent manifest error.
2.9 Removal or Replacement of a Lender.
----------------------------------
A. Anything contained in this Agreement to the contrary
notwithstanding, in the event that:
(i) (a) any Lender (an "Increased-Cost Lender") shall give
notice to Company that such Lender is an Affected Lender or that such
Lender is entitled to receive payments under subsection 2.7 or subsection
3.6, (b) the circumstances which have caused such Lender to be an Affected
Lender or which entitle such Lender to receive such payments shall remain
in effect, and (c) such Lender shall fail to withdraw such notice within
five Business Days after Company's request for such withdrawal; or
(ii) any Lender shall be a Defaulting Lender;
then, and in each such case, Company shall have the right, at its option, to
remove or replace the applicable Increased-Cost Lender or Defaulting Lender (the
"Terminated Lender") to the extent permitted by subsection 2.9B.
B. Company may, by giving written notice to Administrative Agent and
any Terminated Lender of its election to do so:
(i) elect to (a) terminate the Revolving Loan Commitment, if
any, of such Terminated Lender upon receipt by such Terminated Lender of
such notice and (b) prepay on the date of such termination any outstanding
Loans made by such Terminated Lender, at par, together with accrued and
unpaid interest thereon and any other amounts payable to such Terminated
Lender hereunder pursuant to subsection 2.6, subsection 2.7 or subsection
3.6 or otherwise; provided that, in the event such Terminated Lender has
--------
any Loans outstanding at the time of such termination, the written consent
of Administrative Agent and Requisite Lenders (which consent shall not be
unreasonably withheld or delayed) shall be required in order for Company to
make the election set forth in this clause (i); or
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(ii) elect to cause such Terminated Lender (and such Terminated
Lender hereby irrevocably agrees) to assign its outstanding Loans, at par,
and its Revolving Loan Commitment, if any, in full to one or more Eligible
Assignees (each a "Replacement Lender") in accordance with the provisions
of subsection 11.1B (it being understood that neither Administrative Agent
nor such Terminated Lender shall have any obligation to solicit or
otherwise identify any potential Replacement Lender); provided that, on the
--------
date of such assignment, Company shall pay any amounts payable to such
Terminated Lender pursuant to subsection 2.6, subsection 2.7 or subsection
3.6 or otherwise as if it were a prepayment; and provided, further that, if
-------- -------
such Terminated Lender fails to enter into an Assignment Agreement with any
applicable Replacement Lender in accordance with the provisions of
subsection 11.1B as contemplated by the foregoing provisions of this
subsection 2.9B(ii), it shall be deemed to have so entered into such
Assignment Agreement;
provided that Company may not make either of the elections set forth in clauses
- --------
(i) or (ii) above with respect to any Terminated Lender that is an Issuing
Lender unless, prior to the effectiveness of such election, Company shall have
caused each outstanding Letter of Credit issued by such Issuing Lender to be
cancelled or replaced.
C. Upon the prepayment of all amounts owing to any Terminated Lender
and the termination of such Terminated Lender's Revolving Loan Commitment, if
any, pursuant to clause (i) of subsection 2.9B, (i) Schedule 2.1 shall be deemed
------------
modified to reflect any corresponding changes in the Revolving Loan Commitments
and (ii) such Terminated Lender shall no longer constitute a "Lender" for
purposes of this Agreement; provided that any rights of such Terminated Lender
--------
to indemnification under this Agreement (including under subsections 2.6D, 2.7,
3.6, 10.2 and 10.3) shall survive as to such Terminated Lender.
Section 3. LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
---------------------------------------------------------------------
Therein.
- -------
A. Letters of Credit. Company acknowledges and confirms that
Schedule 3.1 annexed hereto sets forth each letter of credit issued under the
- ------------
Existing Credit Agreement and outstanding as of the Effective Date
(collectively, the "Existing Letters of Credit"). Company hereby represents,
warrants, agrees, covenants and (a) reaffirms that it is not aware of any
defense, set off, claim or counterclaim against any Agent or Lender in regard to
its Obligations in respect of such Existing Letters of Credit and (b) reaffirms
its obligation to reimburse the applicable Issuing Lenders for honored drawings
under such Existing Letters of Credit in accordance with the terms and
conditions of this Agreement and the other Loan Documents applicable to Letters
of Credit issued hereunder. Based on the foregoing, Company and each Lender
agrees that (1) each Existing Letter of Credit which is a Standby Letter of
Credit shall, as of the Effective Date, be deemed for all purposes of this
Agreement to be a Standby Letter of
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Credit issued hereunder, and (2) each Existing Letter of Credit which is a
Commercial Letter of Credit shall, as of the Effective Date, be deemed for all
purposes of this Agreement to be a Commercial Letter of Credit issued hereunder.
In addition to Company requesting that Lenders make Revolving Loans pursuant to
subsection 2.1A(ii) and that Swing Line Lender make Swing Line Loans pursuant to
subsection 2.1A(iii), Company may request, in accordance with the provisions of
this subsection 3.1, from time to time during the period from the Effective Date
to but excluding the Revolving Loan Commitment Termination Date, that one or
more Lenders issue Letters of Credit for the account of Company for the purposes
specified in the definitions of Commercial Letters of Credit and Standby Letters
of Credit. Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Company herein set forth, any one or
more Lenders may, but (except as provided in subsection 3.1B(ii)) shall not be
obligated to, issue such Letters of Credit in accordance with the provisions of
this subsection 3.1; provided that Company shall not request that any Lender
--------
issue (and no Lender shall issue):
(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Loan Commitments would exceed
the Revolving Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $7,500,000;
(iii) any Standby Letter of Credit having an expiration date
later than the earlier of (a) the Revolving Loan Commitment Termination
Date and (b) the date which is one year from the date of issuance of such
Standby Letter of Credit; provided that the immediately preceding clause
--------
(b) shall not prevent any Issuing Lender from agreeing that a Standby
Letter of Credit will automatically be extended for one or more successive
periods not to exceed one year each unless such Issuing Lender elects not
to extend for any such additional period; provided, further that such
-------- -------
Issuing Lender shall elect not to extend such Standby Letter of Credit if
it has knowledge that an Event of Default has occurred and is continuing
(and has not been waived in accordance with subsection 11.6) at the time
such Issuing Lender must elect whether or not to allow such extension; and
provided, further that such Issuing Lender shall give (1) prompt written
-------- -------
notice to Company of any election not to extend such Standby Letter of
Credit in accordance with the immediately preceding proviso and (2) 30
days' prior written notice of any other election not to extend such Standby
Letter of Credit;
(iv) any Commercial Letter of Credit having an expiration date
(a) later than the earlier of (X) the date which is 30 days prior to the
Revolving Loan Commitment Termination Date and (Y) the date which is 180
days from the date of issuance of such Commercial Letter of Credit or (b)
that is otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion;
(v) any Letter of Credit denominated in a currency other than
Dollars;
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or
(vi) any Letter of Credit during any period when a Lender
Default exists, unless each Issuing Lender has entered into arrangements
satisfactory to it and Company to eliminate such Issuing Lender's risk with
respect to the Defaulting Lender, including by cash collateralizing such
Defaulting Lender's Pro Rata Share of the Letter of Credit Usage (after
giving effect to the issuance of the proposed Letter of Credit).
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Company desires the issuance
------------------
of a Letter of Credit, it shall deliver to Administrative Agent a Notice of
Issuance of Letter of Credit substantially in the form of Exhibit III
-----------
annexed hereto no later than 12:00 Noon (New York City time) at least five
Business Days (or such shorter period as may be agreed to by the Issuing
Lender in any particular instance) in advance of the proposed date of
issuance. The Notice of Issuance of Letter of Credit shall specify (a) the
proposed date of issuance (which shall be a Business Day), (b) whether the
Letter of Credit is to be a Standby Letter of Credit or a Commercial Letter
of Credit, (c) the face amount of the Letter of Credit, (d) the expiration
date of the Letter of Credit, (e) the name and address of the beneficiary,
and (f) either the verbatim text of the proposed Letter of Credit or the
proposed terms and conditions thereof, including a precise description of
any documents to be presented by the beneficiary which, if presented by the
beneficiary prior to the expiration date of the Letter of Credit, would
require the Issuing Lender to make payment under the Letter of Credit;
provided that the Issuing Lender, in its reasonable discretion, may require
--------
changes in the text of the proposed Letter of Credit or any such documents;
and provided, further that no Letter of Credit shall require payment
-------- -------
against a conforming draft to be made thereunder on the same business day
(under the laws of the jurisdiction in which the office of the Issuing
Lender to which such draft is required to be presented is located) that
such draft is presented if such presentation is made after 10:00 A.M. (in
the time zone of such office of the Issuing Lender) on such business day.
Company shall notify the applicable Issuing Lender (and
Administrative Agent, if Administrative Agent is not such Issuing
Lender) prior to the issuance of any Letter of Credit in the event
that any of the matters to which Company is required to certify in the
applicable Notice of Issuance of Letter of Credit is no longer true
and correct as of the proposed date of issuance of such Letter of
Credit, and upon the issuance of any Letter of Credit Company shall be
deemed to have re-certified, as of the date of such issuance, as to
the matters to which Company is required to certify in the applicable
Notice of Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by
-------------------------------
Administrative Agent of a Notice of Issuance of Letter of Credit pursuant
to subsection 3.1B(i)
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requesting the issuance of a Letter of Credit, in the event Administrative
Agent elects to issue such Letter of Credit, Administrative Agent shall
promptly so notify Company, and Administrative Agent shall be the Issuing
Lender with respect thereto. In the event that Administrative Agent, in
its sole discretion, elects not to issue such Letter of Credit,
Administrative Agent shall promptly so notify Company, whereupon Company
may request any other Lender to issue such Letter of Credit by delivering
to such Lender a copy of the applicable Notice of Issuance of Letter of
Credit. Any Lender so requested to issue such Letter of Credit shall
promptly notify Company and Administrative Agent whether or not, in its
sole discretion, it has elected to issue such Letter of Credit, and any
such Lender which so elects to issue such Letter of Credit shall be the
Issuing Lender with respect thereto. In the event that all other Lenders
shall have declined to issue such Letter of Credit, notwithstanding the
prior election of Administrative Agent not to issue such Letter of Credit,
Administrative Agent shall be obligated to issue such Letter of Credit and
shall be the Issuing Lender with respect thereto, notwithstanding the fact
that the Letter of Credit Usage with respect to such Letter of Credit and
with respect to all other Letters of Credit issued by Administrative Agent,
when aggregated with Administrative Agent's outstanding Revolving Loans and
Swing Line Loans, may exceed Administrative Agent's Revolving Loan
Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver
----------------------------
(in accordance with subsection 11.6) of the conditions set forth in
subsection 4.4, the Issuing Lender shall issue the requested Letter of
Credit in accordance with the Issuing Lender's standard operating
procedures (any such issuance by Administrative Agent being effected
through the Funding and Payment Office), and upon its issuance of such
Letter of Credit the Issuing Lender shall promptly notify Administrative
Agent and each Lender of such issuance, which notice shall be accompanied
by a copy of such Letter of Credit.
(iv) Reports to Lenders. Within 30 days after the end of each
------------------
calendar quarter ending after the Effective Date, so long as any Letter of
Credit shall have been outstanding during such calendar quarter, each
Issuing Lender shall deliver to Administrative Agent and Administrative
Agent shall deliver to each Lender a report setting forth for such calendar
quarter the daily maximum amount available to be drawn under the Letters of
Credit that were outstanding during such calendar quarter.
C. Lenders' Purchase of Participations in Letters of Credit.
Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby agrees to, have irrevocably purchased from the Issuing
Lender a participation in such Letter of Credit and any drawings honored
thereunder in an amount equal to such Lender's Pro Rata Share of the maximum
amount which is or at any time may become available to be drawn thereunder.
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3.2 Letter of Credit Fees.
---------------------
Company agrees to pay the following amounts to each Issuing Lender
with respect to Letters of Credit issued by it for the account of Company:
(i) with respect to each Letter of Credit, (a) a fronting fee
equal to 0.25% per annum of the daily maximum amount available to be drawn
under such Letter of Credit and (b) a Letter of Credit fee equal to the
product of (1) the then Applicable Eurodollar Rate Margin with respect to
Revolving Loans and (2) the daily maximum amount available to be drawn
under such Letter of Credit, in each case payable in arrears on and to the
last Business Day in each of March, June, September and December of each
year, commencing the Effective Date, and computed on the basis of a 360-day
year for the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary and
processing charges payable directly to the applicable Issuing Lender for
its own account in accordance with such Issuing Lender's standard schedule
for such charges in effect at the time of such issuance, amendment,
transfer or payment, as the case may be.
For purposes of calculating any fees payable under clause (i) of this subsection
3.2, the daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of business on any date of determination. Promptly
upon receipt by such Issuing Lender of any amount described in clause (i)(b) of
this subsection 3.2, such Issuing Lender shall distribute to each other Lender
its Pro Rata Share of such amount.
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit.
------------------------------------------------------------------
A. Responsibility of Issuing Lender With Respect to Drawings. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
B. Reimbursement by Company of Amounts Paid Under Letters of Credit.
In the event an Issuing Lender has determined to honor a drawing under a Letter
of Credit issued by it, such Issuing Lender shall immediately notify Company and
Administrative Agent, and Company shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the "Reimbursement Date") in an amount in Dollars and in same day funds
equal to the amount of such honored drawing; provided that, anything contained
--------
in this Agreement to the contrary notwithstanding, (i) unless Company shall have
notified Administrative Agent and such Issuing Lender prior to 10:00 A.M.
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(New York City time) on the date such drawing is honored that Company intends to
reimburse such Issuing Lender for the amount of such honored drawing with funds
other than the proceeds of Revolving Loans, Company shall be deemed to have
given a timely Notice of Borrowing to Administrative Agent requesting Lenders to
make Revolving Loans that are Base Rate Loans on the Reimbursement Date in an
amount in Dollars equal to the amount of such honored drawing and (ii) subject
to satisfaction or waiver of the conditions specified in subsection 4.3B,
Lenders shall, on the Reimbursement Date, make Revolving Loans that are Base
Rate Loans in the amount of such honored drawing, the proceeds of which shall be
applied directly by Administrative Agent to reimburse such Issuing Lender for
the amount of such honored drawing; and provided, further that if for any reason
-------- -------
proceeds of Revolving Loans are not received by such Issuing Lender on the
Reimbursement Date in an amount equal to the amount of such honored drawing,
Company shall reimburse such Issuing Lender, on demand, in an amount in same day
funds equal to the excess of the amount of such honored drawing over the
aggregate amount of such Revolving Loans, if any, which are so received.
Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its
obligation to make Revolving Loans on the terms and conditions set forth in this
Agreement, and Company shall retain any and all rights it may have against any
Lender resulting from the failure of such Lender to make such Revolving Loans
under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of
Credit.
(i) Payment by Lenders. In the event that Company shall fail
------------------
for any reason to reimburse any Issuing Lender as provided in subsection
3.3B in an amount equal to the amount of any drawing honored by such
Issuing Lender under a Letter of Credit issued by it, such Issuing Lender
shall promptly notify each other Lender of the unreimbursed amount of such
honored drawing and of such other Lender's respective participation therein
based on such Lender's Pro Rata Share. Each Lender shall make available to
such Issuing Lender an amount equal to its respective participation, in
Dollars and in same day funds, at the office of such Issuing Lender
specified in such notice, not later than 12:00 Noon (New York City time) on
the first business day (under the laws of the jurisdiction in which such
office of such Issuing Lender is located) after the date notified by such
Issuing Lender. In the event that any Lender fails to make available to
such Issuing Lender on such business day the amount of such Lender's
participation in such Letter of Credit as provided in this subsection 3.3C,
such Issuing Lender shall be entitled to recover such amount on demand from
such Lender together with interest thereon at the rate customarily used by
such Issuing Lender for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. Nothing in this subsection
3.3C shall be deemed to prejudice the right of any Lender to recover from
any Issuing Lender any amounts made available by such Lender to such
Issuing Lender pursuant to this subsection 3.3C in the event that it is
determined by the final judgment of a court of competent jurisdiction that
the payment with respect to a Letter of Credit by such Issuing Lender in
respect of which payment was made by such
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Lender constituted gross negligence or willful misconduct on the part of
such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
-------------------------------------------------------
Company. In the event any Issuing Lender shall have been reimbursed by
-------
other Lenders pursuant to subsection 3.3C(i) for all or any portion of any
drawing honored by such Issuing Lender under a Letter of Credit issued by
it, such Issuing Lender shall distribute to each other Lender which has
paid all amounts payable by it under subsection 3.3C(i) with respect to
such honored drawing such other Lender's Pro Rata Share of all payments
subsequently received by such Issuing Lender from Company in reimbursement
of such honored drawing when such payments are received. Any such
distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such other
address as such Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
(i) Payment of Interest by Company. Company agrees to pay to
------------------------------
each Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it, interest on the amount paid by such Issuing Lender in
respect of each such honored drawing from the date such drawing is honored
to but excluding the date such amount is reimbursed by Company (including
any such reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B) at a rate equal to (a) for the period from the date such
drawing is honored to but excluding the Reimbursement Date, the rate then
in effect under this Agreement with respect to Revolving Loans that are
Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess
of the rate of interest otherwise payable under this Agreement with respect
to Revolving Loans that are Base Rate Loans. Interest payable pursuant to
this subsection 3.3D(i) shall be computed on the basis of a 360-day year
for the actual number of days elapsed in the period during which it accrues
and shall be payable on demand or, if no demand is made, on the date on
which the related drawing under a Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
---------------------------------------------------
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i) with respect to a drawing honored under a
Letter of Credit issued by it, (a) such Issuing Lender shall distribute to
each other Lender, out of the interest received by such Issuing Lender in
respect of the period from the date such drawing is honored to but
excluding the date on which such Issuing Lender is reimbursed for the
amount of such drawing (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B), the amount that
such other Lender would have been entitled to receive in respect of the
letter of credit fee that would have been payable in respect of such Letter
of Credit for such period pursuant to subsection 3.2 if no drawing had been
honored under such Letter of Credit, and (b) in the event such Issuing
Lender shall have been reimbursed by other Lenders pursuant to subsection
3.3C(i) for all or any portion of
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such honored drawing, such Issuing Lender shall distribute to each other
Lender which has paid all amounts payable by it under subsection 3.3C(i)
with respect to such honored drawing such other Lender's Pro Rata Share of
any interest received by such Issuing Lender in respect of that portion of
such honored drawing so reimbursed by other Lenders for the period from the
date on which such Issuing Lender was so reimbursed by other Lenders to but
excluding the date on which such portion of such honored drawing is
reimbursed by Company. Any such distribution shall be made to a Lender at
its primary address set forth below its name on the appropriate signature
page hereof or at such other address as such Lender may request.
3.4 Obligations Absolute.
--------------------
The obligation of Company to reimburse each Issuing Lender for
drawings honored under the Letters of Credit issued by it and to repay any
Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations
of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other
right which Company or any Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons for
whom any such transferee may be acting), any Issuing Lender or other Lender
or any other Person or, in the case of a Lender, against Company, whether
in connection with this Agreement, the transactions contemplated herein or
any unrelated transaction (including any underlying transaction between
Company or one of its Subsidiaries and the beneficiary for which any Letter
of Credit was procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter
of Credit against presentation of a draft or other document which does not
substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
any party thereto;
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(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
- --------
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 Indemnification; Nature of Issuing Lenders' Duties.
--------------------------------------------------
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any 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 (all such acts or omissions herein called
"Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Company and any
Issuing Lender, Company assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) 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; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
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beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender, including any Governmental Acts, and none of the
above shall affect or impair, or prevent the vesting of, any of such Issuing
Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection
3.5, Company shall retain any and all rights it may have against any Issuing
Lender for any liability arising solely out of the gross negligence or willful
misconduct of such Issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
-------------------------------------------------------
Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or Lender shall reasonably determine (which determination shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto) that any law, treaty or governmental rule, regulation or order, or any
change therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by any
Issuing Lender or Lender with any guideline, request or directive issued or made
after the date hereof by any central bank or other governmental or quasi-
governmental authority (whether or not having the force of law):
(i) subjects such Issuing Lender or Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than any
Tax on the overall net income of such Issuing Lender or Lender) with
respect to the issuing or maintaining of any Letters of Credit or the
purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being imposed
on or suffered by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve
(including any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing
Lender or participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Issuing Lender or Lender (or its
applicable lending or letter
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of credit office) regarding this Section 3 or any Letter of Credit or any
participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts as may be necessary to compensate such Issuing
Lender or Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Issuing Lender or Lender shall deliver to Company a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Issuing Lender or Lender under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters
of Credit hereunder are subject to the satisfaction of the following conditions.
4.1 Conditions to Existing Term Loans, Existing Revolving Loans and Letters of
--------------------------------------------------------------------------
Credit.
- ------
The conditions to the making of the Existing Term Loans, the Existing
Revolving Loans and the issuance of the Existing Letters of Credit have been
satisfied.
4.2 Conditions to Revolving Loans to be made on the Effective Date.
--------------------------------------------------------------
The obligations of Lenders to make the Revolving Loans to be made on
the Effective Date are, in addition to the conditions precedent specified in
subsection 4.3, subject to prior or concurrent satisfaction of the following
conditions:
A. Loan Party Documents. On or before the Effective Date, Holdings
and Company shall, and shall cause each other Loan Party to, deliver to Lenders
(or to Administrative Agent for Lenders with sufficient originally executed
copies, where appropriate, for each Lender and its counsel) the following with
respect to Company or such Loan Party, as the case may be, each, unless
otherwise noted, dated the Effective Date:
(i) Certified copies of the Certificate or Articles of
Incorporation of such Person, together with a good standing certificate
from the Secretary of State of its jurisdiction of incorporation and, as
requested by the Administrative Agent, each other state in which such
Person is qualified as a foreign corporation to do business and, to the
extent generally available, a certificate or other evidence of good
standing as to payment
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of any applicable franchise or similar taxes from the appropriate taxing
authority of each of such jurisdictions, each dated a recent date prior to
the Effective Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Effective Date by such Person's corporate secretary or an assistant
secretary;
(iii) Resolutions of the Board of Directors of such Person
approving and authorizing the execution, delivery and performance of the
Loan Documents and Related Agreements to which it is a party, certified as
of the Effective Date by the corporate secretary or an assistant secretary
of such Person as being in full force and effect without modification or
amendment;
(iv) Signature and incumbency certificates of the officers of
such Person executing the Loan Documents to which it is a party;
(v) Executed originals of the Loan Documents to which such
Person is a party; and
(vi) Such other documents as Administrative Agent may
reasonably request.
B. No Material Adverse Effect. Since December 31, 1998, no Material
Adverse Effect (in the good faith opinion of Administrative Agent) shall have
occurred.
C. Corporate and Capital Structure, Ownership, Management, Etc.
(i) Corporate Structure. The corporate organizational
-------------------
structure of Holdings and its Subsidiaries as of the Effective Date, both
before and after giving effect to the 1999 Acquisitions and the other
transactions contemplated hereby to occur on the Effective Date, shall be
as set forth on Schedule 4.2C annexed hereto.
-------------
(ii) Capital Structure and Ownership. The capital structure and
-------------------------------
ownership of Holdings and Company as of the Effective Date, both before and
after giving effect to the 1999 Acquisitions and the other transactions
contemplated hereby to occur on the Effective Date, shall be as set forth
on Schedule 4.2C annexed hereto.
-------------
(iii) Management. The management of Holdings and Company as of
----------
the Effective Date, both before and after giving effect to the 1999
Acquisitions and the other transactions contemplated hereby to occur on the
Effective Date, shall be as set forth on Schedule 4.2C annexed hereto.
-------------
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D. Effective Date Investment; Issuance of Holdings Units and Senior
Notes.
(i) Effective Date Investment. Holdings shall have received
-------------------------
aggregate cash proceeds of not less than $25,000,000 from the issuance of
$6,600,000 of Holdings Common Stock and $18,400,000 of New Holdings
Preferred to MDCP.
(ii) Holdings Units. On or before the Effective Date, Holdings
--------------
shall have received gross cash proceeds of not less than $25,000,000 from
the issuance of the Holdings Units.
(iii) Senior Notes. On or before the Effective Date, Company
------------
shall have received gross cash proceeds of not less than $130,000,000 from
the issuance of the Senior Notes.
(iv) Use of Proceeds. Company shall have provided evidence
---------------
satisfactory to Administrative Agent that the proceeds of the debt and
equity capitalization of Holdings and Company described in the immediately
preceding clauses (i) and (ii) have been irrevocably committed, prior to
the application of the proceeds of the Revolving Loans to be made on the
Effective Date, to the repayment of a portion of the Existing Term Loans
and the PIK Sub Debt and the payment of a portion of the Acquisition
Financing Requirements and the Transaction Costs.
E. Related Agreements. Administrative Agent shall have received a
fully executed or conformed copy of each Related Agreement and any documents
executed in connection therewith, and each Related Agreement shall be in full
force and effect and no provision thereof shall have been modified or waived in
any respect determined by Administrative Agent to be material, in each case
without the consent of Administrative Agent and Requisite Lenders.
F. Existing Term Loans. On the Effective Date, Company shall have
repaid in full the Existing Term Loans.
G. Necessary Governmental Authorizations and Consents; Expiration of
Waiting Periods, Etc. Holdings and Company shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the 1999 Acquisitions, the other
transactions contemplated by the Loan Documents and the Related Agreements, and
the continued operation of the business conducted by Holdings and its
Subsidiaries in substantially the same manner as conducted prior to the
consummation of the 1999 Acquisitions, and each of the foregoing shall be in
full force and effect, in each case other than those the failure to obtain or
maintain which, either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. All applicable waiting periods shall
have expired without any action being taken or threatened by
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any competent authority which would restrain, prevent or otherwise impose
adverse conditions on any of the 1999 Acquisitions or the financing thereof. No
action, request for stay, petition for review or rehearing, reconsideration, or
appeal with respect to any of the foregoing shall be pending, and the time for
any applicable agency to take action to set aside its consent on its own motion
shall have expired.
H. Consummation of the Effective Date Acquisitions.
(i) All conditions to (a) the Central Fabricators Acquisition,
as set forth in Articles VII and VIII of the Central Fabricators
Acquisition Agreement, and (b) the Tisco Acquisition, as set forth in
Articles 10 and 11 of the Tisco Acquisition Agreement, shall have been
satisfied or the fulfillment of any such conditions shall have been waived
with the consent of Administrative Agent and Requisite Lenders;
(ii) each of the Effective Date Acquisitions shall have become
effective in accordance with the terms of the applicable Effective Date
Acquisition Agreement;
(iii) the aggregate cash consideration paid to the holders of
equity interests in Central Fabricators in connection with the Central
Fabricators Acquisition shall not exceed $29,000,000;
(iv) the aggregate cash consideration paid to Tisco in
connection with the Tisco Acquisition shall not exceed $39,500,000;
(v) Transaction Costs shall not exceed $8,000,000, and
Administrative Agent shall have received evidence to its satisfaction to
such effect; and
(vi) Administrative Agent shall have received an Officer's
Certificate of Company to the effect set forth in clauses (i)-(v) above and
stating that Company will proceed to consummate the Effective Date
Acquisitions immediately upon the making of the initial Loans.
I. Security Interests in Personal and Mixed Property. To the extent
not otherwise satisfied pursuant to Loan Documents and filings made prior to the
Effective Date pursuant to the Existing Credit Agreement, Administrative Agent
shall have received evidence satisfactory to it that Holdings, Company and
Subsidiary Guarantors shall have taken or caused to be taken all such actions,
executed and delivered or caused to be executed and delivered all such
agreements, documents and instruments, and made or caused to be made all such
filings and recordings (other than the filing or recording of items described in
clauses (iii), (iv) and (v) below) that may be necessary or, in the opinion of
Administrative Agent, desirable in order to create in favor of Administrative
Agent, for the benefit of Lenders, a valid and (upon such filing
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and recording) perfected First Priority security interest in the entire personal
and mixed property Collateral. Such actions shall include the following:
(i) Schedules to Collateral Documents. Delivery to
---------------------------------
Administrative Agent of accurate and complete schedules to all of the
applicable Collateral Documents.
(ii) Stock Certificates and Instruments. Delivery to
----------------------------------
Administrative Agent of (a) certificates (which certificates shall be
accompanied by irrevocable undated stock powers, duly endorsed in blank and
otherwise satisfactory in form and substance to Administrative Agent)
representing all capital stock pledged pursuant to the Holdings Pledge
Agreement, the Company Pledge Agreement and the Subsidiary Pledge
Agreements and (b) all promissory notes or other instruments (duly
endorsed, where appropriate, in a manner satisfactory to Administrative
Agent) evidencing any Collateral;
(iii) Lien Searches and UCC Termination Statements. Delivery
--------------------------------------------
to Administrative Agent of (a) the results of a recent search, by a Person
satisfactory to Administrative Agent, of all effective UCC financing
statements and fixture filings and all judgment and tax lien filings which
may have been made with respect to any personal or mixed property of any
Loan Party, together with copies of all such filings disclosed by such
search, and (b) UCC termination statements duly executed by all applicable
Persons for filing in all applicable jurisdictions as may be necessary to
terminate any effective UCC financing statements or fixture filings
disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding
pursuant to the terms of this Agreement).
(iv) UCC Financing Statements and Fixture Filings. Delivery
--------------------------------------------
to Administrative Agent of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Loan Party with respect
to all personal and mixed property Collateral of such Loan Party, for
filing in all jurisdictions as may be necessary or, in the opinion of
Administrative Agent, desirable to perfect the security interests created
in such Collateral pursuant to the Collateral Documents;
(v) PTO Cover Sheets, Etc. Delivery to Administrative Agent
---------------------
of all cover sheets or other documents or instruments required to be filed
with the PTO in order to create or perfect Liens in respect of any IP
Collateral; and
(vi) Opinions of Local Counsel. Delivery to Administrative
-------------------------
Agent of an opinion of counsel (which counsel shall be reasonably
satisfactory to Administrative Agent) under the laws of each jurisdiction
in which any Loan Party or any personal or mixed property Collateral is
located with respect to the creation and perfection of the security
interests in favor of Administrative Agent in such Collateral and such
other matters governed by the laws of such jurisdiction regarding such
security interests as
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Administrative Agent may reasonably request, in each case in form and
substance reasonably satisfactory to Administrative Agent.
J. Environmental Reports. Administrative Agent shall have received
reports or other information, in form, scope and substance satisfactory to
Administrative Agent, regarding environmental matters relating to Holdings and
its Subsidiaries and the Facilities.
K. Financial Statements; Pro Forma Balance Sheet. On or before the
Effective Date, Lenders shall have received from Company (i) audited financial
statements of Holdings and its Subsidiaries for Fiscal Years 1997 and 1998,
consisting of balance sheets and the related consolidated statements of income,
stockholders' equity and cash flows for such Fiscal Years, (ii) unaudited
financial statements of Holdings and its Subsidiaries as at June 30 1999,
consisting of a balance sheet and the related consolidated statements of income,
stockholders' equity and cash flows for the six-month period ending on such
date, all in reasonable detail and certified by the chief financial officer of
Holdings and Company that they fairly present the financial condition of
Holdings and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments, and (iii) pro forma
consolidated balance sheets of Holdings and its Subsidiaries as at the Effective
Date, prepared in accordance with GAAP and reflecting the consummation of the
1999 Acquisitions, the related financings and the other transactions
contemplated by the Loan Documents and the Related Agreements, which pro forma
financial statements shall be in form and substance satisfactory to
Administrative Agent and Lenders.
L. Solvency Assurances. On the Effective Date, Administrative Agent
and Lenders shall have received a Financial Condition Certificate dated the
Effective Date, substantially in the form of Exhibit XIV annexed hereto and with
-----------
appropriate attachments, demonstrating that, after giving effect to the
consummation of the 1999 Acquisitions, the related financings and the other
transactions contemplated by the Loan Documents and the Related Agreements,
Company will be Solvent.
M. Evidence of Insurance. Administrative Agent shall have received
a certificate from Company's insurance broker or other evidence satisfactory to
it that all insurance required to be maintained pursuant to subsection 6.4 is in
full force and effect and that Administrative Agent on behalf of Lenders has
been named as additional insured and/or loss payee thereunder to the extent
required under subsection 6.4.
N. Opinions of Counsel to Loan Parties. Lenders and their
respective counsel shall have received (i) originally executed copies of one or
more favorable written opinions of Kirkland & Ellis, counsel for Loan Parties,
in form and substance reasonably satisfactory to Administrative Agent and its
counsel, dated as of the Effective Date and setting forth substantially the
matters in the opinions designated in Exhibit X annexed hereto and as to such
---------
other matters as Administrative Agent acting on behalf of Lenders may reasonably
request
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and (ii) evidence satisfactory to Administrative Agent that Company has
requested such counsel to deliver such opinions to Lenders.
O. Opinions of Administrative Agent's Counsel. Lenders shall have
received originally executed copies of one or more favorable written opinions of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Administrative Agent, dated
as of the Effective Date, substantially in the form of Exhibit XI annexed hereto
----------
and as to such other matters as Administrative Agent acting on behalf of Lenders
may reasonably request.
P. Opinions of Counsel Delivered Under Related Agreements.
Administrative Agent and its counsel shall have received copies of each of the
opinions of counsel delivered to the parties under the Related Agreements,
together with a letter from each such counsel (to the extent not inconsistent
with such counsel's established internal policies) authorizing Lenders to rely
upon such opinion to the same extent as though it were addressed to Lenders.
Q. Fees. Company shall have paid to Administrative Agent, for
distribution (as appropriate) to Administrative Agent and Lenders, the fees
payable on the Effective Date referred to in subsection 2.3.
R. Representations and Warranties; Performance of Agreements.
Company shall have delivered to Administrative Agent an Officer's Certificate,
in form and substance satisfactory to Administrative Agent, to the effect that
the representations and warranties in Section 5 hereof are true, correct and
complete in all material respects on and as of the Effective Date to the same
extent as though made on and as of that date (or, to the extent such
representations and warranties specifically relate to an earlier date, that such
representations and warranties were true, correct and complete in all material
respects on and as of such earlier date) and that each Loan Party shall have
performed in all material respects all agreements and satisfied all conditions
which this Agreement provides shall be performed or satisfied by it on or before
the Effective Date except as otherwise disclosed to and agreed to in writing by
Administrative Agent and Requisite Lenders.
S. Completion of Proceedings. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by
Administrative Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Administrative Agent and such counsel, and
Administrative Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Administrative Agent may
reasonably request.
T. Repayment of Swing Line Loans. On the Effective Date,
immediately before and after giving effect to any borrowings hereunder on such
date, no Swing Line Loans shall be outstanding.
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U. No Event of Default. Company shall have delivered to
Administrative Agent an Officer's Certificate, in form and substance
satisfactory to Administrative Agent, to the effect that immediately prior to
the Effective Date, no event has occurred and is continuing that would
constitute an Event of Default or Potential Event of Default under the Existing
Credit Agreement.
V. Reallocation of Pro Rata Shares. On the Effective Date, each
Lender that will have a greater Pro Rata Share of the Revolving Loan Commitments
on the Effective Date than its Pro Rata Share of the Revolving Loan Commitments
on (under and as defined in the Existing Credit Agreement) immediately prior to
the Effective Date (including any Lender not party to the Existing Credit
Agreement immediately prior to the Effective Date) (each a "Purchasing Lender"),
without executing an Assignment Agreement, shall be deemed to have automatically
purchased assignments pro rata from each Lender that will have a smaller Pro
Rata Share upon the Effective Date (a "Selling Lender") in all such Selling
Lenders' rights and obligations under this Agreement and the other Loan
Documents, with respect to Revolving Loan Commitments and Existing Revolving
Loans (collectively, except as set forth below, the "Assigned Rights and
Obligations") so that, after giving effect to such assignments, each Lender
shall have its respective Pro Rata Share as set forth in Schedule 2.1 of the
------------
Assigned Rights and Obligations. Each such purchase hereunder shall be at par
for a purchase price equal to the principal amount of Loans and without
recourse, representation or warranty, except that, each Selling Lender shall be
deemed to represent and warrant to each Purchasing Lender that the Assigned
Rights and Obligations of such Selling Lender are not subject to any Liens
created by that Selling Lender.
Administrative Agent shall calculate the net amount to be paid or received
by each Lender in connection with the assignments effected hereunder on the
Effective Date. Each Purchasing Lender required to make a payment shall make
the net amount of its required payment available to Administrative Agent, in
same day funds, at the Funding and Payment Office not later than 12:00 p.m. (New
York time) on the Effective Date. Administrative Agent shall distribute on the
Effective Date the proceeds of such amounts to the Selling Lenders entitled to
receive payments, pro rata in proportion to the amount each Selling Lender is
entitled to receive at the primary address set forth below such Selling Lender's
name on the signature pages hereof or at such other address as such Selling
Lender may request in writing to Administrative Agent.
4.3 Conditions to All Loans.
-----------------------
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding
Date, in accordance with the provisions of subsection 2.1B, an originally
executed Notice of Borrowing, in each case signed by the chief executive
officer, the chief financial officer or the treasurer of
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Company or by any officer of Company designated by any of the above-described
officers on behalf of Company in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case such representations and warranties shall have been true,
correct and complete in all material respects on and as of such earlier
date;
(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such Notice
of Borrowing that would constitute an Event of Default or a Potential Event
of Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this Agreement
provides shall be performed or satisfied by it on or before that Funding
Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date
shall not violate any law including Regulation T, Regulation U or
Regulation X of the Board of Governors of the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of
Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Holdings or any of its
Subsidiaries or any property of Holdings or any of its Subsidiaries that
has not been disclosed by Company in writing pursuant to subsection 5.6 or
6.1(x) prior to the making of the last preceding Loans (or, in the case of
the initial Loans, prior to the execution of this Agreement), and there
shall have occurred no development not so disclosed in any such action,
suit, proceeding, governmental investigation or arbitration so disclosed,
that, in either event, in the opinion of Administrative Agent or of
Requisite Lenders, would be expected to have a Material Adverse Effect.
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4.4. Conditions to Letters of Credit.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of
Credit pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Notice of Issuance of Letter of
Credit, in each case signed by the chief executive officer, the chief financial
officer or the treasurer of Company or by any officer of Company designated by
any of the above-described officers on behalf of Company in a writing delivered
to Administrative Agent, together with all other information specified in
subsection 3.1B(i) and such other documents or information as the applicable
Issuing Lender may reasonably require in connection with the issuance of such
Letter of Credit.
C. On the date of issuance of such Letter of Credit, all
conditions precedent described in subsection 4.3B shall be satisfied to the same
extent as if the issuance of such Letter of Credit were the making of a Loan and
the date of issuance of such Letter of Credit were a Funding Date.
Section 5. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND COMPANY
In order to induce Lenders to enter into this Agreement and to make
the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce
other Lenders to purchase participations therein, each of Holdings and Company
represents and warrants to each Lender, on the date of this Agreement, on each
Funding Date and on the date of issuance of each Letter of Credit, that the
following statements are true, correct and complete:
5.1 Organization, Powers, Qualification, Good Standing, Business and
----------------------------------------------------------------
Subsidiaries.
- ------------
A. Organization and Powers. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in Schedule 5.1 annexed hereto. Each
------------
Loan Party has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and Related Agreements to which it
is a party and to carry out the transactions contemplated thereby.
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B. Qualification and Good Standing. Each Loan Party is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified or in good standing has
not had and will not have a Material Adverse Effect.
C. Conduct of Business. Holdings and its Subsidiaries are engaged
only in the businesses permitted to be engaged by them in pursuant to subsection
7.13.
D. Subsidiaries. All of the Subsidiaries of Holdings are identified
in Schedule 5.1 annexed hereto, as said Schedule 5.1 may be supplemented from
------------ ------------
time to time pursuant to the provisions of subsection 6.1(xvii). The capital
stock of each of the Subsidiaries of Holdings identified in Schedule 5.1 annexed
------------
hereto (as so supplemented) is duly authorized, validly issued, fully paid and
nonassessable and none of such capital stock constitutes Margin Stock. Each of
the Subsidiaries of Holdings identified in Schedule 5.1 annexed hereto (as so
------------
supplemented) is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation set
forth therein, has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted, and is qualified to do business and in good standing
in every jurisdiction where its assets are located and wherever necessary to
carry out its business and operations, in each case except where failure to be
so qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5.1 annexed
------------
hereto (as so supplemented) correctly sets forth the ownership interest of
Holdings and each of its Subsidiaries in each of the Subsidiaries of Holdings
identified therein.
5.2 Authorization of Borrowing, etc.
-------------------------------
A. Authorization of Borrowing. The execution, delivery and
performance of the Loan Documents and the Related Agreements have been duly
authorized by all necessary corporate action on the part of each Loan Party that
is a party thereto.
B. No Conflict. The execution, delivery and performance by Loan
Parties of the Loan Documents and the Related Agreements to which they are
parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Holdings or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Holdings or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on
Holdings or any of its Subsidiaries, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Holdings or any of its Subsidiaries, (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of Holdings or any of its Subsidiaries (other than any Liens created
under any of the Loan Documents in favor of Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Holdings or any of its
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Subsidiaries, except for such approvals or consents which will be obtained on or
before the Effective Date and disclosed in writing to Lenders.
C. Governmental Consents. The execution, delivery and performance
by Loan Parties of the Loan Documents and the Related Agreements to which they
are parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body.
D. Binding Obligation. Each of the Loan Documents and Related
Agreements has been duly executed and delivered by each Loan Party that is a
party thereto and is the legally valid and binding obligation of such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
E. Valid Issuance of Holdings Common Stock, New Holdings Preferred,
Holdings Discount Debentures and Senior Notes.
(i) Holdings Common Stock and New Holdings Preferred. The
------------------------------------------------
Holdings Common Stock (including the Holdings Common Stock that comprises a
portion of the Holdings Units) and New Holdings Preferred sold or to be
sold on or before the Effective Date, when issued and delivered, will be
duly and validly issued, fully paid and nonassessable. No stockholder of
Holdings has or will have any preemptive rights to subscribe for any
additional equity Securities of Holdings. The issuance and sale of such
Holdings Common Stock and New Holdings Preferred, upon such issuance and
sale, will either (a) have been registered or qualified under applicable
federal and state securities laws or (b) be exempt therefrom.
(ii) Holdings Discount Debentures. Holdings has the
----------------------------
corporate power and authority to issue the Holdings Discount Debentures.
The Holdings Discount Debentures, when issued and paid for, will be the
legally valid and binding obligation of Holdings, enforceable against
Holdings in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally or by equitable principles
relating to enforceability. The Holdings Discount Debentures, when issued
and sold, will either (a) have been registered or qualified under
applicable federal and state securities laws or (b) be exempt therefrom.
(iii) Senior Notes. Company has the corporate power and
------------
authority to issue the Senior Notes. The Senior Notes, when issued and
paid for, will be the legally valid and binding obligation of Company,
enforceable against Company in accordance
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with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability. The Senior Notes, when issued and sold, will either (a)
have been registered or qualified under applicable federal and state
securities laws or (b) be exempt therefrom.
5.3 Financial Condition.
-------------------
Company has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited consolidated
balance sheets of Holdings and its Subsidiaries as at December 31, 1997 and
1998, and the related consolidated statements of income, stockholders' equity
and cash flows of Holdings and its Subsidiaries for the Fiscal Years then ended
and (ii) the unaudited consolidated balance sheet of Holdings and its
Subsidiaries as at June 30, 1999 and the related unaudited consolidated
statements of income, stockholders' equity and cash flows of Holdings and its
Subsidiaries for the six months then ended. All such statements were prepared
in conformity with GAAP and fairly present, in all material respects, the
financial position (on a consolidated basis) of the entities described in such
financial statements as at the respective dates thereof and the results of
operations and cash flows (on a consolidated basis) of the entities described
therein for each of the periods then ended, subject, in the case of any such
unaudited financial statements, to changes resulting from audit and normal year-
end adjustments. Neither Holdings nor any of its Subsidiaries has (and will not
have following the funding of the initial Loans) any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Holdings or any of its Subsidiaries.
5.4 No Material Adverse Change; No Restricted Payments.
--------------------------------------------------
Since December 31, 1998, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Neither Holdings nor any of its Subsidiaries has directly or indirectly
declared, ordered, paid or made, or set apart any sum or property for, any
Restricted Payment or agreed to do so except as permitted by subsection 7.5.
5.5 Title to Properties; Liens; Real Property .
-----------------------------------------
A. Title to Properties; Liens. Holdings and its Subsidiaries have
(i) good, sufficient and legal title to (in the case of fee interests in real
property), (ii) valid leasehold interests in (in the case of leasehold interests
in real or personal property), or (iii) good title to (in the case of all other
personal property), all of their respective properties and assets reflected in
the financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, in each case except
for assets disposed of since the date of
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such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7.7. Except as permitted by this Agreement, all such
properties and assets are free and clear of Liens.
B. Real Property. As of the Effective Date, Schedule 5.5 annexed
------------
hereto contains a true, accurate and complete list of (i) all Fee Properties and
Leasehold Properties and (ii) all leases, subleases or assignments of leases
(together with all amendments, modifications, supplements, renewals or
extensions of any thereof) affecting each Real Property Asset of any Loan Party,
regardless of whether such Loan Party is the landlord or tenant (whether
directly or as an assignee or successor in interest) under such lease, sublease
or assignment. Except as specified in Schedule 5.5 annexed hereto, each
------------
agreement listed in clause (ii) of the immediately preceding sentence is in full
force and effect and Company does not have knowledge of any default that has
occurred and is continuing thereunder, and each such agreement constitutes the
legally valid and binding obligation of each applicable Loan Party, enforceable
against such Loan Party in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles.
5.6 Litigation; Adverse Facts.
-------------------------
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Holdings or any of its
Subsidiaries) at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (including any Environmental Claims) that
are pending or, to the knowledge of Company, threatened against or affecting
Holdings or any of its Subsidiaries or any property of Holdings or any of its
Subsidiaries and that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither Holdings nor any of its
Subsidiaries (i) is in violation of any applicable laws (including Environmental
Laws), which violation, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, or (ii) is subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
5.7 Payment of Taxes.
----------------
Except to the extent permitted by subsection 6.3, all tax returns and
reports of Holdings and its Subsidiaries required to be filed by any of them
have been timely filed, and all taxes shown on such tax returns to be due and
payable and all assessments, fees and other governmental charges upon Holdings
and its Subsidiaries and upon their respective properties, assets, income,
businesses and franchises which are due and payable have been paid when due and
payable. Company knows of no proposed tax assessment against Holdings or any of
its
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Subsidiaries which is not being actively contested by Holdings or such
Subsidiary in good faith and by appropriate proceedings; provided that such
--------
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
5.8 Performance of Agreements; Materially Adverse Agreements; Material
------------------------------------------------------------------
Contracts.
- ---------
A. Neither Holdings nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Holdings nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
C. Schedule 5.8 contains a true, correct and complete list of all
------------
the Material Contracts in effect on the Effective Date. Except as described on
Schedule 5.8, all such Material Contracts are in full force and effect and no
- ------------
material defaults currently exist thereunder.
5.9 Governmental Regulation.
-----------------------
Neither Holdings 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 under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 Securities Activities.
---------------------
A. Neither Holdings nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than
25% of the value of the assets (either of Holdings or Company only or of
Holdings and its Subsidiaries or Company and its Subsidiaries on a consolidated
basis) subject to the provisions of subsection 7.2 or 7.7 or subject to any
restriction contained in any agreement or instrument, between Holdings or
Company and any Lender or any Affiliate of any Lender, relating to Indebtedness
and within the scope of subsection 9.2, will be Margin Stock.
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5.11 Employee Benefit Plans.
----------------------
A. Holdings, each of its Subsidiaries and each of their respective
ERISA Affiliates are in compliance with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their obligations under each Employee Benefit Plan (in each case except where
the failure to so comply or perform, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect). Each Employee Benefit
Plan which is intended to qualify under Section 401(a) of the Internal Revenue
Code has received a current determination letter from the Internal Revenue
Service stating that it is so qualified and, to the knowledge of Company, no
event has occurred since the date of such determination that would adversely
affect such determination (in each case except where the failure to be so
qualified, or the occurrence of any such event, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect).
B. No ERISA Event has occurred or is reasonably expected to occur
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code or except as set forth in Schedule 5.11 annexed hereto, no Employee
-------------
Benefit Plan provides health or welfare benefits (through the purchase of
insurance or otherwise) for any retired or former employee of Holdings, any of
its Subsidiaries or any of their respective ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), is not material.
E. As of the most recent valuation date for each Multiemployer Plan
for which the actuarial report is available, the potential liability of
Holdings, its Subsidiaries and their respective ERISA Affiliates for a complete
withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of
ERISA), when aggregated with such potential liability for a complete withdrawal
from all Multiemployer Plans, based on information available pursuant to Section
4221(e) of ERISA, is not material.
5.12 Certain Fees.
------------
No broker's or finder's fee or commission will be payable with respect
to this Agreement or any of the transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
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5.13 Environmental Protection.
------------------------
A. Neither Holdings nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order, consent decree or settlement agreement with any Person relating to (a)
any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous
Materials Activity that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
B. Neither Holdings nor any of its Subsidiaries has received any
letter or other written request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
(S) 9604) or any comparable state law, in each case except with respect to
matters that, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.
C. There are and, to Company's knowledge, have been no conditions,
occurrences, or Hazardous Materials Activities which could reasonably be
expected to form the basis of an Environmental Claim against Holdings or any of
its Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
D. Neither Holdings nor any of its Subsidiaries nor, to Company's
knowledge, any predecessor of Holdings or any of its Subsidiaries has filed any
notice under any Environmental Law indicating past or present treatment of
Hazardous Materials at any Facility, and none of Holdings' or any of its
Subsidiaries' operations involves the generation, transportation, treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270
or any state equivalent;, except where such past or present treatment, or such
generation, transportation, treatment, storage or disposal, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
E. Compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws will not, individually or
in the aggregate, have a reasonable possibility of giving rise to a Material
Adverse Effect.
F. No event or condition has occurred or is occurring with respect
to Holdings or any of its Subsidiaries relating to any Environmental Law, any
Release of Hazardous Materials, or any Hazardous Materials Activity which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect.
5.14 Employee Matters.
----------------
There is no strike or work stoppage in existence or threatened
involving Holdings or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
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5.15 Solvency.
--------
Each Loan Party is and, upon the incurrence of any Obligations by such
Loan Party on any date on which this representation is made, will be, Solvent.
5.16 Matters Relating to Collateral.
------------------------------
A. Creation, Perfection and Priority of Liens. The execution and
delivery of the Collateral Documents by Loan Parties, together with (i) the
actions taken on or prior to the date hereof pursuant to subsections 6.8 and 6.9
and (ii) the delivery to Administrative Agent of any Pledged Collateral not
delivered to Administrative Agent at the time of execution and delivery of the
applicable Collateral Document (all of which Pledged Collateral has been so
delivered) are effective to create in favor of Administrative Agent for the
benefit of Lenders, as security for the respective Secured Obligations (as
defined in the applicable Collateral Document in respect of any Collateral), a
valid and perfected First Priority Lien on all of the Collateral, and all
filings and other actions necessary or desirable to perfect and maintain the
perfection and First Priority status of such Liens have been duly made or taken
and remain in full force and effect, other than the filing of any UCC financing
statements delivered to Administrative Agent for filing (but not yet filed) and
the periodic filing of UCC continuation statements in respect of UCC financing
statements filed by or on behalf of Administrative Agent.
B. Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan Party
of the Liens purported to be created in favor of Administrative Agent pursuant
to any of the Collateral Documents or (ii) the exercise by Administrative Agent
of any rights or remedies in respect of any Collateral (whether specifically
granted or created pursuant to any of the Collateral Documents or created or
provided for by applicable law), except for filings or recordings contemplated
by subsection 5.16A and except as may be required, in connection with the
disposition of any Pledged Collateral, by laws generally affecting the offering
and sale of securities.
C. Absence of Third-Party Filings. Except such as may have been
filed in favor of Administrative Agent as contemplated by subsection 5.16A, (i)
no effective UCC financing statement, fixture filing or other instrument similar
in effect covering all or any part of the Collateral is on file in any filing or
recording office and (ii) no effective filing covering all or any part of the IP
Collateral is on file in the PTO.
D. Margin Regulations. The pledge of the Pledged Collateral
pursuant to the Collateral Documents does not violate Regulation T, U or X of
the Board of Governors of the Federal Reserve System.
E. Information Regarding Collateral. All information supplied to
Administrative Agent by or on behalf of any Loan Party with respect to any of
the Collateral (in
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each case taken as a whole with respect to any particular Collateral) is
accurate and complete in all material respects.
5.17 Related Agreements.
------------------
Company has delivered to Lenders complete and correct copies of each
Related Agreement and of all exhibits and schedules thereto.
5.18 Disclosure.
----------
No representation or warranty of Holdings or any of its Subsidiaries
contained in the Confidential Information Memorandum or in any Loan Document or
Related Agreement or in any other document, certificate or written statement
furnished to Lenders by or on behalf of Holdings or any of its Subsidiaries for
use in connection with the transactions contemplated by this Agreement contains
any untrue statement of a material fact or omits to state a material fact (known
to Company, in the case of any document not furnished by it) necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Company to be reasonable at the time made,
it being recognized by Lenders that such projections as to future events are not
to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results. There
are no facts known (or which should upon the reasonable exercise of diligence be
known) to Company (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such other
documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
Section 6. AFFIRMATIVE COVENANTS OF HOLDINGS AND COMPANY
Each of Holdings and Company covenants and agrees that, so long as any
of the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, each of Holdings and Company shall perform, and shall cause each of its
respective Subsidiaries to perform, all covenants in this Section 6.
6.1 Financial Statements and Other Reports.
--------------------------------------
Holdings and Company will maintain, and will cause each of their
respective Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with GAAP. Company will deliver to
Administrative Agent and Lenders:
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(i) Monthly Financials: as soon as available and in any event
------------------
within 30 days after the end of each month ending after the Effective Date,
(a) the consolidated balance sheet of Holdings and its Subsidiaries as at
the end of such month and the related consolidated statements of income,
stockholders' equity and cash flows of Holdings and its Subsidiaries for
such month and for the period from the beginning of the then current Fiscal
Year to the end of such month, 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 Financial Plan
for the current Fiscal Year, to the extent prepared on a monthly basis, all
in reasonable detail and certified by the chief financial officer of
Holdings and Company that they fairly present, in all material respects,
the financial condition of Holdings and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-
end adjustments, and (b) a narrative report describing the operations of
Holdings and its Subsidiaries in the form prepared for presentation to
senior management for such month and for the period from the beginning of
the then current Fiscal Year to the end of such month;
(ii) Quarterly Financials: as soon as available and in any
--------------------
event within 45 days after the end of each Fiscal Quarter, (a) the
consolidated balance sheet of Holdings and its Subsidiaries as at the end
of such Fiscal Quarter and the related consolidated statements of income,
stockholders' equity and cash flows of Holdings 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 Financial Plan for the current Fiscal Year, all in
reasonable detail and certified by the chief financial officer of Holdings
and Company that they fairly present, in all material respects, the
financial condition of Holdings and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-
end adjustments, and (b) a narrative report describing the operations of
Holdings and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter;
(iii) Year-End Financials: as soon as available and in any
-------------------
event within 90 days after the end of each Fiscal Year, (a) the
consolidated balance sheet of Holdings and its Subsidiaries as at the end
of such Fiscal Year and the related consolidated statements of income,
stockholders' equity and cash flows of Holdings 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 Financial Plan for the Fiscal Year covered by such
financial statements, all in reasonable detail and certified by the chief
financial officer of Holdings and Company that they fairly present, in all
material respects, the financial condition of Holdings and its Subsidiaries
as at the dates indicated and the results of their operations and their
cash flows for the periods indicated, (b) a narrative report describing the
operations of Holdings and its
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Subsidiaries in the form prepared for presentation to senior management for
such Fiscal Year, and (c) in the case of such consolidated financial
statements, a report thereon of Ernst & Young or other independent
certified public accountants of recognized national standing selected by
Company and satisfactory to Administrative Agent, which report shall be
unqualified, shall express no doubts about the ability of Holdings and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present, in all material respects,
the consolidated financial position of Holdings and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with
-------------------------------------
each delivery of financial statements of Holdings and its Subsidiaries
pursuant to subdivisions (i), (ii) and (iii) above, (a) an Officer's
Certificate of Company stating that the signers have reviewed the terms of
this Agreement and have made, or caused to be made under their supervision,
a review in reasonable detail of the transactions and condition of Holdings
and its Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of such Officer's Certificate, of
any condition or event that 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
Company has taken, is taking and proposes to take with respect thereto; (b)
a Compliance Certificate demonstrating in reasonable detail compliance
during and at the end of the applicable accounting periods with the
restrictions contained in Section 7, in each case to the extent compliance
with such restrictions is required to be tested at the end of the
applicable accounting period, and (c) with respect to any Net Asset Sale
Proceeds or Net Insurance/Condemnation Proceeds received by Company or any
of its Subsidiaries during the second Fiscal Quarter immediately preceding
the Fiscal Quarter in which the applicable accounting period ends, whether
or not all or any portion of such Net Asset Sale Proceeds or Net
Insurance/Condemnation Proceeds shall have become Unreinvested Asset Sale
Proceeds or Unreinvested Insurance/Condemnation Proceeds, as the case may
be;
(v) Reconciliation Statements: if, as a result of any change
-------------------------
in accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Holdings and its Subsidiaries
delivered pursuant to subdivisions (i), (ii), (iii) or (xiii) of
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this subsection 6.1 will differ in any material respect from the
consolidated financial statements that would have been delivered pursuant
to such subdivisions had no such change in accounting principles and
policies been made, then (a) together with the first delivery of financial
statements pursuant to subdivision (i), (ii), (iii) or (xiii) of this
subsection 6.1 following such change, consolidated financial statements of
Holdings and its Subsidiaries for (y) the current Fiscal Year to the
effective date of such change and (z) the two full Fiscal Years immediately
preceding the Fiscal Year in which such change is made, in each case
prepared on a pro forma basis as if such change had been in effect during
such periods, and (b) together with each delivery of financial statements
pursuant to subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1
following such change, a written statement of the chief accounting officer
or chief financial officer of Holdings and Company setting forth the
differences (including any differences that would affect any calculations
relating to the financial covenants set forth in subsection 7.6) which
would have resulted if such financial statements had been prepared without
giving effect to such change;
(vi) Accountants' Certification: together with each delivery
--------------------------
of consolidated financial statements of Holdings and its Subsidiaries
pursuant to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a review of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, (b) stating whether, in connection with their audit examination,
any condition or event that constitutes an Event of Default or Potential
Event of Default has come to their attention and, if such a 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 Event of Default or
Potential Event of Default that would not be disclosed in the course of
their audit examination, and (c) stating that based on their audit
examination nothing has come to their attention that causes them to believe
either or both that the information contained in the certificates delivered
therewith pursuant to subdivision (iv) above is not correct or that the
matters set forth in the Compliance Certificates delivered therewith
pursuant to clause (b) of subdivision (iv) above for the applicable Fiscal
Year are not stated in accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof
--------------------
(unless restricted by applicable professional standards), copies of all
reports submitted to Holdings or Company by independent certified public
accountants in connection with each annual, interim or special audit of the
financial statements of Holdings and its Subsidiaries made by such
accountants, including any comment letter submitted by such accountants to
management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their
------------------------------
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent
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or made available generally by Holdings or Company to their respective
security holders or by any Subsidiary of Holdings to its security holders
other than Holdings or another Subsidiary of Holdings, (b) all regular and
periodic reports and all registration statements (other than on Form S-8 or
a similar form) and prospectuses, if any, filed by Holdings or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority,
and (c) all press releases and other statements made available generally by
Holdings or any of its Subsidiaries to the public concerning material
developments in the business of Holdings or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of
-----------------------
Company obtaining knowledge (a) of any condition or event that constitutes
an Event of Default or Potential Event of Default, or becoming aware that
any Lender has given any notice (other than to Administrative Agent) or
taken any other action with respect to a claimed Event of Default or
Potential Event of Default, (b) that any Person has given any notice to
Holdings or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 9.2, (c) of any condition or event that would be required to be
disclosed in a current report filed by Holdings or Company with the
Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of
such Form as in effect on the date hereof) if Holdings or Company were
required to file such reports under the Exchange Act, or (d) of the
occurrence of any event or change that has caused or evidences, either in
any case or in the aggregate, a Material Adverse Effect, an Officer's
Certificate specifying the nature and period of existence of such
condition, event or change, or specifying the notice given or action taken
by any such Person and the nature of such claimed Event of Default,
Potential Event of Default, default, event or condition, and what action
Holdings or Company has taken, is taking and proposes to take with respect
thereto;
(x) Litigation or Other Proceedings: promptly upon any
-------------------------------
officer of Company obtaining knowledge of (a) the institution of, or non-
frivolous threat of, any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against
or affecting Holdings or any of its Subsidiaries or any property of
Holdings or any of its Subsidiaries (collectively, "Proceedings") not
previously disclosed in writing by Company to Lenders or (b) any material
development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
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written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters;
(xi) ERISA Events: promptly upon becoming aware of the
------------
occurrence of or forthcoming occurrence of any ERISA Event, a written
notice specifying the nature thereof, what action Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates has taken, is
taking or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a)
-------------
each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by Holdings, any of its Subsidiaries or any of their
respective ERISA Affiliates with the Internal Revenue Service with respect
to each Pension Plan; (b) all notices received by Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (c) copies of
such other documents or governmental reports or filings relating to any
Employee Benefit Plan as Administrative Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event
---------------
no later than the end of each Fiscal Year, a consolidated plan and
financial forecast for the immediately succeeding Fiscal Year (the
"Financial Plan" for such Fiscal Year), including (a) a forecasted
consolidated balance sheet and forecasted consolidated statements of income
and cash flows of Holdings and its Subsidiaries for such Fiscal Year,
together with a pro forma Compliance Certificate for such Fiscal Year and
--- -----
an explanation of the assumptions on which such forecasts are based, (b)
forecasted consolidated statements of income and cash flows of Holdings and
its Subsidiaries for each month of such Fiscal Year, together with an
explanation of the assumptions on which such forecasts are based, (c) the
amount of forecasted unallocated overhead for such Fiscal Year, and (d)
such other information and projections as any Lender may reasonably
request;
(xiv) Insurance: as soon as practicable after any decision by
---------
Holdings or any of its Subsidiaries to implement a material change in the
insurance coverage maintained or to be maintained by Holdings or any of its
Subsidiaries (including any material change in the extent of self-insurance
maintained or to be maintained by Holdings or any of its Subsidiaries), a
report in form and substance reasonably satisfactory to Administrative
Agent outlining such change;
(xv) Board of Directors: with reasonable promptness, written
------------------
notice of any change in the Board of Directors of Holdings or Company;
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(xvi) New Subsidiaries: promptly upon any Person becoming a
----------------
Subsidiary of Holdings, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Holdings
and (b) all of the data required to be set forth in Schedule 5.1 annexed
------------
hereto with respect to all Subsidiaries of Holdings (it being understood
that such written notice shall be deemed to supplement Schedule 5.1 annexed
------------
hereto for all purposes of this Agreement;
(xvii) Material Contracts: promptly, and in any event within
------------------
ten Business Days after any Material Contract of Holdings or any of its
Subsidiaries is terminated or amended in a manner that is materially
adverse to Holdings or such Subsidiary, as the case may be, or any new
Material Contract is entered into, a written statement describing such
event with copies of such material amendments or new contracts, and an
explanation of any actions being taken with respect thereto;
(xviii) UCC Search Report: As promptly as practicable after
-----------------
the date of delivery to Administrative Agent of any UCC financing statement
executed by any Loan Party pursuant to subsection 4.2I or 6.8A, copies of
completed UCC searches evidencing the proper filing, recording and indexing
of all such UCC financing statement and listing all other effective
financing statements that name such Loan Party as debtor, together with
copies of all such other financing statements not previously delivered to
Administrative Agent by or on behalf of Company or such Loan Party; and
(xix) Other Information: with reasonable promptness, such
-----------------
other information and data with respect to Holdings or any of its
Subsidiaries as from time to time may be reasonably requested by any
Lender.
6.2 Corporate Existence, etc.
------------------------
Except as permitted under subsection 7.7, Holdings and Company will,
and will cause each of their respective Subsidiaries to, at all times preserve
and keep in full force and effect its corporate existence and all rights and
franchises material to its business; provided, however that neither Company nor
-------- -------
any of its Subsidiaries shall be required to preserve any such right or
franchise if the Board of Directors of Company or such Subsidiary shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of Company or such Subsidiary, as the case may be, and that the
loss thereof is not disadvantageous in any material respect to Company, such
Subsidiary or Lenders.
6.3 Payment of Taxes and Claims; Tax Consolidation.
----------------------------------------------
A. Each of Holdings and Company will, and will cause each of its
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
income, businesses or franchises before any material penalty accrues thereon,
and all claims (including claims for labor, services,
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materials and supplies) for sums that have become due and payable and that by
law have or may become a Lien upon any of its properties or assets, prior to the
time when any material penalty or fine shall be incurred with respect thereto;
provided that no such charge or claim need be paid if it is being contested in
- --------
good faith by appropriate proceedings promptly instituted and diligently
conducted, so long as (1) such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor and
(2) in the case of a charge or claim which has or may become a Lien against any
of the Collateral, such contest proceedings conclusively operate to stay the
sale of any portion of the Collateral to satisfy such charge or claim.
B. Neither Holdings nor Company will, nor will it permit any of its
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any Person (other than Holdings or any of its Subsidiaries).
6.4 Maintenance of Properties; Insurance.
------------------------------------
A. Maintenance of Properties. Each of Holdings and Company will,
and will cause each of its Subsidiaries to, maintain or cause to be maintained
in good repair, working order and condition, ordinary wear and tear excepted,
all material properties used or useful in the business of Holdings or any of its
Subsidiaries (including all Intellectual Property) and from time to time will
make or cause to be made all appropriate repairs, renewals and replacements
thereof.
B. Insurance. Company will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Holdings and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self-insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry. Without limiting the
generality of the foregoing, Company will maintain or cause to be maintained (i)
flood insurance with respect to each Flood Hazard Property that is located in a
community that participates in the National Flood Insurance Program, in each
case in compliance with any applicable regulations of the Board of Governors of
the Federal Reserve System, and (ii) replacement value casualty insurance on the
Collateral under such policies of insurance, with such insurance companies, in
such amounts, with such deductibles, and covering such risks as are at all times
satisfactory to Administrative Agent in its commercially reasonable judgment.
Each such policy of insurance shall (a) name Administrative Agent for the
benefit of Lenders as an additional insured thereunder as its interests may
appear and (b) contain a loss payable clause or endorsement, satisfactory in
form and substance to Administrative Agent, that names Administrative Agent for
the benefit of Lenders as the loss payee thereunder for any covered loss in
excess of $100,000 and provides for at least 30 days prior written notice to
Administrative Agent of any modification or cancellation of such policy.
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6.5 Inspection Rights; Lender Meeting.
---------------------------------
A. Inspection Rights. Holdings and Company shall, and shall cause
each of their respective Subsidiaries to, permit any authorized representatives
designated by any Lender to visit and inspect any of the properties of Holdings
or of any of its Subsidiaries, to inspect, copy and take extracts from its and
their financial and accounting records, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants (provided that Company may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may reasonably be
requested.
B. Lender Meeting. Company will, upon the request of Administrative
Agent or Requisite Lenders, participate in a meeting of Administrative Agent and
Lenders once during each Fiscal Year to be held at Company's corporate offices
(or at such other location as may be agreed to by Company and Administrative
Agent) at such time as may be agreed to by Company and Administrative Agent.
6.6 Compliance with Laws, etc.
-------------------------
Each of Holdings and Company shall comply, and shall cause each of its
Subsidiaries and all other Persons on or occupying any Facilities to comply,
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority (including all Environmental Laws), noncompliance
with which could reasonably be expected to cause, individually or in the
aggregate, a Material Adverse Effect.
6.7 Environmental Review and Investigation, Disclosure, Etc.; Company's Actions
---------------------------------------------------------------------------
Regarding Hazardous Materials Activities, Environmental Claims and
------------------------------------------------------------------
Violations of Environmental Laws.
--------------------------------
A. Environmental Review and Investigation. Company agrees that
Administrative Agent may, from time to time and in its reasonable discretion,
(i) retain, at Company's expense, an independent professional consultant to
review any environmental audits, investigations, analyses and reports relating
to Hazardous Materials prepared by or for Company and delivered to
Administrative Agent and Lenders pursuant to subsection 6.7B(i), and (ii) in the
event (a) Administrative Agent reasonably believes that Company has breached any
representation, warranty or covenant contained in subsection 5.6, 5.13, 6.6 or
6.7 or that there has been a material violation of Environmental Laws at any
Facility or by Holdings or any of its Subsidiaries at any other location, which
breach or violation, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, or (b) an Event of Default has
occurred and is continuing, conduct its own investigation, which shall be
reasonable in scope under all relevant circumstances, of any Facility currently
owned, leased, operated or used by Holdings or any of its Subsidiaries. Any
such investigation of any Facility shall be conducted, unless otherwise agreed
to by Company and Administrative Agent, during normal business hours
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and, to the extent reasonably practicable, shall be conducted so as not to
interfere with the ongoing operations at such Facility or to cause any damage or
loss to any property at such Facility. Company, Administrative Agent and Lenders
hereby acknowledge and agree that (1) any report of any investigation conducted
at the request of Administrative Agent pursuant to this subsection 6.7A will be
obtained and shall be used by Administrative Agent and Lenders for the purposes
of Lenders' internal credit decisions, to monitor and police the Loans and to
protect Lenders' security interests, if any, created by the Loan Documents, and
(2) any such report, and the contents thereof, shall be held on a confidential
basis in accordance with the provisions of subsection 11.19 applicable to non-
public information identified by Company as confidential. Administrative Agent
agrees to deliver a copy of any such report to Company with the understanding
that Company acknowledges and agrees that (x) it will indemnify and hold
harmless Administrative Agent and each Lender from any costs, losses or
liabilities relating to Company's use of or reliance on such report, (y) neither
Administrative Agent nor any Lender makes any representation or warranty with
respect to such report, and (z) by delivering such report to Company, neither
Administrative Agent nor any Lender is requiring or recommending the
implementation of any suggestions or recommendations contained in such report.
B. Environmental Disclosure. Company will deliver to Administrative
Agent and Lenders:
(i) Environmental Audits and Reports. As soon as practicable
--------------------------------
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Holdings or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to significant environmental matters at any Facility which,
individually or in the aggregate, could reasonably be expected to result in
a Material Adverse Effect or with respect to any Environmental Claims
which, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect;
(ii) Notice of Certain Releases, Remedial Actions, Etc. Promptly
-------------------------------------------------
upon the occurrence thereof, written notice describing in reasonable detail
(a) any Release required to be reported to any federal, state or local
governmental or regulatory agency under any applicable Environmental Laws,
which Release has a reasonable possibility of giving rise to a Material
Adverse Effect, or (b) any remedial action taken by Company or any other
Person in response to (1) any Hazardous Materials Activities the existence
of which has a reasonable possibility of resulting in one or more
Environmental Claims having, individually or in the aggregate, a Material
Adverse Effect, or (2) any Environmental Claims that, individually or in
the aggregate, have a reasonable possibility of resulting in a Material
Adverse Effect.
(iii) Written Communications Regarding Environmental Claims,
-----------------------------------------------------
Releases, Etc. As soon as practicable following the sending or receipt
-------------
thereof by Holdings or any of its Subsidiaries, a copy of any and all
written communications with
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respect to (a) any Environmental Claims that, individually or in the
aggregate, have a reasonable possibility of giving rise to a Material
Adverse Effect, (b) any Release required to be reported to any federal,
state or local governmental or regulatory agency, which Release has a
reasonable possibility of giving rise to a Material Adverse Effect, and (c)
any request for information from any governmental agency that suggests such
agency is investigating whether Holdings or any of its Subsidiaries may be
potentially responsible for any Hazardous Materials Activity, which
responsibility has a reasonable possibility of giving rise to a Material
Adverse Effect.
(iv) Notice of Certain Proposed Actions Having Environmental
-------------------------------------------------------
Impact. Prompt written notice describing in reasonable detail (a) any
------
proposed acquisition of stock, assets, or property by Holdings or any of
its Subsidiaries that could reasonably be expected to (1) expose Holdings
or any of its Subsidiaries to, or result in, Environmental Claims that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or (2) affect, in any manner which could reasonably
be expected to give rise to a Material Adverse Effect, the ability of
Holdings or any of its Subsidiaries to maintain in full force and effect
all material Governmental Authorizations required under any Environmental
Laws for their respective operations and (b) any proposed action to be
taken by Holdings or any of its Subsidiaries to modify current operations
in a manner that could reasonably be expected to subject Holdings or any of
its Subsidiaries to any additional obligations or requirements under any
Environmental Laws that could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(v) Other Information. With reasonable promptness, such other
-----------------
documents and information as from time to time may be reasonably requested
by Administrative Agent in relation to any matters disclosed pursuant to
this subsection 6.7.
C. Company's Actions Regarding Hazardous Materials Activities,
Environmental Claims and Violations of Environmental Laws.
(i) Remedial Actions Relating to Hazardous Materials
------------------------------------------------
Activities. Each of Company and Holdings shall promptly undertake, and
----------
shall cause each of its Subsidiaries promptly to undertake, any and all
investigations, studies, sampling, testing, abatement, cleanup, removal,
remediation or other response actions necessary to remove, remediate, clean
up or abate any Hazardous Materials Activity on or under any Facility in
order to comply with all applicable Environmental Laws and Governmental
Authorizations unless the failure to so comply could not reasonably be
expected to have a Material Adverse Effect. In the event Holdings or any of
its Subsidiaries undertakes any such action with respect to any Hazardous
Materials, Holdings or such Subsidiary shall conduct and complete such
action in compliance in all material respects with all applicable
Environmental Laws and in accordance in all material respects with the
policies, orders and directives of all federal, state and local
governmental authorities
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except when, and only to the extent that, Holdings' or such Subsidiary's
liability with respect to such Hazardous Materials Activity is being
contested in good faith by Holdings or such Subsidiary.
(ii) Actions with Respect to Environmental Claims and Violations
-----------------------------------------------------------
of Environmental Laws. Each of Holdings and Company shall promptly take,
---------------------
and shall cause each of its Subsidiaries promptly to take, any and all
actions necessary to (i) cure any violation of applicable Environmental
Laws by Holdings or its Subsidiaries that could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and (ii)
make an appropriate response to any Environmental Claim against Holdings or
any of its Subsidiaries and discharge any obligations it may have to any
Person thereunder where failure to do so could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents
---------------------------------------------------------------------------
by Certain Subsidiaries and Future Subsidiaries.
-----------------------------------------------
A. Execution of Subsidiary Guaranty and Personal Property Collateral
Documents. In the event that any Person becomes a Domestic Subsidiary after the
date hereof, Company will promptly notify Administrative Agent of that fact and
cause such Subsidiary to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty and a Subsidiary Pledge Agreement, a
Subsidiary Security Agreement and a Subsidiary Patent and Trademark Security
Agreement and to take all such further actions and execute all such further
documents and instruments (including actions, documents and instruments
comparable to those described in subsection 4.2I) as may be necessary or, in the
reasonable opinion of Administrative Agent, desirable to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and perfected First
Priority Lien on all of the personal and mixed property assets of such
Subsidiary described in the applicable forms of Collateral Documents.
B. Subsidiary Charter Documents, Legal Opinions, Etc. Company shall
deliver to Administrative Agent, together with such Loan Documents, (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation,
together with a good standing certificate from the Secretary of State of the
jurisdiction of its incorporation and each other state in which such Person is
qualified as a foreign corporation to do business and, to the extent generally
available, a certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority of
each of such jurisdictions, each to be dated a recent date prior to their
delivery to Administrative Agent, (ii) a copy of such Subsidiary's Bylaws,
certified by its corporate secretary or an assistant secretary as of a recent
date prior to their delivery to Administrative Agent, (iii) a certificate
executed by the secretary or an assistant secretary of such Subsidiary as to (a)
the fact that the attached resolutions of the Board of Directors of such
Subsidiary approving and authorizing the execution, delivery and performance of
such Loan Documents are in full force and effect and have not been modified or
amended and (b) the incumbency and signatures of the officers of such Subsidiary
executing
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such Loan Documents, and (iv) a favorable opinion of counsel to such Subsidiary,
in form and substance satisfactory to Administrative Agent and its counsel, as
to (a) the due organization and good standing of such Subsidiary, (b) the due
authorization, execution and delivery by such Subsidiary of such Loan Documents,
(c) the enforceability of such Loan Documents against such Subsidiary, (d) such
other matters (including matters relating to the creation and perfection of
Liens in any Collateral pursuant to such Loan Documents) as Administrative Agent
may reasonably request, all of the foregoing to be satisfactory in form and
substance to Administrative Agent and its counsel.
6.9 Conforming Leasehold Interests; Matters Relating to Additional Real
-------------------------------------------------------------------
Property Collateral.
-------------------
A. Notice of Acquisition of Real Property Assets. As promptly as
practicable, and in any event no later than the date of acquisition by Company
or any of its Subsidiaries of any Fee Property or Leasehold Property, Company
shall deliver written notice to Administrative Agent of such acquisition.
B. Conforming Leasehold Interests. If Company or any of its
Subsidiaries acquires any Leasehold Property, Company shall, or shall cause such
Subsidiary to, use its best efforts (without requiring Company or such
Subsidiary to relinquish any material rights or incur any material obligations
or to expend more than a nominal amount of money over and above the
reimbursement, if required, of the landlord's out-of-pocket costs, including
attorneys fees) to cause such Leasehold Property to be a Conforming Leasehold
Interest.
C. Mortgages, Etc. Each Real Property Asset listed on Schedule 6.9C
-------------
annexed hereto (excluding any such Real Property Asset consisting of a Leasehold
Property the encumbrancing of which requires the consent of the applicable
lessor, where Company is unable, after using its best efforts (without requiring
Company to relinquish any material rights or incur any material obligations or
to expend more than a nominal amount of money over and above the reimbursement,
if required, of the landlord's out-of-pocket costs, including attorneys fees) to
obtain such lessor's consent) shall be a "Scheduled Post-Effective Date
Mortgaged Property". In addition, from and after the Effective Date, in the
event that (i) Company has not sold the Hubbardston Property on or before the
twelve-month anniversary of the Effective Date, (ii) Company or any Subsidiary
Guarantor acquires any Fee Property or any Material Leasehold Property, or (iii)
at the time any Person becomes a Subsidiary Guarantor, such Person owns or holds
any Fee Property or any Material Leasehold Property, in any case excluding any
such Real Property Asset the encumbrancing of which requires the consent of any
applicable lessor or (in the case of clause (iii) above) then-existing senior
lienholder, where Company and its Subsidiaries are unable to obtain such
lessor's or senior lienholder's consent, any such non-excluded Real Property
Asset described in the foregoing clause (i), (ii) or (iii) of this sentence
shall be an "Additional Mortgaged Property". Company or such Subsidiary
Guarantor shall deliver to Administrative Agent, within 45 days after the
Effective Date (in the case of each Scheduled Post-Effective Date Mortgaged
Property) or as soon as practicable after such twelve-
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month anniversary (in the case of the Hubbardston Property) or as soon as
practicable after such Person acquires such Additional Mortgaged Property or
becomes a Subsidiary Guarantor (in the case of any other Additional Mortgaged
Property) the following:
(i) Mortgage. A fully executed and notarized Mortgage (each, an
--------
"Additional Mortgage"), in proper form for recording in all appropriate
places in all applicable jurisdictions, encumbering the interest of such
Loan Party in the applicable Additional Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of counsel to such
-------------------
Loan Party, in form and substance satisfactory to Administrative Agent and
its counsel, as to the due authorization, execution and delivery by such
Loan Party of such Additional Mortgage and such other matters as
Administrative Agent may reasonably request, and (b) if required by
Administrative Agent, an opinion of counsel (which counsel shall be
reasonably satisfactory to Administrative Agent) in the state in which such
Additional Mortgaged Property is located with respect to the enforceability
of such Additional Mortgage and such other matters (including any matters
governed by the laws of such state regarding personal property security
interests in respect of any Collateral) as Administrative Agent may
reasonably request, in each case in form and substance reasonably
satisfactory to Administrative Agent;
(iii) Landlord Consent and Estoppel; Recorded Leasehold Interest. In
----------------------------------------------------------
the case of an Additional Mortgaged Property consisting of a Leasehold
Property, (a) a Landlord Consent and Estoppel and (b) evidence that such
Leasehold Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) If required by Administrative Agent, an
---------------
ALTA mortgagee title insurance policy or an unconditional commitment
therefor (an "Additional Mortgage Policy") issued by the Title Company with
respect to such Additional Mortgaged Property, in an amount satisfactory to
Administrative Agent, insuring fee simple title to, or a valid leasehold
interest in, such Additional Mortgaged Property vested in such Loan Party
and assuring Administrative Agent that such Additional Mortgage creates a
valid and enforceable First Priority mortgage Lien on such Additional
Mortgaged Property, subject only to a standard survey exception in the
event a survey is not required to be delivered with respect to such
Additional Mortgaged Property pursuant to subsection 6.9C(vii), which
Additional Mortgage Policy (1) shall include an endorsement for mechanics'
liens, for future advances under this Agreement and for any other matters
reasonably requested by Administrative Agent and (2) shall provide for
affirmative insurance and such reinsurance as Administrative Agent may
reasonably request, all of the foregoing in form and substance reasonably
satisfactory to Administrative Agent; and (b) evidence satisfactory to
Administrative Agent that such Loan Party has (i) delivered to the Title
Company all certificates and affidavits required by the Title Company in
connection with the issuance of the Additional Mortgage Policy
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and (ii) paid to the Title Company or to the appropriate governmental
authorities all expenses and premiums of the Title Company in connection
with the issuance of the Additional Mortgage Policy and all recording and
stamp taxes (including mortgage recording and intangible taxes) payable in
connection with recording the Additional Mortgage in the appropriate real
estate records;
(v) Title Report. If no Additional Mortgage Policy is required with
------------
respect to such Additional Mortgaged Property, a title report issued by the
Title Company with respect thereto, dated not more than 90 days prior to
the date such Additional Mortgage is to be recorded and satisfactory in
form and substance to Administrative Agent;
(vi) Copies of Documents Relating to Title Exceptions. Copies of all
------------------------------------------------
recorded documents listed as exceptions to title or otherwise referred to
in the Additional Mortgage Policy or title report delivered pursuant to
clause (v) or (vi) above;
(vii) Surveys. If required by Administrative Agent in the case of any
-------
Additional Mortgaged Property consisting of a Fee Property, a survey with
respect to such Additional Mortgaged Property dated not more than six
months prior to the date such Additional Mortgage is to be recorded and
reasonably satisfactory in form and substance to Administrative Agent;
(viii) Matters Relating to Flood Hazard Properties. (a) Evidence,
-------------------------------------------
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to (1) whether such Additional Mortgaged Property is
a Flood Hazard Property and (2) if so, whether the community in which such
Flood Hazard Property is located is participating in the National Flood
Insurance Program, (b) if such Additional Mortgaged Property is a Flood
Hazard Property, such Loan Party's written acknowledgment of receipt of
written notification from Administrative Agent (1) that such Additional
Mortgaged Property is a Flood Hazard Property and (2) as to whether the
community in which such Flood Hazard Property is located is participating
in the National Flood Insurance Program, and (c) in the event such
Additional Mortgaged Property is a Flood Hazard Property that is located in
a community that participates in the National Flood Insurance Program,
evidence that Company has obtained flood insurance in respect of such Flood
Hazard Property to the extent required under the applicable regulations of
the Board of Governors of the Federal Reserve System; and
(ix) Environmental Audit. If required by Administrative Agent,
-------------------
reports and other information, in form, scope and substance satisfactory to
Administrative Agent and prepared by environmental consultants satisfactory
to Administrative Agent, concerning any environmental hazards or
liabilities to which Company or any of its Subsidiaries may be subject with
respect to such Additional Mortgaged Property.
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D. Real Estate Appraisals. Company shall, and shall cause each of
its Subsidiaries to, permit an independent real estate appraiser satisfactory to
Administrative Agent, upon reasonable notice, to visit and inspect any
Additional Mortgaged Property for the purpose of preparing an appraisal of such
Additional Mortgaged Property satisfying the requirements of any applicable laws
and regulations (in each case to the extent required under such laws and
regulations as determined by Administrative Agent in its discretion).
6.10 Year 2000 Compliance.
--------------------
No later than October 31, 1999, Company shall perform all acts
reasonably necessary to ensure that Holdings and its Subsidiaries become Year
2000 Compliant. Such acts shall include, to the extent reasonably necessary in
order for Holdings and its Subsidiaries to become Year 2000 Compliant,
performing a comprehensive review and assessment of all of Company's computer
systems and applications and adopting a plan, including a budget, for the
remediation, monitoring and testing of such systems and applications. Company
shall, promptly upon request therefor, provide to Administrative Agent such
certifications or other evidence of Company's compliance with the terms of this
subsection 6.11 as Administrative Agent may from time to time reasonably
request.
6.11 Alitec Acquisition.
------------------
Company shall use its commercially reasonable best efforts to
consummate the Alitec Acquisition in accordance with subsection 7.7(viii) on or
before August 31, 1999.
Section 7. NEGATIVE COVENANTS OF HOLDINGS AND COMPANY
Each of Holdings and Company covenants and agrees that, so long as any
of the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, each of Holdings and Company shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 7.
7.1 Indebtedness.
------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Company may become and remain liable with respect to the
Obligations;
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<PAGE>
(ii) Holdings and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries may become and remain liable with
respect to (a) Indebtedness in respect of Capital Leases and (b)
Indebtedness secured by Liens permitted under subsection 7.2(iv); provided
--------
that the aggregate outstanding principal amount of all Indebtedness
permitted under this subsection 7.1(iii) shall not exceed $25,000,000 at
any time;
(iv) Company may become and remain liable with respect to
Indebtedness to any wholly-owned Subsidiary Guarantor, and any wholly-owned
Subsidiary Guarantor may become and remain liable with respect to
Indebtedness to Company or any other wholly-owned Subsidiary Guarantor;
provided that (a) all such inter company Indebtedness shall be evidenced by
--------
promissory notes that are included in the Pledged Collateral, (b) all such
inter company Indebtedness owed by Company to any of its Subsidiaries shall
be subordinated in right of payment to the payment in full of the
Obligations pursuant to the terms of the applicable promissory notes or an
inter company subordination agreement, and (c) any payment by any
Subsidiary of Company under any guaranty of the Obligations shall result in
a pro tanto reduction of the amount of any inter company Indebtedness owed
--- -----
by such Subsidiary to Company or to any of its Subsidiaries for whose
benefit such payment is made;
(v) Company and its Subsidiaries, as applicable, may remain liable
with respect to (a) Indebtedness in respect of the Existing Seller Notes in
an aggregate principal amount not to exceed the amount thereof outstanding
as of the Effective Date less any payments after the Effective Date in
respect thereof, (b) the Holdings Discount Debentures, (c) the Senior Notes
and (d) Indebtedness described in Schedule 7.1 annexed hereto; and
------------
(vi) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed $5,000,000 at any time outstanding.
7.2 Liens and Related Matters.
-------------------------
A. Prohibition on Liens. Neither Holdings nor Company shall, nor
shall it permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume or permit to exist any Lien on or with respect to any property or
asset of any kind (including any document or instrument in respect of goods or
accounts receivable) of Holdings or any of its Subsidiaries, whether now owned
or hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any
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<PAGE>
Lien with respect to any such property, asset, income or profits under the
Uniform Commercial Code of any State or under any similar recording or notice
statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens described in Schedule 7.2 annexed hereto;
------------
(iv) Liens on real property or tangible personal property not
heretofore owned by Company or any of its Subsidiaries (any such property,
including any present or future fixed improvements thereon, being "New
Property"), in each case arising from (a) the giving, simultaneously with
or within 30 days after the acquisition or construction by Company or any
of its Subsidiaries thereof, of purchase money Liens (including vendors'
rights under purchase contracts under an agreement whereby title is
retained for the purpose of securing the purchase price thereof) on any New
Property hereafter acquired or constructed by Company or any of its
Subsidiaries, or (b) from the extension, renewal or replacement of any
Indebtedness secured by any of the foregoing Liens so long as the aggregate
principal amount thereof and the security therefor is not thereby
increased; provided, however, that in each case (X) such Lien is limited to
-------- -------
such New Property and (Y) the principal amount of the Indebtedness secured
by such Lien shall not exceed the cost of such New Property to Company or
any of its Subsidiaries; and provided, further that the Indebtedness
-------- -------
secured by such Liens is permitted under subsection 7.1(iii)(b); and
(v) Other Liens securing Indebtedness of Company and its
Subsidiaries in an aggregate amount not to exceed $2,500,000 at any time
outstanding.
B. No Further Negative Pledges. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale, neither
Holdings nor any of its Subsidiaries shall enter into any agreement (other than
(i) any documents of a type described in subdivisions (c) and (d) of subsection
7.2C or (ii) any agreement prohibiting only the creation of Liens securing
Subordinated Indebtedness, the Holdings Discount Debentures or the Senior Notes)
prohibiting the creation or assumption of any Lien upon any of its properties or
assets, whether now owned or hereafter acquired.
C. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except as provided herein, neither Holdings nor Company shall, nor
shall it permit any of its Subsidiaries to, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of any
kind on the ability of any such Subsidiary to (i) pay dividends or make any
other distributions on any of such Subsidiary's capital stock owned by Company
or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed
by
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<PAGE>
such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans
or advances to Company or any other Subsidiary of Company, or (iv) transfer any
of its property or assets to Company or any other Subsidiary of Company, except
for such encumbrances or restrictions existing under or by reason of (a)
applicable law, (b) this Agreement and the other Loan Documents, (c) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of Company or any of its Subsidiaries, (d) customary
provisions restricting assignment of any licensing agreement entered into by
Company or any of its Subsidiaries in the ordinary course of business, or (e) as
set forth in the Senior Notes Indenture.
7.3 Investments; Joint Ventures.
---------------------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments
in Cash Equivalents;
(ii) Company and its Subsidiaries may make inter company loans
to the extent permitted under subsection 7.1(iv);
(iii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted by subsection 7.8;
(iv) Company and its Subsidiaries may make acquisitions
otherwise permitted by subsection 7.7;
(v) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7.3 annexed hereto; and
------------
(vi) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time $2,500,000.
7.4 Contingent Obligations.
----------------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) Holdings may become and remain liable with respect to
Contingent Obligations in respect of the Holdings Guaranty, and
Subsidiaries of Company may become and remain liable with respect to
Contingent Obligations in respect of the Subsidiary Guaranty;
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<PAGE>
(ii) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit;
(iii) Company may become and remain liable with respect to
Contingent Obligations under Hedge Agreements required under subsection
6.10;
(iv) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets;
(v) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of any Indebtedness of
Company or any of its Subsidiaries permitted by subsection 7.1;
(vi) Company and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in Schedule 7.4
------------
annexed hereto; and
(vii) Company and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
--------
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no time
exceed $2,500,000.
7.5 Restricted Payments.
-------------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Payment; provided that, (i) so long as no Event of
--------
Default or Potential Event of Default shall have occurred and be continuing or
shall be caused thereby (a) Company may make regularly scheduled payments of
principal and interest in respect of the Existing Seller Notes in accordance
with the terms thereof, and only to the extent required thereby (and subject to
any subordination provisions contained therein), (b) Holdings or Company, as
applicable, may make regularly scheduled payments of interest in respect of the
Senior Notes or any Subordinated Indebtedness incurred by Holdings or Company
permitted hereunder, in each case in accordance with the terms of, and only to
the extent required by (and subject to the subordination provisions contained
in), the indenture or other agreement pursuant to which the Senior Notes or such
Subordinated Indebtedness was issued, as such indenture or other agreement may
be amended from time to time to the extent permitted under subsection 7.14B, (c)
Company may make Restricted Payments to Holdings (1) to the extent necessary to
enable Holdings to make any Restricted Payments permitted to be made by Holdings
as provided in the immediately preceding clause (b), and (2) to the extent
necessary to enable Holdings to pay administrative costs and expenses not in
excess of $250,000 in any Fiscal Year, in each case so long as Holdings applies
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<PAGE>
the amount of any such Restricted Payment for such purpose, and (d) Company may
pay Management Fees, and (ii) Company may make Restricted Payments to Holdings
to the extent necessary to enable Holdings to discharge the consolidated tax
liabilities of Holdings and its Subsidiaries, so long as Holdings applies the
amount of any such Restricted Payment for such purpose.
7.6 Financial Covenants.
-------------------
A. Minimum Interest Coverage Ratio. Company shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense
for any four-Fiscal Quarter period ending with any Fiscal Quarter set forth
below to be less than the correlative ratio indicated:
<TABLE>
====================================================================
Last Fiscal Quarter in Minimum Interest
Calculation Period Coverage Ratio
====================================================================
<S> <C>
Effective Date--
Second Fiscal Quarter 2000 1.55:1.00
--------------------------------------------------------------------
Third Fiscal Quarter 2000 1.60:1.00
Fourth Fiscal Quarter 2000 --
Third Fiscal Quarter 2001 1.70:1.00
--------------------------------------------------------------------
Fourth Fiscal Quarter 2001--
Third Fiscal Quarter 2002 1.90:1.00
--------------------------------------------------------------------
Fourth Fiscal Quarter 2002--
Third Fiscal Quarter 2003 2.00:1.00
Fourth Fiscal Quarter 2003
and thereafter 2.25:1.00
====================================================================
</TABLE>
B. Minimum Fixed Charge Coverage Ratio. Company shall not permit the
ratio of (i) Consolidated Adjusted EBITDA minus Consolidated Capital
-----
Expenditures for any four-Fiscal Quarter period ending with any Fiscal Quarter
set forth below (excluding (a) all Consolidated Capital Expenditures of (1)
Central Fabricators incurred prior to the Effective Date, and (2) Alitec
incurred prior to on the closing date of the Alitec Acquisition, and (b) up to
$2,000,000 of Consolidated Capital Expenditures incurred in connection with
information systems upgrades by Holdings and its Subsidiaries on or before July
31, 2001) to (ii) Consolidated Fixed Charges for any four-Fiscal Quarter period
ending with any Fiscal Quarter set forth below to be less than the correlative
ratio indicated:
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<PAGE>
<TABLE>
=======================================================
Last Fiscal Quarter in Minimum Fixed Charge
Calculation Period Coverage Ratio
=======================================================
<S> <C>
Effective Date --
Third Fiscal Quarter 2000 1.00:1.00
-------------------------------------------------------
Fourth Fiscal Quarter 2000 --
Third Fiscal Quarter 2001 1.10:1.00
-------------------------------------------------------
Fourth Fiscal Quarter 2001
and thereafter 1.15:1.00
=======================================================
</TABLE>
C. Maximum Leverage Ratio. Company shall not permit the Leverage
Ratio as of the last day of any Fiscal Quarter set forth below to exceed the
correlative ratio indicated:
<TABLE>
==============================================================
Maximum
Fiscal Quarter Leverage Ratio
<S> <C>
--------------------------------------------------------------
Effective Date --
Second Fiscal Quarter 2000 5.60:1.00
--------------------------------------------------------------
Third Fiscal Quarter 2000 5.50:1.00
--------------------------------------------------------------
Fourth Fiscal Quarter 2000 --
Third Fiscal Quarter 2001 5.00:1.00
--------------------------------------------------------------
Fourth Fiscal Quarter 2001 --
Third Fiscal Quarter 2002 4.50:1.00
--------------------------------------------------------------
Fourth Fiscal Quarter 2002 --
Third Fiscal Quarter 2003 4.25:1.00
--------------------------------------------------------------
Fourth Fiscal Quarter 2003 --
Third Fiscal Quarter 2004 4.00:1.00
--------------------------------------------------------------
Fourth Fiscal Quarter 2004
and thereafter 3.75:1.00
==============================================================
</TABLE>
C. Certain Calculations. Anything contained herein to the contrary
notwithstanding, with respect to any four-Fiscal Quarter period during which any
Permitted Acquisition is consummated, for purposes of determining compliance
with the financial covenants set forth in this subsection 7.6, Consolidated
Adjusted EBITDA and Consolidated Interest Expense shall be calculated on a Pro
Forma Basis for such period; provided that Company shall deliver to
Administrative Agent and Lenders, together with the Compliance Certificate in
respect of such period, an Officer's Certificate, in form and substance
satisfactory to Administrative Agent and demonstrating in reasonable detail such
calculations on a Pro Forma Basis.
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<PAGE>
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions.
----------------------------------------------------------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, alter the corporate, capital or legal structure of Holdings or
any of its Subsidiaries, or enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or
sublessor), transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or assets, whether now
owned or hereafter acquired, or make any Acquisition, except:
(i) any Subsidiary of Company may be merged with or into
Company or any wholly-owned Subsidiary Guarantor, or be liquidated, wound
up or dissolved, or all or any part of its business, property or assets may
be conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Company or any wholly-owned
Subsidiary Guarantor; provided that, in the case of such a merger of any
--------
Subsidiary of Company with or into Company or any wholly-owned Subsidiary
Guarantor, Company or such wholly-owned Subsidiary Guarantor, as the case
may be, shall be the continuing or surviving corporation;
(ii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted under subsection 7.8;
(iii) Company and its Subsidiaries may dispose of obsolete, worn
out or surplus property in the ordinary course of business;
(iv) Company and its Subsidiaries may sell or otherwise dispose
of assets in transactions that do not constitute Asset Sales; provided that
--------
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof; and
(v) subject to subsection 7.13, Company and its Subsidiaries
may make Asset Sales of assets having a fair market value not in excess of
$15,000,000 during the term of this Agreement; provided that (x) the
--------
consideration received for such assets shall be in an amount at least equal
to the fair market value thereof; (y) in the case of any such Asset Sale or
related series of Asset Sales in respect of which the aggregate Net Asset
Sale Proceeds equals or exceeds $1,000,000, not less than 85% of the
consideration received in respect thereof shall be cash; and (z) no later
than the first Business Day following the date of receipt by Holdings or
any of its Subsidiaries of any Net Asset Sale Proceeds of such Asset Sale,
Company shall deliver to Administrative Agent an Officer's Certificate,
reasonably satisfactory in form and substance to Administrative Agent,
demonstrating the derivation of the Net Asset Sale Proceeds of such Asset
Sale from the gross sales price received in connection therewith;
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(i) So long as no Event of Default or Potential Event of Default
shall have occurred and be continuing or shall be caused thereby, Company
and Subsidiary Guarantors may make Acquisitions of the assets or the stock
or other equity Securities of, or by direct merger of Company or any
Subsidiary Guarantor with, other Persons engaged in the same or related
lines of business as Company and its Subsidiaries; provided that, with
---------
respect to any Acquisition permitted under this subsection 7.7(vi):
(a) Company shall give Administrative Agent at least 10 days' prior
written notice of such Acquisition, together with copies of the definitive
documentation relating thereto;
(b) such Acquisition shall be made in compliance with all applicable
laws;
(c) in the event such Acquisition is effected pursuant to a merger of
(1) Company or (2) any Subsidiary Guarantor with any other Person, Company
(in the case of clause (1)) or a Subsidiary Guarantor (in the case of
clause (2)) shall be the surviving or continuing corporation;
(d) in the event such Acquisition is effected by the purchase of the
stock or other equity interests of any Person by Company or any Subsidiary
Guarantor, (1) Company or such Subsidiary Guarantor, as the case may be,
shall own all of the outstanding equity Securities of such Person, and (2)
upon the consummation of such Acquisition, such Person shall comply with
the provisions of subsections 6.8 and 6.9;
(e) prior to the consummation of such Acquisition, Company shall
deliver to Administrative Agent and Lenders an Officer's Certificate,
together with supporting financial statements and any other relevant
information, in form and substance reasonably satisfactory to
Administrative Agent and demonstrating in reasonable detail that, on a Pro
Forma Basis, for the four-Fiscal Quarter period most recently ended (1) the
Leverage Ratio shall not exceed 0.25 less than the Leverage Ratio required
to be met for such period pursuant to subsection 7.6C, (2) Company and its
Subsidiaries are otherwise in compliance with the covenants set forth in
subsection 7.6 with respect to such period, (3) the portion of Consolidated
Adjusted EBITDA for such period that is attributable to the business or
property being acquired shall not exceed 25% of the total Consolidated
Adjusted EBITDA for such period, and (4) the business or property being
acquired in such Acquisition shall have positive Consolidated Adjusted
EBITDA; provided that, for purposes of this clause (d)(4), the calculation
--------
of Consolidated Adjusted EBITDA shall be made solely with respect to such
acquired business or property and not with respect to Holdings and its
Subsidiaries on a consolidated basis; and
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<PAGE>
(f) after giving effect to such Acquisition, the Total
Utilization of Revolving Loan Commitments shall not exceed the Revolving
Loan Commitments then in effect minus $5,000,000;
-----
(vii) Company and Subsidiary Guarantors may consummate the
Effective Date Acquisitions; and
(viii) Company and Subsidiary Guarantors may consummate the
Alitec Acquisition so long as:
(a) all conditions to the Alitec Acquisition as set forth the
Alitec Acquisition Agreement shall have been satisfied or the fulfillment
of any such conditions shall have been waived with the consent of
Administrative Agent and Requisite Lenders;
(b) the Alitec Acquisition shall have become effective in
accordance with the terms of the Alitec Acquisition Agreement;
(c) the aggregate cash consideration paid to the holders of
equity interests in Alitec in connection with the Alitec Acquisition does
not exceed $11,000,000; and
(d) Administrative Agent shall have received an Officer's
Certificate of Company to the effect set forth in clauses (a)-(c) above.
7.8 Consolidated Capital Expenditures.
---------------------------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, make or incur Consolidated Capital Expenditures (which shall
include, without limitation, all amounts expended in connection with information
systems upgrades by Holdings and its Subsidiaries), in any Fiscal Year indicated
below, in an aggregate amount in excess of the corresponding amount (the
"Maximum Consolidated Capital Expenditures Amount") set forth below opposite
such Fiscal Year (or portion thereof); provided that the Maximum Consolidated
--------
Capital Expenditures Amount for any Fiscal Year shall be increased by the sum of
an amount equal to the 50% of the excess, if any, of the Maximum Consolidated
Capital Expenditures Amount for the previous Fiscal Year (prior to any
adjustment in accordance with this proviso) over the actual amount of
Consolidated Capital Expenditures for such previous Fiscal Year:
115
<PAGE>
<TABLE>
=======================================================================
Maximum Consolidated
Fiscal Year Capital Expenditures
-----------------------------------------------------------------------
<S> <C>
Fiscal Year 1999 $11,000,000
-----------------------------------------------------------------------
Fiscal Year 2000 $12,000,000
-----------------------------------------------------------------------
Fiscal Year 2001
and each Fiscal Year thereafter $ 8,000,000
=======================================================================
</TABLE>
Notwithstanding anything herein to the contrary, Consolidated Capital
Expenditures for Fiscal Year 1999 shall exclude all Consolidated Capital
Expenditures (i) of Central Fabricators incurred prior to the Effective Date,
and (ii) of Alitec incurred prior to on the closing date of the Alitec
Acquisition.
7.9 Sales and Lease-Backs.
---------------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, become or remain liable as lessee or as
a guarantor or other surety with respect to any lease, whether an Operating
Lease or a Capital Lease, of any property (whether real, personal or mixed),
whether now owned or hereafter acquired, (i) which Holdings or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (other than Company or any of its Subsidiaries) or (ii) which Holdings or
any of its Subsidiaries intends to use for substantially the same purpose as any
other property which has been or is to be sold or transferred by Holdings or any
of its Subsidiaries to any Person (other than Company or any of its
Subsidiaries) in connection with such lease.
7.10 Sale or Discount of Receivables.
-------------------------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its notes or
accounts receivable.
7.11 Transactions with Shareholders and Affiliates .
---------------------------------------------
Neither Holdings nor Company shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any holder of 5% or more of any class of
equity Securities of Holdings or with any Affiliate of Holdings or of any such
holder, on terms that are less favorable to Holdings or Company or that
Subsidiary, as the case may be, than those that might be obtained at the time
from Persons who are not such a holder or Affiliate; provided that the foregoing
--------
restriction shall not apply to (i) any transaction between Company and any of
its wholly-owned Subsidiaries or between any of its wholly-owned
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<PAGE>
Subsidiaries, (ii) reasonable and customary fees paid to members of the Boards
of Directors of Holdings and Company and their respective Subsidiaries, and
(iii) the payment of Management Fees to the extent permitted under subsection
7.5.
7.12 Disposal of Subsidiary Stock.
----------------------------
Except for any sale of 100% of the capital stock or other equity
Securities of any Subsidiary of Company in compliance with the provisions of
subsection 7.7(v), neither Holdings nor Company shall:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to Company, another Subsidiary of
Company, or to qualify directors if required by applicable law.
7.13 Conduct of Business.
-------------------
From and after the Effective Date, (i) Holdings shall not engage in
any business other than holding the capital stock of Company and (ii) Company
shall not, and shall not permit any of its Subsidiaries to, engage in any
business other than the businesses engaged in by Company and its Subsidiaries on
the Effective Date and similar or related businesses.
7.14 Amendments or Waivers of Certain Existing Agreements and Related
----------------------------------------------------------------
Agreements; Amendments of Documents Relating to Holdings Discount
-----------------------------------------------------------------
Debentures,Senior Notes and Subordinated Indebtedness.
-----------------------------------------------------
A. Amendments or Waivers of Certain Existing Agreements and Related
Agreements. Neither Holdings nor any of its Subsidiaries will agree to any
material amendment to, or waive any of its material rights under, any Existing
Agreement or any Related Agreement (other than any Related Agreement evidencing
or governing the Holdings Discount Debentures, the Senior Notes or any
Subordinated Indebtedness) after the Effective Date without in each case
obtaining the prior written consent of Requisite Lenders to such amendment or
waiver.
B. Amendments of Documents Relating to Holdings Discount Debentures,
Senior Notes and Subordinated Indebtedness. Except as permitted by clause (i) of
subsection 7.5, neither Holdings nor Company shall, nor shall it permit any of
its Subsidiaries to, amend or otherwise change the terms of the Holdings
Discount Debentures, the Senior Notes or any Subordinated Indebtedness, or make
any payment consistent with an amendment thereof or change thereto, if the
effect of such amendment or change is to increase the interest rate on the
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Holdings Discount Debentures, the Senior Notes or such Subordinated
Indebtedness, change (to earlier dates) any dates upon which payments of
principal or interest are due thereon, change any event of default or condition
to an event of default with respect thereto (other than to eliminate any such
event of default or increase any grace period related thereto), change the
redemption, prepayment or defeasance provisions thereof, change any
subordination provisions thereof (or of any guaranty thereof), or change any
collateral therefor (other than to release such collateral), or if the effect of
such amendment or change, together with all other amendments or changes made, is
to increase materially the obligations of the obligor thereunder or to confer
any additional rights on the holders of the Holdings Discount Debentures, the
Senior Notes or such Subordinated Indebtedness (or a trustee or other
representative on their behalf) which would be adverse to Holdings, Company or
Lenders.
7.15 Fiscal Year.
----------
Neither Holdings nor Company shall change its Fiscal Year-end.
Section 8. HOLDINGS GUARANTY
8.1 Guaranty of the Obligations.
---------------------------
Holdings hereby irrevocably and unconditionally guaranties the due and
punctual payment in full of all Obligations when the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. (S) 362(a)).
8.2 Limitation on Amount Guarantied.
-------------------------------
Anything contained herein to the contrary notwithstanding, if any
Fraudulent Transfer Law (as hereinafter defined) is determined by a court of
competent jurisdiction to be applicable to the obligations of Holdings
hereunder, such obligations of Holdings hereunder shall be limited to a maximum
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
Holdings, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of Holdings in
respect of inter company indebtedness to Company or other Affiliates of Company
to the extent that such indebtedness would be discharged in an amount equal to
the amount paid by Holdings hereunder and after giving effect as assets to the
value (as determined under the applicable provisions of the Fraudulent Transfer
Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of Holdings pursuant to applicable law or pursuant to the terms of
any agreement).
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8.3 Payment by Holdings.
-------------------
Holdings hereby agrees, in furtherance of the foregoing and not in
limitation of any other right which Administrative Agent or any Lender may have
at law or in equity against Holdings by virtue hereof, that upon the failure of
Company to pay any of the Obligations when and as the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. (S) 362(a)), Holdings will upon demand pay, or cause to be paid, in cash,
to Administrative Agent for the ratable benefit of Agents and Lenders as
beneficiaries of the Holdings Guaranty (collectively, for purposes of the
Holdings Guaranty, "Beneficiaries"), an amount equal to the sum of the unpaid
principal amount of all Obligations then due as aforesaid, accrued and unpaid
interest on such Obligations (including interest which, but for the filing of a
petition in bankruptcy with respect to Company, would have accrued on such
Obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding) and all other Obligations then owed to
Beneficiaries as aforesaid.
8.4 Liability of Holdings Absolute.
------------------------------
Holdings agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than payment in full of the Obligations. In furtherance of the
foregoing and without limiting the generality thereof, Holdings agrees as
follows:
A. The Holdings Guaranty is a guaranty of payment when due and not
of collectibility.
B. Administrative Agent may enforce the Holdings Guaranty upon the
occurrence of an Event of Default notwithstanding the existence of any dispute
between Company and any Beneficiary with respect to the existence of such Event
of Default.
C. The obligations of Holdings hereunder are independent of the
obligations of Company and the obligations of any other guarantor (including any
Subsidiary Guarantor) of the obligations of Company, and a separate action or
actions may be brought and prosecuted against Holdings whether or not any action
is brought against Company or any of such other guarantors and whether or not
Company is joined in any such action or actions.
D. Payment by Holdings of a portion, but not all, of the Obligations
shall in no way limit, affect, modify or abridge Holdings' liability for any
portion of the Obligations which has not been paid. Without limiting the
generality of the foregoing, if Administrative Agent is awarded a judgment in
any suit brought to enforce Holdings' covenant to pay a portion
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of the Obligations, such judgment shall not be deemed to release Holdings from
its covenant to pay the portion of the Obligations that is not the subject of
such suit.
E. Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability hereof or
giving rise to any reduction, limitation, impairment, discharge or termination
of Holdings' liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Obligations; (ii) settle, compromise,
release or discharge, or accept or refuse any offer of performance with respect
to, or substitutions for, the Obligations or any agreement relating thereto
and/or subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the Obligations and
take and hold security for the payment hereof or the Obligations; (iv) release,
surrender, exchange, substitute, compromise, settle, rescind, waive, alter,
subordinate or modify, with or without consideration, any security for payment
of the Obligations, any other guaranties of the Obligations, or any other
obligation of any Person (including any Subsidiary Guarantor) with respect to
the Obligations; (v) enforce and apply any security now or hereafter held by or
for the benefit of such Beneficiary in respect hereof or of the Obligations and
direct the order or manner of sale thereof, or exercise any other right or
remedy that such Beneficiary may have against any such security, in each case as
such Beneficiary in its discretion may determine consistent herewith and any
applicable security agreement, including foreclosure on any such security
pursuant to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and even though such action
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of Holdings against Company or any security for the
Obligations; and (vi) exercise any other rights available to it under the Loan
Documents.
F. The Holdings Guaranty and the obligations of Holdings hereunder
shall be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
payment in full of the Obligations), including the occurrence of any of the
following, whether or not Holdings shall have had notice or knowledge of any of
them: (i) any failure or omission to assert or enforce, or agreement or election
not to assert or enforce, or the stay or enjoining, by order of court, by
operation of law or otherwise, of the exercise or enforcement of, any claim or
demand or any right, power or remedy (whether arising under the Loan Documents,
at law, in equity or otherwise) with respect to the Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for the
payment of the Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including provisions relating to events of default) of this
Agreement, any of the other Loan Documents or any agreement or instrument
executed pursuant thereto, or of any other guaranty or security for the
Obligations, in each case whether or not in accordance with the terms hereof or
such Loan Document or any agreement relating to such other guaranty or security;
(iii) the Obligations, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received from any source (other than payments received
pursuant to the
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other Loan Documents or from the proceeds of any security for the Obligations,
except to the extent such security also serves as collateral for indebtedness
other than the Obligations) to the payment of indebtedness other than the
Obligations, even though any Beneficiary might have elected to apply such
payment to any part or all of the Obligations; (v) any Beneficiary's consent to
the change, reorganization or termination of the corporate structure or
existence of Company or any of its Subsidiaries and to any corresponding
restructuring of the Obligations; (vi) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of the
Obligations; (vii) any defenses, set-offs or counterclaims which Company may
allege or assert against any Beneficiary in respect of the Obligations,
including failure of consideration, breach of warranty, payment, statute of
frauds, statute of limitations, accord and satisfaction and usury; and (viii)
any other act or thing or omission, or delay to do any other act or thing, which
may or might in any manner or to any extent vary the risk of Holdings as an
obligor in respect of the Obligations.
8.5 Waivers by Holdings.
-------------------
Holdings hereby waives, for the benefit of Beneficiaries:
(i) any right to require any Beneficiary, as a condition of
payment or performance by Holdings, to (a) proceed against Company, any
other guarantor (including any Subsidiary Guarantor) of the Obligations or
any other Person, (b) proceed against or exhaust any security held from
Company, any such other guarantor or any other Person, (c) proceed against
or have resort to any balance of any deposit account or credit on the books
of any Beneficiary in favor of Company or any other Person, or (d) pursue
any other remedy in the power of any Beneficiary whatsoever;
(ii) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company including any
defense based on or arising out of the lack of validity or the
unenforceability of the Obligations or any agreement or instrument relating
thereto or by reason of the cessation of the liability of Company from any
cause other than payment in full of the Obligations;
(iii) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal;
(iv) any defense based upon any Beneficiary's errors or
omissions in the administration of the Obligations, except behavior which
amounts to bad faith;
(v) (a) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms hereof and any
legal or equitable discharge of Holdings' obligations hereunder, (b) the
benefit of any statute of limitations affecting Holdings' liability
hereunder or the enforcement hereof, (c) any rights to set-
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offs, recoupments and counterclaims, and (d) promptness, diligence and any
requirement that any Beneficiary protect, secure, perfect or insure any
security interest or lien or any property subject thereto;
(vi) notices, demands, presentments, protests, notices of
protest, notices of dishonor and notices of any action or inaction,
including acceptance hereof, notices of default hereunder, notices of any
renewal, extension or modification of the Obligations or any agreement
related thereto, notices of any extension of credit to Company and notices
of any of the matters referred to in subsection 8.4 and any right to
consent to any thereof; and
(vii) any defenses or benefits that may be derived from or
afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms hereof.
8.6 Holdings' Rights of Subrogation, Contribution, Etc.
--------------------------------------------------
Holdings hereby waives any claim, right or remedy, direct or indirect,
that Holdings now has or may hereafter have against any Loan Party or any of its
assets in connection herewith or with the performance by Holdings of its
obligations hereunder, in each case whether such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise and
including (i) any right of subrogation, reimbursement or indemnification that
Holdings now has or may hereafter have against any Loan Party, (ii) any right to
enforce, or to participate in, any claim, right or remedy that any Beneficiary
now has or may hereafter have against any Loan Party, and (iii) any benefit of,
and any right to participate in, any collateral or security now or hereafter
held by any Beneficiary. In addition, until the Obligations shall have been paid
in full and the Commitments shall have terminated and all Letters of Credit
shall have expired or been cancelled, Holdings shall withhold exercise of any
right of contribution Holdings may have against any other guarantor (including
any Subsidiary Guarantor) of the Obligations. Holdings further agrees that, to
the extent the waiver or agreement to withhold the exercise of its rights of
subrogation, reimbursement, indemnification and contribution as set forth herein
is found by a court of competent jurisdiction to be void or voidable for any
reason, any rights of subrogation, reimbursement or indemnification Holdings may
have against any Loan Party or against any collateral or security, and any
rights of contribution Holdings may have against any such other guarantor, shall
be junior and subordinate to any rights any Beneficiary may have against such
Loan Party, to all right, title and interest any Beneficiary may have in any
such collateral or security, and to any right any Beneficiary may have against
such other guarantor. If any amount shall be paid to Holdings on account of any
such subrogation, reimbursement, indemnification or contribution rights at any
time when all Obligations shall not have been paid in full, such amount shall be
held in trust for Administrative Agent on behalf of Beneficiaries and shall
forthwith be paid over to Administrative Agent for the benefit of Beneficiaries
to be credited and applied against the Obligations, whether matured or
unmatured, in accordance with the terms hereof.
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8.7 Subordination of Other Obligations.
----------------------------------
Any Indebtedness of Company or any Subsidiary Guarantor now or
hereafter held by Holdings is hereby subordinated in right of payment to the
Obligations, and any such indebtedness collected or received by Holdings after
an Event of Default has occurred and is continuing shall be held in trust for
Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over
to Administrative Agent for the benefit of Beneficiaries to be credited and
applied against the Obligations but without affecting, impairing or limiting in
any manner the liability of Holdings under any other provision hereof.
8.8 Continuing Guaranty.
-------------------
The Holdings Guaranty is a continuing guaranty and shall remain in
effect until all of the Obligations shall have been paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled. Holdings hereby irrevocably waives any right to revoke the
Holdings Guaranty as to future transactions giving rise to any Obligations.
8.9 Authority of Holdings or Company.
--------------------------------
It is not necessary for any Beneficiary to inquire into the capacity
or powers of Holdings or Company or the officers, directors or any agents acting
or purporting to act on behalf of either of them.
8.10 Financial Condition of Company.
------------------------------
Any extension of credit may be granted to Company or continued from
time to time without notice to or authorization from Holdings, regardless of the
financial or other condition of Company at the time of any such grant or
continuation. No Beneficiary shall have any obligation to disclose or discuss
with Holdings its assessment, or Holdings' assessment, of the financial
condition of Company. Holdings has adequate means to obtain information from
Company on a continuing basis concerning the financial condition of Company and
its ability to perform its obligations under the Loan Documents, and Holdings
assumes the responsibility for being and keeping informed of the financial
condition of Company and of all circumstances bearing upon the risk of
nonpayment of the Obligations. Holdings hereby waives and relinquishes any duty
on the part of any Beneficiary to disclose any matter, fact or thing relating to
the business, operations or conditions of Company now known or hereafter known
by any Beneficiary.
8.11 Bankruptcy, Etc.
---------------
A. So long as any Obligations remain outstanding, Holdings shall not,
without the prior written consent of Administrative Agent acting pursuant to the
instructions of
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Requisite Lenders, commence or join with any other Person in commencing any
bankruptcy, reorganization or insolvency proceedings of or against Company. The
obligations of Holdings hereunder shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of Company or by any defense which Company may have
by reason of the order, decree or decision of any court or administrative body
resulting from any such proceeding.
B. Holdings acknowledges and agrees that any interest on any
portion of the Obligations which accrues after the commencement of any
proceeding referred to in subsection 8.11A (or, if interest on any portion of
the Obligations ceases to accrue by operation of law by reason of the
commencement of said proceeding, such interest as would have accrued on such
portion of the Obligations if said proceedings had not been commenced) shall be
included in the Obligations because it is the intention of Holdings and
Beneficiaries that the Obligations which are guarantied by Holdings pursuant
hereto should be determined without regard to any rule of law or order which may
relieve Company of any portion of such Obligations. Holdings will permit any
trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit
of creditors or similar person to pay Administrative Agent, or allow the claim
of Administrative Agent in respect of, any such interest accruing after the date
on which such proceeding is commenced.
C. In the event that all or any portion of the Obligations are paid
by Company, the obligations of Holdings hereunder shall continue and remain in
full force and effect or be reinstated, as the case may be, in the event that
all or any part of such payment(s) are rescinded or recovered directly or
indirectly from any Beneficiary as a preference, fraudulent transfer or
otherwise, and any such payments which are so rescinded or recovered shall
constitute Obligations for all purposes hereunder.
Section 9. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur:
9.1 Failure to Make Payments When Due.
---------------------------------
Failure by Company to pay any installment of principal of any Loan
when due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; failure by Company to pay when
due any amount payable to an Issuing Lender in reimbursement of any drawing
under a Letter of Credit; or failure by Company to pay any interest on any Loan
or any fee or any other amount due under this Agreement within five days after
the date due; or
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9.2 Default in Other Agreements.
---------------------------
(i) Failure of Holdings or any of its Subsidiaries to pay when
due any principal of or interest on or any other amount payable in
respect of one or more items of Indebtedness (other than Indebtedness
referred to in subsection 9.1) or Contingent Obligations in an
individual principal amount of $2,500,000 or more or with an aggregate
principal amount of $4,000,000 or more, in each case beyond the end of
any grace period provided therefor; or (ii) breach or default by
Holdings or any of its Subsidiaries with respect to any other material
term of (a) one or more items of Indebtedness or Contingent
Obligations in the individual or aggregate principal amounts referred
to in clause (i) above or (b) any loan agreement, mortgage, indenture
or other agreement relating to such item(s) of Indebtedness or
Contingent Obligation(s), if the effect of such breach or default is
to cause, or to permit the holder or holders of that Indebtedness or
Contingent Obligation(s) (or a trustee on behalf of such holder or
holders) to cause, that Indebtedness or Contingent Obligation(s) to
become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligation, as the case may be
(upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
9.3 Breach of Certain Covenants.
---------------------------
Failure of Company to perform or comply with any term or condition
contained in subsection 2.5 or 6.2 or Section 7 of this Agreement; or
9.4 Breach of Warranty.
------------------
Any representation, warranty, certification or other statement made by
any Loan Party in any Loan Document or in any statement or certificate at any
time given by any Loan Party in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false in any material respect on the
date as of which made; or
9.5 Other Defaults Under Loan Documents.
-----------------------------------
Any Loan Party shall default in the performance of or compliance with
any term contained in this Agreement or any of the other Loan Documents, other
than any such term referred to in any other subsection of this Section 9, and
such default shall not have been remedied or waived within 10 days after the
earlier of (i) an officer of Company or such Loan Party becoming aware of such
default or (ii) receipt by Company and such Loan Party of notice from
Administrative Agent or any Lender of such default; or
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9.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Holdings or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law; or (ii) an
involuntary case shall be commenced against Holdings or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Holdings or any of its
Subsidiaries, or over all or a substantial part of any of their respective
property, shall have been entered; or there shall have occurred the
involuntary appointment of an interim receiver, trustee or other custodian
of Holdings or any of its Subsidiaries for all or a substantial part of its
property; or a warrant of attachment, execution or similar process shall
have been issued against any substantial part of the property of Holdings
or any of its Subsidiaries, and any such event described in this clause
(ii) shall continue for 60 days unless dismissed, bonded or discharged; or
9.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
--------------------------------------------------
(i) Holdings or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
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 Holdings or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Holdings or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Holdings or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
9.8 Judgments and Attachments.
-------------------------
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $2,500,000 or (ii)
in the aggregate at any time an amount in excess of $4,000,000 (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Holdings or any of its Subsidiaries or any of their respective assets and
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shall remain undischarged, unvacated, unbonded or unstayed for a period of 60
days (or in any event later than five days prior to the date of any proposed
sale thereunder); or
9.9 Dissolution.
-----------
Any order, judgment or decree shall be entered against Holdings or any
of its Subsidiaries decreeing the dissolution or split up of Holdings or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
9.10 Employee Benefit Plans.
----------------------
There shall occur one or more ERISA Events which individually or in
the aggregate results in or might reasonably be expected to result in liability
of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates
in excess of $500,000 during the term of this Agreement; or there shall exist an
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), which exceeds $500,000; or
9.11 Change in Control.
-----------------
(i) prior to the consummation of an initial public offering of
the common stock of Holdings, MDCP shall cease to beneficially own and
control at least a majority of the issued and outstanding shares of capital
stock of Holdings entitled (without regard to the occurrence of any
contingency) to vote for the election of members of the Board of Directors
of Holdings; (ii) other than MDCP and its Affiliates, any Person or any two
or more Persons acting in concert shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Exchange Act), directly or indirectly, of Securities of Holdings
(or other Securities convertible into such Securities) representing 35% or
more of the combined voting power of all Securities of Holdings entitled to
vote in the election of directors, other than Securities having such power
only by reason of the happening of a contingency; or (iii) Holdings shall
cease to own and control 100% of the outstanding capital stock of Company;
or
9.12 Invalidity of Guaranties; Failure of Security; Repudiation of Obligations.
-------------------------------------------------------------------------
At any time after the execution and delivery thereof, (i) any Guaranty
for any reason, other than the satisfaction in full of all Obligations, shall
cease to be in full force and effect (other than in accordance with its terms)
or shall be declared to be null and void, (ii) any Collateral Document shall
cease to be in full force and effect (other than by reason of a release of
Collateral thereunder in accordance with the terms hereof or thereof, the
satisfaction in full of the Obligations or any other termination of such
Collateral Document in accordance with the terms
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hereof or thereof) or shall be declared null and void, or Administrative Agent
shall not have or shall cease to have a valid and perfected First Priority Lien
in any Collateral purported to be covered thereby and having a fair market
value, individually or in the aggregate, of $100,000 or more, in each case for
any reason other than the failure of Administrative Agent or any Lender to take
any action within its control, or (iii) any Loan Party shall contest the
validity or enforceability of any Loan Document in writing or deny in writing
that it has any further liability, including with respect to future advances by
Lenders, under any Loan Document to which it is a party;
THEN (i) upon the occurrence of any Event of Default described in subsection 9.6
or 9.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Administrative Agent to issue any Letter of Credit and the right
of any Lender to issue any Letter of Credit hereunder shall thereupon terminate,
and (ii) upon the occurrence and during the continuation of any other Event of
Default, Administrative Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to Company, declare all
or any portion of the amounts described in clauses (a) through (c) above to be,
and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Administrative
Agent to issue any Letter of Credit and the right of any Lender to issue any
Letter of Credit hereunder shall thereupon terminate; provided that the
--------
foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i) or the obligations of Lenders to purchase participations in
any unpaid Swing Line Loans as provided in subsection 2.1A(iii).
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Administrative Agent pursuant to the
terms of the Collateral Account Agreement and shall be applied as therein
provided.
Notwithstanding anything contained in the second preceding paragraph,
if at any time within 60 days after an acceleration of the Loans pursuant to
clause (ii) of such paragraph Company shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than non-
payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 11.6, then Requisite Lenders, by written notice to
Company, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event
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of Default or impair any right consequent thereon. The provisions of this
paragraph are intended merely to bind Lenders to a decision which may be made at
the election of Requisite Lenders and are not intended, directly or indirectly,
to benefit Company, and such provisions shall not at any time be construed so as
to grant Company the right to require Lenders to rescind or annul any
acceleration hereunder or to preclude Administrative Agent or Lenders from
exercising any of the rights or remedies available to them under any of the Loan
Documents, even if the conditions set forth in this paragraph are met.
Section 10. Administrative Agent
10.1 Appointment.
-----------
CSFB is hereby appointed Administrative Agent hereunder and under the
other Loan Documents and each Lender hereby authorizes Administrative Agent to
act as its agent in accordance with the terms of this Agreement and the other
Loan Documents. Administrative Agent agrees to act upon the express conditions
contained in this Agreement and the other Loan Documents, as applicable. The
provisions of this Section 10 are solely for the benefit of Administrative Agent
and Lenders, and no Loan Party shall have any rights as a third party
beneficiary of any of the provisions thereof. In performing its functions and
duties under this Agreement, Administrative Agent shall act solely as an agent
of Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Holdings or
any of its Subsidiaries.
10.2 Powers and Duties; General Immunity.
-----------------------------------
A. Powers; Duties Specified. Each Lender irrevocably authorizes
Administrative Agent to take such action on such Lender's behalf and to exercise
such powers, rights and remedies hereunder and under the other Loan Documents as
are specifically delegated or granted to Administrative Agent by the terms
hereof and thereof, together with such powers, rights and remedies as are
reasonably incidental thereto. Administrative Agent shall have only those
duties and responsibilities that are expressly specified in this Agreement and
the other Loan Documents. Administrative Agent may exercise such powers, rights
and remedies and perform such duties by or through its agents or employees.
Administrative Agent shall not have, by reason of this Agreement or any of the
other Loan Documents, a fiduciary relationship in respect of any Lender; and
nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon
Administrative Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. Administrative Agent shall
not be responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for
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any representations, warranties, recitals or statements made herein or therein
or made in any written or oral statements or in any financial or other
statements, instruments, reports or certificates or any other documents
furnished or made by Administrative Agent to Lenders or by or on behalf of any
Loan Party to Administrative Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Company or any other Person liable for the
payment of any Obligations, nor shall Administrative Agent be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained in any of the Loan
Documents or as to the use of the proceeds of the Loans or the use of the
Letters of Credit or as to the existence or possible existence of any Event of
Default or Potential Event of Default. Anything contained in this Agreement to
the contrary notwithstanding, Administrative Agent shall not have any liability
arising from confirmations of the amount of outstanding Loans or the Letter of
Credit Usage or the component amounts thereof.
C. Exculpatory Provisions. Neither Administrative Agent nor any of
its officers, directors, employees or agents shall be liable to Lenders for any
action taken or omitted by Administrative Agent under or in connection with any
of the Loan Documents except to the extent caused by Administrative Agent's
gross negligence or willful misconduct. Administrative Agent shall be entitled
to refrain from any act or the taking of any action (including the failure to
take an action) in connection with this Agreement or any of the other Loan
Documents or from the exercise of any power, discretion or authority vested in
it hereunder or thereunder unless and until Administrative Agent shall have
received instructions in respect thereof from Requisite Lenders (or such other
Lenders as may be required to give such instructions under subsection 11.6) and,
upon receipt of such instructions from Requisite Lenders (or such other Lenders,
as the case may be), Administrative Agent shall be entitled to act or (where so
instructed) refrain from acting, or to exercise such power, discretion or
authority, in accordance with such instructions. Without prejudice to the
generality of the foregoing, (i) Administrative Agent shall be entitled to rely,
and shall be fully protected in relying, upon any communication, instrument or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and shall be entitled to rely and shall be
protected in relying on opinions and judgments of attorneys (who may be
attorneys for Company and its Subsidiaries), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any right of
action whatsoever against Administrative Agent as a result of Administrative
Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 11.6).
D. Administrative Agent Entitled to Act as Lender. The agency hereby
created shall in no way impair or affect any of the rights and powers of, or
impose any duties or obligations upon, Administrative Agent in its individual
capacity as a Lender hereunder. With respect to its participation in the Loans
and the Letters of Credit, Administrative Agent shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not performing the duties and functions delegated to it hereunder, and the term
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"Lender" or "Lenders" or any similar term shall, unless the context clearly
otherwise indicates, include Administrative Agent in its individual capacity.
Administrative Agent and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of banking, trust, financial advisory or other
business with Holdings or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Holdings or Company for services in connection with this Agreement and otherwise
without having to account for the same to Lenders.
10.3 Representations and Warranties; No Responsibility For Appraisal of
------------------------------------------------------------------
Creditworthiness.
----------------
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Holdings and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Holdings and its Subsidiaries.
Administrative Agent shall not have any duty or responsibility, either initially
or on a continuing basis, to make any such investigation or any such appraisal
on behalf of Lenders or to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter, and Administrative Agent
shall not have any responsibility with respect to the accuracy of or the
completeness of any information provided to Lenders.
10.4 Right to Indemnity.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Administrative Agent, to the extent that Administrative Agent shall
not have been reimbursed by Company, for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements) or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Loan Documents or otherwise in its
capacity as Administrative Agent in any way relating to or arising out of this
Agreement or the other Loan Documents; provided that no Lender shall be liable
--------
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Administrative Agent's gross negligence or willful misconduct. If any indemnity
furnished to Administrative Agent for any purpose shall, in the opinion of
Administrative Agent, be insufficient or become impaired, Administrative Agent
may call for additional indemnity and cease, or not commence, to do the acts
indemnified against until such additional indemnity is furnished.
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10.5 Successor Administrative Agent and Swing Line Lender.
----------------------------------------------------
A. Successor Administrative Agent. Administrative Agent may resign at
any time by giving 30 days' prior written notice thereof to Lenders and Company,
and Administrative Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Company and
Administrative Agent and signed by Requisite Lenders. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
five Business Days' written notice to Company and with the consent of Company
(which consent (i) shall not be unreasonably withheld and (ii) shall be deemed
to have been given if Company shall not have responded to such written notice
within five Business Days after receipt thereof), to appoint a successor
Administrative Agent. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Administrative
Agent and the retiring or removed Administrative Agent shall be discharged from
its duties and obligations under this Agreement. After any retiring or removed
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Section 10 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
B. Successor Swing Line Lender. Any resignation or removal of
Administrative Agent pursuant to subsection 10.5A shall also constitute the
resignation or removal of CSFB or its successor as Swing Line Lender, and any
successor Administrative Agent appointed pursuant to subsection 10.5A shall,
upon its acceptance of such appointment, become the successor Swing Line Lender
for all purposes hereunder. In such event (i) Company shall prepay any
outstanding Swing Line Loans made by the retiring or removed Administrative
Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the
retiring or removed Administrative Agent and Swing Line Lender shall surrender
the Swing Line Note held by it to Company for cancellation, and (iii) Company
shall issue a new Swing Line Note to the successor Administrative Agent and
Swing Line Lender substantially in the form of Exhibit VIII annexed hereto, in
------------
the principal amount of the Swing Line Loan Commitment then in effect and with
other appropriate insertions.
10.6 Collateral Documents and Guaranties.
-----------------------------------
Each Lender hereby further authorizes Administrative Agent, on behalf
of and for the benefit of Lenders, to enter into each Collateral Document as
secured party and to be the agent for and representative of Lenders under each
Guaranty, and each Lender agrees to be bound by the terms of each Collateral
Document and Guaranty; provided that Administrative Agent shall not (i) enter
--------
into or consent to any material amendment, modification, termination or waiver
of any provision contained in any Collateral Document or Guaranty or (ii)
release any Collateral (except as otherwise expressly permitted or required
pursuant to the terms of this Agreement or the applicable Collateral Document),
in each case without the prior consent of
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Requisite Lenders (or, if required pursuant to subsection 11.6, all Lenders);
provided further, however, that, without further written consent or
- -------- ------- -------
authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (a) release any Lien encumbering any item of Collateral
that is the subject of a sale or other disposition of assets permitted by this
Agreement or to which Requisite Lenders have otherwise consented or (b) release
any Subsidiary Guarantor from the Subsidiary Guaranty if all of the capital
stock of such Subsidiary Guarantor is sold to any Person (other than an
Affiliate of Company) pursuant to a sale or other disposition permitted
hereunder or to which Requisite Lenders have otherwise consented. Anything
contained in any of the Loan Documents to the contrary notwithstanding, Company,
Administrative Agent and each Lender hereby agree that (X) no Lender shall have
any right individually to realize upon any of the Collateral under any
Collateral Document or to enforce any Guaranty, it being understood and agreed
that all powers, rights and remedies under the Collateral Documents and the
Guaranties may be exercised solely by Administrative Agent for the benefit of
Lenders in accordance with the terms thereof, and (Y) in the event of a
foreclosure by Administrative Agent on any of the Collateral pursuant to a
public or private sale, Administrative Agent or any Lender may be the purchaser
of any or all of such Collateral at any such sale and Administrative Agent, as
agent for and representative of Lenders (but not any Lender or Lenders in its or
their respective individual capacities unless Requisite Lenders shall otherwise
agree in writing) shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Obligations
as a credit on account of the purchase price for any collateral payable by
Administrative Agent at such sale.
Section 11. MISCELLANEOUS
11.1 Assignments and Participations in Loans and Letters of Credit.
-------------------------------------------------------------
A. General. Subject to subsection 11.1B, each Lender shall have the
right at any time to (i) sell, assign or transfer to any Eligible Assignee, or
(ii) sell participations to any Person in, all or any part of its Commitments or
any Loan or Loans made by it or its Letters of Credit or participations therein
or any other interest herein or in any other Obligations owed to it; provided
--------
that no such sale, assignment, transfer or participation shall, without the
consent of Company, require Company to file a registration statement with the
Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided,
--------
further that no such sale, assignment or transfer described in clause (i) above
- -------
shall be effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 11.1B(ii); provided, further
-------- -------
that no such sale, assignment, transfer or participation of any Letter of Credit
or any participation therein may be made separately from a sale, assignment,
transfer or participation of a corresponding interest in the Revolving Loan
Commitment and the Revolving Loans of the Lender effecting such sale,
assignment, transfer or participation; and provided, further that, anything
-------- -------
contained herein to the contrary notwithstanding, the Swing Line Loan Commitment
and the Swing Line Loans of
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Swing Line Lender may not be sold, assigned or transferred as described in
clause (i) above to any Person other than a successor Administrative Agent and
Swing Line Lender to the extent contemplated by subsection 11.5. Except as
otherwise provided in this subsection 11.1, no Lender shall, as between Company
and such Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment or transfer of, or any granting of participations in, all
or any part of its Commitments or the Loans, the Letters of Credit or
participations therein, or the other Obligations owed to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan,
--------------------------------
Letter of Credit or participation therein, or other Obligation may (a) be
assigned in any amount to another Lender, or to an Affiliate or Approved
Fund of the assigning Lender or another Lender, with the giving of notice
to Company and Administrative Agent or (b) be assigned in an aggregate
amount of not less than $2,500,000 (or such lesser amount as shall
constitute the aggregate amount of the Commitments, Loans, Letters of
Credit and participations therein, and other Obligations of the assigning
Lender) to any other Eligible Assignee with the consent of Company and
Administrative Agent (which consent of Company and Administrative Agent
shall not be unreasonably withheld or delayed). To the extent of any such
assignment in accordance with either clause (a) or (b) above, the assigning
Lender shall be relieved of its obligations with respect to its
Commitments, Loans, Letters of Credit or participations therein, or other
Obligations or the portion thereof so assigned. The parties to each such
assignment shall execute and deliver to Administrative Agent, for its
acceptance and recording in the Register, an Assignment Agreement, together
with a processing and recordation fee of $3,500 and such forms,
certificates or other evidence, if any, with respect to United States
federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery,
acceptance and recordation, from and after the effective date specified in
such Assignment Agreement, (y) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment Agreement, shall have the rights
and obligations of a Lender hereunder and (z) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment Agreement, relinquish its
rights (other than any rights which survive the termination of this
Agreement under subsection 11.9B) and be released from its obligations
under this Agreement (and, in the case of an Assignment Agreement covering
all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party
hereto; provided that, anything contained in any of the Loan Documents to
--------
the contrary notwithstanding, if such Lender is the Issuing Lender with
respect to any outstanding Letters of Credit such Lender shall continue to
have all rights and obligations of an Issuing Lender with respect to such
Letters of Credit until the cancellation or expiration of such Letters of
Credit and the reimbursement of any
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amounts drawn thereunder). The Commitments hereunder shall be modified to
reflect the Commitment of such assignee and any remaining Commitment of
such assigning Lender and, if any such assignment occurs after the issuance
of the Notes hereunder, the assigning Lender shall, upon the effectiveness
of such assignment or as promptly thereafter as practicable, surrender its
Note to Administrative Agent for cancellation, and thereupon new Notes
shall be issued to the assignee and/or to the assigning Lender,
substantially in the form of Exhibit VII annexed hereto with appropriate
-----------
insertions, to reflect the new Commitments of the assignee and/or the
assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in
--------------------------------------------------
Register. Upon its receipt of an Assignment Agreement executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing and recordation fee referred to in
subsection 11.1B(i) and any forms, certificates or other evidence with
respect to United States federal income tax withholding matters that such
assignee may be required to deliver to Administrative Agent pursuant to
subsection 2.7B(iii)(a), Administrative Agent shall, if Administrative
Agent and Company have consented to the assignment evidenced thereby (in
each case to the extent such consent is required pursuant to subsection
11.1B(i)), (a) accept such Assignment Agreement by executing a counterpart
thereof as provided therein (which acceptance shall evidence any required
consent of Administrative Agent to such assignment), (b) record the
information contained therein in the Register, and (c) give prompt notice
thereof to Company. Administrative Agent shall maintain a copy of each
Assignment Agreement delivered to and accepted by it as provided in this
subsection 11.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of, or
the regularly scheduled maturity of any portion of the principal amount of or
interest on, any Loan allocated to such participation or (ii) a reduction of the
principal amount of or the rate of interest payable on any Loan allocated to
such participation, and all amounts payable by Company hereunder (including
amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall
be determined as if such Lender had not sold such participation. Company and
each Lender hereby acknowledge and agree that, solely for purposes of
subsections 11.4 and 11.5, (a) any participation will give rise to a direct
obligation of Company to the participant and (b) the participant shall be
considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 11.1, any Lender may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Lender, and its Notes to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued by
such Federal Reserve Bank; provided that (i) no Lender shall, as between Company
--------
and such Lender, be relieved of any of its obligations hereunder as a result of
any such assignment and pledge and
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(ii) in no event shall such Federal Reserve Bank be considered to be a "Lender"
or be entitled to require the assigning Lender to take or omit to take any
action hereunder.
E. Information. Each Lender may furnish any information concerning
Holdings and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 11.19.
F. Special Purpose Funding Vehicle. Notwithstanding anything to the
contrary contained herein, any Lender (a "Granting Bank") may grant to a special
-------------
purpose funding vehicle (a "SPC"), identified as such in writing from time to
---
time by the Granting Bank to the Administrative Agent and Company, the option to
provide to Company all or any part of any Loan that such Granting Bank would
otherwise be obligated to make to Company pursuant to this Agreement; provided
--------
that (i) nothing herein shall constitute a commitment by any SPC to make any
- ----
Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to
provide all or any part of such Loan, the Granting Bank shall be obligated to
make such Loan pursuant to the terms hereof. The making of a Loan by an SPC
hereunder shall utilize the Commitment of the Granting Bank to the same extent,
and as if, such Loan were made by such Granting Bank. Each party hereto hereby
agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Bank). In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior indebtedness of any SPC, it will
not institute against, or join any other person in instituting against, such SPC
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any State thereof. In
addition, notwithstanding anything to the contrary contained in this subsection
11.1F, any SPC may (i) with notice to, but without the prior written consent of,
Company and the Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to the Granting
Bank or to any financial institutions (consented to by Company and
Administrative Agent) providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Loans and (ii)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC. This section may not
be amended without the written consent of the SPC.
G. Representations of Lenders. Each Lender listed on the signature
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of or investing in loans such as the Loans; and
(iii) that it will make or invest in its Loans for its own account in the
ordinary course of its business and without a view to distribution of such Loans
within the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of this
subsection 11.1, the disposition of such Loans or any interests therein shall at
all times remain within its exclusive control). Each Lender that
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becomes a party hereto pursuant to an Assignment Agreement shall be deemed to
agree that the representations and warranties of such Lender contained in
Section 2(c) of such Assignment Agreement are incorporated herein by this
reference.
11.2 Expenses.
--------
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents and any consents,
amendments, waivers or other modifications thereto; (ii) all the costs of
furnishing all opinions by counsel for Company (including any opinions requested
by Lenders as to any legal matters arising hereunder) and of each Loan Party's
performance of and compliance with all agreements and conditions on its part to
be performed or complied with under this Agreement and the other Loan Documents
including with respect to confirming compliance with environmental, insurance
and solvency requirements; (iii) the reasonable fees, expenses and disbursements
of counsel to Administrative Agent (including allocated costs of internal
counsel) in connection with the negotiation, preparation, execution and
administration of the Loan Documents and any consents, amendments, waivers or
other modifications thereto and any other documents or matters requested by
Company; (iv) all the actual costs and reasonable expenses of creating and
perfecting Liens in favor of Administrative Agent on behalf of Lenders pursuant
to any Collateral Document, including filing and recording fees, expenses and
taxes, stamp or documentary taxes, search fees, title insurance premiums, and
reasonable fees, expenses and disbursements of counsel to Administrative Agent
and of counsel providing any opinions that Administrative Agent or Requisite
Lenders may request in respect of the Collateral Documents or the Liens created
pursuant thereto; (v) all the actual costs and reasonable expenses (including
the reasonable fees, expenses and disbursements of any auditors, accountants or
appraisers and any environmental or other consultants, advisors and agents
employed or retained by Administrative Agent or its counsel) of obtaining and
reviewing any appraisals provided for under subsection 6.9D and any
environmental audits or reports provided for under subsection 4.2J or 6.9C; (vi)
the custody or preservation of any of the Collateral; (vii) all other actual and
reasonable costs and expenses incurred by Administrative Agent in connection
with the syndication of the Commitments and the negotiation, preparation and
execution of the Loan Documents and any consents, amendments, waivers or other
modifications thereto and the transactions contemplated thereby; and (viii)
after the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including allocated costs of internal counsel) and
costs of settlement, incurred by Administrative Agent and Lenders in enforcing
any Obligations of or in collecting any payments due from any Loan Party
hereunder or under the other Loan Documents by reason of such Event of Default
(including in connection with the sale of, collection from, or other realization
upon any of the Collateral or the enforcement of the Guaranties or in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.
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11.3 Indemnity.
---------
In addition to the payment of expenses pursuant to subsection 11.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless Administrative Agent and Lenders, and the
officers, directors, employees, agents and affiliates of Administrative Agent
and Lenders (collectively called the "Indemnitees"), from and against any and
all Indemnified Liabilities (as hereinafter defined); provided that Company
--------
shall not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise from
the gross negligence or willful misconduct of that Indemnitee.
As used herein, "Indemnified Liabilities" means, collectively, any and
all liabilities, obligations, losses, damages (including natural resource
damages), penalties, actions, judgments, suits, claims (including Environmental
Claims), costs (including the costs of any investigation, study, sampling,
testing, abatement, cleanup, removal, remediation or other response action
necessary to remove, remediate, clean up or abate any Hazardous Materials
Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement or the other Loan Documents or the Existing
Agreements or the Related Agreements or the transactions contemplated hereby or
thereby (including Lenders' agreement to make the Loans hereunder or the use or
intended use of the proceeds thereof or the issuance of Letters of Credit
hereunder or the use or intended use of any thereof, or any enforcement of any
of the Loan Documents (including any sale of, collection from, or other
realization upon any of the Collateral or the enforcement of the Guaranties),
(ii) the statements contained in the commitment letter delivered by any Lender
to Company with respect thereto, or (iii) any Environmental Claim or any
Hazardous Materials Activity relating to or arising from, directly or
indirectly, any past or present activity, operation, land ownership, or practice
of Holdings or any of its Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 11.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, Company shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
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<PAGE>
11.4 Set-Off; Security Interest in Deposit Accounts.
----------------------------------------------
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Company at any time or from
time to time, without notice to Company or to any other 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 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 that Lender to
or for the credit or the account of Company against and on account of the
obligations and liabilities of Company to that Lender under this Agreement, the
Letters of Credit and participations therein and the other Loan Documents,
including all claims of any nature or description arising out of or connected
with this Agreement, the Letters of Credit and participations therein or any
other Loan Document, irrespective of whether or not (i) that Lender shall have
made any demand hereunder or (ii) the principal of or the interest on the Loans
or any amounts in respect of the Letters of Credit or any other amounts due
hereunder shall have become due and payable pursuant to Section 11 and although
said obligations and liabilities, or any of them, may be contingent or
unmatured. Company hereby further grants to Administrative Agent and each Lender
a security interest in all deposits and accounts maintained with Administrative
Agent or such Lender as security for the Obligations.
11.5 Ratable Sharing.
---------------
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
--------
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy or reorganization of Company or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the
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<PAGE>
extent of such recovery, but without interest. Company expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Company to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
11.6 Amendments and Waivers.
----------------------
No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to any departure by Company or any
other Loan Party therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that any such amendment,
--------
modification, termination, waiver or consent which: reduces the principal amount
of any of the Loans; changes in any manner the definition of "Requisite
Lenders"; changes in any manner any provision of this Agreement which, by its
terms, expressly requires the approval or concurrence of all Lenders; postpones
the date or reduces the amount of any scheduled payment (but not prepayment) of
principal of any of the Loans; postpones the date on which any interest or any
fees are payable; decreases the interest rate borne by any of the Loans or the
amount of any fees payable hereunder; increases the maximum duration of Interest
Periods permitted hereunder; releases all or substantially all of the
Collateral; releases Holdings or any Subsidiary Guarantor from its obligations
under the Guaranties; reduces the amount or postpones the due date of any amount
payable in respect of, or extends the required expiration date of, any Letter of
Credit; changes the obligations of Lenders relating to the purchase of
participations in Letters of Credit in any manner that could be adverse to any
Issuing Lender; or changes in any manner the provisions contained in subsection
9.1 or this subsection 11.6 shall be effective only if evidenced by a writing
signed by or on behalf of all Lenders to whom are owed Obligations being
directly affected by such amendment, modification, termination, waiver or
consent. In addition, (i) any amendment, modification, termination or waiver of
any of the provisions contained in Section 4 shall be effective only if
evidenced by a writing signed by or on behalf of Administrative Agent and
Requisite Lenders, (ii) no amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written concurrence of the
Lender which is the holder of that Note, (iii) no increase in the Commitments of
any Lender over the amount thereof then in effect shall be effective without the
written concurrence of that Lender, it being understood and agreed that in no
event shall waivers or modifications of conditions precedent, covenants, Events
of Default, Potential Events of Default or of a mandatory prepayment be deemed
to constitute an increase of the Commitment of any Lender and that an increase
in the available portion of any Commitment of any Lender shall not be deemed to
constitute an increase in the Commitment of such Lender, (iv) no amendment,
modification, termination or waiver of any provision of subsection 2.1A(iii) or
any other provision of this Agreement relating to the Swing Line Loan Commitment
or the Swing Line Loans shall be effective without the written concurrence of
Swing Line Lender, (v) no amendment, modification, termination or waiver of any
provision of Section 3 relating to the rights or obligations of any or all
Issuing Lenders shall be effective without the written concurrence of
Administrative Agent and each Lender who is an Issuing Lender with respect to
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<PAGE>
any Letter of Credit then outstanding, and (vi) no amendment, modification,
termination or waiver of any provision of Section 10 or of any other provision
of this Agreement which, by its terms, expressly requires the approval or
concurrence of Administrative Agent shall be effective without the written
concurrence of Administrative Agent. Administrative Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of that Lender. 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 Company in any case
shall entitle Company to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 11.6 shall be binding upon each
Lender at the time outstanding, each future Lender and, if signed by Holdings or
Company, on Holdings or Company, as the case may be.
11.7 Independence of Covenants.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
11.8 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, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Administrative Agent shall not
--------
be effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Holdings, Company and Administrative Agent, such other
address as shall be designated by such Person in a written notice delivered to
the other parties hereto and (ii) as to each other party, such other address as
shall be designated by such party in a written notice delivered to
Administrative Agent.
11.9 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder. B.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 11.2, 11.3 and
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<PAGE>
11.4 and the agreements of Lenders set forth in subsections 11.2C, 11.4 and 11.5
shall survive the payment of the Loans, the cancellation or expiration of the
Letters of Credit and the reimbursement of any amounts drawn thereunder, and the
termination of this Agreement.
11.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of Administrative Agent or any Lender
in the exercise of any power, right or privilege hereunder or under any other
Loan Document 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 power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
11.11 Marshalling; Payments Set Aside.
-------------------------------
Neither Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their 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 and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
11.12 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.
11.13 Obligations Several; Independent Nature of Lenders' Rights.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender shall
be responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a
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<PAGE>
separate and independent debt, and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and it shall not be necessary
for any other Lender to be joined as an additional party in any proceeding for
such purpose.
11.14 Headings.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
11.15 Applicable Law.
--------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
11.16 Successors and Assigns.
----------------------
This Agreement 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 assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 11.1). Neither Holdings'
nor Company's rights or obligations hereunder nor any interest therein may be
assigned or delegated by Holdings or Company without the prior written consent
of all Lenders.
11.17 Consent to Jurisdiction and Service of Process.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST HOLDINGS OR COMPANY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH OF HOLDINGS AND COMPANY, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
143
<PAGE>
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SUBSECTION 11.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER HOLDINGS OR COMPANY IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST HOLDINGS
OR COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 11.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-
1402 OR OTHERWISE.
11.18 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 11.18 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
144
<PAGE>
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as
a written consent to a trial by the court.
11.19 Confidentiality.
---------------
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking or investing practices, it being understood and agreed by Company that
in any event a Lender may make disclosures to Affiliates of such Lender or
disclosures reasonably required by any bona fide assignee, transferee or
participant in connection with the contemplated assignment or transfer by such
Lender of any Loans or any participations therein or disclosures required or
requested by any governmental agency or representative thereof or the National
Association of Insurance Commissioners (the "NAIC") or pursuant to legal
process; provided that, unless specifically prohibited by applicable law or
--------
court order, each Lender shall notify Company of any request by any governmental
agency or representative thereof or the NAIC (other than any such request in
connection with any examination of the financial condition of such Lender by
such governmental agency or the NAIC) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
-------- -------
in no event shall any Lender be obligated or required to return any materials
furnished by Holdings or any of its Subsidiaries.
11.20 Counterparts; Effectiveness.
---------------------------
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate 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; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
145
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
WEC COMPANY
By:_______________________________
Title:
Notice Address:
6944 Newburg Road
Rockford, Illinois 61108
Attention: D. Stephen Crider
Tel: 815-732-2141
Fax: 815-732-6047
HOLDINGS:
WOODS EQUIPMENT COMPANY
By:_______________________________
Title:
Notice Address:
6944 Newburg Road
Rockford, Illinois 61108
Attention: D. Stephen Crider
Tel: 815-732-2141
Fax: 815-732-6047
S-1
<PAGE>
LENDERS:
CREDIT SUISSE FIRST BOSTON,
individually and as Administrative Agent
By:______________________________________
Title:___________________________________
By:______________________________________
Title:___________________________________
Notice Address:
Eleven Madison Avenue
New York, New York 10010
Attention: Jessica Totaram
Tel: 212-325-0034
Fax: 212-325-8304
with a copy to:
Eleven Madison Avenue
New York, New York 10010
Attention: Robert Hetu
Tel: 212-325-4542
Fax: 212-325-8509
S-2
<PAGE>
BANK ONE, ILLINOIS, NATIONAL ASSOCIATION
By:______________________________________
Title:___________________________________
Notice Address:
6000 East State Street
Rockford, IL 61110
Attention: Robert J. Louvar
Tel: 815-394-4667
Fax: 815-394-1889
S-3
<PAGE>
FLEET BUSINESS CREDIT CORPORATION
By:________________________________
Title:_____________________________
Notice Address:
One South Wacker Drive
Chicago, IL 60606-4614
Attention: Dan Manella
Tel: 312-853-8923
Fax: 312-782-6035
S-4
<PAGE>
HARRIS TRUST & SAVINGS BANK
By:____________________________
Title:_________________________
Notice Address:
111 West Monroe
Chicago, IL 60603
Attention: Michael Johns
Tel: 312-461-6750
Fax: 312-765-8095
S-5
<PAGE>
LASALLE BANK NATIONAL ASSOCIATION
By:__________________________________
Title:_______________________________
Notice Address:
135 South LaSalle Street
Chicago, IL 60603
Attention: Brian Sommerfeld
Tel: 312-904-6726
Fax: 312-904-4779
S-6
<PAGE>
SCHEDULE 1.1(i)
CERTAIN ADJUSTMENTS TO EBITDA
Consolidated Adjusted EBITDA shall be adjusted by adding:
(i) all pro forma annualized cost savings, not in excess of
$1,5000,000, with respect to owner's compensation in connection
with the 1999Acquisitions;
(ii) all costs incurred, not in excess of $500,000 in connection
with the closing of the Seguin plant;
(iii) amounts expended, not in excess of $300,000, on a one time
basis only, in connection with layoffs related to the 1999
Acquisitions; and
(iv) pro forma cost savings, not in excess of $300,000, on a one
time basis only, in connection with layoffs related to the 1999
Acquisitions.
SCHEDULE-1.1(i)-1
<PAGE>
SCHEDULE 2.1
EXISTING REVOLVING LOANS
LENDERS' COMMITMENTS AND PRO RATA SHARES
<TABLE>
<CAPTION>
===================================================================================================
Existing Pro
Revolving Revolving Rata
Lender Loans Loan Commitments Share
==================================================================================================
<S> <C> <C> <C>
Credit Suisse First Boston $0 $ 8,000,000 20%
- -------------------------------------------------------------------------------------------------
Bank One, Illinois, National Association $0 $ 8,000,000 20%
- -------------------------------------------------------------------------------------------------
Fleet Capital Corporation $0 $ 8,000,000 20%
- -------------------------------------------------------------------------------------------------
Harris Trust & Savings Bank $0 $ 8,000,000 20%
- -------------------------------------------------------------------------------------------------
LaSalle Bank National Association $0 $ 8,000,000 20%
=================================================================================================
Total $0 $40,000,000 100%
=================================================================================================
</TABLE>
SCHEDULE-2.1-1
<PAGE>
SCHEDULE 3.1
EXISTING LETTER SOF CREDIT
<TABLE>
<CAPTION>
=====================================================================================================
Face Standby/ Expiry
Issuer Amount Commercial Beneficiary Date
=====================================================================================================
<S> <C> <C> <C> <C>
Credit Suisse $400,000 Standby Liberty Mutual
First Boston Insurance Company 4/30/00
- ----------------------------------------------------------------------------------------------------
Gentex-Kirco 2/25/00
Credit Suisse Industrial (automatically
First Boston $634,506 Standby Summit I, L.L.C. renewable until
10/1/08)
===================================================================================================
</TABLE>
SCHEDULE-3.1-1
<PAGE>
Exhibit 4.7
THIS WARRANT AND ANY SHARES OF STOCK PURCHASABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE'S SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES
ACT OR PURSUANT TO AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER OF SUCH
SECURITIES (THE "COMPANY"), TO THE EFFECT THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THE SHARES OF STOCK PURCHASABLE UPON EXERCISE OF THIS WARRANT ARE ALSO SUBJECT
TO CERTAIN TRANSFER RESTRICTIONS PURSUANT TO A STOCKHOLDERS AGREEMENT DATED AS
OF AUGUST 7, 1998, AMONG THE COMPANY AND CERTAIN PARTIES SIGNATORIES THERETO (AS
AMENDED AND MODIFIED FROM TIME TO TIME, THE "AGREEMENT"). A COPY OF THE
AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF
UPON WRITTEN REQUEST.
WOODS EQUIPMENT COMPANY
CONTINGENT STOCK PURCHASE WARRANT
---------------------------------
Date of Issuance: August 7, 1998 Certificate No. W-1
FOR VALUE RECEIVED, Woods Equipment Company, a Delaware corporation
(the "Company"), hereby grants to Code, Hennessy & Simmons L.L.C., as Trustee on
-------
behalf of certain parties pursuant to that certain Trust Agreement dated as of
August __, 1998 (the "Registered Holder") the right to purchase from the
-----------------
Company, during the period specified in this Warrant, the Warrant Shares, at a
price per share of $0.01 (as adjusted from time to time in accordance herewith,
the "Exercise Price"). The Common Stock issued upon exercise of this Warrant is
--------------
subject to the terms and provisions contained in the Agreement. Certain
capitalized terms used herein are defined in Section 3 hereof. The amount and
kind of securities obtainable pursuant to the rights granted hereunder and the
Exercise Price for such securities are subject to adjustment pursuant to the
provisions contained in this Warrant.
<PAGE>
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
-------------------
1A. Exercise Period. The Registered Holder may exercise, in whole,
---------------
the purchase rights represented by this Warrant at any time and from time to
time after the Exercise Event and prior to the earlier of (i) the tenth
anniversary of the date hereof, (ii) a Public Offering or (iii) a Sale of the
Company (the "Exercise Period"). The Company shall give the Registered Holder
---------------
written notice of the expiration of the Exercise Period at least 30 days but not
more than 90 days prior to the end of the Exercise Period.
1B. Exercise Procedure.
------------------
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
-------------
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the Person exercising all of the purchase rights
represented by this Warrant (the "Purchaser");
---------
(b) this Warrant;
(c) if this Warrant is not registered in the name of the Purchaser, an
Assignment or Assignments in the form set forth in Exhibit II hereto
----------
evidencing the assignment of this Warrant to the Purchaser, in which case
the Registered Holder shall have complied with the provisions set forth in
Section 7 hereof; and
(d) either (1) a check payable to the Company in an amount equal to
the product of the Exercise Price multiplied by the number of shares of
Common Stock being purchased upon such exercise (the "Aggregate Exercise
------------------
Price"), (2) the surrender to the Company of debt or equity securities of
-----
the Company having a Market Value equal to the Aggregate Exercise Price of
the Common Stock being purchased upon such exercise (provided that for
purposes of this subparagraph, the Market Value of any note or other debt
security or any preferred stock shall be deemed to be equal to the
aggregate outstanding principal amount or liquidation value thereof plus
all accrued and unpaid interest thereon or accrued or declared and unpaid
dividends thereon) or (3) a written notice to the Company that the
Purchaser is exercising the Warrant by authorizing the Company to withhold
from issuance a number of shares of Common Stock issuable upon such
exercise of the Warrant which when multiplied by the Market Value of the
Common Stock is equal to the Aggregate Exercise Price (and such withheld
shares shall no longer be issuable under this Warrant).
-2-
<PAGE>
(ii) Certificates for shares of Common Stock purchased upon exercise
of this Warrant (plus cash, in lieu of any fractional share pursuant to Section
14 hereof) shall be delivered by the Company to the Purchaser within seven (7)
business days after the date of the Exercise Time.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time, and
the Purchaser shall be deemed for all purposes to have become the record holder
of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance tax in respect thereof or other cost incurred
by the Company in connection with such exercise and the related issuance of
shares of Common Stock. Each share of Common Stock issuable upon exercise of
this Warrant shall, upon payment of the Exercise Price therefor, be fully paid
and nonassessable and free from all liens and charges with respect to the
issuance thereof.
(v) The Company shall not close its books against the transfer of
this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely exercise
of this Warrant.
(vi) The Company shall assist and cooperate with any Registered
Holder or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including, without limitation, making any filings required to be made
by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise of
any portion of this Warrant is to be made in connection with a registered public
offering or the sale of the Company, the exercise of any portion of this Warrant
may, at the election of the holder hereof, be conditioned upon the consummation
of the public offering or sale of the Company, in which case such exercise shall
not be deemed to be effective until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock solely for the purpose of
issuance upon the exercise of the Warrants, such number of shares of Common
Stock as is issuable upon the exercise of all outstanding Warrants. All shares
of Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Company shall take all such actions as may be reasonably necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation (including registration of the
issuance of such shares under the Securities Act, but only to the extent that a
short form of registration is available) or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed (except for
official notice of issuance which
-3-
<PAGE>
shall be immediately delivered by the Company upon each such issuance);
provided, however, that this Warrant shall not be exercised if and to the extent
the Company reasonably determines that the exercise of this Warrant may violate
the Securities Act or any other law or requirement of any governmental
authority. The Company shall not take any action which would cause the number of
authorized but unissued shares of Common Stock to be less than the number of
such shares required to be reserved hereunder for issuance upon exercise of the
Warrant.
1C. Exercise Agreement. Upon any exercise of this Warrant, the
------------------
Exercise Agreement shall be substantially in the form set forth in Exhibit I
---------
hereto, except that if the shares of Common Stock are not to be issued in the
name of the Person in whose name this Warrant is registered, (i) the Exercise
Agreement shall also state the name of the Person to whom the certificates for
the shares of Common Stock are to be issued and (ii) such Person shall execute
and deliver to the Company a counterpart to the Agreement. Such Exercise
Agreement shall be dated the actual date of execution thereof.
Section 2. Adjustment of Exercise Price and Number of Shares. In
-------------------------------------------------
order to prevent dilution of the rights granted under this Warrant, the Exercise
Price and the number of shares of Common Stock obtainable upon exercise of this
Warrant shall be subject to adjustment from time to time as provided in this
Section 2.
2A. Subdivision or Combination of Common Stock. If the Company at
------------------------------------------
any time after the Effective Time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares obtainable upon exercise of this Warrant shall be proportionately
increased. If the Company at any time after the Effective Time combines (by
reverse stock split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant shall be proportionately decreased.
2B. Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction,
in each case which is effected in such a way that the holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "Organic Change." Prior to the consummation of any Organic
--------------
Change, whether or not the Exercise Event has occurred prior to such Organic
Change, the Company shall make appropriate provision to insure that the
Registered Holder of the Warrants shall thereafter have the right to acquire and
receive, in lieu of or in addition to (as the case may be) the shares of Common
Stock immediately theretofore acquirable and receivable upon the exercise of
such holder's Warrant (or the shares of Common Stock that would have been
acquirable and receivable at the time of the Organic
-4-
<PAGE>
Change had an Exercise Event occurred), such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and receivable upon
exercise of such holder's Warrant had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision with respect to such
holders' rights and interests to insure that the provisions of this Section 2
shall thereafter be applicable to the Warrants. The Company shall not effect any
such consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
2C. Notices.
-------
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered Holder
at least 20 days prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the Common
Stock (provided that notice shall not be required for regular cash dividends),
(B) with respect to any pro rata subscription offer to holders of Common Stock
or (C) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holders at least 20 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
Section 3. Definitions. The following terms have the meanings set
-----------
forth below:
"Affiliates" means, with respect to any Person, any other Person
----------
controlling, controlled by or under common control with such Person.
"Alamo Transaction" means any form of transaction (or series of
-----------------
transactions) resulting in the combination of the businesses, operations or
assets of the Company (or any of its subsidiaries, whether now existing or
hereafter created) and Alamo Group, Inc. ("Alamo"), including without limitation
-----
any transaction whereby the Company directly or indirectly (i) acquires capital
stock of Alamo possessing the voting power under normal circumstances to elect a
majority of Alamo's board of directors (whether by merger, consolidation or sale
or transfer of Alamo's capital stock) or (ii) acquires all or substantially all
of the assets of Alamo and its subsidiaries.
-5-
<PAGE>
"Common Stock" means shares of the Company's Common Stock, par value
------------
$.01 per share.
"Continuing Stockholders" has the meaning set forth in the
-----------------------
Recapitalization Agreement.
"Effective Time" means the time immediately after the closing of the
--------------
Alamo Transaction.
"Executives" means the employees of the Company and its Subsidiaries.
----------
"Exercise Event" means the closing of an Alamo Transaction within two
--------------
(2) years of the Date of Issuance (the "Two-Year Period"), provided that if an
---------------
agreement is executed for an Alamo Transaction prior to the end of the Two-Year
Period, and the closing contemplated by such transaction occurs, then the
closing of such transaction shall be deemed to be within the Two-Year Period for
purposes hereof.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 15%, on a fully-diluted
basis, of the Company's voting capital stock (a "15% Owner"), who is not
---------
controlling, controlled by or under common control with any such 15% Owner and
who is not the spouse or descendent (by birth or adoption) of any such 15% Owner
or a trust for the benefit of such 15% Owner and/or such other Persons.
"Market Value" as to any security means the fair market value of such
------------
security as determined by the board of directors of the Company in its
reasonable good faith judgment.
"MDP" means Madison Dearborn Capital Partners II, L.P., a Delaware
---
limited partnership and its Affiliates.
"Original Cost" means the consideration paid to the Company for a
-------------
share of Common Stock and a share of Preferred Stock (each as adjusted for stock
splits, stock combinations or other similar events); provided that for purposes
hereof, the "Original Cost" of the Common Stock (i) issued pursuant to the
Recapitalization Agreement, (ii) retained by the executives in connection with
the Recapitalization Agreement and (iii) issued pursuant to the Management Stock
Agreements executed as of the date hereof by and between the Company and certain
of its employees, in each case shall mean $16.10 per share.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
-6-
<PAGE>
"Preferred Stock" means shares of the Company's Preferred Stock, par
---------------
value $.01 per share.
"Public Offering" means the sale in an underwritten public offering
---------------
registered under the Securities Act of 1933, as amended, of shares of the
Company's Common Stock.
"Recapitalization Agreement" has the meaning set forth in the
--------------------------
preamble.
"Sale of the Company" means the sale of the Company to an Independent
-------------------
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Sellers" has the meaning set forth in the Recapitalization Agreement.
-------
"Warrant Shares" means the following number of shares of Common Stock
--------------
as adjusted from time to time after the Effective Time pursuant to Section 2
hereof: (1) the number of shares of Common Stock of the Company on a Fully-
Diluted Basis as of the Effective Time multiplied by (2) 3.0% multiplied by (A-
B)/(X + Y - Z)
where:
A = $38,757,451.86 + $361,564.87
B = A dollar amount equal to the aggregate repurchases of Common Stock
and/or Preferred Stock by the Company from the Date of Issuance to the
Effective Time
X = A dollar amount equal to all Common Stock issued and outstanding held
by all shareholders at the Effective Time multiplied, in the case of
each such share of Common Stock, by the Original Cost of such share
Y = A dollar amount equal to all Preferred Stock issued and outstanding
held by MDP and the Executives at the Effective Time multiplied, in
the case of each such share of Preferred Stock, by the Original Cost
of such share
-7-
<PAGE>
Z = A dollar amount equal to all Common Stock and Preferred Stock of the
Company issued or issuable to MDP and the Executives in connection
with the Alamo Transaction multiplied by the Original Cost of each
such share
For purposes hereof, "Fully-Diluted Basis" includes, without duplication, (i)
-------------------
all shares of Common Stock issued and outstanding at the time of determination,
(ii) all shares of Common Stock issuable upon the exercise or conversion of all
warrants, options or other rights to subscribe for or to acquire, directly or
indirectly, Common Stock, whether or not then exercisable or convertible at such
time of determination, (iii) all shares of Common Stock issuable upon the
conversion or exchange of all stock or other securities which are convertible
into or exchangeable for, directly or indirectly, Common Stock, whether or not
then convertible or exchangeable as of such time of determination, and (iv) all
shares of Common Stock issued or issuable in connection with the Alamo
Transaction; provided, however, that (i) Common Stock (whether in the form of
-------- -------
stock, options, warrants or other similar rights) issued or issuable to
employees of the Company and its Subsidiaries and (ii) shares issuable upon
exercise of this Warrant, shall not be included for determining "Fully-Diluted
Basis".
Section 4. Information Rights. So long as this Warrant remains
------------------
outstanding and unexercised, the Registered Holder will promptly be provided the
same information as that provided by the Company to the Securities and Exchange
Commission in connection with an offering by the Company of its debt securities.
Notwithstanding the foregoing, the Registered Holder is entitled to receive (i)
annually, within ninety (90) days following the end of each fiscal year of the
Company, audited financial statements of the Company prepared in accordance with
generally accepted accounting principles and containing a balance sheet,
statement of operations, statement of cash flows and statement of changes in
stockholders' equity, and (ii) quarterly, within forty-five (45) days following
the end of each of the first three fiscal quarters of the Company, unaudited
financial statements of the Company containing a balance sheet and statement of
operations.
Section 5. Cancellation of Warrant. If there is not an Exercise
-----------------------
Event, the right to purchase shares of Common Stock hereby will automatically
terminate, and this Warrant will automatically be canceled and will become null
and void.
Section 6. No Voting Rights; Limitations of Liability. This Warrant
------------------------------------------
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Registered Holder to purchase Common Stock, and no enumeration
herein of the rights or privileges of the Registered Holder shall give rise to
any liability of such holder for the Exercise Price of Common Stock acquirable
by exercise hereof or as a stockholder of the Company.
Section 7. Warrant Not Transferable. This Warrant is not
------------------------
transferable without the prior written consent of the Company. With prior
written consent of the Company, this Warrant and all rights hereunder may be
transferred upon surrender of this Warrant with a properly executed
-8-
<PAGE>
Assignment (in the form of Exhibit II hereto) at the principal office of the
----------
Company. Any permitted transferee hereof shall be a "Registered Holder"
hereunder.
Section 8. Warrant Exchangeable for Different Denominations. This
------------------------------------------------
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. The date the Company initially issued
this Warrant shall be deemed to be the "Date of Issuance" hereof regardless of
----------------
the number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
--------
Section 9. Replacement. Upon receipt of evidence reasonably
-----------
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Company, or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at its expense) execute and deliver in lieu of
such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Section 10. Notices. Except as otherwise expressly provided herein,
-------
all notices referred to in this Warrant shall be in writing and shall be
delivered personally, sent via nationally recognized overnight courier or sent
by registered or certified mail, return receipt requested, postage prepaid and
shall be deemed to have been given when so delivered or sent (i) to the Company,
at its principal executive offices and (ii) to the Registered Holder of this
Warrant, at such holder's address as it appears in the records of the Company
(unless otherwise indicated by such holder).
Section 11. Amendment and Waiver. Except as otherwise provided
--------------------
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing a majority of the shares of Common
Stock obtainable upon exercise of the Warrants.
Section 12. Descriptive Headings. The descriptive headings of the
--------------------
several Sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant.
Section 13. Governing Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto
-9-
<PAGE>
shall be governed by, and construed in accordance with, the laws of the State of
Illinois, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Illinois or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Illinois.
Section 14. Fractions of Shares. The Company may, but shall not be
-------------------
required to, issue a fraction of a share of Common Stock upon the exercise of
this Warrant. As to any fraction of a share which the Company elects not to
issue, the Company shall make a cash payment in respect of such fraction in an
amount equal to the same fraction of the Market Value of a share of Common Stock
on the date of such exercise.
* * * *
-10-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Contingent Stock Purchase
Warrant to be signed and attested by its duly authorized officers under its
corporate seal and to be dated the Date of Issuance hereof.
WOODS EQUIPMENT COMPANY
By: /s/ Thomas J. Laird
------------------------------------------------
Name: Thomas J. Laird
Its: President and CEO
Attest:
Woods Equipment Company
By: /s/ D. Stephen Crider
- ---------------------------------
Name: D. Stephen Crider
Its: Secretary
<PAGE>
EXHIBIT I
WOODS EQUIPMENT COMPANY
WARRANT EXERCISE AGREEMENT
--------------------------
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-1) hereby agrees to subscribe for the purchase of
______ shares of the Common Stock covered by such Warrant and makes payment
herewith in full therefor at the price per share provided by such Warrant in
accordance with the terms of such Warrant. [A new Warrant for the unexercised
portion of the attached Warrant (Certificate No. W-1) should be delivered to the
following: ________________________.]
Signature
Address
EXHIBIT II
ASSIGNMENT
----------
FOR VALUE RECEIVED, _____________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (Certificate No. W-1) with respect to the number of shares of the Common
Stock covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
- ----------------- ------- -------------
Dated: Signature
Witness
<PAGE>
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
200 East Randolph Drive
Chicago, Illinois 60601
To Call Writer Directly: (312) 861-2000 Facsimile:
(312) 861-2000 (312) 861-2200
Exhibit 5.1
-----------
October 8, 1999
Woods Equipment Company
WEC Company
6944 Newburg Road
Rockford, IL 61108
Re: Woods Equipment Company
WEC Company
Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Woods Equipment Company, a
Delaware corporation ("Woods") and WEC Company, a Delaware corporation and
wholly owned subsidiary of Woods ("WEC" and together with Woods, the "Issuers"),
in connection with the proposed registration by WEC of its offer to exchange up
to $130,000,000 in aggregate principal amount of its 12% Senior Notes due 2009,
Series B (the "Exchange Notes") and by Woods of its offer to exchange up to
$51,927,000 in aggregate principal amount at maturity of its 15% Senior Discount
Debentures due 2011, Series B (the "Exchange Debentures" and, together with the
Exchange Notes, the "Exchange Securities"), pursuant to a Registration Statement
on Form S-4, originally filed with the Securities and Exchange Commission (the
"Commission") on October 8, 1999, under the Securities Act of 1933, as amended
(the "Act") (such Registration Statement, as amended or supplemented is
hereinafter referred to as the "Registration Statement").
The obligations of WEC under the Exchange Notes will be guaranteed by
Woods (the "Guaranty"). The Exchange Notes are to be issued pursuant to the
Indenture, dated as of July 28, 1999, by and between WEC and United States Trust
Company of New York, as trustee (the "Notes Indenture") in exchange for and in
replacement of WEC's outstanding 12% Senior Notes due 2009 (the "Old Notes").
The Exchange Debentures are to be issued pursuant to the Indenture, dated as of
July 28, 1999, by and between Woods and United States Trust Company of Texas,
N.A., as trustee (the "Debenture Indenture" and, together with the Notes
Indenture, the "Indentures") in exchange for and in replacement of Woods'
outstanding 15% Senior Discount Debentures due 2011 (the "Old Debentures").
London Los Angeles New York Washington, D.C.
<PAGE>
KIRKLAND & ELLIS
Woods Equipment Company
WEC Company
October 8, 1999
Page 2
This opinion is being delivered in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act. Capitalized terms used but not
otherwise defined herein have the meanings ascribed to them in the Registration
Statement.
In connection with this opinion, we have examined originals or copies
certified or otherwise identified to our satisfaction of such documents,
corporate records and other instruments as we have deemed necessary for the
purposes of this opinion, including (i) the certificate of incorporation, as
amended, and the bylaws, as amended, of each of the Issuers, (ii) minutes and
records of the corporate proceedings of the Issuers with respect to the issuance
of the Exchange Securities, (iii) the Registration Statement, (iv) the
Indentures and (v) the Registration Rights Agreement, dated as of July 28, 1999,
by and among Woods, WEC and Credit Suisse First Boston Corporation (the
"Registration Agreement").
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of the
signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Issuers and the due authorization, execution and
delivery of all documents by the parties thereto other than the Issuers. As to
any facts material to the opinions expressed herein which we have not
independently established or verified, we have relied upon the statements and
representations of officers and other representatives of the Issuers and others.
Our opinion expressed below is subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principle of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of New York, the
General Corporation Law of the State of Delaware and the Delaware case law
decided thereunder and the federal laws of the United States of America. We
advise you that the issues addressed by this opinion may be governed in whole or
in part by other laws, and we express no opinion as to whether any relevant
difference exists between the laws upon which our opinion is based and any other
laws that may actually govern.
<PAGE>
KIRKLAND & ELLIS
Woods Equipment Company
WEC Company
October 8, 1999
Page 3
Based upon and subject to the assumptions, qualifications, exclusions
and other limitations contained in this letter, we are of the opinion that when:
(i) the Registration Statement becomes effective under the Act, (ii) the
Indentures have been duly qualified under the Trust Indenture Act of 1939, as
amended, (iii) the Exchange Securities and the Guaranty have been duly executed
and authenticated in accordance with the provisions of the Indentures and duly
delivered to the purchasers thereof in exchange for the Old Notes or the Old
Debentures, as the case may be, in accordance with the terms of the Registration
Agreement, the Exchange Notes will be validly issued and binding obligations of
WEC and the Guaranty and Exchange Debentures will be validly issued and binding
obligations of Woods.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
This opinion is limited to the specific issues addressed herein, and
no opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of New York or Delaware or the federal law of the United
States be changed by legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Sincerely,
/s/ KIRKLAND & ELLIS
Kirkland & Ellis
<PAGE>
Exhibit 10.1
WOODS EQUIPMENT COMPANY
1999 NONQUALIFIED STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
---------------
This 1999 Nonqualified Stock Option Plan (the "Plan") of Woods
Equipment Company, a Delaware corporation (the "Company"), adopted by the Board
of Directors and a majority of the stockholders of the Company on
_________________, 1999 (the "Effective Date"), for executives and other key
employees of the Company, is intended to advance the best interests of the
Company by providing those persons who have a substantial responsibility for its
management and growth with additional incentives by allowing them to increase
their ownership interest in the Company and thereby encouraging them to
contribute to the success of the Company and to remain in its employ. The
availability and offering of stock options under the Plan also increases the
Company's ability to retain individuals of exceptional managerial talent upon
whom, in large measure, the sustained progress, growth and profitability of the
Company depends.
ARTICLE II
Definitions
-----------
For purposes of the Plan, except where the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:
"Board" shall mean the Board of Directors of the Company.
-----
"Cause" shall mean with respect to a Participant: (a) the repeated
-----
failure on the part of such Participant to perform such duties as are reasonably
requested by the President (or, in the case of the President, the Board) of the
Company; (b) gross negligence or willful misconduct on the part of such
Participating in the conduct of his or her duties with and/or failure to comply
in any material respect with policies of, the Company; (c) a reasonable and good
faith determination by the Board that such Participant shall have committed any
act of fraud or embezzlement against the Company and/or its respective
affiliates or any conviction or admission of a felony or offense involving
dishonesty or moral turpitude; or (d) willful, knowing or reckless unauthorized
dissemination of Confidential Information (as defined in the Stockholders
Agreement, dated as of August 7, 1998, by and among the Company and certain
parties listed therein); provided, however, that with respect to clauses (a) and
(b), if such failure or breach is capable of cure, such failure or
<PAGE>
breach, as the case may be, shall not be deemed to constitute "Cause" unless
such failure or breach remains uncured after the expiration of fifteen (15) days
following delivery of written notice to such Participant by the Board.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
any successor statute.
"Committee" shall mean the committee of the Board which may be
---------
designated by the Board to administer the Plan. The Committee shall be composed
of two or more directors as appointed from time to time to serve by the Board.
"Common Stock" shall mean the Company's Common Stock, par value $.01
------------
per share, or if the outstanding Common Stock is hereafter changed into or
exchanged for different stock or securities of the Company, such other stock or
securities.
"Company" shall mean Woods Equipment Company, a Delaware corporation,
-------
and (except to the extent the context requires otherwise) any subsidiary
corporation of Woods Equipment Company, as such term is defined in Section
424(f) of the Code.
"Disability" shall mean the inability, due to illness, accident,
----------
injury, physical or mental incapacity or other disability, of any Participant to
carry out effectively his duties and obligations to the Company or to
participate effectively and actively in the management of the Company for a
period of at least 90 consecutive days or for shorter periods aggregating at
least 120 days (whether or not consecutive) during any twelve-month period, as
determined in the reasonable judgment of the Board.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully-diluted basis voting capital stock (a "5% Owner"), who
is not controlling, controlled by or under common control with any such 5% Owner
and who is not the spouse or descendent (by birth or adoption) of any such 5%
Owner or a trust for the benefit of such 5% Owner and/or such other Persons.
Notwithstanding the foregoing, no holder or group of holders of the Company's
Common Stock as of the Effective Date of this Plan shall be an Independent Third
Party or group of Independent Third Parties.
"IPO" means the Company's initial public offering of its Common Stock
---
under the Securities Act of 1933, as amended.
"Options" shall have the meaning set forth in Article IV.
-------
"Participant" shall mean any executive or other key employee of the
-----------
Company who has been selected to participate in the Plan by the Committee or the
Board.
-2-
<PAGE>
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Sale of the Company" means the sale of the Company to an Independent
-------------------
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire(s): (i) capital stock of the Company possessing the voting
power under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
ARTICLE III
Administration
--------------
The Plan shall be administered by the Committee; provided that if for
any reason the Committee shall not have been appointed by the Board, all
authority and duties of the Committee under the Plan shall be vested in and
exercised by the Board. Subject to the limitations of the Plan, the Committee
shall have the sole and complete authority to: (i) select Participants, (ii)
grant Options (as defined in Article IV below) to Participants in such forms and
amounts as it shall determine, (iii) impose such limitations, restrictions and
conditions upon such Options as it shall deem appropriate, (iv) interpret the
Plan and adopt, amend and rescind administrative guidelines and other rules and
regulations relating to the Plan, (v) correct any defect or omission or
reconcile any inconsistency in the Plan or in any Option granted hereunder and
(vi) make all other determinations and take all other actions necessary or
advisable for the implementation and administration of the Plan. The Committee's
determinations on matters within its authority shall be conclusive and binding
upon the Participants, the Company and all other Persons. All expenses
associated with the administration of the Plan shall be borne by the Company.
The Committee may, as approved by the Board and to the extent permissible by
law, delegate any of its authority hereunder to such persons as it deems
appropriate.
ARTICLE IV
Limitation on Aggregate Shares
------------------------------
The number of shares of Common Stock with respect to which options may
be granted under the Plan (the "Options") and which may be issued upon the
exercise thereof shall not exceed, in the aggregate, 23,863.93 shares; provided
that the type and the aggregate number of shares which may be subject to Options
shall be subject to adjustment in accordance with the provisions of paragraph
6.8 below, and further provided that to the extent any Options expire
unexercised or are canceled, terminated or forfeited in any manner without the
issuance of Common Stock thereunder, or if any Options are exercised and the
shares of Common Stock issued thereunder are
-3-
<PAGE>
repurchased by the Company, such shares shall again be available under the Plan.
The 23,863.93 shares of Common Stock available under the Plan may be either
authorized and unissued shares, treasury shares or a combination thereof, as the
Committee shall determine.
ARTICLE V
Awards
------
5.1 Options. The Committee may grant Options to Participants in
-------
accordance with this Article V.
5.2 Form of Option. Options granted under this Plan shall be
--------------
nonqualified stock options and are not intended to be "incentive stock options"
---
within the meaning of Section 422A of the Code or any successor provision.
5.3 Exercise Price. The option exercise price per share of Common
--------------
Stock shall be $16.10.
5.4 Exercisability. Options shall be exercisable at such time or
--------------
times as the Committee shall determine at or subsequent to grant.
5.5 Payment of Exercise Price. Options shall be exercised in whole
-------------------------
or in part by written notice to the Company (to the attention of the Company's
President and Secretary) accompanied by payment in full of the option exercise
price. Payment of the option exercise price shall be made in cash (including
check, bank draft or money order) or, in the discretion of the Committee, by
delivery of a promissory note (if in accordance with policies approved by the
Board).
5.6 Terms of Options. The Committee shall determine the term of
----------------
each Option, which term shall in no event exceed ten years from the date of
grant.
ARTICLE VI
General Provisions
------------------
6.1 Conditions and Limitations on Exercise. Options may be made
--------------------------------------
exercisable in one or more installments, upon the happening of certain events,
upon the passage of a specified period of time, upon the fulfillment of certain
conditions or upon the achievement by the Company of certain performance goals,
as the Committee shall decide in each case when the Options are granted.
-4-
<PAGE>
6.2 Sale of the Company; IPO. In the event of a Sale of the
------------------------
Company, the Committee may provide, in its discretion, that the Options shall
become immediately exercisable by any Participants who are employed by the
Company at the time of the Sale of the Company and that such Options shall
terminate if not exercised as of the date of the Sale of the Company or other
prescribed period of time. In the event of an IPO, the Committee may provide,
in its discretion, that the Options become immediately exercisable by any
Participants who are employed by the Company at the time of the consummation of
the IPO.
6.3 Written Agreement. Each Option granted hereunder to a
-----------------
Participant shall be embodied in a written agreement (an "Option Agreement")
which shall be signed by the Participant and by the Chairman or the President of
the Company for and in the name and on behalf of the Company and shall be
subject to the terms and conditions of the Plan prescribed in the Agreement
(including, but not limited to, (i) the right of the Company and such other
Persons as the Committee shall designate ("Designees") to repurchase from each
Participant, and such Participant's transferees, all shares of Common Stock
issued or issuable to such Participant on the exercise of an Option in the event
of such Participant's termination of employment, (ii) rights of first refusal
granted to the Company and Designees, (iii) holdback and other registration
right restrictions in the event of a public registration of any equity
securities of the Company and (iv) any other terms and conditions which the
Committee shall deem necessary and desirable).
6.4 Listing, Registration and Compliance with Laws and Regulations.
--------------------------------------------------------------
Options shall be subject to the requirement that if at any time the Committee
shall determine, in its discretion, that the listing, registration or
qualification of the shares subject to the Options upon any securities exchange
or under any state or federal securities or other law or regulation, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition to or in connection with the granting of the Options or
the issuance or purchase of shares thereunder, no Options may be granted or
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee. The holders of such Options
shall supply the Company with such certificates, representations and information
as the Company shall request and shall otherwise cooperate with the Company in
obtaining such listing, registration, qualification, consent or approval. In the
case of officers and other Persons subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, the Committee may at any time impose any
limitations upon the exercise of an Option that, in the Committee's discretion,
are necessary or desirable in order to comply with such Section 16(b) and the
rules and regulations thereunder. If the Company, as part of an offering of
securities or otherwise, finds it desirable because of federal or state
regulatory requirements to reduce the period during which any Options may be
exercised, the Committee, may, in its discretion and without the Participant's
consent, so reduce such period on not less than 15 days written notice to the
holders thereof.
6.5 Nontransferability. Options may not be transferred other than
------------------
by will or the laws of descent and distribution and, during the lifetime of the
Participant, may be exercised only
-5-
<PAGE>
by such Participant (or his legal guardian or legal representative). In the
event of the death of a Participant, exercise of Options granted hereunder shall
be made only:
(i) by the executor or administrator of the estate of the
deceased Participant or the Person or Persons to whom the deceased
Participant's rights under the Option shall pass by will or the laws of
descent and distribution; and
(ii) to the extent that the deceased Participant was entitled
thereto at the date of his death, unless otherwise provided by the
Committee in such Participant's Option Agreement.
6.6 Expiration of Options.
---------------------
(a) Normal Expiration. In no event shall any part of any Option be
-----------------
exercisable after the date of expiration thereof (the "Expiration Date"), as
determined by the Committee pursuant to paragraph 5.6 above.
(b) Early Expiration Upon Termination of Employment. Except as
-----------------------------------------------
otherwise provided by the Committee in the Option Agreement, any portion of a
Participant's Option that was not vested and exercisable on the date of the
termination of such Participant's employment shall expire and be forfeited as of
such date, and any portion of a Participant's Option that was vested and
exercisable on the date of the termination of such Participant's employment
shall expire and be forfeited as of such date, except that: (i) if any
Participant dies or becomes subject to any Disability, such Participant's Option
shall expire 180 days after the date of his death or Disability, but in no event
after the Expiration Date, (ii) if any Participant retires (with the approval of
the Board), his Option shall expire 90 days after the date of his retirement,
but in no event after the Expiration Date, and (iii) if any Participant is
discharged other than for Cause, such Participant's Option shall expire 30 days
after the date of his discharge, but in no event after the Expiration Date.
6.7 Withholding of Taxes. The Company shall be entitled, if
--------------------
necessary or desirable, to withhold from any Participant from any amounts due
and payable by the Company to such Participant (or secure payment from such
Participant in lieu of withholding) the amount of any withholding or other tax
due from the Company with respect to any shares issuable under the Options, and
the Company may defer such issuance unless indemnified to its satisfaction.
6.8 Adjustments. In the event of a reorganization, recapitalization,
-----------
stock dividend or stock split, or combination or other change in the shares of
Common Stock, the Board or the Committee may, in its sole discretion, in order
to prevent the dilution or enlargement of rights under outstanding Options, make
such adjustments in the number and type of shares authorized by the Plan, the
number and type of shares covered by outstanding Options and the exercise prices
specified therein as may be determined to be appropriate and equitable. The
issuance by the Company of shares of stock of any class, or options or
securities exercisable or convertible into shares of stock of any class, for
cash or property, or for labor or services either upon direct sale, or
-6-
<PAGE>
upon the exercise of rights or warrants to subscribe therefor, or upon exercise
or conversion of other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock then subject to any Options.
6.9 Rights of Participants. Nothing in this Plan or in any Option
----------------------
Agreement shall interfere with or limit in any way the right of the Company to
terminate any Participant's employment at any time (with or without Cause), nor
confer upon any Participant any right to continue in the employ of the Company
for any period of time or to continue his present (or any other) rate of
compensation, and except as otherwise provided under this Plan or by the
Committee in the Option Agreement, in the event of any Participant's termination
of employment (including, but not limited to, the termination by the Company
without Cause) any portion of such Participant's Option that was not previously
vested and exercisable shall expire and be forfeited as of the date of such
termination. No employee shall have a right to be selected as a Participant or,
having been so selected, to be selected again as a Participant.
6.10 Amendment, Suspension and Termination of Plan. The Board or
---------------------------------------------
the Committee may suspend or terminate the Plan or any portion thereof at any
time and may amend it from time to time in such respects as the Board or the
Committee may deem advisable; provided that no such amendment shall be made
without stockholder approval to the extent such approval is required by law,
agreement or the rules of any exchange upon which the Common Stock is listed,
and no such amendment, suspension or termination shall impair the rights of
Participants under outstanding Options without the consent of the Participants
affected thereby. No Options shall be granted hereunder after the tenth
anniversary of the adoption of the Plan.
6.11 Amendment, Modification and Cancellation of Outstanding
-------------------------------------------------------
Options. The Committee may amend or modify any Option in any manner to the
- -------
extent that the Committee would have had the authority under the Plan initially
to grant such Option; provided that no such amendment or modification shall
impair the rights of any Participant under any Option without the consent of
such Participant. With the Participant's consent, the Committee may cancel any
Option and issue a new Option to such Participant.
6.12 Indemnification. In addition to such other rights of
---------------
indemnification as they may have as members of the Board or the Committee, the
members of the Committee shall be indemnified by the Company against all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding; provided that any such Committee member shall be entitled to
the indemnification rights set forth in this paragraph 6.12 only if such member
has acted in good faith and in a manner that such member reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe that such
conduct was unlawful, and further provided that upon the
-7-
<PAGE>
institution of any such action, suit or proceeding a Committee member shall give
the Company written notice thereof and an opportunity, at its own expense, to
handle and defend the same before such Committee member undertakes to handle and
defend it on his own behalf.
* * * *
-8-
<PAGE>
Exhibit 10.2
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
WOODS EQUIPMENT COMPANY
6944 Newburg Road
Rockford, IL 61108
____________ __, 1999
_______________
c/o Woods Equipment Company
Re: Woods Equipment Company (the "Company")
Grant of Nonqualified Stock Option
----------------------------------
Dear _______________:
The Company is pleased to advise you that its Board of Directors has
granted to you a stock option (an "Option"), as provided below, under the
Company's 1999 Nonqualified Stock Option Plan (the "Plan"), a copy of which is
attached hereto and incorporated herein by reference.
1. Definitions. For the purposes of this Agreement, the following
-----------
terms shall have the meanings set forth below:
"Agreement Date" means the date first written above.
--------------
"Board" shall mean the Board of Directors of the Company.
-----
"Cause" shall mean: (a) your repeated failure to perform such duties
-----
as are reasonably requested by the President of the Company; (b) your gross
negligence or willful misconduct in the conduct of your duties with and/or
failure to comply in any material respect with policies of, the Company; (c) a
reasonable and good faith determination by the Board that you have committed any
act of fraud or embezzlement against the Company and/or its respective
affiliates or any conviction or admission of a felony or offense involving
dishonesty or moral turpitude; or (d) willful, knowing or reckless unauthorized
dissemination of Confidential Information (as defined in the Stockholders
Agreement); provided, however, that with respect to clauses (a) and (b), if such
failure or breach is capable of cure, such failure or breach, as the case may
be, shall not be deemed to constitute "Cause"
<PAGE>
unless such failure or breach remains uncured after the expiration of fifteen
(15) days following delivery of written notice to such Participant by the Board.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
any successor statute.
"Committee" shall mean the Stock Option Committee, or such other
---------
committee of the Board which may be designated by the Board to administer the
Plan. The Committee shall be composed of two or more directors as appointed from
time to time to serve by the Board.
"Common Stock" shall mean the Company's Common Stock, par value $.01
------------
per share, or, in the event that the outstanding Common Stock is hereafter
changed into or exchanged for different stock or securities of the Company, such
other stock or securities.
"Company" shall mean Woods Equipment Company, a Delaware corporation,
-------
and (except to the extent the context requires otherwise) any subsidiary
corporation of Woods Equipment Company, as such term is defined in Section
424(f) of the Code.
"Disability" shall mean your inability, due to illness, accident,
----------
injury, physical or mental incapacity or other disability, to carry out
effectively your duties and obligations to the Company or to participate
effectively and actively in the management of the Company for a period of at
least 90 consecutive days or for shorter periods aggregating at least 120 days
(whether or not consecutive) during any twelve-month period, as determined in
the reasonable judgment of the Board.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully-diluted basis voting capital stock (a "5% Owner"), who
is not controlling, controlled by or under common control with any such 5% Owner
and who is not the spouse or descendent (by birth or adoption) of any such 5%
Owner or a trust for the benefit of such 5% Owner and/or such other Persons.
Notwithstanding the foregoing, no holder or group of holders of the Company's
Common Stock as of the Effective Date (as defined in the Plan) of the Plan
and/or their affiliates shall be an Independent Third Party or group of
Independent Third Parties.
"Investor" shall mean Madison Dearborn Capital Partners II, L.P.
--------
"IPO" shall mean the Company's initial public offering of its Common
---
Stock under the Securities Act.
"Option Shares" shall mean (i) all shares of Common Stock issued or
-------------
issuable upon the exercise of the Option and (ii) all shares of Common Stock
issued with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with any conversion, merger,
consolidation or recapitalization or other reorganization affecting the
-2-
<PAGE>
Common Stock. Option Shares shall continue to be Option Shares in the hands of
any holder other than you (except for the Company or the Investor and, to the
extent that you are permitted to transfer Option Shares pursuant to the terms
hereof, purchasers pursuant to a public offering under the Securities Act), and
each such transferee thereof shall succeed to the rights and obligations of a
holder of Option Shares hereunder.
"Sale of the Company" means the sale of the Company to an Independent
-------------------
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire(s): (i) capital stock of the Company possessing the voting
power under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and any successor statute.
"Stockholders Agreement" shall mean that certain Stockholders
----------------------
Agreement, dated as of August 7, 1998, by and among the Company and its
stockholders listed therein, as such agreement may be amended, modified or
supplemented from time to time.
2. Option.
------
(a) Terms. Your Option is for the purchase of up to _______________
-----
shares of Common Stock (the "Option Shares") at a price per share of $16.10 (the
"Exercise Price"), payable upon exercise as set forth in paragraph 2(b) below.
Your Option shall expire at the close of business on the tenth anniversary of
the Agreement Date (the "Expiration Date"), subject to earlier expiration as
provided in paragraph 3(a) below or as provided in paragraph 4(b) below. Your
Option is not intended to be an "incentive stock option" within the meaning of
Section 422A of the Code.
(b) Payment of Option Price. Subject to paragraph 3 below, your
-----------------------
Option may be exercised in whole or in part upon payment of an amount (the
"Option Price") equal to the product of (i) the Exercise Price multiplied by
(ii) the number of Option Shares to be acquired. Payment shall be made in cash
(including check, bank draft or money order) or, in the discretion of the
Committee, by delivery of a promissory note (if in accordance with policies
approved by the Board).
3. Exercisability/Vesting.
----------------------
(a) Vesting. Your Option may be exercised only to the extent it has
-------
become vested. Your Option shall begin vesting on the first anniversary of the
date of this Agreement (the "First Anniversary Date"), if you are and have been,
continuously employed by the Company from the date of this Agreement through
such date. Your Option shall vest daily on a pro rata basis (based on a 365-day
year) for the period commencing on the First Anniversary Date and ending on the
fourth anniversary of the date of this Agreement; provided however, that if you
cease to be an
-3-
<PAGE>
employee of the Company for any reason, your Option shall no longer continue to
vest and any portion of your Option that was not vested and exercisable on such
date of termination of employment shall expire and be forfeited.
(b) Acceleration of Vesting on Sale of the Company and IPO.
------------------------------------------------------
(i) If you have been continuously employed by the Company from
the date of this Agreement until a Sale of the Company, the portion of your
outstanding Option which has not become vested at the date of such event
shall immediately vest and become exercisable with respect to 100% of the
Option Shares simultaneously with the consummation of the Sale of the
Company. In any event, any portion of your Option which has not been
exercised prior to or in connection with the Sale of the Company shall be
forfeited, unless otherwise determined by the Committee or the Board.
(ii) If you have been continuously employed by the Company from
the date of this Agreement until the IPO, the portion of your outstanding
Option which has not become vested at the date of such event shall
immediately vest and become exercisable with respect to 100% of the Option
Shares simultaneously with the consummation of the IPO.
4. Expiration of Option.
--------------------
(a) Normal Expiration. In no event shall any part of your Option be
-----------------
exercisable after the Expiration Date set forth in paragraph 2(a) above.
(b) Early Expiration Upon Termination of Employment. Any portion of
-----------------------------------------------
your Option that was not vested and exercisable on the date your employment with
the Company terminated shall expire and be forfeited on such date, and any
portion of your Option that was vested and exercisable on the date your
employment with the Company terminated shall also expire and be forfeited;
provided that: (i) if you die or become subject to any Disability, the portion
of your Option that is vested and exercisable shall expire 180 days from the
date of your death or Disability, but in no event after the Expiration Date,
(ii) if you retire (with the approval of the Committee or the Board), the
portion of your Option that is vested and exercisable shall expire 90 days from
the date of your retirement, but in no event after the Expiration Date, and
(iii) if you are discharged other than for Cause, the portion of your Option
that is vested and exercisable shall expire 30 days from the date of your
discharge, but in no event after the Expiration Date.
5. Procedure for Exercise. You may exercise all or any portion of
----------------------
your Option, to the extent it has vested and is outstanding, at any time and
from time to time prior to its expiration, by delivering written notice to the
Company (as provided in paragraph 21 hereof) and your written acknowledgment
that you have read and have been afforded an opportunity to ask questions of
management of the Company regarding all financial and other information provided
to you regarding the Company, together with payment of the Option Price in
accordance with the provisions of paragraph 2(b) above. As a condition to any
exercise of your Option, you shall permit the Company
-4-
<PAGE>
to deliver to you all financial and other information regarding the Company it
believes necessary to enable you to make an informed investment decision, and
you shall make all customary investment representations which the Company
requires.
6. Securities Laws Restrictions and Other Restrictions on Transfer
---------------------------------------------------------------
of Option Shares. You represent that when you exercise your Option you shall be
- ----------------
purchasing Option Shares for your own account and not on behalf of others. You
understand and acknowledge that federal and state securities laws govern and
restrict your right to offer, sell or otherwise dispose of any Option Shares
unless your offer, sale or other disposition thereof is registered under the
Securities Act and state securities laws, or in the opinion of the Company's
counsel, such offer, sale or other disposition is exempt from registration or
qualification thereunder. You agree that you shall not offer, sell or otherwise
dispose of any Option Shares in any manner which would: (i) require the Company
to file any registration statement with the Securities and Exchange Commission
(or any similar filing under state law) or to amend or supplement any such
filing or (ii) violate or cause the Company to violate the Securities Act, the
rules and regulations promulgated thereunder or any other state or federal law.
You further understand that the certificates for any Option Shares you purchase
shall bear the legend set forth in paragraph 13 hereof and such other legends as
the Company deems necessary or desirable in connection with the Securities Act
or other rules, regulations or laws.
7. Non-Transferability of Option. Your Option is personal to you
-----------------------------
and is not transferable by you other than by will or the laws of descent and
distribution. During your lifetime only you (or your guardian or legal
representative) may exercise your Option. In the event of your death, your
Option may be exercised only (i) by the executor or administrator of your estate
or the person or persons to whom your rights under the Option shall pass by will
or the laws of descent and distribution and (ii) to the extent that you were
entitled hereunder at the date of your death. The Company will not be required
(i) to transfer on its books any Option Shares which have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (ii) to treat as owner of such shares, to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares have been
transferred in violation of this Agreement.
8. Conformity with Plan. Your Option is intended to conform in all
--------------------
respects with, and is subject to all applicable provisions of, the Plan (which
is incorporated herein by reference). Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge
your receipt of this Agreement and the Plan and agree to be bound by all of the
terms of this Agreement and the Plan.
9. Rights of Participants. Nothing in this Agreement shall
----------------------
interfere with or limit in any way the right of the Company to terminate your
employment at any time (with or without Cause), nor confer upon you any right to
continue in the employ of the Company for any period of time or to continue your
present (or any other) rate of compensation, and in the event of your
termination of employment (including, but not limited to, termination by the
Company without Cause) any portion of your Option that was not previously vested
and exercisable shall be forfeited.
-5-
<PAGE>
Nothing in this Agreement shall confer upon you any right to be selected again
as a Plan participant, and nothing in the Plan or this Agreement shall provide
for any adjustment to the number of Option Shares subject to your Option upon
the occurrence of subsequent events except as provided in paragraph 11 below.
10. Withholding of Taxes. The Company shall be entitled, if
--------------------
necessary or desirable, to withhold from you from any amounts due and payable by
the Company to you (or secure payment from you in lieu of withholding) the
amount of any withholding or other tax due from the Company with respect to any
Option Shares issuable under this Plan, and the Company may defer such issuance
unless indemnified by you to its satisfaction.
11. Adjustments. In the event of a reorganization, recapitalization,
-----------
stock dividend or stock split, or combination or other change in the shares of
Common Stock, the Board or the Committee may, in its sole discretion, in order
to prevent the dilution or enlargement of rights under your Option, make such
adjustments in the number and type of shares authorized by the Plan, the number
and type of shares covered by your Option and the Exercise Price specified
herein as may be determined to be appropriate and equitable. The issuance by the
Company of shares of stock of any class, or options or securities exercisable or
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale, or upon the exercise of rights or
warrants to subscribe therefor, or upon exercise or conversion of other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of Option Shares or the Exercise Price.
12. Applicability of the Stockholders Agreement. The parties hereto
-------------------------------------------
acknowledge and agree that your Option Shares are "Stockholder Shares" for all
purposes of the Stockholders Agreement, including, but not limited to, the
provisions set forth below.
(a) Restrictions on Transfer. You shall not sell, pledge or otherwise
------------------------
transfer any interest in any Option Shares, except pursuant to the terms of the
Stockholders Agreement.
(b) Right to Purchase Option Shares. Upon the termination of your
-------------------------------
employment with the Company for any reason, your Option Shares (whether held by
you or by one or more of your transferees), shall be subject to repurchase by
the Company and the Investor, pursuant to the terms of the Stockholders
Agreement.
(c) Drag-Along and Tag-Along Rights. Your Option Shares (whether held
-------------------------------
by you or by one or more of your transferees), shall be subject to drag-along
and tag-along provisions, pursuant to the terms of the Stockholders Agreement.
13. Additional Restrictions on Transfer.
-----------------------------------
(a) Restrictive Legend. The certificates representing the Option
------------------
Shares shall bear the following legend:
-6-
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED ON ________, 1999 HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS
SET FORTH IN (I) A NONQUALIFIED STOCK OPTION AGREEMENT BETWEEN
THE COMPANY AND _______________ DATED AS OF __________, 1999, AS
AMENDED, MODIFIED AND SUPPLEMENTED FROM TIME TO TIME, AND (II) A
STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND ITS STOCKHOLDERS
LISTED THEREIN, DATED AS OF AUGUST 7, 1998, AS AMENDED, MODIFIED
AND SUPPLEMENTED FROM TIME TO TIME. A COPY OF EACH SUCH AGREEMENT
MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
(b) Opinion of Counsel. You may not sell, transfer or dispose of any
------------------
Option Shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company that registration
under the Securities Act or any applicable state securities law is not required
in connection with such transfer.
14. Remedies. The parties hereto (and the Investor as a third-party
--------
beneficiary) shall be entitled to enforce their rights under this Agreement
specifically, to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights existing in their favor. The
parties hereto acknowledge and agree that money damages would not be an adequate
remedy for any breach of the provisions of this Agreement and that any party
hereto (and the Investor as a third-party beneficiary) may, in its sole
discretion, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement.
15. Amendment. Except as otherwise provided herein, any provision of
---------
this Agreement may be amended or waived only with the prior written consent of
you and the Company; provided that no provision of paragraph 11, 12 or 13 or of
this paragraph 15 may be amended or waived without the prior written consent of
the Investor.
16. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto
-7-
<PAGE>
shall bind and inure to the benefit of the respective successors and permitted
assigns of the parties hereto whether so expressed or not.
17. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
18. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts (including by means of telecopied signature pages),
each of which shall constitute an original, but all of which taken together
shall constitute one and the same Agreement.
19. Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
20. Governing Law. The corporate law of the State of Delaware shall
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of the State of Illinois.
21. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the parties hereto at the addresses set forth below or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. Notices shall be deemed
to have been given hereunder when delivered personally, three days after deposit
in the U.S. mail and one day after deposit with a reputable overnight courier
service.
(a) If to the Optionee:
___________________________
___________________________
___________________________
(b) If to the Company:
Woods Equipment Company
6944 Newburg Road
Rockford, IL 61108
Attention: President
with a copy to:
-8-
<PAGE>
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 3800
Chicago, IL 60602
Attention: Paul R. Wood
Timothy M. Hurd
22. Third-Party Beneficiary. The Company and you acknowledge that
-----------------------
the Investor is a third-party beneficiary under this Agreement.
23. Entire Agreement. This Agreement constitutes the entire
----------------
understanding between you and the Company, and supersedes all other agreements,
whether written or oral, with respect to the acquisition by you of Option Shares
of the Company.
* * * *
-9-
<PAGE>
Please execute the extra copy of this Agreement in the space below and
return it to the Company's President at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
WOODS EQUIPMENT COMPANY
By ___________________________
Name _________________________
Title ________________________
Enclosures: 1. Extra copy of this Agreement
2. Copy of the Plan
3. Copy of the Stockholders Agreement
The undersigned hereby acknowledges having read this Agreement, the
Plan and the Stockholders Agreement and hereby agrees to be bound by all
provisions set forth herein, in the Plan and the Stockholders Agreement.
Dated as of ________________________
OPTIONEE: ___________________________________
Name ______________________________
-10-
<PAGE>
(Provision for Community Property Jurisdiction)
CONSENT
-------
The undersigned spouse of ___________hereby acknowledges that I have
read the foregoing Nonqualified Stock Option Agreement and that I understand its
contents. I am aware that the Agreement provides for the repurchase of my
spouse's shares of Common Stock under certain circumstances and imposes other
restrictions on the transfer of such Common Stock. I agree that my spouse's
interest in the Common Stock is subject to this Agreement and any interest I may
have in such Common Stock shall be irrevocably bound by this Agreement and
further that the my community property interest, if any, shall be similarly
bound by this Agreement.
I am aware that the legal, financial and other matters contained in
this Agreement are complex and I am free to seek advice with respect thereto
from independent counsel. I have either sought such advice or determined after
carefully reviewing this Agreement that I will waive such right.
______________________________
______________________________
Witness
-11-
<PAGE>
Exhibit 10.3
MANAGEMENT STOCK AGREEMENT
--------------------------
THIS MANAGEMENT STOCK AGREEMENT is made as of August 7, 1998 by and
between Woods Equipment Company, a Delaware corporation (the "Company"), and
-------
_____________ (the "Manager").
-------
Manager is a management employee of WEC Company, a direct subsidiary
of the Company. The Company and Manager desire to enter into an agreement by
which Manager will purchase, and the Company will sell, the number of shares of
the Company's Common Stock, par value $.01 per share (the "Common Stock") and
------------
the number of shares of the Company's 8% Cumulative Redeemable Preferred Stock,
par value $.01 per share (the "Preferred Stock"), set forth on Schedule A
--------------- ----------
hereto. All of such shares of Common Stock and Preferred Stock and all shares
of Common Stock and Preferred Stock hereafter acquired by Manager in respect of
such shares are referred to herein as "Management Stock."
----------------
In connection with the purchase of Management Stock hereunder, the
Company, Manager and certain other parties are entering into a Stockholders
Agreement dated of the date hereof (the "Stockholders Agreement").
----------------------
The parties hereto agree as follows:
1. Purchase and Sale of Management Stock.
-------------------------------------
(a) Upon execution of this Agreement, Manager will purchase, and the
Company will sell, (i) the number of shares of Common Stock set forth on
Schedule A hereto at a price equal to the consideration set forth on Schedule A
- ---------- ----------
and (ii) the number of shares of Preferred Stock set forth on Schedule A hereto
----------
at a price equal to the consideration set forth on Schedule A. The Company will
----------
deliver to Manager copies of, and receipts for, the certificates representing
such Common Stock and Preferred Stock, and Manager will deliver to the Company
the consideration set forth on Schedule A in the manner set forth on Schedule A.
---------- ----------
The Management Stock will be pledged to the Company pursuant to the Management
Stock Pledge Agreement dated as of the date hereof, by and between the Company
and Manager./1/
(b) Within 30 days after Manager purchases any Management Stock from
the Company, Manager shall make, if Manager is a citizen or resident of the
United States, an effective election with the Internal Revenue Service under
Section 83(b) of the Internal Revenue Code and the regulations promulgated
thereunder.
(c) In connection with the purchase and sale of the Management Stock
hereunder, Manager represents and warrants to the Company that:
_____________________
/1/ Sentence is omitted if promissory note is not used as consideration.
<PAGE>
(i) The Management Stock to be acquired by Manager pursuant to this
Agreement will be acquired for Manager's own account and not
with a view to, or intention of, distribution thereof in
violation of the Securities Act of 1933, as amended (the "1933
----
Act"), or any applicable state securities laws, and the
---
Management Stock will not be disposed of in contravention of the
1933 Act or any applicable state securities laws;
(ii) Manager is sophisticated in financial matters and is able to
evaluate the risks and benefits of the investment in the
Management Stock;
(iii) Manager is able to bear the economic risk of Manager's
investment in the Management Stock for an indefinite period of
time because the Management Stock has not been registered under
the 1933 Act and, therefore, cannot be sold unless subsequently
registered under the 1933 Act or an exemption from such
registration is available;
(iv) Manager has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of
Management Stock; and
(vi) This Agreement constitutes the legal, valid and binding
obligation of Manager, enforceable in accordance with its terms,
and the execution, delivery and performance of this Agreement by
Manager does not and will not conflict with, violate or cause a
breach of any agreement, contract or instrument to which Manager
is a party or any judgment, order or decree to which Manager is
subject.
(e) As an inducement to the Company to issue the Management Stock to
Manager, as a condition thereto, Manager acknowledges and agrees that:
(i) neither the issuance of the Management Stock to Manager nor any
provision contained herein shall entitle Manager to remain in
the employment of the Company and its Subsidiaries or affect the
right of the Company to terminate Manager's employment at any
time for any reason; and
(ii) the Company shall have no duty or obligation to disclose to
Manager, and Manager shall have no right to be advised of, any
material information regarding the Company and its Subsidiaries
at any time prior to, upon or in connection with the repurchase
of Management Stock upon the termination of Manager's employment
with the Company and its Subsidiaries or as otherwise provided
hereunder.
2. Stockholders Agreement. In consideration of the purchase and
----------------------
sale of the Management Stock, Manager concurrently with the execution and
delivery of this Agreement will enter into the Stockholders Agreement.
-2-
<PAGE>
3. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested), sent by reputable overnight
courier service (charges prepaid) or telecopied (with a confirmatory copy sent
by reputable overnight courier services) to the recipient at the address below
indicated:
To the Company:
--------------
Woods Equipment Company
6944 Newburg Road
Rockford, IL 61108
Facsimile: (815) 381-6047
With a copy to:
--------------
____________________
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
and to Manager at the address set forth on the signature page hereto or, in the
case of any recipient, to such other address or to the attention of such other
person as the recipient party shall have specified by prior written notice to
the sending party. Any notice under this Agreement will be deemed to have been
given when so delivered or sent or, if mailed, five days after deposit in the
U.S. mail.
4. General Provisions.
------------------
(a) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(c) Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
-3-
<PAGE>
(d) Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of and be enforceable by Manager and the Company and their
respective successors and assigns.
(e) Choice of Law. The corporate law of the state of Delaware of the
-------------
Company will govern all questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity
and interpretation of this Agreement and the exhibits hereto will be governed by
the internal law, and not the law of conflicts, of the State of Illinois.
(f) Choice of Forum. No suit, action or proceeding with respect to
---------------
this Agreement may be brought in any court or before any similar authority other
than a court of competent jurisdiction in the state of Illinois, and Manager
hereby submits to the non-exclusive jurisdiction of such courts for the purpose
of such suit, proceeding or judgment. Manager hereby irrevocably waives any
right to bring such an action in any other court, domestic or foreign, or before
any similar domestic or foreign authority.
(g) Remedies. Each of the parties to this Agreement will be entitled
--------
to enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the Company and
Manager.
* * * * *
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Management
Stock Agreement as of the date first written above.
WOODS EQUIPMENT COMPANY
By: ____________________________________________
Name: ____________________________________________
Its: ____________________________________________
MANAGER:
__________________________________________________
[Name]
Address: _________________________________________
_________________________________________
_________________________________________
<PAGE>
CONSENT/2/
-------
The undersigned spouse of Manager hereby acknowledges that I have read
the foregoing Management Stock Agreement and the Stockholders Agreement attached
hereto and that I understand its contents. I am aware that the Stockholders
Agreement provides for the repurchase of my spouse's shares of Common Stock
under certain circumstances and imposes other restrictions on the transfer of
such Common Stock. I agree that my spouse's interest in the Common Stock is
subject to the Stockholders Agreement and any interest I may have in such Common
Stock shall be irrevocably bound by the Stockholders Agreement and further that
my community property interest, if any, shall be similarly bound by the
Stockholders Agreement.
I am aware that the legal, financial and other matters contained in
the Stockholders Agreement are complex and I am free to seek advice with respect
thereto from independent counsel. I have either sought such advice or determined
after carefully reviewing the Stockholders Agreement that I will waive such
right.
____________________________________
Spouse
____________________________________
Witness
______________________
/2/ To be signed in the case of managers who are residents of Community
Property States.
<PAGE>
SCHEDULE A
----------
Number of
Shares of Total
Common Stock Consideration
------------ -------------
________ $________
Number of
Shares of Total
Preferred Stock Consideration
--------------- -------------
________ $________
Method of Payment
- -----------------
$__________ in cash
$__________ by promissory note
<PAGE>
Exhibit 10.4
MANAGEMENT SERVICES AGREEMENT
-----------------------------
This Management Services Agreement (this "Agreement") is made as of
---------
August 7, 1998, by and between Woods Equipment Company, a Delaware corporation
(the "Company"), and Madison Dearborn Partners, Inc., a Delaware corporation
-------
("MDP").
---
WHEREAS, the Company desires to retain MDP and MDP desires to perform
for the Company and its subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term of
----
one year commencing on the date hereof (the "Term"), and shall be automatically
----
extended thereafter on a year to year basis unless the Company or MDP provides
written notice of its desire to terminate this Agreement to the other party at
least 30 days prior to the expiration of the Term or any extension thereof.
2. Services. MDP shall perform or cause to be performed such
--------
services for the Company and its subsidiaries as directed by the Company's board
of directors (the "Board"), which may include, without limitation, the
-----
following:
(a) general executive and management services;
(b) identification, support, negotiation and analysis of acquisitions
and dispositions by the Company or its subsidiaries;
(c) support, negotiation and analysis of financing alternatives,
including, without limitation, in connection with acquisitions, capital
expenditures and refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing agreements;
(e) marketing functions, including monitoring of marketing plans and
strategies; and
(f) other services for the Company and its subsidiaries upon which
the Board and MDP agree.
<PAGE>
3. Advisory Fees and Transaction Fees.
----------------------------------
(a) Payment to MDP for services rendered in connection with this
Agreement shall be $300,000 per year plus reasonable out-of-pocket expenses of
MDP, payable by the Company on a quarterly basis in arrears after the end of
each fiscal quarter, with the first payment due on December 31, 1998 prorated
for the number of days elapsed from the date of this Agreement to December 31,
1998.
4. Personnel. MDP shall provide and devote to the performance of
---------
this Agreement such partners, employees and agents of MDP as MDP shall deem
appropriate to the furnishing of the services required.
5. Liability. Neither MDP nor any of its affiliates, partners,
---------
employees or agents shall be liable to the Company or its subsidiaries or
affiliates for any loss, liability, damage or expense arising out of or in
connection with the performance of services contemplated by this Agreement,
unless such loss, liability, damage or expense shall be proven to result
directly from gross negligence or willful misconduct on the part of MDP, its
affiliates, partners, employees or agents acting within the scope of their
employment or authority.
6. Indemnity. The Company and its subsidiaries shall defend,
---------
indemnify and hold harmless MDP, its affiliates, partners, employees and agents
from and against any and all loss, liability, damage, or expenses arising from
any claim (a "Claim") by any person with respect to, or in any way related to,
-----
the performance of services contemplated by this Agreement (including attorneys'
fees) (collectively, "Claims") resulting from any act or omission of MDP, its
------
affiliates, partners, employees or agents, other than for Claims which shall be
proven to be the direct result of gross negligence or willful misconduct by MDP,
its affiliates, partners, employees or agents. The Company and its subsidiaries
shall defend at their own cost and expense any and all suits or actions (just or
unjust) which may be brought against the Company, its subsidiaries and MDP, its
affiliates, partners, employees or agents or in which MDP, its affiliates,
partners, employees or agents may be impleaded with others upon any Claim or
Claims, or upon any matter, directly or indirectly, related to or arising out of
this Agreement or the performance hereof by MDP, its affiliates, partners,
employees or agents, except that if such damage shall be proven to be the direct
result of gross negligence or willful misconduct by MDP, its affiliates,
partners, employees or agents, then MDP shall reimburse the Company and its
subsidiaries for the costs of defense and other costs incurred by the Company
and its subsidiaries.
7. Notices. All notices hereunder shall be in writing and shall be
-------
delivered personally, mailed by United States mail, postage prepaid, or sent via
facsimile and addressed to the parties as follows:
-2-
<PAGE>
To the Company:
---------------
Woods Equipment Company
6944 Newburg Road
Rockford, Illinois 61108
Attention: Board of Directors
Facsimile: (815) 381-6047
To MDP:
-------
Madison Dearborn Partners, Inc.
Three First National Plaza, Suite 3800
Chicago, Illinois 60602
Attention: Paul R. Wood
Facsimile: (312) 895-1156
8. Assignment. Neither party may assign any obligations hereunder to
-----------
any other party without the prior written consent of the other party and such
consent shall not be unreasonably withheld; provided, however, that MDP may
-------- -------
assign its rights and obligations under this Agreement to any of its affiliates
without the consent of the Company. The assignor shall remain liable for the
performance of any assignee.
9. Successors. This Agreement and all the obligations and benefits
----------
hereunder shall inure to the successors and assigns of the parties.
10. Counterparts. This Agreement may be executed and delivered by
------------
each party hereto in separate counterparts (including by means of telecopied
signature pages), each of which when so executed and delivered shall be deemed
an original and both of which taken together shall constitute but one and the
same agreement.
11. Entire Agreement; Modification; Governing Law. The terms and
---------------------------------------------
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions hereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Illinois.
* * * *
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Services
Agreement as of the date first written above.
WOODS EQUIPMENT COMPANY
By: /s/ Thomas J. Laird
---------------------------------------------
Name: Thomas J. Laird
Its: President
MADISON DEARBORN PARTNERS, INC.
By: /s/ Paul R. Wood
---------------------------------------------
Name: Paul R. Wood
Its: Vice President
<PAGE>
EXHIBIT 1.1
WEC Company
$130,000,000
12% Senior Notes due July 15, 2009
Woods Equipment Company
$51,927,000
51,927 Units
Consisting of
15% Senior Discount Debentures due 2011
and
.8745 Shares of Common Stock
PURCHASE AGREEMENT
------------------
July 23, 1999
Credit Suisse First Boston Corporation
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. WEC Company, a Delaware corporation ("WEC"), proposes,
subject to the terms and conditions stated herein, to issue and sell to Credit
Suisse First Boston Corporation (the "Purchaser") $130,000,000 principal amount
of its 12% Senior Notes due July 15, 2009 (the "Notes") to be issued under an
indenture, to be dated as of July 28, 1999 (the "Notes Indenture"), among WEC,
Woods Equipment Company, a Delaware corporation and parent of WEC ("Woods" or
the "Parent Guarantor" and together with WEC, the "Issuers"), and United States
Trust Company of New York, as trustee (the "Notes Trustee"), which Notes will be
unconditionally guaranteed (the "Parent Guaranty") by Woods and by each future
domestic subsidiary of WEC. Woods proposes, subject to the terms and conditions
stated herein, to issue and sell the Purchaser 51,927 Units (the "Units"), each
Unit consisting of (i) one 15% Senior Discount Debenture due 2011 (the
"Debentures") with a principal amount at maturity of $1,000 to be issued under
an indenture, to be dated as of July 28, 1999 (the "Debenture Indenture"), with
a potential amount at maturity of $1,000 between Woods and United States Trust
Company of Texas, N.A., as trustee (the "Debenture Trustee") and (ii) .8745
shares of common stock, $.01 par value per share (the "Common Stock") of Woods.
The shares of Common Stock to be issued as part of the Units are collectively
referred to as the "Shares" and the Notes, Units, Debentures and Shares are
collectively referred to as the "Securities." The
<PAGE>
United States Securities Act of 1933, as amended, is herein referred to as the
"Securities Act." Pursuant to agreements dated as of July 1, 1999 and as of July
7, 1999 (the "Acquisition Agreements"), Woods will purchase the common stock or
assets of Tru-Part Manufacturing Corporation and its principal operating
subsidiary, Tool & Implement Supply Company (collectively, "TISCO") and Central
Fabricators Inc. ("Central Fabricators") (collectively, the "Acquisitions").
Holders (including subsequent transferees) of the Notes and Debentures will
have the registration rights set forth in the Registration Rights Agreement (the
"Registration Rights Agreement"), among WEC, Woods and the Purchaser, in
substantially the form of Exhibit A hereto. Pursuant to the Registration Rights
Agreement, the Issuers agree to file with the Securities and Exchange Commission
(the "Commission") under the circumstances set forth therein, (i) a registration
statement under the Securities Act (the "Notes Exchange Offer Registration
Statement") registering an issue of senior notes identical to the Notes (the
"Exchange Notes") to be offered in exchange for the Notes (the "Notes Exchange
Offer"), (ii) a registration statement under the Securities Act (the "Debentures
Exchange Offer Registration Statement") registering an issue of senior discount
debentures identical to the Debentures (the "Exchange Debentures") to be offered
in exchange for the Debentures (the "Debentures Exchange Offer") and (iii) under
the circumstances set forth therein, a registration statement pursuant to Rule
415 under the Securities Act (the "Shelf Registration Statement"). Holders of
the Shares will have certain registration rights pursuant to a Registration
Rights and Securityholders Agreement (the "Securityholders Agreement") among
Woods, Madison Dearborn Partners, Inc. and the Purchaser. This Agreement, the
Notes Indenture, the Notes, the Parent Guaranty, the Debenture Indenture, the
Debentures, the Registration Rights Agreement, the Securityholders Agreement and
the Acquisition Agreements are sometimes referred to in this Agreement,
individually, as a "Transaction Document" and, collectively, as the "Transaction
Documents." The Acquisitions and the offering of the Notes and the Units (the
"Offerings") are sometimes referred to herein, individually, as a "Transaction"
and collectively, as the "Transactions."
WEC and Woods each hereby agree with the Purchaser as follows:
2. Representations and Warranties of the Issuers. Each of WEC and Woods
represents and warrants to, and agrees with, the Purchaser that:
(a) A preliminary offering circular dated July 9, 1999, and an
offering circular dated July 23, 1999, relating to the Notes to be offered
by the Purchaser have been prepared by WEC, and a preliminary offering
circular dated July 19, 1999, and an offering circular to be dated July 26,
1999, relating to the Debentures to be offered by the Purchaser have been
prepared by Woods. Such preliminary offering circulars and offering
circulars, as supplemented as of the
2
<PAGE>
date of this Agreement, together with any other document approved by the
Issuers for use in connection with the contemplated resale of the
Securities are hereinafter collectively referred to as the "Offering
Circulars." On the date of this Agreement, the Offering Circulars do not
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in or omissions from the
Offering Circulars based upon written information furnished to the Issuers
by the Purchaser specifically for use therein, it being understood and
agreed that the only such information is that described as such in Section
7(b) hereof.
(b) Each of WEC and Woods has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Delaware, with the corporate power and authority to own its properties and
conduct its business as described in the Offering Circulars; and each of
WEC and Woods is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such qualification except
where the failure to qualify would not, (1) individually or in the
aggregate, have a material adverse effect on the conditions (financial or
other), business, properties or results of operations of the Issuers taken
as a whole (2) adversely affect the issuance, validity or enforceability of
the Securities, the Notes Indenture or the Debenture Indenture or (3)
adversely affect the consummation of any of the transactions contemplated
by the Agreement (each of (1), (2) and (3) above, a "Material Adverse
Effect").
(c) There are no subsidiaries of WEC; the only subsidiary of Woods is
WEC.
(d) The Notes Indenture has been duly authorized by all necessary
corporate action of WEC and Woods; the Notes have been duly authorized by
all necessary corporate action of WEC; the Parent Guaranty and the
Debentures have been duly authorized by Woods and when the Notes and the
Debentures are delivered and paid for pursuant to this Agreement and the
Notes Indenture or Debenture Indenture, as applicable, on the Closing Date
(as defined below), the Notes Indenture will have been duly executed and
delivered by WEC and Woods, the Debenture Indenture will have been duly
executed and delivered by Woods, such Notes will have been duly executed,
issued and delivered by WEC and will conform to the description thereof
contained in the Offering Circulars, such Debentures will have been duly
executed, issued and delivered by Woods and will conform to the description
thereof contained in the Offering Circulars, the Notes Indenture and such
Notes will constitute valid and legally binding
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obligations of WEC and Woods and the Debenture Indenture and Debentures
will constitute valid and legally binding obligations of Woods, in each
case enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles; when the Notes are delivered to and paid
for by the Purchaser in accordance with this Agreement, the Parent Guaranty
will constitute the valid and binding obligation of Woods enforceable
against Woods in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(e) The Exchange Notes have been duly authorized by all necessary
corporate action of WEC and, when issued, authenticated, and delivered in
accordance with the terms of the Notes Indenture, the Registration Rights
Agreement and the Notes Exchange Offer, will constitute valid and legally
binding obligations of WEC and Woods, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(f) The Exchange Debentures have been duly authorized by all necessary
corporate action of Woods and, when issued, authenticated, and delivered in
accordance with the terms of the Debenture Indenture, the Registration
Rights Agreement and the Debentures Exchange Offer, will constitute valid
and legally binding obligations of Woods, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(g) The Shares and all other outstanding shares of capital stock of
Woods have been duly authorized; all outstanding shares of capital stock of
Woods and WEC are, and, when the Shares have been delivered and paid for in
accordance with this Agreement on the Closing Date, such Shares will have
been, validly issued, fully paid and nonassessable and will conform to the
description thereof contained in the Offering Circulars; and the
stockholders of Woods have no preemptive rights with respect to the Shares;
and there are no restrictions on transfers of the Shares except as
described in the Offering Circulars.
(h) Except as disclosed or reflected in the Offering Circulars, there
are no contracts, agreements or understandings between WEC or Woods and any
person that would give rise to a valid claim against WEC, Woods or the
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Purchaser for a brokerage commission, finder's fee or other like payment in
connection with the Offerings.
(i) Except for the Registration Rights Agreement, the Securityholders
Agreement and as otherwise described in the Offering Circulars, there are
no contracts, agreements or understandings between WEC or Woods and any
person granting such person the right to require WEC or Woods to file a
registration statement under the Securities Act with respect to any
securities of WEC or Woods owned or to be owned by such person or to
require WEC or Woods to include such securities in any registration
statement registering any other securities of WEC or Woods under the
Securities Act.
(j) Except for those which have already been obtained or would not have
a Material Adverse Effect, no consent, approval, authorization, or order
of, or filing with, any governmental agency or body or any court is
required for the consummation of the Transactions as contemplated by (i)
this Agreement in connection with the issuance and sale of the Securities
by the Issuers, or (ii) any other Transaction Documents in connection with
the consummation of the transactions contemplated therein.
(k) The execution, delivery and performance by WEC and Woods of each of
the Transaction Documents (to the extent each is a party thereto) and
compliance with the terms and provisions thereof will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, (i) any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over WEC or Woods or any of their properties, or (ii) any
agreement or instrument to which WEC or Woods is a party or by which WEC or
Woods is bound or to which any of the properties of WEC or Woods is subject
except for such breach, violation or default which would not have a
Material Adverse Effect, or (iii) the charter or by-laws of WEC or Woods
and the Issuers have full corporate power and authority to authorize, issue
and sell the Securities as contemplated by this Agreement.
(l) This Agreement has been duly authorized, executed and delivered by
WEC and Woods.
(m) The Registration Rights Agreement has been duly authorized,
executed and delivered by WEC and Woods and the Registration Rights
Agreement conforms to the descriptions thereof contained in the Offering
Circular and the Registration Rights Agreement constitutes valid and
legally binding obligations of WEC and Woods, enforceable in accordance
with its respective terms, except that any rights to indemnity and
contribution may be limited by federal and state securities laws and public
policy considerations and
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subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(n) The Securityholders Agreement has been duly authorized, executed
and delivered Woods and the Securityholders Agreement conforms to the
descriptions thereof contained in the Offering Circulars and the
Securityholders Agreement constitutes valid and legally binding obligations
of the Woods, enforceable in accordance with its respective terms, except
that any rights to indemnity and contribution may be limited by federal and
state securities laws and public policy considerations and subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(o) The Acquisition Agreements have been duly authorized, executed and
delivered by WEC, Woods and their subsidiaries (to the extent each is a
party thereto) and the Acquisition Agreements conform or will conform to
the descriptions thereof contained in the Offering Circulars and the
Acquisition Agreements are or will constitute valid and legally binding
obligations of the Company and its subsidiaries (to the extent each is a
party thereto), enforceable in accordance with its respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(p) Except as disclosed in the Offering Circulars, each of WEC and
Woods have good and marketable title to all real properties and all other
properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and
except as disclosed in the Offering Circulars, WEC and Woods hold any
leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or to be made
thereof by them.
(q) WEC and Woods possess all certificates, authorities or permits
issued by appropriate governmental agencies or bodies necessary to conduct
the business now operated by them and have not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to WEC or
Woods, would individually or in the aggregate, have a Material Adverse
Effect.
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(r) Except as disclosed in the Offering Circulars, no labor strike,
slowdown, stoppage or dispute (except for routine disciplinary and
grievance matters) with the employees of WEC or Woods exists or, to the
knowledge of WEC or Woods, is imminent, that would individually or in the
aggregate, have a Material Adverse Effect.
(s) WEC and Woods own, possess, have the right to use, or can acquire
on reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "intellectual property rights")
used in the conduct of the business now operated by them, and have not
received any notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if determined
adversely to WEC or Woods, would, individually or in the aggregate, have a
Material Adverse Effect.
(t) Except as disclosed in the Offering Circulars, neither WEC nor
Woods (i) is in violation of any statute, any rule, regulation, decision or
order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances
or relating to the protection or restoration of the environment or human
exposure to hazardous or toxic substances (collectively, "environmental
laws"), (ii) owns or operates any real property contaminated with any
substance that is subject to any environmen tal laws, (iii) is liable for
any off-site disposal or contamination pursuant to any environmental laws,
or (iv) is subject to any claim relating to any environmental laws, in each
case, which violation, contamination, liability or claim would individually
or in the aggregate have a Material Adverse Effect; and neither WEC nor
Woods is aware of any pending investigation which might lead to such a
claim.
(u) Except as disclosed in the Offering Circulars, there are no pending
actions, suits or proceedings against or affecting WEC or Woods or any of
their respective properties that if determined adversely to WEC or Woods,
would individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of WEC or Woods to
perform its obligations under any Transaction Document to which it is a
party, or which are otherwise material in the context of the sale of the
Securities and the consummation of the other Transactions; and no such
actions, suits or proceedings are threatened or, to WEC or Woods'
knowledge, contemplated.
(v) The financial statements included in the Offering Circulars present
fairly the financial position of the applicable Issuer and its consolidated
subsidiaries as of the dates shown and their results of operations and cash
flows for the periods shown, and such financial statements have been
prepared in
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conformity with the generally accepted accounting principles in the United
States applied on a consistent basis; and the assumptions used in preparing
the pro forma financial statements included in the Offering Circulars
provide a reasonable basis for presenting the significant effects directly
attributable to the Offerings or events described therein, the related pro
forma adjustments give appropriate effect to those assumptions, and the pro
forma columns therein reflect the proper application of those adjustments
to the corresponding historical financial statement amounts.
(w) Except as disclosed in the Offering Circulars, since the date of
the latest audited financial statements included in the Offering Circulars,
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of WEC
and Woods taken as a whole, and, except as disclosed in or contemplated by
the Offering Circulars, there has been no dividend or distribution of any
kind declared, paid or made by Woods on any class of its capital stock.
(x) Neither WEC nor Woods is an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the United States Investment Company
Act of 1940, as amended (the "Investment Company Act"); and neither WEC nor
Woods is and, after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in the
Offering Circulars and the consummation of the other Transactions, will not
be an "investment company" as defined in the Investment Company Act.
(y) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as any of the Securities are listed on
any national securities exchange registered under Section 6 of the United
States Securities Exchange Act of 1934, as amended (the "Exchange Act") or
quoted in a U.S. automated inter-dealer quotation system.
(z) The offer and sale of the Securities in the manner contemplated by
this Agreement will be exempt from the registration requirements of the
Securities Act by reason of Section 4(2) thereof and, in the case of the
Notes, Regulation S thereunder; and it is not necessary to qualify an
indenture in respect of the Notes or the Debentures under the United States
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(aa) None of WEC, Woods or any of their respective affiliates, nor any
person acting on its or their behalf (i) has, within the six-month period
prior to the date hereof, offered or sold in the United States or to any
U.S. person (as
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<PAGE>
such terms are defined in Regulation S under the Securities Act) any of the
Securities or any security of the same class or series as any of the
Securities or (ii) has offered or will offer or sell any of the Securities
(A) in the United States by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the Securities
Act or (B) with respect to any such securities sold in reliance on Rule 903
of Regulation S ("Regulation S") under the Securities Act, by means of any
directed selling efforts within the meaning of Rule 902(b) of Regulation S.
In the case of the Notes, WEC, Woods and their respective affiliates and
any person acting on its or their behalf have complied and will comply with
the offering restrictions requirement of Regulation S. Neither of the
Issuers has entered and they will not enter into any contractual
arrangement with respect to the distribution of any of the Securities
except for this Agreement.
(ab) The statistical and market related data included in the Offering
Circulars are based on or derived from sources which the Issuers believe to
be reliable.
(ac) The Issuers have delivered to the Purchaser true, correct and
complete executed copies of the Acquisition Agreements, together with any
amendments thereto.
(ad) None of WEC, Woods or any of their respective affiliates, nor any
person acting on its or their behalf has taken or will take any action that
might cause this Agreement or the sale of any of the Securities to violate,
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System, in each case as in effect on the date hereof, or as the
same may hereafter be in effect, on the Closing Date.
(ae) The proceeds to the Issuers from the Offerings will be used as
described in the Offering Circulars.
3. Purchase, Sale and Delivery of the Notes. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, WEC agrees to sell to the Purchaser, and
the Purchaser agrees to purchase from WEC, at a purchase price of 97% of the
principal amount thereof plus accrued interest from July 28, 1999 to the Closing
Date (as hereinafter defined), all of the Notes. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, Woods agrees to sell to the Purchaser,
and the Purchaser agrees to purchase the Units from Woods, at an aggregate
purchase price of $24,187,746 plus accrued interest on the Debentures from July
28, 1999 to the Closing Date, all of the Units.
9
<PAGE>
WEC will deliver against payment of the purchase price the Notes in the
form of one or more permanent global Notes in registered form without interest
coupons (the "Global Notes") deposited with the Notes Trustee as custodian for
The Depository Trust Company ("DTC") and registered in the name of Cede & Co.,
as nominee for DTC. Woods will deliver against payment of the purchase price the
Units in the form of one or more permanent global Units (each of which will
consist of one or more global certificates for Debentures and Shares) in
registered from without interest coupons (the "Global Units" and together with
the Global Notes, the "Global Securities") deposited with the transfer agent for
the Units, as custodian for DTC and registered in the name of Cede & Co., as
nominee for DTC. Interests in any permanent Global Securities will be held only
in book-entry form through DTC, except in the limited circumstances described in
the Offering Circulars.
Payment for the Securities shall be made by the Purchaser in Federal (same
day) funds by official check or checks or wire transfer to an account at a bank
acceptable to the Purchaser drawn to the order of WEC or Woods at the office of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York,
10022 at 10:00A.M., (New York time), on July 28, 1999, or at such other time not
later than seven full business days thereafter as the Purchaser and the Company
determine, such time being herein referred to as the "Closing Date," against
delivery to the Notes Trustee or transfer agent for Units, as applicable, as
custodian for DTC of Global Notes or Global Units representing all of the Notes
and Units, respectively. The Global Securities will be made available for
checking at the above office of Skadden, Arps, Slate, Meagher & Flom LLP, at
least 24 hours prior to the Closing Date.
4. Representations by Purchaser; Resale by Purchaser.
(a) the Purchaser represents and warrants to WEC and Woods that it is
an "accredited investor" within the meaning of Regulation D under the
Securities Act.
(b) the Purchaser acknowledges that the Securities have not been
registered under the Securities Act and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons
except pursuant to an exemption from the registration requirements of the
Securities Act or, in the case of the Notes, in accordance with Regulation
S. The Purchaser represents and agrees that it has offered and sold the
Securities, and will offer and sell the Securities only in accordance with
Rule 903 or Rule 144A under the Securities Act ("Rule 144A") or, in the
case of the Notes, Rule 903. Accordingly, neither the Purchaser nor its
affiliates, nor any persons acting on its or their behalf, have engaged or
will engage in any directed selling efforts with respect to the Securities,
and the Purchaser, its affiliates and all persons acting
10
<PAGE>
on its or their behalf have complied and will comply with the offering
restrictions requirement of Regulation S and Rule 144A.
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
(c) the Purchaser agrees that it and each of its affiliates have not
entered and will not enter into any contractual arrangement with respect to
the distribution of the Securities except with the prior written consent of
WEC with respect to the Notes or Woods with respect to the Units.
(d) the Purchaser agrees that it and each of its affiliates will not
offer or sell the Securities in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act, including, but not limited to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. The Purchaser agrees, with
respect to resales made in reliance on Rule 144A of any of the Securities,
to deliver either with the confirmation of such resale or otherwise prior
to settlement of such resale a notice to the effect that the resale of such
Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) the Purchaser represents and agrees that (i) it has not offered or
sold and prior to the date six months after the date of issue of the
Securities will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in
the United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995; (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done
by it in relation to the Notes in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection
with the issue of the Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.
5. Certain Agreements of WEC and Woods. WEC and Woods each agrees with the
Purchaser that:
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(a) The Issuers will advise the Purchaser promptly of any proposal to
amend or supplement the Offering Circulars and will not effect such
amendment or supplementation without the Purchaser's consent. If, at any
time prior to the completion of the resale of the Securities by the
Purchaser, any event occurs as a result of which the Offering Circulars as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, the Issuers promptly will notify the Purchaser
of such event and promptly will prepare, at their own expense, an amendment
or supplement which will correct such statement or omission or effect such
compliance. Neither the Purchaser's consent to, nor the Purchaser's
delivery of, any such amendment or supplement shall constitute a waiver of
any of the conditions set forth in Section 6 hereof.
(b) The Issuers will furnish to the Purchaser copies of any
preliminary offering circular, the Offering Circulars and all amendments
and supplements to such documents, in each case as soon as available and in
such quantities as the Purchaser requests. At any time when the Issuers are
not subject to Section 13 or 15(d) of the Exchange Act, the Issuers will
promptly furnish or cause to be furnished to the Purchaser and, upon
request of holders and prospective purchasers of the Securities, to such
holders and purchasers, copies of the information required to be delivered
to holders and prospective purchasers of the Securities pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision thereto) in
order to permit compliance with Rule 144A in connection with resales by
such holders of the Securities. The Issuers will pay the expenses of
printing and distributing to the Purchaser all such documents.
(c) The Issuers will arrange for the qualification of the Securities
for sale and the determination of their eligibility for investment under
the laws of such jurisdictions as the Purchaser reasonably designates and
will continue such qualifications in effect so long as required for the
resale of the Securities by the Purchaser.
(d) During the period of three years hereafter, WEC and Woods will
furnish to the Purchaser, as soon as reasonably practicable after the end
of each fiscal year, a copy of its annual report to stockholders for such
year; and WEC and Woods will furnish to the Purchaser, as soon as
available, (i) a copy of each report and any definitive proxy statement of
WEC and Woods filed with the Commission under the Exchange Act, or mailed
to stockholders and (ii) from time to time, such other information
concerning WEC and Woods as the Purchaser may reasonably request, subject
to the execution by Purchaser of a confidentiality agreement with respect
to such information if it is not otherwise
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<PAGE>
publicly available. Nothing in this clause (d) shall be interpreted as
requiring WEC and Woods to prepare such materials if not otherwise required
to do so.
(e) During the period of two years after the Closing Date, the
Issuers will, upon request, furnish to the Purchaser and any holder of the
Securities a copy of the restrictions on transfer applicable to the
Securities.
(f) During the period of two years after the Closing Date, Woods and
WEC will not, and will not permit any of their affiliates (as defined in
Rule 144 under the Securities Act) to, resell any of the Securities that
have been reacquired by any of them.
(g) During the period of two years after the Closing Date, neither
WEC nor Woods will be or become, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act.
(h) The Issuers will pay all expenses incidental to the performance
of their respective obligations under this Agreement and the Notes
Indenture or the Debenture Indenture, as the case may be, including (i) the
fees and reasonable expenses of the Notes Trustee or Debenture Trustee and
its professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the
Securities, the preparation and printing of this Agreement, the Notes
Indenture, the Debenture Indenture, the Securities, the Offering Circulars
and amendments and supplements thereto, and any other document relating to
the issuance, offer, sale and delivery of the Securities (provided such
documents are printed by a professional printer); (iii) the cost of
qualifying the Securities for trading in The Portal(SM) Market ("PORTAL")
and any expenses incidental thereto; (iv) the cost of any advertising
approved by the Issuers in connection with the issue of the Securities; (v)
for any expenses (including reasonable fees and disbursements of counsel)
incurred in connection with qualification of the Securities for sale under
the laws of such jurisdictions as the Purchaser designates and the printing
of memoranda relating thereto (not to exceed $10,000 in the aggregate);
(vi) for any fees charged by investment rating agencies for the rating of
the Securities; and (vii) for expenses incurred in distributing preliminary
offering circulars and the Offering Circulars (including any amendments and
supplements thereto) to the Purchaser. The Issuers will also pay or
reimburse the Purchaser (to the extent incurred) for all travel expenses of
the Issuers' officers and employees and any other expenses of the Issuers
in connection with attending or hosting meetings with prospective
purchasers of the Securities. Such amount may be deducted from the purchase
price for the Securities set forth in Section 3 hereof.
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(i) In connection with the offering of the Securities, until the
Purchaser shall have notified the Issuers of the completion of the resale
of the Securities, none of Woods, WEC nor any of their affiliates has or
will, either alone or with one or more other persons, bid for or purchase
for any account in which it or any of its affiliates has a beneficial
interest any Securities or attempt to induce any person to purchase any
Securities; and neither it nor any of its affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active trading
in, or of raising the price of, the Securities.
(j) For a period of 180 days after the date of the initial offering of
the Securities by the Purchaser, neither WEC nor Woods will offer, sell,
contract to sell, announce their intention to sell, pledge or otherwise
dispose of, directly or indirectly, any United States dollar-denominated
debt securities issued or guaranteed by WEC or Woods and having a maturity
of more than one year from the date of issue. Neither WEC nor Woods will at
any time offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any securities under circumstances where such
offer, sale, pledge, contract or disposition would cause the exemption
afforded by Section 4(2) of the Securities Act or, in the case of the
Notes, the safe harbor of Regulation S thereunder to cease to be applicable
to the offer and sale of the Securities.
6. Conditions of the Obligation of the Purchaser. The obligation of the
Purchaser to purchase and pay for the Securities will be subject to the accuracy
of the representations and warranties on the part of WEC and Woods herein, to
the accuracy of the statements of officers of WEC and Woods made pursuant to the
provisions hereof, to the performance by WEC and Woods of their respective
obligations hereunder and to the following additional conditions precedent:
(a) (I) the Purchaser shall have received a letter, dated the date of
this Agreement, of Ernst & Young LLP confirming that, with respect to WEC,
Woods and Central Fabricators, they are independent public accountants
within the meaning of the Securities Act and the applicable published rules
and regulations thereunder (the "Rules and Regulations") and stating:
(i) in their opinion the financial statements and schedules of
WEC, Woods and Central Fabricators examined by them and included in
the Offering Circulars comply as to form with the applicable
accounting requirements of the Securities Act and the related
published Rules and Regulations;
(ii) they have performed the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards
No. 71,
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Interim Financial Information, on the unaudited financial statements
of WEC, Woods and Central Fabricators included in the Offering
Circulars;
(iii) on the basis of the review referred to in clause (ii) above,
a reading of the latest available interim financial statements of WEC,
Woods and Central Fabricators, and of all subsidiaries of WEC, Woods
and Central Fabricators for which such interim financial statements
are provided, inquiries of officials of WEC, Woods and Central
Fabricators, and of such subsidiaries, who have responsibility for
financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements of WEC, Woods and
Central Fabricators included in the Offering Circulars do not
comply as to form with applicable accounting requirements of the
Securities Act and the related published Rules and Regulations or
any material modifications should be made to such unaudited
financial statements for them to be in conformity with generally
accepted accounting principles;
(B) at the date of the latest available balance sheet read by
such accountants, or at a subsequent specified date not more than
three business days prior to the date of this Agreement, there
was any change in the capital stock or any increase in long-term
debt of WEC, Woods and Central Fabricators and their consolidated
subsidiaries or, at the date of the latest available balance
sheet read by such accoun tants, there was any decrease in
consolidated net assets, as compared with amounts shown on the
latest balance sheet included in the Offering Circulars; or
(C) for the period from the closing date of the latest income
statement of WEC, Woods and Central Fabricators included in the
Offering Circulars to the closing date of the latest available
income statement of WEC, Woods and Central Fabricators read by
such accountants there were any decreases, as compared with the
corresponding period of the previous year and with the period of
corresponding length ended the date of the latest income
statement of WEC, Woods and Central Fabricators included in the
Offering Circular, in consolidated net sales or in the total
amounts of consolidated net income or in the ratio of earnings
to fixed charges;
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except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Offering Circulars disclose
have occurred or may occur or which are described in such letter;
(iv) they have performed the procedures specified therein on the
pro forma financial statements included in the Offering Circulars;
(v) on the basis of the review referred to in clause (iv) above,
nothing came to their attention that caused them to believe that the
pro forma financial statements included in or incorporated by
reference in the Offering Circulars do not comply as to form with the
applicable accounting requirements of the Act and the related
published Rules and Regulations or that the pro forma adjustments have
not been properly applied to the historical amounts in the compilation
of those statements; and
(vi) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information of
WEC, Woods and Central Fabricators contained in the Offering Circulars
(in each case to the extent that such dollar amounts, percentages and
other financial information are derived from the general accounting
records of WEC, Woods and Central Fabricators and their subsidiaries
subject to the internal controls of WEC's, Woods' or Central
Fabricators' accounting systems or are derived directly from such
records by analysis or computation) with the results obtained from
inquiries, a reading of such general accounting records and other
procedures specified in such letter and have found such dollar
amounts, percentages and other financial information to be in
agreement with such results, except as otherwise specified in such
letter.
(II) the Purchaser shall have received a letter, dated the date of
this Agreement, of Grant Thorton LLP confirming that, with respect to
TISCO, they are independent public accountants within the meaning of the
Securities Act and the Rules and Regulations and stating to the effect
that:
(i) in their opinion the financial statements and schedules of
TISCO examined by them and included in the Offering Circulars comply
as to form with the applicable accounting requirements of the
Securities Act and the related published Rules and Regulations;
(ii) they have performed the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards
No. 71,
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Interim Financial Information, on the unaudited financial statements
of TISCO included in the Offering Circulars;
(iii) on the basis of the review referred to in clause (ii) above,
a reading of the latest available interim financial statements of
TISCO, and of all subsidiaries of TISCO for which such interim
financial statements are provided, inquiries of officials of TISCO,
and of such subsidiaries, who have responsibility for financial and
accounting matters and other specified procedures, nothing came to
their attention that caused them to believe that:
(A) the unaudited financial statements of TISCO included in
the Offering Circulars do not comply as to form with the
applicable accounting requirements of the Securities Act and the
related published Rules and Regulations or any material
modifications should be made to such unaudited financial
statements for them to be in conformity with generally accepted
accounting principles;
(B) at the date of the latest available balance sheet read by
such accountants, or at a subsequent specified date not more than
three business days prior to the date of this Agreement, there
was any change in the capital stock or any material increase in
long-term debt of TISCO and its consolidated subsidiaries or, as
compared with amounts shown on the latest balance sheet included
in the Offering Circulars; or
(C) for the period from the closing date of the latest income
statement of TISCO included in the Offering Circulars to the
closing date of the latest available income statement of TISCO
read by such accountants there were any decreases, as compared
with the corresponding period of the previous year and with the
period of corresponding length ended the date of the latest
income statement of TISCO included in the Offering Circulars, in
consolidated net sales or in the total or per share amounts of
consolidated net income or in the ratio of earnings to fixed
charges;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Offering Circulars disclose
have occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
(including pro forma financial information and adjustments thereto) of
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TISCO contained in the Offering Circulars (in each case to the extent
that such dollar amounts, percentages and other financial information
are derived from the general accounting records of TISCO and its
subsidiaries subject to the internal controls of TISCO's accounting
system or are derived directly from such records by analysis or
computation) with the results obtained from inquiries, a reading of
such general accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except as
otherwise specified in such letter.
(III) the Purchaser shall have received a letter, dated the date of
this Agreement, of Greenwalt Sponsel & Co., Inc. confirming that, with
respect to Alitec, they are independent public accountants within the
meaning of the Securities Act and the Rules and Regulations and stating:
(i) in their opinion the financial statements and schedules of
Alitec examined by them and included in the Offering Circulars comply
as to form with the applicable accounting requirements of the
Securities Act and the related published Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements of Alitec included in the Offering Circulars;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of Alitec, and of all subsidiaries of Alitec for which such interim
financial statements are provided, inquiries of officials of Alitec,
and of such subsidiaries, who have responsibility for financial and
accounting matters and other specified procedures, nothing came to
their attention that caused them to believe that:
(A) the unaudited financial statements of Alitec included in
the Offering Circulars do not comply as to form with applicable
accounting requirements of the Securities Act and the related
published Rules and Regulations or any material modifications
should be made to such unaudited financial statements for them to
be in conformity with generally accepted accounting principles;
(B) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more
than
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three business days prior to the date of this Agreement, there
was any change in the capital stock or any increase in long-term
debt of Alitec and its consolidated subsidiaries or, at the date
of the latest available balance sheet read by such accountants,
there was any decrease in consolidated net assets, as compared
with amounts shown on the latest balance sheet included in the
Offering Circulars; or
(C) for the period from the closing date of the latest
income statement of Alitec included in the Offering Circulars to
the closing date of the latest available income statement of
Alitec read by such accountants there were any decreases, as
compared with the corresponding period of the previous year and
with the period of corresponding length ended the date of the
latest income statement of Alitec included in the Offering
Circulars, in consolidated net sales or in the total amounts of
consolidated net income or in the ratio of earnings to fixed
charges;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Offering Circulars disclose
have occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
(including pro forma financial information and adjustments thereto) of
Alitec contained in the Offering Circulars (in each case to the extent
that such dollar amounts, percentages and other financial information
are derived from the general accounting records of Alitec and its
subsidiaries subject to the internal controls of Alitec's accounting
system or are derived directly from such records by analysis or
computation) with the results obtained from inquiries, a reading of
such general accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except as
otherwise specified in such letter.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (A) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange
controls as would, in the judgement of the Purchaser, make it impractical
or inadvisable to proceed with the proposed issue, sale or distribution of
the Securities, whether in the primary market or in respect of dealings in
the secondary market, (B) any change, or any development or event involving
a prospective change, in the condition (financial or other), business,
properties or results of operations of
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WEC and Woods taken as a whole, which, in the judgment of the Purchaser, is
material and adverse to WEC and Woods taken as a whole and makes it
impractical or inadvisable to proceed with completion of the offering or
the sale of and payment for the Securities; (C) any downgrading in the
rating of any debt securities of WEC or Woods by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Securities Act), or any public announcement that any such
organization has under surveillance or review its rating in effect on the
date of this Agreement of any debt securities of WEC or Woods (other than
an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (D) any material
suspension or material limitation of trading in securities generally on the
New York Stock Exchange, or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of WEC or
Woods on any exchange or in the over-the-counter market; (E) any banking
moratorium declared by U.S. Federal or New York authorities; or (F) any
outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the judgment of the
Purchaser, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the offering or sale of and payment for the Securities.
(c) the Purchaser shall have received an opinion, dated such Closing
Date, of Kirkland & Ellis, counsel for WEC and Woods, that:
(i) Each of WEC and Woods has been duly incorporated and is a
corporation existing and in good standing under the laws of the State
of Delaware. Each of WEC and Woods is duly qualified to do business as
a foreign corporation in good standing in the jurisdictions indicated
in such opinion;
(ii) As of the date hereof, the authorized capital stock of
Woods consists of (A) 5,000,000 shares of Common Stock, par value
$0.01 per share, and (B) 600,000 shares of preferred stock consisting
of (x) 500,000 shares of undesignated, serial preferred stock, par
value $0.01 per share, and (y) 100,000 shares of 8% Cumulative
Redeemable Preferred Stock, par value $0.01 per share. As of the date
hereof, Woods is the record holder of all of the outstanding shares of
capital stock of WEC and, to our knowledge, such shares are not
subject to any security interest, lien or encumbrance except as
described in the Offering Circulars. All outstanding shares of the
capital stock of WEC and Woods have been duly authorized and are
validly issued, fully paid and nonassessable.
20
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(iii) Each of WEC and Woods has the corporate power and authority
to enter into and perform its obligations under the Transaction
Agreements to which it is a party, including, in the case of Woods,
the corporate power and authority to issue, sell and deliver the
Units, the Debentures and the Shares and to issue the Parent Guaranty
and, in the case of WEC, the corporate power and authority to issue,
sell and deliver the Notes, in each case as contemplated by this
Agreement. Each of Woods and WEC has the corporate power and authority
to own their respective properties and conduct their respective
businesses as described in the Offering Circulars.
(iv) Except a described in the Offering Circulars, such counsel
has no knowledge of any contracts, agreements or understandings
between WEC or Woods and any person granting such person the right to
require WEC or Woods to file a registration statement under the
Securities Act with respect to any securities of WEC or Woods owned or
to be owned by such person or to require WEC or Woods to include such
securities in securities being registered pursuant to any other
registration statement filed by WEC or Woods under the Securities Act;
(v) The Board of Directors of each of WEC and Woods has adopted
by requisite vote the resolutions necessary to authorize the
execution, delivery and performance of each of this Agreement, the
Notes Indenture, the Debenture Indenture, the Registration Rights
Agreement, the Securityholders Agreement, the Notes, the Units, the
Debentures and the Parent Guaranty to the extent a party thereto. No
approval by the stockholders of WEC or Woods is required. Each of WEC
and Woods has duly executed and delivered such documents (to the
extent each is a party thereto); the Notes have been duly executed and
delivered by WEC and the Parent Guaranty has been duly executed and
delivered by Woods and, when the Notes are duly and validly
authenticated in accordance with the terms of the Notes Indenture and
delivered against payment therefor in accordance with the terms of
this Agreement, the Notes will have been validly issued and will
constitute valid and binding obligations of WEC, enforceable against
WEC in accordance with its terms and entitled to the benefits of the
Notes Indenture, and the Parent Guaranty will have been validly issued
and will constitute the valid and binding obligation of Woods,
enforceable against Woods in accordance with its terms and entitled to
the benefits of the Debenture Indenture; the Debentures have been duly
executed and delivered by Woods and, when the Debentures are duly and
validly authenticated in accordance with the terms of the Debenture
Indenture and delivered against payment therefor in accordance with
the terms of this Agreement, the Debentures will have been validly
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<PAGE>
issued and will constitute valid and binding obligations of Woods,
enforceable against Woods in accordance with its terms and entitled to
the benefits of the Debenture Indenture; each of the documents listed
above conforms to the description thereof contained in the Offering
Circulars; and each of such documents (other than this Agreement and
the Securities) constitutes valid and binding obligations of WEC and
Woods (to the extent each is a party thereto) enforceable in
accordance with its respective terms, subject in each case of
enforceability to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(vi) The board of directors of each of WEC and Woods has
adopted by requisite vote the resolutions necessary to authorize the
execution, delivery and performance of, in the case of Woods, the
Exchange Debentures and, in the case of WEC, the Exchange Notes. No
approval by the stockholders of each of WEC or Woods is required.
(vii) When the Exchange Notes have been duly and validly,
executed and delivered by WEC in accordance with the terms of the
Registration Rights Agreement, the Notes Exchange Offer and the Notes
Indenture, the Exchange Notes will constitute the valid and binding
obligations of WEC and Woods, entitled to the benefits of the
Indenture, and enforceable against WEC, in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting
creditors' rights and to general equity principles;
(viii) When the Exchange Debentures have been duly and validly
executed and delivered by Woods in accordance with the terms of the
Registration Rights Agreement, the Debentures Exchange Offer and the
Debenture Indenture, the Exchange Debentures will constitute the valid
and binding obligations of Woods, entitled to the benefits of the
Debenture Indenture, and enforceable against Woods, in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting
creditors' rights and to general equity principles;
(ix) The Shares have been duly authorized and validly issued,
are fully paid and nonassessable and conform to the description
thereof contained in the Offering Circulars; the issuance of the
Shares will not be subject to any preemptive or similar rights;
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<PAGE>
(x) Neither WEC nor Woods is and, after giving effect to the
offering and sale of the Securities and the application of the
proceeds thereof as described in the Offering Circulars and the
consummation of the other Transactions (as defined below), will not be
an "investment company" as defined in the Investment Company Act;
(xi) Except for those which have already been obtained, no
consent, approval, authorization or order of, or filing with, any
governmental agency or body or any court is required to be obtained or
made by WEC or Woods for the consummation of the transactions
contemplated by this Agreement or the Transaction Documents or
otherwise in connection with the issuance and sale of the Securities,
except such as may be required under Securities Act, the Exchange Act
of Trust Indenture Act in connection with the Registration Rights
Agreement (with respect to which such counsel need express no
opinion);
(xii) The execution and delivery by WEC and Woods (to the extent
each is a party thereto) of, and performance by such parties of their
respective obligations under, each of the Transaction Documents
(including the issuance and sale of the Securities) and compliance
with the terms and provisions thereof will not (a) violate the
certificate of incorporation or bylaws of WEC or Woods, (b) constitute
a violation by WEC or Woods of any applicable law, statute or
regulation or governmental order, judgment or decree (except that any
rights to indemnity and contribution herein may be limited by federal
and state securities laws and public policy considerations), or (iii)
breach, or result in a default under, any material agreement or
instrument to which WEC or Woods are a party or by which WEC or Woods
is bound, or to which any of the properties of WEC or Woods is
subject, or the charter or by-laws of WEC or Woods, such material
agreements to be specified in such opinion;
(xiii) It is not necessary in connection with (i) the offer, sale
and delivery of the Securities by the Issuers to the Purchaser
pursuant to this Agreement or (ii) the resales of the Securities by
the Purchaser in the manner contemplated by this Agreement, to
register the Securities under the Securities Act or to qualify the
Notes Indenture or the Debenture Indenture under the Trust Indenture
Act;
(xiv) The statements made in the Offering Circulars under the
captions "Description of Other Financing Arrangements," "Description
of the Notes," "Description of Capital Stock," "Description of the
Units," "Description of the Debentures," "Certain Federal Income Tax
Considerations," and "United States Federal Income Tax Consequences,"
insofar as
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<PAGE>
they purport to describe the provisions of laws and documents referred
to therein, are correct in all material respects.
(xv) Neither the issuance or sale of the Securities under the
circumstances contemplated by this Agreement nor the use of proceeds
in the manner contemplated by the Offering Circulars under the caption
"Use of Proceeds" will contravene Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part
224) of the Board of Governors of the Federal Reserve System, in each
case as in effect on the date hereof, or as the same may hereafter be
in effect, on the Closing Date; and
(xvi) None of the Securities is of the same class (within the
meaning of Rule 144A under the Securities Act) as securities of WEC or
Woods that are listed on a national securities exchange registered
under Section 6 of the Exchange Act or that are quoted in a United
States automated inter-dealer quotation system.
(xvii) Such counsel shall state that no facts have come to such
counsel's attention in the course of participating with officers and
represen tatives of WEC and Woods in the preparation of the Offering
Circulars (except for financial statements and schedules and other
financial data contained therein, as to which such counsel need
express no opinion) to lead it to believe that any part of the
Offering Circulars, as of the dates thereof or the Closing Date,
contained or contains any untrue statement of a material fact or
omitted or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Purchaser shall have received from Skadden, Arps, Slate,
Meagher & Flom LLP, counsel for the Purchaser, such opinion or opinions,
dated such Closing Date, with respect to the incorporation of WEC, Woods,
the validity of the Securities, the Offering Circulars, the exemption from
registration for the offer and sale of the Securities by the Issuers to the
Purchaser and the resales by the Purchaser as contemplated hereby and other
related matters as the Purchaser may require, and WEC and Woods shall have
furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(e) The Purchaser shall have received a certificate, dated the Closing
Date, of the President or any Vice President and a principal financial or
accounting officer of each of WEC and Woods in which such officers, to the
best of their knowledge after reasonable investigation, shall state that
the
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<PAGE>
representations and warranties of WEC and Woods in this Agreement are
true and correct, that WEC and Woods have complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date, and that, subsequent to the date of the
most recent financial statements in the Offering Circulars, there has been
no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of WEC and Woods, taken as a
whole, except as set forth in or contemplated by the Offering Circular or
as described in such certificate.
(f) The Purchaser shall have received letters, dated the Closing
Date, of Ernst & Young LLP which meets the requirements of subsection
(a)(I) of this Section, of Grant Thorton LLP which meets the requirements
of subsection (a)(II) of this Section and of Greenwalt Sponsel & Co., Inc.
which meets the requirements of subsection (a)(III) of this Section except
that, in each case, the specified date referred to in such subsections will
be a date not more than three business days prior to the Closing Date for
the purposes of this subsection.
(g) The Securities shall have been designated PORTAL securities in
accordance with the rules and regulations adopted by the NASD relating to
trading in PORTAL.
(h) On or prior to the Closing Date (i) each of the Transactions
shall have been consummated; (ii) the Transaction Documents shall continue
to be in full force and effect in accordance with the terms thereof; and
(iii) WEC or Woods shall have provided to each of the Purchaser and counsel
to the Purchaser copies of all Transaction Documents delivered to the
parties relating to the Transactions (including but not limited to legal
opinions relating thereto).
(i) The issuance and sale of the Notes and the Units shall have been
consummated concurrently in accordance with the terms of this Agreement and
the description thereof in the Offering Circulars.
WEC or Woods will furnish the Purchaser with such conformed copies of such
opinions, certificates, letters and documents as the Purchaser reasonably
requests. the Purchaser may in its sole discretion waive compliance with any
conditions to the obligations of the Purchaser hereunder.
7. Indemnification and Contribution. (a) WEC and Woods will indemnify and
hold harmless the Purchaser, its directors and officers and each person, if any,
who controls the Purchaser within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which the Purchaser may become subject, under the Securities Act or the Exchange
Act or otherwise, insofar as
25
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such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Offering Circulars, or any amendment or
supplement thereto, or any related preliminary offering circular, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, including any
losses, claims, damages or liabilities arising out of or based upon the Issuers'
failure to perform its obligations under Section 5(a) of this Agreement, and
will reimburse the Purchaser for any legal or other expenses reasonably incurred
by the Purchaser in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
--------
however, that neither of WEC or Woods will be liable in any such case to the
- -------
extent that any such loss, claim, damage or liability (or actions in respect
thereof) arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to WEC or
Woods by the Purchaser specifically for use therein, it being understood and
agreed that the only such information consists of the information described as
such in subsection (b) below.
(b) the Purchaser will indemnify and hold harmless WEC and Woods,
their directors and officers and each person, if any, who controls WEC and Woods
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities to which WEC or Woods may become subject, under
the Securities Act or the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Offering Circulars, or any amendment or supplement
thereto, or any related preliminary offering circular, or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to WEC or Woods by the Purchaser
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by WEC or Woods in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred, it being understood and agreed that the only such information
furnished by the Purchaser consists of the following information in the Offering
Circular furnished on behalf of each Purchaser: the seventh and eighth
paragraphs under the caption "Plan of Distribution," provided, however, that the
-------- -------
Purchaser shall not be liable for any losses, claims, damages or liabilities
arising out of or based upon WEC's or Woods' failure to perform their
obligations under Section 5(a) of this Agreement.
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(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action and does not include a statement as
to or an admission of fault, culpability or failure to act by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by WEC and Woods on the
one hand and the Purchaser on the other from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
WEC and Woods on the one hand and the Purchaser on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by WEC and Woods on the one hand and the Purchaser on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by WEC and Woods bear to
the total discounts and commissions received by the Purchaser from WEC and Woods
under this Agreement. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by WEC or Woods or the Purchaser and the parties'
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relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), the
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total price at which the Securities purchased by it were resold
exceeds the amount of any damages which the Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
(e) The obligations of WEC and Woods under this Section shall be in
addition to any liability which WEC or Woods may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
the Purchaser within the meaning of the Securities Act or the Exchange Act; and
the obligations of the Purchaser under this Section shall be in addition to any
liability which the Purchaser may otherwise have and shall extend, upon the same
terms and conditions to each person, if any, who controls WEC or Woods within
the meaning of the Securities Act or the Exchange Act.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of WEC
and Woods or their officers and of the Purchaser set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Purchaser, WEC, Woods, or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and payment
for the Securities. If this Agreement is terminated or if for any reason the
purchase of the Securities by the Purchaser is not consummated, the Issuers
shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 5 and the respective obligations of WEC, Woods and the
Purchaser pursuant to Section 7 shall remain in effect. If the purchase of the
Securities by the Purchaser is not consummated other than solely because of the
occurrence of any event specified in clause (C), (D) or (E) of Section 6(b)(ii),
the Issuers will reimburse the Purchaser for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by it in
connection with the offering of the Securities.
9. Notices. All communications hereunder will be in writing and, if sent
to the Purchaser will be mailed, delivered or telegraphed and confirmed to the
Purchaser, at Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention:
Investment Banking Department - Transactions Advisory Group, or, if sent to WEC
or Woods, will
28
<PAGE>
be mailed, delivered or telegraphed and confirmed to it at Woods Equipment
Company, 6944 Newbury Road, Rockford, Il 61108, Attention: Chief Financial
Officer.
10. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Securities shall be entitled to
enforce the agreements for their benefit contained in the second and third
sentences of Section 5(b) hereof against the Issuers as if such holders were
parties thereto.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
12. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
EACH OF WEC AND WOODS HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
THE FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
29
<PAGE>
If the foregoing is in accordance with the Purchaser's understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among WEC, Woods and the Purchaser
in accordance with its terms.
Very truly yours,
WEC COMPANY
By: /s/ Thomas J. Laird
--------------------------------------------
Name: Thomas J. Laird
Title: President and Chief Executive Officer
WOODS EQUIPMENT COMPANY
By: /s/ Thomas J. Laird
--------------------------------------------
Name: Thomas J. Laird
Title: President and Chief Executive Officer
<PAGE>
The foregoing Purchase Agreement is hereby confirmed and accepted as of the date
first above written.
Credit Suisse First Boston Corporation
By: /s/ Joseph Fashano
--------------------------
Name: Joseph Fashano
Title:
<PAGE>
Exhibit 12.1
------------
Computations of the Ratios of Earnings to Fixed Charges
(in thousands)
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------------------------------------
Fiscal Year Ended, Six Months Ended,
----------------------------------------------------------------- ------------------
December 31, December 30, December 28, December 27, January 2, June 28, July 3,
1994 1995 1996 1997 1999 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges
Interest expense 9,132 8,184 7,326 7,831 10,261 3,964 5,585
Rental expense included in fixed charges 237 340 400 522 703 390 397
----------------------------------------------------------------- ------------------
Total fixed charges 9,369 8,524 7,726 8,353 10,964 4,354 5,982
----------------------------------------------------------------- ------------------
Earnings:
Pre-tax (loss) income (2,526) 1,938 4,623 589 (2,741) 6,271 3,748
Plus: fixed charges 9,369 8,524 7,726 8,353 10,964 4,354 5,982
----------------------------------------------------------------- ------------------
Total earnings 6,843 10,462 12,349 8,942 8,223 10,625 9,730
----------------------------------------------------------------- ------------------
Ratio of earnings to fixed charges 0.7 (a) 1.2 1.6 1.1 0.8 (a) 2.4 1.6
<CAPTION>
Pro Forma
-----------------------------------------------------
Fiscal Twelve
Year Ended Six Months Ended, Months Ended
-----------------------
January 2, June 27, July 3, July 3,
1999 1998 1999 1999
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Fixed charges
Interest expense 21,353 10,177 10,177 21,353
Rental expense included in fixed charges 1,122 541 557 1,138
--------- --------- --------- ---------
Total fixed charges 22,475 10,718 10,734 22,491
--------- --------- --------- ---------
Earnings:
Pre-tax (loss) income (6,693) 4,651 3,078 (8,266)
Plus: fixed charges 22,475 10,718 10,734 22,491
--------- --------- --------- ---------
Total earnings 15,782 15,369 13,812 14,225
--------- --------- --------- ---------
Ratio of earnings to fixed charges 0.7 (b) 1.4 1.3 0.6 (b)
</TABLE>
(a) Earnings were insufficient to cover fixed charges by $2,526 for the fiscal
year ended December 31, 1994, and by $2,741 for the fiscal year ended
January 2, 1999.
(b) Pro forma earnings were insufficient to cover fixed charges by $6,693 for
the fiscal year ended January 2, 1999 and by $8,266 for the twelve months
ended July 3, 1999.
<PAGE>
Exhibit 21.1
------------
List of Subsidiaries
WEC Company, a Delaware corporation, is the only subsidiary of Woods
Equipment Company. All of the outstanding capital stock of WEC Company is owned
by Woods Equipment Company.
<PAGE>
Exhibit 23.1
------------
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report, dated February 19, 1999, except for Note 15, as to which the
date is July 23, 1999, on the consolidated balance sheets of Woods Equipment
Company as of January 2, 1999 and December 27, 1997, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the three fiscal years in the period ended January 2, 1999 and
our report, dated June 18, 1999, on the balance sheets of Central Fabricators,
Inc. as of December 31, 1998 and 1997, and the related statements of income,
changes in stockholders' equity, and cash flows for the years then ended; in the
Registration Statement (Form S-4 No. 333-XXXXX) and related Prospectus of Woods
Equipment Company and WEC Company for the registration of $51,927,000 of 15.0%
Senior Discount Debentures due 2011, Series B, of Woods Equipment Company, and
$130,000,000 of 12.0% Senior Notes due 2009, Series B, of WEC Company.
/s/ Ernst & Young LLP
Chicago, Illinois
October 8, 1999
<PAGE>
Exhibit 23.2
------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated December 17, 1998, accompanying the
financial statements of Tru-Part Manufacturing Corporation contained in the
Registration Statement. We consent to the use of the aforementioned report in
the Registration Statement, and to the use of our name as it appears under the
caption "Experts."
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
October 7, 1999
<PAGE>
Greenwalt Sponsel & Co., Inc.
Consultants to Management Certified Public Accountants
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our audit report dated August 31, 1999, accompanying the audited
financial statements of Alitec Corporation Attachments Division contained in the
Registration Statement. We have issued our review report dated September 10,
1999, related to the reviewed financial statements of Alitec Corporation
Attachments Division contained in the Registration Statement. We consent to use
of the aforementioned reports in the Registration Statement, and to the use of
our name as it appears under the caption "Experts."
/s/ Greenwalt Sponsel & Co., Inc.
October 7, 1999
<PAGE>
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Ave, Suite 2700 75201
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Ave, Suite 2700
Dallas, Texas 75201
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
WOODS EQUIPMENT COMPANY
(Exact name of obligor as specified in its charter)
Delaware 36-3868249
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
6944 Newburg Road 61108
Rockford, Illinois (Zip code)
(Address of principal executive offices)
--------------------------
15% Senior Discount Debentures due 2011
(Title of the indenture securities)
================================================================================
<PAGE>
GENERAL
1. General Information.
-------------------
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of Dallas (11th District), Dallas, Texas
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency, Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
------------------------------------------
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
--------------------------------
Furnish the following information as to each class of voting securities of
the Trustee:
As of August 18, 1999
________________________________________________________________________________
Col A. Col B.
________________________________________________________________________________
Title of Class Amount Outstanding
________________________________________________________________________________
Capital Stock - par value $100 per share 5,000 shares
4. Trusteeships under Other Indentures.
-----------------------------------
Not Applicable
5. Interlocking Directorates and Similar Relationships with the Obligor or
-----------------------------------------------------------------------
Underwriters.
------------
Not Applicable
<PAGE>
6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
----------------------------------------------------------------------
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their Officials.
-------------------------------------------------------------------------
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
------------------------------------------------------
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
-------------------------------------------------------
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
--------------------------------------------------------------------
Affiliates or Security Holders of the Obligor.
---------------------------------------------
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person Owning
-------------------------------------------------------------------------
50 Percent or More of the Voting Securities of the Obligor.
----------------------------------------------------------
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
------------------------------------------
Not Applicable
13. Defaults by the Obligor.
-----------------------
Not Applicable
14. Affiliations with the Underwriters.
----------------------------------
Not Applicable
15. Foreign Trustee.
---------------
Not Applicable
16. List of Exhibits.
----------------
T-1.1 - A copy of the Articles of Association of U.S. Trust Company of
Texas, N.A.; incorporated herein by reference to Exhibit T-1.1
filed with Form T-1 Statement, Registration No. 22-21897.
<PAGE>
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to Exhibit
T-1.2 filed with Form T-1 Statement, Registration No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference to
Exhibit T-1.3 filed with Form T-1 Statement, Registration No.
22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas, N.A.,
as amended to date; incorporated herein by reference to Exhibit
T-1.4 filed with Form T-1 Statement, Registration No. 22-21897.
T-1.6 - The consent of the Trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of August 18, 1999, the Trustee had 5,000 shares of Capital Stock
outstanding, all of which are owned by U.S. T.L.P.O. Corp. As of August 18,
1999, U.S. T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of
which are owned by U.S. Trust Corporation. U.S. Trust Corporation had
outstanding 18,597,534 shares of $1 par value Common Stock as of August 18,
1999.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
In as much as this Form T-1 is filed prior to the ascertainment by the Trustee
of all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the Trustee
disclaims responsibility for the accuracy or completeness of such information.
________________
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, U.S
Trust Company of Texas, N.A., a national banking association organized under the
laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
18/th/ day of August, 1999.
U.S. Trust Company
of Texas, N.A., Trustee
By: /s/ Gerald Ganey
-----------------------------------
Authorized Officer
<PAGE>
Exhibit T-1.6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of NEXTLINK
Communications, Inc., Senior Discount Notes, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefore.
U.S. Trust Company of Texas, N.A.
By: ___________________________________
Authorized Officer
<PAGE>
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-005
Office of the Comptroller of the Currency
Federal Financial Institutions Examination Council OMB Number: 1557-0081
Expires March 31, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
(1)
Please Refer to Page I,
(LOGO) Table of Contents, for
the required disclosure
of estimated burden.
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION
AND INCOME FOR A BANK WITH DOMESTIC
OFFICES ONLY AND TOTAL ASSETS OF LESS
THAN $100 MILLION OR MORE BUT LESS THAN
$300 MILLION - - FFIEC 033
(19990331)
REPORT AT THE CLOSE OF BUSINESS March 31, 1999 ----------
(RCRI 9999)
This report form is to be filed by banks with domestic
This report is required by law: 12 U.S.C. Section (S). 324 (State offices only. Banks with branches and consolidated
member banks); 12 U.S.C. Section (S). 1817 (State nonmember banks); subsidiaries in U.S. territories and possessions, Edge
and 12 U.S.C. Section (S). 161 (National banks). or Agreement subsidiaries, foreign branches, consolidated
foreign subsidiaries, or International Banking Facilities
must file FFIEC 031.
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an The Reports of Condition and Income are to be prepared in
authorized officer and the Report of Condition must be attested accordance with Federal regulatory authority instructions.
to by not less than two directors (trustees) for State nonmember NOTE: these instructions may in some cases differ from
banks and three directors for State member and National Banks. generally accepted accounting principles.
I, /s/ Alfred B. Childs, Managing Director We, the undersigned directors (trustees), attest to the
---------------------------------------
Name and Title of Officer Authorized to Sign Report correctness of this Report of Condition (including the
supporting schedules) and declare that it has been examined
of the named bank do hereby declare that these Reports of by us and to the best of our knowledge and belief has been
Condition and Income (including the supporting schedules) prepared in conformance with the instructions issued by the
have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and
appropriate Federal regulatory authority and are true to the best correct
of my knowledge and belief.
/s/ Stuart M. Pearman
----------------------------
Director (Trustee)
/s/ Alfred B. Childs /s/. J. T. More, Jr.
- ------------------------------------------ ----------------------------
Signature of Officer Authorized to Sign Report Director (Trustee)
April 21, 1999 /s/. Arthur Whit
- ------------------------------------------ ----------------------------
Date of Signature Director (Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Submission of Reports
Each bank must prepare its Reports of Condition and Income either: For electronic filing assistance, contact EDS Call Report
(a) in electronic form and then file the computer data Services, 2150 North Prospect Avenue, Milwaukee, WI 53202,
file directly with the banking agencies' collection agent, telephone (800) 255-1571.
Electronic Data Systems Corporation (EDS), by modem or on
computer diskette; or To fulfill the signature and attestation requirement for the
(b) in hard-copy (paper) form and arrange for another or Reports of Condition and Income for this report date,
party to convert the paper report to electronic form. attach this signature page to the hard-copy record of the
That party (if other than EDS) must transmit the bank's completed report that the bank places in its files.
computer data file to EDS.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
FDIC Certificate Number 33217 US Trust Company of Texas, National Association
----------- ---------------------------------------------------
(RCRI 9050) Legal Title of Bank (TEXT 9010)
Dallas_____________________________________________
City (TEXT 9130)
TX 75201
---------------------------------------------------
State Abbrev. (TEXT 9200) Zip Code. (TEXT 9220)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
U.S. Trust Company of Texas, N.A. Call Date: 3/31/1999 State #: 48-6797 FFIEC 033
2001 Ross Avenue, Suite 2700 Vendor ID: D Cert #: 33217 RC-1
Dallas, TX 75201 Transit #: 11101765
---------------
9
---------------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR March 31, 1999
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC - Balance Sheet
<TABLE>
<CAPTION>
C200 more than
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions:
RCON
----
a. Noninterest-bearing balances and currency and coin (1,2)____________________ ______ _______ 0081 1,297 1.a
--------
b. Interest bearing balances(3)________________________________________________ ______ _______ 0071 696 1.b
--------
2. Securities:
--------
a. Held-to-maturity securities (from Schedule RC-B, column A)__________________ ______ _______ 1754 0 2.a
--------
b. Available-for-sale securities (from Schedule RC-B, column D)________________ ______ _______ 1773 131,683 2.b
--------
3. Federal funds sold (4) and securities purchased under agreements to resell: 1350 6,000 3
--------
4. Loans and lease financing receivables: RCON
---- _______
a. Loans and leases, net of unearned income (from Schedule RC-C)_______________ 2122 22,709 4.a
_______
b. LESS: Allowance for loan and lease losses___________________________________ 3123 260 4.b
-------
c. LESS: Allocated transfer risk reserve_______________________________________ 3128 0 4.c
-------
d. Loans and leases, net of unearned income, allowance, and reserve RCON
---- --------
(item 4.a minus 4.b and 4.c)________________________________________________ ______ _______ 2125 22,249 4.d
--------
5. Trading assets__________________________________________________________________ ______ _______ 3545 0 5.
--------
6. Premises and fixed assets (including capitalized leases)________________________ ______ _______ 2145 917 6.
--------
7. Other real estate owned (from Schedule RC-M)____________________________________ ______ _______ 2150 0 7.
--------
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)____________________________________________________________ ______ _______ 2130 0 8.
--------
9. Customers' liability to this bank on acceptances outstanding____________________ ______ _______ 2155 0 9.
--------
10. Intangible assets (from Schedule RC-M)__________________________________________ ______ _______ 2143 1,950 10.
--------
11. Other assest (from Schedule RC-F)_______________________________________________ ______ _______ 2160 2,527 11.
--------
12. Total assets (sum of items 1 through 11)________________________________________ ______ _______ 2170 167,519 12.
--------
</TABLE>
(1) Includes cash items in process of collection and unposted debits.
(2) Included time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
U.S. Trust Company of Texas, N.A. Call Date: 3/31/1999 State #: 48-6797 FFIEC 033
2001 Ross Avenue, Suite 2700 Vendor ID: D Cert #: 33217 RC-2
Dallas, TX 75201 Transit #: 11101765
---------------
10
---------------
</TABLE>
<TABLE>
<CAPTION>
Schedule RC - Continued
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of ---- --------
columns A and C from Schedule RC-E)_________________________________________ RCON 2200 141,618 13.a
---- -------- --------
(1) Noninterest-bearing____________________________________________________ 6631 8,794 13.a.1
--------
(2) Interest-bearing_______________________________________________________ 6636 132,824 13.a.2
--------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing____________________________________________________
(2) Interest-bearing_______________________________________________________
--------
14. Federal funds purchased(2) and securities sold under agreements to repurchase: RCON 0 14
----
2800
--------
15. a. Demand notes issued to the U.S. Treasury____________________________________ ______ ________ 2840 0 15.a
--------
b. Trading liabilities_________________________________________________________ ______ ________ 3548 0 15.b
--------
16. Other borrowed money:
a. With a remaining maturity of one year or less_______________________________ ______ ________ 2332 0 16.a
--------
b. With a remaining maturity of more than one year through three
years_______________________________________________________________________ ______ ________ A547 2,000 16.b
--------
c. With a remaining maturity of more than three years__________________________ ______ _______ A548 1,000 16.c
--------
17. Not applicable
--------
18. Bank's liability on acceptances executed and outstanding_______________________ ______ _______ 2920 0 18.
--------
19. Subordinated notes and debentures______________________________________________ ______ _______ 3200 0 19.
--------
20. Other liabilities (from Schedule RC-G)_________________________________________ ______ _______ 2930 2,317 20.
--------
21. Total liabilities (sum of items 13 through 20)_________________________________ ______ _______ 2948 146,935 21.
--------
22. Not applicable
EQUITY CAPITAL
RCON
----
--------
23. Perpetual preferred stock and related surplus__________________________________ ______ _______ 3838 7,000 23.
--------
24. Common stock___________________________________________________________________ ______ _______ 3230 500 24.
--------
25. Surplus (exclude all surplus related to preferred stock)_______________________ ______ _______ 3839 8,384 25.
--------
26. a. Undivided profits and capital reserves_____________________________________ ______ _______ 3632 4,406 26.a
--------
b. Net unrealized holding gains (losses) on available-for-sale securities____ ______ _______ 8434 294 26.b
--------
27. Cumulative foreign currency translation adjustments__________________________
--------
28. Total equity capital (sum of items 23 through 27)____________________________ ______ _______ 3210 20,584 28.
--------
29. Total liabilities and equity capital (sum of items 21 and 28)________________ ______ _______ 2257 167,519 29.
--------
Memorandum
To be reported only with the March Report of Condition. Number
1. Indicate in the box at the right the number of the statement below that best describes the ---------
most comprehensive level of auditing work performed for the bank by independent
external auditors as of any date during 1998_____________________________________________________ 6724 1 M.1
---------
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
</TABLE>
<PAGE>
<TABLE>
<S> <C>
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering
authority)
</TABLE>
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE>
EXHIBIT 25.2
FORM T-1
==============================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
==================
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
=================
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
==================
WEC COMPANY
(Exact name of obligor as specified in its charter)
Delaware 36-3868248
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
6944 Newburg Road
Rockford, Illinois 61108
(Address of principal executive offices) (Zip Code)
__________________
12% Senior Notes
Due July 15, 2009
(Title of the indenture securities)
==============================================
<PAGE>
- 2 -
GENERAL
1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
ChiRex Inc. currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and
15 of Form T-1 are not required under General Instruction B.
16. List of Exhibits
----------------
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to Form
T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. List of Exhibits
----------------
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form
T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
- ----
As of August 18, 1999, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 18th day
of August, 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: ____________________________________
Gerard F. Ganey
Senior Vice President
Exhibit T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
<PAGE>
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/ Gerald Ganey
- ---------------------------
By: S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
March 31, 1999
--------------
($ IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
- ------
Cash and Due from Banks $ 139,755
Short-Term Investments 85,326
Securities, Available for Sale 528,160
Loans 2,081,103
Less: Allowance for Credit Losses 17,114
----------
Net Loans 2,063,989
Premises and Equipment 57,765
Other Assets 125,780
----------
Total Assets $3,000,775
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 623,046
Interest Bearing 1,875,364
----------
Total Deposits 2,498,410
Short-Term Credit Facilities 184,281
Accounts Payable and Accrued Liabilities 126,652
----------
Total Liabilities $2,809,343
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 121,759
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 1,637
----------
Total Stockholder's Equity 191,432
----------
Total Liabilities and
Stockholder's Equity $3,000,775
==========
</TABLE>
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Comptroller
May 18, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> JAN-02-1999 JAN-01-2000
<PERIOD-START> DEC-28-1997 JAN-03-1999
<PERIOD-END> JAN-02-1999 JUL-03-1999
<CASH> 1,352 0
<SECURITIES> 0 0
<RECEIVABLES> 24,280 29,787
<ALLOWANCES> 120 51
<INVENTORY> 21,362 18,510
<CURRENT-ASSETS> 52,266 53,429
<PP&E> 39,024 41,581
<DEPRECIATION> 13,079 14,993
<TOTAL-ASSETS> 108,665 109,166
<CURRENT-LIABILITIES> 12,587 16,560
<BONDS> 0 0
30,110 31,274
0 0
<COMMON> 6 6
<OTHER-SE> (54,230) (53,519)
<TOTAL-LIABILITY-AND-EQUITY> 108,665 109,166
<SALES> 154,734 85,797
<TOTAL-REVENUES> 154,734 85,797
<CGS> 113,205 61,588
<TOTAL-COSTS> 147,214 76,464
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10,261 5,585
<INCOME-PRETAX> (2,741) 3,748
<INCOME-TAX> (438) 1,826
<INCOME-CONTINUING> (2,303) 1,922
<DISCONTINUED> 0 0
<EXTRAORDINARY> 795 0
<CHANGES> 0 0
<NET-INCOME> (3,098) 1,922
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
