EXHIBIT 10.7
PACIFIC AEROSPACE & ELECTRONICS, INC.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
5.0% Senior Secured Notes due May 1, 2007
Dated as of March 19, 2002
Xxxxxxxxx & Company, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Pacific Aerospace & Electronics, Inc., a Washington corporation
(the "Company"), hereby agrees with the Initial Purchaser (as defined herein)
and First Union National Bank, a national banking association, as Collateral
Agent (in such capacity, the "Collateral Agent"), as follows:
SECTION 1. AUTHORIZATION OF NOTES
The Company will authorize the issuance and sale of $36,000,000
aggregate principal amount of its 5.0% Senior Secured Notes due May 1, 2007 (the
"Notes", such term to include any Notes issued in substitution therefor or
replacement thereof pursuant to Section 13.3). The Notes shall be substantially
in the form of Exhibit A, with such changes therefrom, if any, as may be
approved by the Holders and the Company. Certain capitalized terms used in this
Note Purchase Agreement (as amended, restated or supplemented from time to time,
this "Agreement") are defined in Section 12.
SECTION 2. SALE AND PURCHASE OF NOTES; PAYMENTS ON THE NOTES
2.1 Sale and Purchase of the Notes.
Subject to the terms and conditions of this Agreement, the
Company will issue and sell to Jefferies & Company, Inc. (the "Initial
Purchaser"), and the Initial Purchaser will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount of $36,000,000
(the "Principal Amount"), at a purchase price equal to the Original Issue Price
less the Initial Discount. From and after the Closing provided for in Section 3,
the Company will use the proceeds of the sale of the Notes solely as provided in
Section 5.20.
2.2 Payments of Principal.
The Company shall repay the entire unpaid principal amount of the
Notes, together with accrued and unpaid interest thereon, on May 1, 2007 (the
"Maturity Date").
2.3 Interest on the Notes.
(a) The outstanding Principal Amount of the Notes shall bear
interest at an annual rate equal to 5.0%, payable semi-annually in arrears in
cash on each May 1 and November 1 commencing on May 1, 2002; provided, however,
that during the occurrence and
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continuance of an Event of Default, the Notes shall bear interest, payable on
demand, at a rate per annum equal at all times to 8.0% per annum. All
computations of interest shall be made on the basis of a year of 360 days, for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
(b) On or prior to April 27, 2007, the Company shall pay to the
Holders an amount equal to all amounts constituting accrued but unpaid interest
on the Notes for federal income tax purposes as of such date, including, without
limitation, all original issue discount.
2.4 Payments Free of Taxes.
Any and all payments by the Company under or in respect of the
Notes (including by any repayment or repurchase of the Notes in accordance with
the terms hereof) shall be made free and clear of and without deduction for any
and all present or future Taxes and all liabilities with respect thereto,
excluding Taxes measured by a Holder's net income and franchise taxes imposed on
it by the jurisdiction under the laws of which such Holder is organized or is
required to be qualified to do business or any political subdivision of either
of the foregoing. If the Company shall be required by law to deduct any Taxes
from or in respect of any sum payable under or in respect of the Notes
(including by the repayment or repurchase thereof), (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including, without limitation, deductions applicable to additional sums payable
under this Section 2.4), such Holder receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Company shall
make such deductions and (iii) the Company shall pay the full amount deducted to
the relevant taxing authority or other Governmental Authority in accordance with
applicable law.
SECTION 3. CLOSING
The sale of the Notes to the Initial Purchaser shall take place
at the offices of Milbank, Tweed, Xxxxxx & XxXxxx, 0 Xxxxx Xxxxxxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000-0000 at 11:00 a.m., New York City time, at a closing (the
"Closing") on March 19, 2002, or such later date as may be agreed upon by the
Company and the Initial Purchaser (such date, the "Closing Date"). At the
Closing, the Company will deliver to the Initial Purchaser Notes in the
principal amount of the Principal Amount, in the form of a single Note (or such
greater number of Notes as the Initial Purchaser may request; provided that each
such Note shall be in a denomination of at least $1,000,000 or integral
multiples of $100,000), each dated the Closing Date and registered in the
Initial Purchaser's name (or in the name of its nominee or another Holder),
against payment of the purchase price therefor on the Closing Date by transfer
of immediately available funds to the Company, or as otherwise directed by the
Company in writing (at least two (2) days prior to the Closing Date). If at the
Closing the Company shall fail to tender such Notes to the Initial Purchaser as
provided above in this Section 3 or if any of the conditions specified in
Section 4 shall not have been fulfilled to the Initial Purchaser's satisfaction,
the Initial Purchaser shall, at its election, be relieved of all further
obligations under this Agreement, without thereby waiving any other rights it
may have by reason of such failure or such nonfulfillment.
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SECTION 4. CONDITIONS TO CLOSING
The Initial Purchaser's obligation to purchase and pay for the
Notes to be sold to it at the Closing is subject to the fulfillment to its
satisfaction, prior to or at the Closing, of the following conditions:
4.1 Representations and Warranties.
The representations and warranties of the Company and each of its
Subsidiaries contained in this Agreement, the other Operative Agreements, and
those other agreements otherwise made in writing by or on behalf of the Company
or any of its Subsidiaries in connection with the transactions contemplated by
this Agreement, shall be true and correct when made and at the time of the
Closing, except for any representation and warranty that is expressly stated to
relate to a specific date, in which case such representation and warranty shall
be true and correct as of such earlier date.
4.2 Performance; No Default.
The Company and each of its Subsidiaries shall have performed and
complied with all agreements and conditions contained in this Agreement and each
other Operative Agreement required to be performed or complied with by it prior
to or at the Closing, and at the time of the Closing no Default or Event of
Default under this Agreement or default by any party under any Operative
Agreement shall have occurred and be continuing.
4.3 Compliance Certificates.
The Initial Purchaser shall have received an Officer's
Certificate of the Company, dated the Closing Date and satisfactory in substance
and form to it, certifying that (i) the conditions specified in Sections 4.1 and
4.2 have been fulfilled and (ii) no Material Adverse Effect has occurred
subsequent to November 30, 2001 other than (A) the Company's failure to pay (1)
interest on the Old Notes and (2) amounts due under the DDJ Loan Agreement and
(B) the breach by the Company and its Subsidiaries of certain covenants under
the Old Notes Indenture, the DDJ Loan Agreement and the KeyBank Promissory
Notes.
4.4 Opinions of Counsel.
The Initial Purchaser shall have received favorable opinions from
(a) Milbank, Tweed, Xxxxxx and XxXxxx LLP, New York counsel for the Company and
each of its Subsidiaries, substantially in the form of Exhibit B-1 and (b) Xxxxx
Xxxxxx Xxxxxxxx LLP, Washington counsel for the Company and each of its
Subsidiaries, substantially in the form of Exhibit B-2, and in each case
covering such other matters as the Initial Purchaser may reasonably request,
each addressed to the Initial Purchaser, dated the Closing Date and otherwise
reasonably satisfactory in substance and form to the Initial Purchaser. The
Company and each of its Subsidiaries hereby direct their counsel referred to in
clauses (a) and (b) above to deliver to the Initial Purchaser such opinions and
letters to be delivered by it and authorize the Initial Purchaser to rely
thereon.
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4.5 Legal Investment.
On the Closing Date the Initial Purchaser's purchase of Notes
shall be permitted by the laws and regulations of each jurisdiction to which the
Initial Purchaser's investments are subject. If requested by the Initial
Purchaser by prior written request to the Company, the Initial Purchaser shall
have received, at least five (5) Business Days prior to the Closing, an
Officers' Certificate of the Company or any of its Subsidiaries, as the case may
be, certifying as to such matters of fact as the Initial Purchaser may
reasonably specify to enable it to determine whether such purchase is so
permitted.
4.6 Operative Agreements.
Each of the Operative Agreements shall be in full force and
effect, and shall constitute the legal, valid and binding and enforceable
obligations of the respective parties thereto, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting the rights and
remedies of creditors and by general equitable principles, regardless of whether
such enforceability is considered in a proceeding in equity or law. No default
or accrued right of termination on the part of any of the parties to the
Operative Agreements (other than the Initial Purchaser) shall exist thereunder
as of the Closing Date, and the Initial Purchaser shall have received a fully
executed original, or a true and complete copy, of each such document (other
than the Notes).
4.7 Use of Proceeds.
At the time of the Closing, the Company shall have used the net
proceeds of the sale of the Notes to the Initial Purchaser, solely in accordance
with Section 5.20.
4.8 Proceedings and Documents.
All proceedings in connection with the transactions contemplated
by this Agreement and the Operative Agreements and all documents and instruments
incident to such transactions shall be reasonably satisfactory to the Initial
Purchaser and its special counsel, and the Initial Purchaser and its special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as the Initial Purchaser or such special counsel may
reasonably request.
4.9 Rating.
Prior to the Closing, the Notes shall have received an estimated
rating of at least B3/B- from Xxxxx'x and S&P, which rating shall remain in
effect as of the Closing.
4.10 Insurance.
Insurance complying with the provisions of Section 8.4 hereof
shall be in full force and effect.
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4.11 CUSIP Number.
The Company shall have obtained for the Notes a CUSIP Number
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners).
4.12 Exchange.
The "Closing" (as defined in the Exchange Agreement) shall have
occurred, and the Initial Purchaser shall have received an executed copy of the
Exchange Agreement and each of the other documents executed and delivered in
connection therewith, each of which shall be in full force and effect.
4.13 Release of Liens; Financing Statements.
(a) The Initial Purchaser shall have received evidence reasonably
satisfactory to it that upon payment by the Company of the outstanding amounts
under the DDJ Loan Agreement with the proceeds of the Notes sold on the Closing
Date, (i) the notes representing such indebtedness shall be cancelled, (ii) all
obligations of the Company and its Subsidiaries and any of their respective
Affiliates under such DDJ Loan Agreement and notes and any loan or other
agreement related thereto shall be fully satisfied, and (iii) any and all Liens
under such DDJ Loan Agreement shall be completely and irrevocably released.
(b) The Initial Purchaser shall have received duly completed and
executed Deeds of Trust and all relevant Uniform Commercial Code financing
statements (Form UCC-1) for all jurisdictions as may be necessary or, in the
reasonable opinion of the Initial Purchaser, desirable to perfect the Lien
created by the Collateral Documents, and the Company shall have taken all other
actions required or reasonably requested by the Initial Purchaser in respect of
the creation and perfection of the Liens created pursuant to the Collateral
Documents (including, without limitation, the delivery of all security
certificates).
4.14 Corporate Documents.
The Initial Purchaser shall have received a copy of the
Certificate of Incorporation or other comparable organizational document of the
Company and each of its Subsidiaries, certified as of a recent date by the
Secretary of State of the state of incorporation (or other applicable
Governmental Authority) of the Company and each such Subsidiary, together with
certificates of such official attesting to the good standing (or its equivalent)
of the Company and each such Subsidiary.
4.15 Secretary's Certificates.
The Initial Purchaser shall have received copies of (i) the
Company's and each of its Subsidiaries' Certificate of Incorporation and By-Laws
(or other organizational documents), (ii) the resolutions of the Board of
Directors (or other comparable governing body) of the Company and of each
Subsidiary party to an Operative Agreement approving each Operative Agreement to
which it is a party, and (iii) all documents evidencing other necessary
corporate action and required governmental and third party approvals, licenses
and consents with respect to each Operative Agreement and the transactions
contemplated thereby, certified by the Secretary
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of the Company and each such Subsidiary, as the case may be, as being true and
correct and in full force and effect as of the Closing Date.
4.16 Offering Circular.
The Initial Purchaser shall have received a final copy of the
Offering Circular prepared in connection with the offer and sale of the Notes,
dated as of the Closing Date, in a form reasonably satisfactory to the Initial
Purchaser and the Company.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holders that as of the
date hereof and the Closing (before and after giving effect to the transactions
contemplated hereby):
5.1 Corporate Existence; Qualification; Power; Licenses and
Permits.
The Company and each of its Subsidiaries (i) is a corporation
duly incorporated and validly existing under the laws of the jurisdiction of its
incorporation and (ii) is duly qualified and is authorized to do business in
every jurisdiction in which the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect. The Company and each of its
Subsidiaries has (i) all corporate power and authority required to own its
properties and assets and to carry on its business as now conducted and (ii) all
licenses, authorizations, consents, approvals, franchises, leases, permits,
certificates, qualifications, easements, rights of way and other rights required
to carry on its business as now conducted except where the failure to have such
licenses, authorizations, consents, approvals, franchises, leases, permits,
certificates, qualifications, easements, rights of way and other rights could
not reasonably be expected to have a Material Adverse Effect. None of the
Company nor any of its Subsidiaries is in violation of the terms of any such
license, authorization, consent, approval, franchise, lease, permit,
certificate, qualification, easement, right of way or other right in any such
case which would have a Material Adverse Effect.
5.2 Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by the Company and each
of its Subsidiaries of this Agreement and each Operative Agreement to which it
is a party and the consummation by the Company and each such Subsidiary of the
transactions contemplated hereby and thereby, (i) are within the Company's and
each such Subsidiary's corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) except as provided herein or in the Operative
Agreements, require no action by or in respect of, or filing with, any
Governmental Authority, other than the filing of a Form D with the Securities
and Exchange Commission and the "blue sky" filings in all applicable states in
connection with this Agreement and the transactions contemplated hereby, (iv) do
not contravene, or constitute a default under, any provision of any applicable
law, statute, ordinance, regulation, rule, order or other governmental
restriction or of the Articles of Incorporation or By-Laws or other
organizational documents of the Company or any of its Subsidiaries, (v) do not
contravene, or constitute a default under, any agreement, judgment, injunction,
order, decree, indenture, contract, lease, instrument or other commitment to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective assets are bound which
could reasonably be expected to have a Material Adverse Effect, and (vi) will
not result in the
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creation or imposition of any Lien upon any asset of the Company or any of its
Subsidiaries under any existing indenture, mortgage, deed of trust, loan or
credit agreement or other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the or any of their assets may be bound
or affected (except as contemplated herein).
5.3 Binding Effect.
This Agreement and each of the other Operative Agreements has
been duly executed and delivered by the Company and each of its Subsidiaries to
which it is a party and is a legal, valid and binding agreement of the Company
and each such Subsidiary, and is or will be enforceable against the Company and
each such Subsidiary in accordance with their terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws affecting creditors' rights generally
and general principles of equity, and except to the extent that the
indemnification provisions of Section 15 hereof may be limited by federal and/or
state securities laws and public policy considerations.
5.4 Information.
The Company has furnished to the Holders as of the date of this
Agreement the following financial statements (the "Financials") of the Company:
(i) except as described on Schedule 5.4, consolidated balance sheets as of, and
consolidated statements of earnings, changes in consolidated shareholders'
equity and changes in consolidated cash flow for the fiscal year ended May 31,
2001 audited by independent certified public accountants, and (ii) unaudited
consolidated balance sheets as of the end of the most recent fiscal quarter
ending prior to the Closing and the related unaudited consolidated statements of
earnings, changes in shareholders' equity and changes in consolidated cash flow
for the three months then ended. The Financials fairly present the consolidated
financial condition of the Company and its Subsidiaries at the dates thereof and
the results of operations for the periods indicated (subject, in the case of
unaudited financial statements, to normal year-end adjustments), and such
financial statements have been prepared in conformity with GAAP consistently
applied throughout the periods involved (except for omission of notes to the
unaudited Financials).
5.5 Litigation and Judgments.
Except as set forth on Schedule 5.5, there is no (i) injunction,
stay, decree, judgment, writ or order issued and outstanding by any court or
arbitrator or any Governmental Authority or official against the Company or any
of its Subsidiaries or (ii) action, suit, proceeding, litigation, contested
claim, investigation or arbitration pending, or threatened, against or affecting
the Company or any of its Subsidiaries, in each case, which could reasonably be
expected to have a Material Adverse Effect, or which in any manner impairs the
validity of this Agreement or any other Operative Agreement.
5.6 Compliance with ERISA.
None of the Company, any of its Subsidiaries nor any ERISA Affiliate maintains
or contributes to any Benefit Plan or Multiemployer Plan except for the Benefit
Plans and Multiemployer Plans set forth on Schedule 5.6. Each Plan is maintained
and is funded in all material respects in accordance with its terms and in
compliance with all provisions of ERISA and the Code applicable thereto, and the
Company and each of its Subsidiaries and each ERISA
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Affiliate has fulfilled in all material respects its obligations related to the
minimum funding standards of ERISA and the Code for each Plan, is in compliance
in all material respects with the currently applicable provisions of ERISA and
of the Code relating to the qualification with respect to each Plan intended to
be so qualified and has not incurred any material liability (other than routine
liability for premiums) under Title IV of ERISA. No Termination Event has
occurred which has resulted in liability which either has not been satisfied or
is not reflected on the Company's financial statements, nor has any other event
occurred that is likely to result in a Termination Event which could reasonably
be expected to have a Material Adverse Effect. No event or events have occurred
in connection with which the Company or any of its Subsidiaries, any ERISA
Affiliate, or any Plan, directly or indirectly, is likely to be subject to any
liability under ERISA, the Code or any other law, regulation or governmental
order or under any agreement, instrument, statute, rule of law or regulation
pursuant to or under which any such entity has agreed to indemnify or is
required to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirements of, any such statute,
regulation or order which could reasonably be expected to have a Material
Adverse Effect. The Company has made available to the Holders true, correct and
complete copies of the following documents: each Plan and all amendments
thereto, all written interpretations thereof and written descriptions thereof
that have been distributed to employees or former employees of the Company and
each of its Subsidiaries or the ERISA Affiliates, the most recent determination
letter issued by the Internal Revenue Service with respect to each Plan, for the
three most recent plan years, Annual Reports on Form 5500 Series required to be
filed with any Governmental Authority for each Plan, all actuarial reports
prepared for the last three plan years for each Benefit Plan, a listing of all
Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by the Company or any of its Subsidiaries or
any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions, any information that has been provided
to the Company or any of its Subsidiaries or any ERISA Affiliate regarding
withdrawal liability under any Multiemployer Plan. None of the Company or any of
its Subsidiaries has made, or has any obligation to make, annual payments to
former employees of the Company or any of its Subsidiaries or any ERISA
Affiliate under any Retiree Health Plan.
5.7 Taxes.
(a) Except as set forth on Schedule 5.7(a), the Company and each
of its Subsidiaries has timely filed (inclusive of any permitted extensions)
with the appropriate taxing authorities all Tax Returns (including, without
limitation, information returns and other material information) in respect of
Taxes required to be filed through the date hereof. The information filed on
such Tax Returns is complete and accurate in all material respects. To the
Company's knowledge and to each of its Subsidiaries' knowledge, all material
deductions taken by the Company and each such Subsidiary as reflected in such
Tax Returns have been taken in accordance with applicable laws and regulations.
(b) All Taxes, in respect of periods beginning prior to the date
hereof, have been timely paid when due, except where the same are being
contested in good faith by appropriate proceedings and appropriate reserves
therefor have been established and maintained in accordance with GAAP for the
accrual thereof as reflected on the audited consolidated financial statements
for the Company's fiscal year ended May 31, 2000, and, to the extent such
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reserves are maintained for periods after May 31, 2000, consistent with the
Company's past practice.
(c) (i) No material deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental authority against the
Company or any of its Subsidiaries other than such deficiencies of which the
Holders have been notified in writing and which are being contested in good
faith by appropriate proceedings, and appropriate reserves therefor have been
established and maintained as reflected on the audited consolidated financial
statements for the Company's fiscal year ended May 31, 2001 and in accordance
with GAAP, and, to the extent such reserves are maintained for periods after May
31, 2001, consistent with the Company's and each of its Subsidiaries' past
practice and (ii) no tax liens have been filed against any of the Collateral.
There are no pending or threatened audits, investigations or claims for or
relating to any material liability in respect of Taxes, and there are no matters
under discussion with any governmental authorities with respect to Taxes which
are likely to result in a material additional liability for Taxes. For all years
up to and including the fiscal year ended May 31, 1998, either the period during
which any assessments may be made by the Internal Revenue Service have expired
without waiver or extension or the federal income Tax Returns of the Company and
each of its Subsidiaries has been audited by the Internal Revenue Service and
such audits have been closed.
(d) Neither the Company nor any of its Subsidiaries has incurred,
or will incur any material tax liability in connection with (i) the Exchange,
(ii) the other transactions contemplated by the Exchange Agreement or (iii) the
transactions contemplated by this Agreement.
5.8 Subsidiaries.
The Subsidiaries of the Company as of the date of this Agreement
are those listed on Schedule 5.8 attached hereto. The Company is the record and
beneficial owner, either directly or indirectly, of all of the shares of Capital
Stock of each of its Subsidiaries listed on such schedule as being owned by the
Company, and there are no proxies, irrevocable or otherwise, with respect to
such shares. No Capital Stock of any of the Company's Subsidiaries are or may
become required to be issued by reason of any options, warrants, scripts, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of Capital
Stock of any such Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any such Subsidiary is or may become
bound to issue additional shares of its Capital Stock or Stock Equivalents. All
of such respective shares so owned (whether directly or indirectly) by the
Company are owned by it free and clear of any Liens, and all such shares are
validly issued, fully paid and non-assessable.
5.9 Not Investment Companies.
None of the Company or any of its Subsidiaries is (i) an "investment company" or
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, (ii) a "holding company" or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject
to any other law which purports to regulate or restrict its ability to
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borrow money or to consummate the transactions contemplated by this Agreement or
any other Operative Agreement or to perform its obligations hereunder or
thereunder.
5.10 No Conflicting Requirements.
Except as set forth on Schedule 5.10, none of the Company nor any
of its Subsidiaries has violated or is in default under any term or provision of
any charter, by-law, mortgage, indenture, agreement, instrument, statute, rule,
regulation, judgment, decree, order, writ, injunction, contract, lease or other
commitment to which any of them is a party or by which any of them is bound such
that such violations or defaults in the aggregate could reasonably be expected
to have a Material Adverse Effect. None of the Company nor any of its
Subsidiaries know of any dispute regarding any indenture, contract, lease,
agreement, instrument or other commitment which would individually, or when
aggregated with other such disputes, be reasonably likely to have a Material
Adverse Effect.
5.11 Debt.
Schedule 5.11 attached hereto sets forth as of January 31, 2002
all of the Debt of the Company and each of its Subsidiaries and a pro forma
schedule of such Debt as of January 31, 2002, assuming the application of the
proceeds of the Notes in accordance with this Agreement. After application of
the proceeds of the Notes as set forth herein, the Company and each of its
Subsidiaries will have no Debt that is senior, pari passu or subordinated in
right of payment to their Obligations under the Notes or under this Agreement,
except for Debt permitted pursuant to Section 9.1 of this Agreement.
5.12 Title to Properties and Assets.
(a) Except for (i) Liens permitted pursuant to Section 9.4 hereof
and (ii) such imperfections of title that represent imperfections of title or
easements of record, if any, which do not materially detract from the value or
interfere with the use of the properties subject thereto or affected thereby, or
otherwise materially impair business operations, the Company and each of its
Subsidiaries has (a) good and marketable fee simple title to the Owned Real
Property material to their respective businesses and the Owned Real Property on
which a Lien has been granted to the Collateral Agent for the benefit of the
Holders, (b) valid leasehold interests in all of its Leased Real Property
material to their businesses, and (c) good and marketable title to all of the
other material property and assets owned by the Company and each of its
Subsidiaries at any time (including, without limitation, all of their Accounts
and Inventory). Schedule 5.12(a) attached hereto sets forth the Owned Real
Property and the Leased Real Property held by the Company and each of its
Subsidiaries. The Company and each of its Subsidiaries enjoy peaceful and
undisturbed possession of all their material Real Estate and there is no pending
or threatened condemnation proceeding relating to any Real Estate which could
reasonably be expected to have a Material Adverse Effect. No default exists
under any Lease which could reasonably be expected to have a Material Adverse
Effect. All of the Structures and other tangible assets owned, leased or used by
the Company and each of its Subsidiaries in the conduct of their respective
businesses are (a) insured as required by the terms of this Agreement and the
other Operative Agreements, (b) sufficient for the operation of the businesses
of the Company and each such Subsidiary as presently conducted and (c) in
conformity with all applicable laws, ordinances, orders, regulations and other
requirements (including applicable zoning, environmental, motor vehicle safety,
occupational safety and health laws and regulations)
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relating thereto, except where the failure to conform could not reasonably be
expected to have a Material Adverse Effect.
(b) The Company and each of its Subsidiaries possess adequate
assets, licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications and tradenames to continue to conduct its
business as presently conducted. Schedule 5.12(b) attached hereto sets forth as
of the date of this Agreement (i) all of the federal, state and foreign
registrations of the registered trademarks of the Company and each of its
Subsidiaries and all pending applications for any such registrations and (ii)
all of the patents of the Company and each of its Subsidiaries and all pending
applications therefor (collectively, together with all service marks and other
marks and all applications therefor, tradenames and other trade rights of the
Company and each of its Subsidiaries, the "Proprietary Rights"). The Company and
each of its Subsidiaries are the owners of each of the trademarks and patents
listed on Schedule 5.12(b) as indicated on such Schedule and except as set forth
on such Schedule and, except pursuant to licenses granted in the ordinary course
of business, no other Person has the right to exploit such patents or use any of
such marks in commerce either in the identical form or in such near resemblance
thereto as may be likely to cause confusion or to cause mistake or to deceive.
As of the date of this Agreement each of the trademarks listed on Schedule
5.12(b) is a valid and subsisting federally registered trademark of the Company
or one or more of its Subsidiaries having the registration number and issue date
set forth on Schedule 5.12(b), and each of the patents listed on Schedule
5.12(b) is a valid and subsisting patent of the Company or its Subsidiaries
having the patent number and issue date set forth on Schedule 5.12(b). Except as
disclosed on Schedule 5.12(b), no Person has a right to receive any material
royalty or similar payment from the Company or any of its Subsidiaries in
respect of any such registered Propriety Rights. None of the Company nor any of
its Subsidiaries has granted any material license, except such licenses as were
granted in the ordinary course of the Company's and each such Subsidiary's
businesses, or sold or otherwise transferred any interest in any of the
Proprietary Rights to any other Person. None of the Company nor any of its
Subsidiaries is aware that the use of any of the material Proprietary Rights by
the Company or any of its Subsidiaries is infringing upon or otherwise violating
the rights of any third party in or to such Proprietary Rights which violation
or infringement could reasonably be expected to result in a material liability
to the Company or any of its Subsidiaries, as the case may be, and no proceeding
has been instituted against or notice received by the Company or any of its
Subsidiaries that are presently outstanding alleging that the use of any of the
material Proprietary Rights infringes upon or otherwise violates the rights of
any third party in or to any of the material Proprietary Rights which, if
successful, could reasonably be expected to materially adversely affect the fair
market value of any such material Proprietary Rights or the rights granted
therein to the Collateral Agent for the benefit of the Holders, including,
without limitation, the validity, priority or perfection of the security
interest granted therein to the Collateral Agent for the benefit of the Holders
under the Collateral Documents or the remedies therein or in this Agreement. All
of the material Proprietary Rights of the Company and each of its Subsidiaries
are valid and enforceable rights of the Company and each such Subsidiary and
will not cease to be valid and in full force and effect by reason of the
execution and delivery of this Agreement or the other Operative Agreements or
the consummation of the transactions contemplated hereby or thereby.
(c) As of the Closing Date, the Capital Stock of each Subsidiary
(including, without limitation, each Foreign Subsidiary) has been pledged to the
Collateral Agent for the
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benefit of the Holders in accordance with the terms of the Pledge Agreement. The
owners of all such Capital Stock are parties as pledgors under the Pledge
Agreement, and each such pledgor has delivered the stock certificates
representing the Capital Stock owned by each such pledgor in accordance with the
Pledge Agreement.
5.13 Compliance with Law.
None of the Company nor any of its Subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule or order of
any foreign, federal, state or local government or any other governmental
department or agency or any self regulatory organization, or any judgment,
decree or order of any court, applicable to its business or operations or
properties except where the aggregate of all such violations or failures to
comply would not have a Material Adverse Effect. The conduct of the businesses
of Company and each of its Subsidiaries is in conformity with all securities,
commodities, energy, public utility, zoning, building code, health, OSHA and
environmental requirements and all other foreign, federal, state and local
governmental and regulatory requirements and requirements of any self regulatory
organizations, except where the aggregate of all such non-conformities could not
reasonably be expected to have a Material Adverse Effect. None of Company nor
any of its Subsidiaries has received any notice to the effect that, or otherwise
been advised that, they are not in compliance with, and none of the Company nor
any of its Subsidiaries has any reason to anticipate that any presently existing
circumstances are likely to result in the violation of, any such statute, law,
ordinance, regulation, rule, judgment, decree or order which failure or
violation could reasonably be expected to have a Material Adverse Effect.
5.14 Compliance with Environmental Laws.
(a) The Company and each of its Subsidiaries has complied with
and is currently in compliance with all applicable Environmental Laws, except
where noncompliance could not reasonably be expected to have a Material Adverse
Effect.
(b) No Hazardous Substances are generated, processed, discharged,
stored, treated, disposed of, or managed at any facility owned, leased or
operated by the Company or any of its Subsidiaries or, at the request or behest
of the Company or any of its Subsidiaries, at any other site, so as to require a
license, permit or authorization of any type from any governmental authority,
other than licenses, permits and authorizations which have been obtained and are
in full force and effect or where the failure to obtain such a license, permit
or authorization could not reasonably be expected to have a Material Adverse
Effect. No governmental or private actions to enforce environmental or pollution
control laws or arising under any Environmental Law are pending against the
Company or any of its Subsidiaries or against or with respect to any facility
owned, operated or leased by the Company or any of its Subsidiaries. None of the
Company nor any of its Subsidiaries has received from any Person any complaint,
notice of violation, alleged violation, investigation or advisory action or of
potential liability or of potential responsibility regarding environmental
protection matters or permit compliance or under any Environmental Law, and none
of the Company nor any of its Subsidiaries has any contingent liability of which
the Company or any such Subsidiary has knowledge under any Environmental Law or
in connection with any Release or threatened Release of any Hazardous Substance,
nor has the Company or any of its Subsidiaries received from any Person any
notice, letter or other indication of potential liability arising from the
Release or threatened Release of any Hazardous Substance. There are no
circumstances or
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conditions (including, without limitation, any Release or threatened Release of
any Hazardous Substance) that could reasonably be expected to result in any
claims, liability, investigation or cost pursuant to any Environmental Law
against or relating to the Company, any of its Subsidiaries or any facility
owned, leased or operated by the Company or any of its Subsidiaries, except
where the existence of such circumstance or condition could not reasonably be
expected to have a Material Adverse Effect.
(c) Other than any pending workers' compensation claims which
individually and in the aggregate are not material to the Company or any of its
Subsidiaries, no action, suit or proceeding brought by any employee of the
Company or any of its Subsidiaries or any other person involving (i) a claim for
damages in excess of $100,000 or (ii) claims for damages under $100,000 and
which in the aggregate could reasonably be expected to have a Material Adverse
Effect, in each case based on alleged damage to health or property caused by any
Hazardous Substance, is pending before any court or arbitrator or any
governmental body, agency or official.
5.15 Security Interests and Liens; Inventory and Equipment.
After the application of the proceeds of the sale of the Notes as
set forth herein, there will be no Liens in favor of third parties with respect
to any of the Collateral, including, without limitation, with respect to the
Inventory, wherever located, other than Liens permitted pursuant to Section 9.4
hereof. Upon the proper filing of financing statements and the proper
recordation of other applicable documents with the appropriate filing or
recordation offices in each of the necessary jurisdictions (all of which the
Company undertakes to do or cause to be done), the security interests granted
pursuant to the Collateral Documents constitute and shall at all times
constitute a valid and enforceable first priority perfected Lien on such
Collateral, subject only to Liens permitted pursuant to Section 9.4 hereof. The
Company and each of its Subsidiaries are or will be at the time additional
Collateral is acquired by them, the absolute owners of the Collateral with full
right to pledge, sell, consign, transfer and create a Lien therein, free and
clear of any and all Liens in favor of third parties, except for Liens permitted
pursuant to Section 9.4 hereof. Except as set forth on Schedule 5.15, no
consents, filings or recordings are required in order to perfect the security
interests created by the Collateral Documents.
5.16 Labor Relations.
None of the Company nor any of its Subsidiaries is engaged in any
material unfair labor practices which could reasonably be expected to result in
a material liability to the Company or any of its Subsidiaries, materially
increase the costs of operations or materially decrease the revenue generated
from the Company's or any of its Subsidiaries' operations or which could
otherwise reasonably be expected to have a Material Adverse Effect. There is (i)
no unfair labor practice complaint pending against the Company or any of its
Subsidiaries or, to the best knowledge of the Company and any of its
Subsidiaries, threatened against, before the National Labor Relations Board, and
no material grievance or significant arbitration proceeding arising out of or
under collective bargaining agreements is so pending against the Company or any
of its Subsidiaries or, threatened against them, (ii) no strike, labor dispute,
slowdown or stoppage pending against the Company or any of its Subsidiaries
threatened against it which, in the case of the items described in the preceding
clauses (i) and (ii) could reasonably be expected to result in a material
liability to the Company or any of its Subsidiaries, materially increase the
costs of the Company's or any of its Subsidiaries' operations or materially
decrease the revenue
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generated from the Company's or any of its Subsidiaries' operations or which
could otherwise reasonably be expected to have a Material Adverse Effect, and
(iii) no union representation question with respect to the employees of the
Company or any of its Subsidiaries and, to the knowledge of the Company and each
of its Subsidiaries, no union organizing activities which representation
question or organizing activity could reasonably be expected to have a Material
Adverse Effect. There are no controversies pending or threatened between the
Company or any of its Subsidiaries and any of their respective employees, other
than (i) employee grievances and other controversies arising in the ordinary
course of business which could not, in the aggregate, be reasonably expected to
have a Material Adverse Effect and (ii) employee grievances and other
controversies arising outside the ordinary course of business of which the
Holders have received written notice and could not reasonably be expected to
have a Material Adverse Effect.
5.17 UCC Filing Information.
As of the date of this Agreement the jurisdiction of
incorporation of the Company and each of its Subsidiaries is as set forth on
Schedule 5.17, which jurisdiction is the place where the Company and such
Subsidiary is "located" for the purposes of Section 9-301 of the UCC. Schedule
5.17 is a true, correct and complete list as of the date of this Agreement of
the address of all offices where records and books of account each the Company
and each of its Subsidiaries is kept. None of the receipts received by the
Company or any of its Subsidiaries from any warehouseman, filler, processor or
packer states that the goods covered thereby are to be delivered to bearer or to
the order of a named person or to a named person and such named person's
assignees.
5.18 Solvency.
The fair saleable value of the Company's and each of its
Subsidiaries' assets exceeds all probable liabilities, including those to be
incurred pursuant to this Agreement. The Company and each of its Subsidiaries,
taken as a whole (i) do not have unreasonably small capital in relation to the
business in which they are or propose to be engaged and (ii) have not incurred,
and do not believe that they will incur after giving effect to the transactions
contemplated by this Agreement, debts beyond their ability to pay such debts as
they become due.
5.19 Fictitious Business Names.
Except as set forth on Schedule 5.19, none of the Company nor any
of its Subsidiaries has conducted any material amount of business on or after
August 1, 1993 under any corporate or fictitious name other than the corporate
name shown on the Company's and each such Subsidiary's respective organizational
documents.
5.20 Use of Proceeds.
The proceeds of the Notes will be used solely (i) to repay on the
Closing Date in full all Debt of the borrowers outstanding under the DDJ Loan
Agreement, (ii) to repay certain fees and expenses owed by the Company in
connection with (A) this Agreement and the transactions contemplated hereby and
(B) the Company's recapitalization pursuant to the Exchange and (iii) for
general corporate purposes.
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5.21 Margin Stock.
Neither the Company nor any of its Subsidiaries owns any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, or any regulations, interpretations or rulings
thereunder, nor is the Company or any of its Subsidiaries engaged principally or
as one of its important activities in extending credit which is used for the
purpose of purchasing or carrying margin stock.
5.22 Affiliate Transactions.
Except as set forth on Schedule 5.22 hereto, none of the Company
nor any of its Subsidiaries is a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of the Company or
any Subsidiary is a party.
5.23 Accuracy and Completeness of Information.
All factual information heretofore, contemporaneously or
hereafter furnished by or on behalf of the Company and each of its Subsidiaries
in writing to the Holders or the Auditors for purposes of or in connection with
this Agreement or any other Operative Agreement, including all information
contained in the Offering Circular, or any transaction contemplated hereby or
thereby is or will be (in the case of factual information provided after the
Closing) true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading at such time.
There is no fact now known to any officer of the Company or any of its
Subsidiaries which has, or would have, a Material Adverse Effect, which fact has
not been set forth herein, in the Financials, or some certificate, opinion or
other written statement made or furnished by the Company or any of its
Subsidiaries to the Holders.
5.24 Capital Stock.
There are presently issued by the Company and each of its
Subsidiaries and outstanding the shares of Capital Stock indicated on Schedule
5.24. All of the issued and outstanding Capital Stock of each Subsidiary of the
Company listed is owned of record and beneficially by the entity set forth on
such Schedule. The Company and each of its Subsidiaries has received at least
the consideration for which such Capital Stock was authorized to be issued and
have otherwise complied in all material respects with all legal requirements
relating to the authorization and issuance of shares of Capital Stock and all
such shares are validly issued, fully paid and non-assessable. The Company and
each of its Subsidiaries has no other Capital Stock of any class outstanding
other than as set forth on Schedule 5.24 hereto. Except as set forth on Schedule
5.24, none of the Company or any of its Subsidiaries has outstanding any Stock
Equivalents or any other equity interest nor does the Company or any of its
Subsidiaries have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its Capital Stock or other obligations or commitments of
any kind whatsoever to issue, sell or otherwise dispose of, any shares of or
other equity interest in the Company or any of its Subsidiaries. Except as
contemplated by the Operative Agreements, none of the Company or any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its Capital Stock. There are no
voting trusts or
-15-
other agreement or understandings to which the Company or any of its
Subsidiaries is a party with respect to the voting of its Capital Stock.
5.25 Private Offering by the Company.
Neither the Company nor any Person acting on its behalf has (i)
engaged, in connection with the issuance and sale of the Notes, in any "general
solicitation" or "general advertising" within the meaning of such terms used in
Rule 502 promulgated pursuant to the Securities Act or (ii) offered the Notes or
any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than the Holders, which have been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act, any
state securities or "Blue Sky" laws or any other similar any law, treaty, rule
or regulation of any jurisdiction.
SECTION 6. INITIAL PURCHASER'S REPRESENTATIONS
6.1 Initial Purchaser's Representations.
The Initial Purchaser represents and warrants to, and agrees with, the
Company that:
(i) It is a "qualified institutional buyer" ("QIB") within
the meaning of Rule 144A under the Securities Act with such knowledge
and experience in financial and business matters as is necessary in
order to evaluate the merits and risks of an investment in the Notes.
(ii) It is not acquiring the Notes with a view to any
distribution thereof or with any present intention of offering or
selling any of the Notes in a transaction that would violate the
Securities Act or the securities laws of any State of the United States
or any other applicable jurisdiction. In connection with any Exempt
Resales, it will solicit offers to buy the Notes only from, and will
offer and sell the Notes only to (A) persons reasonably believed by the
Initial Purchaser to be QIBs or (B) persons reasonably believed by the
Initial Purchaser to be accredited investors (within the meaning of Rule
501 under the Securities Act) (each such person, an "Eligible
Purchaser").
(iii) It agrees that no form of general solicitation or
general advertising has been or will be used by the Initial Purchaser or
any of its representatives in connection with the offer and sale of any
of the Notes.
SECTION 7. PREPAYMENT OF NOTES
7.1 Required Prepayments of the Notes.
(a) Upon the receipt by the Company or any of its Subsidiaries of
Net Cash Proceeds from any Asset Disposition, the Company shall prepay the
outstanding Accreted Principal Amount of the Notes, together with accrued and
unpaid interest thereon, at a premium equal to the then applicable Premium
Amount, in an amount equal to such Net Cash Proceeds.
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(b) Upon the receipt by the Company or any of its Subsidiaries of
net proceeds from any sale or issuance of their respective Capital Stock or
Stock Equivalents, the Company shall prepay the outstanding Accreted Principal
Amount of the Notes, together with accrued and unpaid interest thereon, at a
premium equal to the then applicable Premium Amount, in an amount equal to such
net proceeds.
(c) Upon the receipt by the Company or any of its Subsidiaries of
any proceeds of insurance maintained pursuant to Section 8.4(b), the Company
shall prepay the outstanding Accreted Principal Amount of the Notes, together
with accrued and unpaid interest thereon, at a premium equal to the then
applicable Premium Amount, in an amount equal to such proceeds to the extent
such proceeds are not applied pursuant to Section 8.4(b).
7.2 Optional Prepayments of the Notes.
Upon notice as provided in Section 7.4, the Company may prepay,
in whole or in part, at any time or from time to time, the outstanding Accreted
Principal Amount of the Notes at the prices (expressed as percentages of the
Accreted Principal Amount of the Notes on the date of such prepayment)
corresponding to the relevant period set forth in the table below (the "Premium
Amount"), plus accrued and unpaid interest thereon to the applicable prepayment
date.
Premium to Accreted
Period Principal Amount
------------------------ ------------------------
Closing Date -
November 30, 2002 104.0%
December 1, 2002 -
November 30, 2003 103.0%
December 1, 2003 -
November 30, 2004 102.0%
December 1, 2004 -
Maturity Date 100.0%
7.3 Offers to Purchase Notes upon Certain Events.
(a) Change of Control Offer. The Company shall, within ninety
(90) days after any Change of Control, give written notice of such Change of
Control to the Holders. Such notice shall contain and constitute an offer (a
"Change of Control Offer") to all Holders to repurchase, within 30 days after
the date of such notice, all or, at the option of any Holder, any part (equal to
$1,000,000 or an integral multiple thereof) of the outstanding Accreted
Principal Amount of Notes held by such Holder. The offer price in any Change of
Control Offer will be equal to the outstanding Accreted Principal Amount of the
Notes, together with accrued and unpaid interest to the date of repurchase, at a
premium equal to the then applicable Premium Amount, and will be payable in cash
(the "Change of Control Payment") on the Proposed Repurchase Date.
-17-
(b) Excess Cash Flow Offer. As soon as practicable after the end
of each fiscal year of the Company, and in any event no later than August 31 of
each year, the Company shall make an offer to all Holders to purchase the
maximum outstanding Accreted Principal Amount of Notes that may be purchased
with 100% of the Excess Cash Flow of the Company for the immediately preceding
fiscal year (each such offer, an "Excess Cash Flow Offer"). The offer price in
any Excess Cash Flow Offer will be equal to the Accreted Principal Amount of the
Notes, together with accrued and unpaid interest to the date of repurchase, at a
premium equal to the then applicable Premium Amount, and will be payable in cash
(the "Excess Cash Flow Payment"). If the aggregate Accreted Principal Amount of
Notes tendered into such Excess Cash Flow Offer exceeds the amount of Excess
Cash Proceeds, the Notes shall be purchased on a pro rata basis, based upon the
respective share of the outstanding Notes held by the Holders thereof.
(c) Procedures for Offers and Purchases.
(i) The offer to repurchase the Notes contemplated by this
Section 7.3 shall be an offer to repurchase, in accordance with and
subject to this Section 7.3, each Note held by the Holders on the
Business Day specified in such offer (the "Proposed Repurchase Date").
(ii) Each Holder may accept the Offer to repurchase the
Notes made pursuant to this Section 7.3 by causing a notice of such
acceptance to be delivered to the Company at least five (5) days prior
to the Proposed Repurchase Date. A failure by any Holder to respond to
an Offer to repurchase the Notes made pursuant to this Section 7.3 shall
be deemed to constitute a rejection of such Offer by such Holder.
(iii) On each Proposed Repurchase Date, the Company shall
(i) accept for payment all Notes or portions thereof validly tendered
and not properly withdrawn pursuant to an Offer and (ii) pay to the
tendering Holders (by wire transfer of immediately available funds to an
account designated by such Holder) an amount equal to the Offer Payment
in respect of all Notes or portions thereof so validly tendered and not
properly withdrawn. The Company shall promptly mail to each Holder,
which has so validly tendered and not properly withdrawn a Note, a new
Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any, provided that each such new Note will be in a
principal amount of $1,000,000 or an integral multiple thereof.
(iv) Each Offer to repurchase the Notes pursuant to this
Section 7.3 shall be accompanied by a certificate, executed by a senior
financial officer of the Company and dated the date of such Offer,
specifying: (i) the Proposed Repurchase Date; (ii) that such Offer is
made pursuant to this Section 7.3; (iii) the Accreted Principal Amount
of each Note offered to be repurchased; (iv) the applicable Premium
Amount on each Note in connection with such prepayment (calculated as of
the date of such Proposed Repurchase Date); (v) the interest that would
be due on each Note offered to be repurchased, accrued to the Proposed
Repurchase Date; (vi) that the conditions of this Section 7.3 have been
fulfilled; (vii) with respect to a Change in Control Offer, in
reasonable detail, the nature and date of the Change of Control; and
(viii) that a failure to respond to such notice shall be deemed a
rejection of such Offer to repurchase the Notes.
-18-
7.4 Notice of Prepayments; Officers' Certificate.
The Company will give each Holder irrevocable written notice of
each prepayment under Section 7.2 not less than ten (10) days and not more than
thirty (30) days prior to the Business Day fixed for such prepayment, in each
case specifying such prepayment date, the aggregate Accreted Principal Amount of
the Notes, the Accreted Principal Amount of each Note held by such Holder to be
prepaid, and the applicable Premium Amount to be paid in connection with such
prepayment (calculated as of the date of such prepayment). Notice of prepayment
having been given as aforesaid the aggregate Accreted Principal Amount, together
with accrued and unpaid interest until the proposed date of prepayment, at a
premium equal to the then applicable Premium Amount, shall become due and
payable on such prepayment date. The Company shall, on or before the Business
Day next succeeding the date on which the Company sends such written notice,
give telephonic notice (immediately followed by written notice sent by facsimile
transmission) of the items set forth in the first sentence of this paragraph and
the prepayment date to each Holder at the telephone and facsimile numbers
specified in Section 19 hereof. Each Holder shall receive, on the Business Day
immediately preceding the date scheduled for any such prepayment, an Officers'
Certificate setting forth and certifying the calculations of the amounts to be
prepaid to such Holder on the prepayment date.
7.5 Allocation of Partial Prepayments.
Upon any partial prepayment of the Notes pursuant to Section 7.1
or 7.2, the principal amount so prepaid shall be allocated (as nearly as
practicable) to all Notes at the time outstanding in proportion to the
respective outstanding Accreted Principal Amounts thereof not theretofore
prepaid, with adjustments, to the extent practicable, to compensate for any
prior prepayments not made exactly in such proportion.
7.6 Maturity; Surrender, etc.
In the case of each prepayment, the Accreted Principal Amount of
each Note to be prepaid shall mature and become due and payable on the date
fixed for such prepayment. Payment of the total Accreted Principal Amount at a
premium equal to the then applicable Premium Amount shall be deemed payment of
the total principal amount then outstanding. From and after such date, unless
the Company shall fail to pay such Accreted Principal Amount at a premium equal
to the then applicable Premium Amount, as aforesaid, interest on such Accreted
Principal Amount shall cease to accrue. Any Note paid, prepaid or repurchased in
full shall, after such payment, prepayment or repurchase in full, be surrendered
to the Company and canceled and shall not be reissued, and no Note shall be
issued in lieu of any such paid or prepaid principal amount of any Note.
7.7 Acquisition of Notes.
The Company shall not and shall not permit any of its
Subsidiaries to, prepay or otherwise retire in whole or in part prior to their
stated final maturity (other than by prepayment or repurchase pursuant to
Section 7.1, 7.2, or 7.3 or upon acceleration of such final maturity pursuant to
Section 10.2), or purchase or otherwise acquire, directly or indirectly, Notes
held by the Holders, except, in the case of such purchase or acquisition,
pursuant to an offer to purchase made pro rata to all Holders on the same terms
and conditions. Any Notes prepaid in full or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries
-19-
shall not be deemed to be outstanding for any purpose under this Agreement or
any other Operative Agreement, shall be canceled and shall not be reissued. Any
Notes prepaid or otherwise purchased or otherwise acquired by any Affiliate of
the Company shall not be deemed outstanding for the purpose of any vote of the
holders of the Notes (including, without limitation, the calculation of any
percentage of principal amount of the Notes outstanding with respect to any such
vote) pursuant to this Agreement or any other Operative Agreement but shall be
deemed outstanding with respect to the calculation of any future payment of
principal, premium and interest on the Notes.
SECTION 8. AFFIRMATIVE COVENANTS OF THE COMPANY
In order to induce the Holders to enter into this Agreement and
to purchase the Notes as contemplated hereby, as long as any of the Obligations
remain outstanding, the Company covenants and agrees that:
8.1 Financial Statements.
The Company will deliver to the Holders:
(a) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, consolidated and consolidating
balance sheets of the Company and its Subsidiaries as of the end of such fiscal
year and the related consolidated and consolidating statements of earnings,
changes in consolidated shareholders equity and changes in consolidated cash
flow for such fiscal year, setting forth in the case of each consolidated
financial statement in comparative form the figures for the previous fiscal
year, including the previous fiscal year budget (if such budget was prepared);
all (except for the consolidating statements) accompanied by (A) a certificate
of the Auditors stating that (1) in the course of the regular audit of the
business of the Company and its Subsidiaries, which audit was conducted by such
Auditors in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge that a Default or Event of Default has
occurred and is continuing, or, if in the opinion of such Auditors, a Default or
Event of Default has occurred and is continuing, a statement as to the nature
thereof and (2) such financial statements present fairly in all material
respects the financial position of the Company and its Subsidiaries and the
results of its operations and cash flows for such fiscal year in conformity with
GAAP and otherwise reported on in a manner acceptable to the Securities and
Exchange Commission and (B) a schedule in form reasonably satisfactory to the
Holders of the computations used by such accountants in determining, as of the
end of such fiscal year, the Company's compliance with all financial covenants
contained herein;
(b) as soon as available and in any event within forty-five (45)
days after the end of each of the first three quarters of each fiscal year of
the Company, consolidated and consolidating balance sheets of the Company and
its Subsidiaries as of the end of such quarter and the related consolidated and
consolidating statements of earnings, changes in consolidated shareholders
equity and changes in consolidated cash flow for such quarter and for the
portion of the Company's fiscal year ended at the end of such quarter, setting
forth in the case of each consolidated financial statement in comparative form
the figures for the corresponding quarter and the corresponding portion of the
Company's previous fiscal year, including the previous fiscal year budget (if
such budget was prepared), all certified (subject to normal year-end
-20-
adjustments) as to fairness of presentation, GAAP and consistency by the chief
financial officer or the chief accounting officer of the Company; and
(c) as soon as available and in any event within thirty (30) days
after the end of each of the first two months of each fiscal quarter (forty-five
(45) days in the case of the last month of each fiscal year of the Company),
statements of earnings and consolidated and consolidating balance sheets of the
Company and its Subsidiaries as of the end of such month, and related changes in
consolidated cash flow for such month and for the portion of the Company's
fiscal year ended at the end of such month, all certified (subject to normal
year-end adjustments) as to fairness of presentation, GAAP and consistency by
the chief financial officer or chief accounting officer of the Company.
8.2 Reporting Requirements.
The Company shall furnish to the Holders:
(a) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto unless the securities covered
thereby are held or distributed by the Company, other than any registration
statement on Form S-3 to the extent that it relates to a secondary offering, and
other than any registration statement on Form S-8 or its equivalent) and reports
on Form 10-K, 10-Q and 8-K (or their equivalents) which the Company or any of
its Subsidiaries shall have filed with the Securities and Exchange Commission,
and promptly upon the mailing thereof to the shareholders of the Company and
each of its Subsidiaries generally, copies of all financial statements, reports
and proxy statements so mailed;
(b) no later than forty-five (45) days after the end of each of
the first three quarters of each fiscal year and no later than ninety (90) days
after the end of each fiscal year, (A) a certificate of the chief financial
officer or chief accounting officer of the Company setting forth in reasonable
detail any calculations required to establish whether the Company was in
compliance with the requirements of Sections 8.16 and 9.6 hereof as of the end
of such quarter or year, as the case may be, and (B) a compliance certificate in
the form of Exhibit C attached hereto (the "Compliance Certificate").
(c) as soon as available and in any event no later than sixty
(60) days after the last day of each fiscal year of the Company, copies of
annual budgets and other similar materials prepared by or for the Company and
each of its Subsidiaries, which budgets and other information shall be presented
on a monthly basis for the then current fiscal year and on an annual basis for
each subsequent fiscal year; and
(d) within three Business Days of any executive officer of the
Company obtaining knowledge of any Default or Event of Default, a certificate of
the chief financial officer or the chief accounting officer of the Company
setting forth the details thereof and the action which is being taken or
proposed to be taken with respect thereto;
(e) within three Business Days after the Company's or any of its
Subsidiaries' knowledge thereof, notice, in reasonable detail, of any material
change relating to the type, quality or quantity of any material portion of the
Collateral, or any event which could have a material adverse effect on the value
of the Collateral or any event affecting the validity or
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priority of the security interests granted to the Collateral Agent for the
benefit of the Holders in the Collateral;
(f) within three Business Days of the chief executive officer,
chief financial officer, chief accounting officer, controller or other senior
financial officer of the Company or any of its Subsidiaries obtaining knowledge
of any Material Adverse Effect, a certificate of the chief financial officer or
accounting officer of the Company setting forth details thereof and the action
which is being taken or proposed to be taken with respect thereto;
(g) promptly following, and in no event more than five Business
Days of any executive officer of the Company or any of its Subsidiaries
obtaining knowledge of (i) any litigation or proceeding affecting the Company or
any of its Subsidiaries in which the amount involved is $250,000 or more and is
not covered by insurance or in which injunctive or similar relief is sought, or
(ii) any order, judgment or decree in excess of $250,000 which shall have been
entered against the Company or any of its Subsidiaries or any of their
respective properties or assets, the Company will deliver a certificate of the
chief financial officer or accounting officer setting forth details thereof and
the action which is being taken or proposed to be taken with respect thereto;
(h) prompt notice of any notification of a violation of any law
or regulation received by the Company or any of its Subsidiaries from any local,
state, federal or foreign Governmental Authority which violation could
reasonably be expected to have a Material Adverse Effect; and
(i) from time to time such additional information or analyses
regarding the financial position or business of the Company or any of its
Subsidiaries as the Holders may reasonably request.
8.3 Payment of Obligations.
The Company shall pay and discharge, and shall cause each of its
Subsidiaries to pay and discharge, at or before maturity, all of its material
obligations and liabilities, including, without limitation, Tax liabilities,
except where the same may be contested in good faith by appropriate proceedings,
and will maintain, in accordance with GAAP, appropriate reserves for the accrual
of any of the same.
8.4 Maintenance of Property; Insurance.
(a) The Company shall keep, and shall cause each of its
Subsidiaries to keep, all material property useful and necessary in its
businesses in good working order and condition (ordinary wear and tear, casualty
and condemnation excepted) and not commit or suffer any material waste with
respect to any of its material properties.
(b) The Company shall maintain, and shall cause each of its
Subsidiaries to maintain, public liability insurance, third party property
damage and replacement cost insurance on the Collateral under such policies of
insurance, and the Company and each such Subsidiary agrees to maintain insurance
on their material assets in such amounts and covering such risks as is customary
for similarly situated corporations. Such insurance may include levels of self
insurance comparable to those in place on the date of this Agreement or as shall
be customary for
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corporations similarly situated in the industry. All policies covering the
Collateral are to name the Holders as additional insureds and loss payees in
case of loss, as the Holders' interests may appear, and are to contain such
other provisions as the Holders may reasonably require to fully protect the
Holders' interest in the Collateral and to any payments to be made under such
policies. Certificates of all insurance policies are to be delivered to the
Holders (with true copies of such policies to be made available to the Holders)
on or within five (5) Business Days prior to the Closing, and such policies
shall have all premiums with respect thereto currently paid and contain loss
payable endorsements in the Holders' favor, and shall provide for not less than
ten (10) days' prior written notice to the Holders, of the exercise of any right
of cancellation. In the event the Company or any of its Subsidiaries fails to
respond in a timely and appropriate manner (as determined by the Holders in the
Holders' reasonable discretion) with respect to collecting under any insurance
policies required to be maintained under this Section 8.4, the Holders shall
have the right, in the name of the Company or any such Subsidiary, to file
claims under such insurance policies, to receive and give acquaintance for any
payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies. The Company and each of its
Subsidiaries shall provide written notice to the Holders of the occurrence of
any of the following events within five (5) Business Days after the occurrence
of any such event: any material asset or property owned or used by the Company
or any such Subsidiary (i) is damaged or destroyed, or suffers any other loss,
or (ii) is, or the Company or any of its Subsidiaries receives notice of the
institution of any proceeding pursuant to which any such asset or property could
reasonably be expected to be, condemned, confiscated or otherwise taken, in
whole or in part, or the use thereof is otherwise diminished so as to render
impracticable or unreasonable the use of such asset or property for the purposes
to which such asset or property were used immediately prior to such
condemnation, confiscation or taking, by exercise of the powers of condemnation
or eminent domain or otherwise, and in either case the amount of the damage,
destruction, loss or diminution in value is in excess of $250,000 (collectively,
a "Casualty Loss"). The Company and each of its Subsidiaries shall diligently
file and prosecute its claim or claims for any award or payment in connection
with a Casualty Loss. In the event of a Casualty Loss with respect to any of the
Collateral, if directed by the Collateral Agent, the Company and each of its
Subsidiaries shall pay to the Collateral Agent for payment to the Holders in
accordance with the Collateral Documents, promptly upon receipt thereof, any and
all insurance proceeds and payments received by the Company or such Subsidiary
on account of damage, destruction, loss, condemnation or eminent domain
proceedings (excluding, however, business interruption insurance and the
proceeds thereof). So long as no Default or Event of Default shall have occurred
and be continuing, the Company and each of its Subsidiaries may use such
proceeds and payments to repair, replace or rebuild the asset or property or
portion thereof that was the subject of the Casualty Loss. After the occurrence
and during the continuance of any Default or Event of Default the Holders may,
at the Holders' election in the Holders' sole discretion either (a) apply
ratably the proceeds realized from Casualty Losses to payment of accrued and
unpaid interest or outstanding principal under the Notes or (b) direct the
insurance company to pay such proceeds to the Holders to be used to repair,
replace or rebuild the asset or property or portion thereof that was the subject
of the Casualty Loss. After the occurrence and during the continuance of an
Event of Default, (i) no settlement on account of any such Casualty Loss shall
be made without the Holders' written consent and (ii) the Holders may
participate in any such proceedings and the Company and each of its Subsidiaries
shall deliver to the Holders such documents as may be requested by the Holders
to permit such participation and shall consult
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with the Holders, the Holders' attorneys and agents in the making and
prosecution of such claim or claims.
8.5 Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all acts, regulations, orders, directions and
ordinances of any legislative, administrative or judicial body or official,
applicable to the Collateral or any part thereof, or to the operation of their
respective business (including, without limitation, ERISA and the rules and
regulations thereunder) except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.
8.6 Inspection of Property, Books and Records; Change of Name,
Principal Place of Business, Location of Collateral, Etc.
The Company shall keep, and shall cause each of its Subsidiaries
to keep, proper books of record and account in which full, true and correct
entries in conformity with GAAP shall be made of all dealings and transactions
in relation to their respective businesses and activities; the Company and each
of its Subsidiaries shall make no significant change in their accounting
practices except as permitted or required by GAAP. The Company shall permit the
Holders to enter upon the premises of the Company and each of its Subsidiaries
at any time and from time to time, during normal business hours and upon
reasonable prior notice, and at any time during normal business hours and
without notice on and after the occurrence and during the continuance of an
Event of Default, for the purpose of (i) inspecting the Collateral, (ii)
inspecting and/or copying (at Company's expense) any and all records pertaining
thereto, and (iii) discussing the affairs, finances, business operations,
properties and financial and other conditions of the Company and each Subsidiary
with any officers, employees and directors of the Company or any such Subsidiary
or with the Auditors. The Holders shall have the right to (A) discuss the
affairs, finances, business operations, properties and conditions of the Company
and each Subsidiary with management and make suggestions to the Company's and
each Subsidiary's management and management will discuss such proposals or
suggestions made by the Holders within a reasonable period after such
submission, (B) tour the Company's and each Subsidiary's business premises and
other properties, (C) receive financial statements, operating reports, budgets
or other financial reports, (D) request information at reasonable times and
intervals concerning the general status of the Company's and each Subsidiary's
financial condition and operations. The Company shall, and shall cause each of
its Subsidiaries to, afford the Holders ten (10) Business Days' prior written
notice of (a) any new or additional location of any Collateral at which location
Collateral having an aggregate value in excess of $250,000 will be located, (b)
any change in the jurisdiction of incorporation of the Company or any of its
Subsidiaries from the jurisdictions specified in Schedule 5.17, and (c) any
change in any corporate name and, in each such case, the Company and each such
Subsidiary further agree to execute in advance of such addition or change and
cause to be filed and/or delivered to the Holders or the Holders' counsel any
financing statements or other documents required by the Holders to maintain
their perfected first priority Lien on the Collateral.
8.7 Compliance with Operative Agreements.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with the terms of each of the Operative Agreements to
which it is a party.
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8.8 Corporate Existence.
Except as otherwise permitted pursuant to Section 9.5 and except
for the liquidation or dissolution of the Company's inactive Subsidiaries set
forth on Schedule 9.5, the Company shall, and shall cause each of its
Subsidiaries to, (i) maintain its corporate existence, maintain in full force
and effect all material licenses, bonds, franchise, leases, qualifications to do
business, Proprietary Rights, contracts and other rights necessary for the
conduct of its business, (ii) continue in, and limit their operations to, the
same general lines of business as that presently conducted by it and reasonable
extensions thereof and (iii) comply with all applicable laws and regulations of
any federal, state or local governmental authority, except in each case where
noncompliance with such laws and regulations would not, in the aggregate, have a
Material Adverse Effect.
8.9 ERISA.
(a) The Company shall deliver to the Holders, at the Company's
expense, the following information at the times specified below:
(i) within twenty (20) Business Days after the Company or
any ERISA Affiliate has actual knowledge that a Termination Event has
occurred which could reasonably be expected to result in a liability to
the Company or any of its Subsidiaries of $300,000 or more, a written
statement of the chief financial officer describing such Termination
Event and the action, if any, which the Company or such ERISA Affiliate
or any other entities have taken, are taking or propose to take with
respect thereto, and when actually known, any action taken or threatened
by the Internal Revenue Service, DOL or PBGC with respect thereto;
(ii) within sixty (60) Business Days after the Company or
any ERISA Affiliate has actual knowledge that a prohibited transaction
(as defined in Sections 406 of ERISA and 4975 of the Code) has occurred
which could reasonably be expected to result in a liability to the
Company or any such ERISA Affiliate of $300,000 or more, a statement of
the chief financial officer describing such transaction and the action
which the Company or any such ERISA Affiliate or other such entities
have taken, are taking or propose to take with respect thereto;
(iii) at any time that the Holders may reasonably request,
copies of each annual report (form 5500 series), including Schedule B
thereto, filed with respect to each Benefit Plan;
(iv) at any time that the Holders may reasonably request,
copies of each actuarial report for any Benefit Plan or Multiemployer
Plan and each annual report for any Multiemployer Plan;
(v) within three (3) Business Days after the filing
thereof with the Internal Revenue Service, a copy of each funding waiver
request filed with respect to any Benefit Plan with respect to any
funding of $300,000 or more and all communications received by the
Company or any of its Subsidiaries or any ERISA Affiliate with respect
to such request;
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(vi) within twenty (20) Business Days upon the occurrence
thereof, notification of any increase in the benefits of any existing
Plan or the establishment of any new Benefit Plan or the commencement of
contributions to any Benefit Plan to which the Company or any ERISA
Affiliate was not previously contributing, in either case, which could
reasonably be expected to result in an increase in the annual
contributions necessary to satisfy the minimum funding requirements of
ERISA or the terms of such Benefit Plan to the Company or any such ERISA
Affiliate of $300,000 or more;
(vii) within three (3) Business Days after receipt by the
Company or any ERISA Affiliate of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, in either case which could reasonably be expected to result in a
liability to the Company or any such ERISA Affiliate of $300,000 or
more, copies of each such notice;
(viii) if and when any ERISA Affiliate (i) gives or is
required to give notice to the PBGC of any Reportable Event with respect
to any Benefit Plan which could reasonably be expected to constitute
grounds for a termination of such Benefit Plan under Title IV of ERISA,
or knows that the plan administrator of any Benefit Plan has given or is
required to give notice of any such Reportable Event, a copy of the
notice of such Reportable Event given or required to be given to the
PBGC; or (ii) receives notice of complete or partial withdrawal
liability under Title IV of ERISA, a copy of such notice;
(ix) within ten (10) Business Days after receipt by the
Company or any ERISA Affiliate of any unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a
Benefit Plan under Section 401(a) of the Code which could reasonably be
expected to result in a liability to the Company or any such ERISA
Affiliate of $300,000 or more, copies of each such letter;
(x) within ten (10) Business Days after receipt by the
Company or any ERISA Affiliate of a notice regarding the imposition of
withdrawal liability of $300,000 or more under Section 4203, 4204 or
4205 of ERISA, copies of each such notice;
(xi) within ten (10) Business Days after the Company or
any ERISA Affiliate fails to make a required installment or any other
required payment of $300,000 or more under Section 412 of the Code on or
before the due date for such installment or payment, a notification of
such failure; and
(xii) within ten (10) Business Days after the Company or
any ERISA Affiliate has actual knowledge that (a) a Multiemployer Plan
has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the
PBGC has instituted or will institute proceedings under Section 4042 of
ERISA to terminate a Multiemployer Plan, in any such case, which could
reasonably be expected to result in a liability to the Company or any
such ERISA Affiliate of $300,000 or more, a written statement setting
forth any such event or information.
(b) The Company shall, and shall cause each of its Subsidiaries
to, establish, maintain and operate all Plans to comply with the applicable
provisions of ERISA, the Code, and
-26-
all other applicable laws, other than to the extent that the Company and each
such Subsidiary are in good faith contesting by appropriate proceedings the
validity or application of any such provision or law, except to the extent
failure to so comply could not reasonably be expected to result in the Company
or any such Subsidiary incurring a liability, individually or in the aggregate
equal to or in excess of $300,000.
8.10 Environmental Matters.
(a) The Company shall, and shall cause each of its Subsidiaries
to, use commercially reasonable efforts to conduct its businesses so as to
comply with all Environmental Laws in all jurisdictions in which it is or may at
any time be doing business, except to the extent that the Company and each such
Subsidiary is contesting, in good faith by appropriate legal proceedings, any
such Environmental Law or interpretation thereof or application thereof and
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect; provided, further, that the Company and each such
Subsidiary shall comply with the order of any court or other Governmental
Authority or applicable jurisdiction relating to such Environmental Laws unless
the Company or any such Subsidiary shall currently be prosecuting an appeal or
proceedings for review and shall have secured a stay of enforcement or execution
or other arrangement postponing enforcement or execution pending such appeal or
proceedings for review. If the Company or any of its Subsidiaries shall (a)
receive written notice that any material violation of any Environmental Law may
have been committed or is about to be committed by the Company or any such
Subsidiary, (b) receive written notice that any administrative or judicial
complaint or order has been filed or is about to be filed against the Company or
any such Subsidiary under any Environmental Law or alleging material violations
of any Environmental Law or requiring the Company or any such Subsidiary to take
any action in connection with the Release or threatened Release of Hazardous
Substances or (c) receive any written notice from a Governmental Authority or
private party alleging that the Company or any such Subsidiary may be liable
under any Environmental Law or in connection with any Release or threatened
Release of a Hazardous Substance, the Company and each such Subsidiary shall
provide the Holders with a copy of such notice within thirty (30) days after the
receipt thereof by the Company or such Subsidiary, as the case may be. The
Company and each of its Subsidiaries shall promptly take all actions necessary
to prevent the imposition of any Liens on any of their properties arising out of
or related to any environmental matters.
(b) In the event that any investigation, site monitoring,
containment, cleanup, response, removal, restoration or other remedial work of
any kind or nature (the "Remedial Work") with respect to any Real Estate owned,
operated or leased by the Company or any of its Subsidiaries is required to be
performed by the Company or such Subsidiary under any applicable local, state or
federal law or regulation, any judicial order, or by any governmental or
non-governmental entity or Person because of, or in connection with, the current
or future presence, suspected presence, Release or threatened Release of a
Hazardous Substance, the Company or such Subsidiary, as the case may be, shall
within thirty (30) days after written demand for performance thereof by the
Holders (or such shorter period of time as may be required under any applicable
law, regulation, order or agreement), commence during and after such 30-day
period diligently prosecute to completion, all such Remedial Work unless the
requirement to perform such Remedial Work is being contested in good faith by
the Company or such Subsidiary.
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8.11 Collateral Records.
The Company shall, and shall cause each of its Subsidiaries to,
promptly execute and deliver to the Holders, from time to time, solely for the
Holders' convenience in maintaining a record of the Collateral, such written
statements and schedules as the Holders may reasonably require, designating,
identifying or describing the Collateral pledged to the Holders. If the Company
or any of its Subsidiaries fail, however, to promptly give the Holders such
statements or schedules, such failure shall not affect, diminish, modify or
otherwise limit the Holders' security interests in the Collateral. In addition,
upon any Holder's reasonable request, the Company and each of its Subsidiaries
will make available to such Holder copies of agreements with, or purchase orders
from, the customers of the Company and each such Subsidiary, and copies of
invoices to customers, proof of shipment or delivery and such other
documentation and information relating to said Collateral as such Holder may
reasonably require. Failure to provide the Holders with any of the foregoing
shall in no way affect, diminish, modify or otherwise limit the security
interests granted herein. The Company and each of its Subsidiaries hereby
authorizes the Holders to regard its printed name or rubber stamp signature on
assignment schedules or invoices as the equivalent of a manual signature by such
Person's authorized officers or agents.
8.12 Security Interests.
(a) The Company shall defend, and shall cause each of its
Subsidiaries to defend, the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein. The Company shall
comply, and shall cause each of its Subsidiaries to comply, with the
requirements of all state and federal laws in order to grant to the Collateral
Agent for the benefit of the Holders valid and perfected security interests in
the Collateral, subject only to Liens permitted pursuant to Section 9.4 hereof,
and except to the extent such Lien is in cash held by the Company or any such
Subsidiary as xxxxx cash or till cash in the ordinary course of their businesses
consistent with past practices shall not remain perfected. Without limiting the
generality of the foregoing, upon the Closing, the Company shall, and shall
cause each of its Subsidiaries to, at its own expense, execute, acknowledge and
deliver, or cause the execution, acknowledgment and delivery of, and thereafter
register, file or record, or cause to be registered, filed or recorded, in all
necessary and appropriate governmental offices, all documents or instruments as
may be necessary or desirable for the perfection and priority of the Liens on
the Collateral covered by the Collateral Documents, and thereafter, the Company
shall, and shall cause each of its Subsidiaries to, promptly, upon the
reasonable request of the Holders, at the Company's expense, execute,
acknowledge and deliver, or cause the execution, acknowledgment and delivery of,
and thereafter register, file or record, or cause to be registered, filed or
recorded, in an appropriate governmental office, any document or instrument
supplemental to or confirmatory of the Collateral Documents or otherwise
reasonably deemed by the Holders necessary or desirable for the continued
validity, perfection and priority of the Liens on the Collateral covered thereby
to the extent required by the immediately preceding sentence.
(b) The Collateral Agent and each of the Holders is hereby
authorized by the Company for itself and on behalf of each of its Subsidiaries
to file any financing statements covering the Collateral whether or not the
Company's or any of its Subsidiaries' signatures appear thereon. The Company
shall do, and shall cause each of its Subsidiaries to do, whatever the
Collateral Agent or any of the Holders may reasonably request, from time to
time, by way of filing notices of Liens, financing statements, fixture filings
and amendments, renewals and
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continuations thereof; cooperating with the Holders' custodians; keeping stock
records; using commercially reasonable efforts to obtain waivers from landlords
and mortgagees and from warehousemen, fillers, processors and packers and their
respective landlords and mortgagees; paying claims, which might if unpaid,
become a Lien on the Collateral; and performing such further acts as the Holders
may reasonably require in order to effect the purposes of this Agreement and the
Operative Agreements. Any and all reasonable fees, costs and expenses, of
whatever kind and nature (including any Taxes, reasonable attorneys' fees or
costs for insurance of any kind), which the Collateral Agent or the Holders may
incur with respect to the Collateral or the Obligations under the Operative
Agreements, (i) in filing public notices, (ii) in preparing or filing documents,
(iii) making title examinations or rendering opinions, (iv) in protecting,
maintaining, or preserving the Collateral or its interest therein, (v) in
enforcing or foreclosing the Liens hereunder, whether through judicial
procedures or otherwise or (vi) in defending or prosecuting any actions or
proceedings arising out of or relating to its transactions with the Company or
any of its Subsidiaries under this Agreement or any other Operative Agreements,
shall be borne and paid by the Company. If same are not promptly paid by the
Company, the Holders may pay the same on the Company's behalf, and the amount
thereof shall be an Obligation secured under the Operative Agreements and due to
the Holders on demand.
(c) The Company shall deliver, and shall cause each of its
Subsidiaries to deliver, to the Collateral Agent title insurance policies, in a
form reasonably satisfactory to the Holders, with respect to the Deeds of Trust
delivered hereunder at the Closing.
8.13 Taxes.
The Company shall pay, and shall cause each of its Subsidiaries
to pay, when due, all Taxes levied or assessed against the Company and each such
Subsidiary or any of the Collateral; provided, however, that, unless such Taxes
have become a federal tax Lien or ERISA Lien on any of the assets of such
Person, no such Tax need be paid if the same is being contested, in good faith,
by appropriate proceedings promptly instituted and diligently conducted and if
an adequate reserve or other appropriate provision shall have been made therefor
as reflected on the audited financial statements for the relevant fiscal year in
accordance with GAAP, and, to the extent such reserves shall be taken
thereafter, consistent with the Company's and each such Subsidiary's past
practices.
8.14 Accounts.
(a) The Company shall, and shall cause each of its Subsidiaries
to, cause to be mailed, by the respective payors thereof, directly into the post
office lockbox opened in accordance with the terms of the Lockbox Agreement or
if the Company or any of its Subsidiaries opens a post office lockbox and
lockbox account with another commercial bank or financial institution in
accordance with subsection (c) of this Section, such post office lockbox (each
such lockbox, a "Lockbox"), all revenues, receipts and other amounts which the
Company or any of its Subsidiaries is entitled to receive from any source
whatsoever (including, without limitation, all payments received in respect of
its Contractual Obligations and all dividends and other distributions paid to
the Company or any of its Subsidiaries by any of the Company's Subsidiaries).
The Company shall open and maintain a lockbox account in accordance with the
terms of the Lockbox Agreement (such account and the lockbox account opened with
another commercial bank or financial institution in accordance with subsection
(c) of this Section, a
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"Lockbox Account"). The Company and its Subsidiaries shall maintain no more than
two Lockboxes and two Lockbox Accounts at any one time.
(b) The Company, for itself and on behalf of its Subsidiaries,
the Collateral Agent and KeyBank shall execute the Lockbox Agreement stating,
among other things, that (i) the Lockbox Account is deemed to be a "deposit
account" as such term is defined in Article 9 of the UCC and (ii) KeyBank agrees
that it will comply with the instructions directing disposition of the funds in
the Lockbox Account originated by the Collateral Agent without further consent
by the Company or any of its Subsidiaries.
(c) The Company or any of its Subsidiaries may, upon 30 days'
notice to the Collateral Agent, open another Lockbox and Lockbox Account with
another commercial bank or financial institution into which all of the items
described in clause (a) of this Section that are not mailed to any other Lockbox
shall be mailed. If the Company or any of its Subsidiaries elects to open a new
Lockbox and Lockbox Account with another commercial bank or financial
institution, the Company or such Subsidiary and the Collateral Agent shall
execute a security agreement, substantially in the form of the Security
Agreement or such form as the Collateral Agent may, in its reasonable
discretion, approve, and the Company or such Subsidiary, the Collateral Agent
and the commercial bank or financial institution maintaining such Lockbox
Account shall execute an agreement, in form and substance as the Collateral
Agent may, in its reasonable discretion, approve, stating that (i) such Lockbox
Account is deemed to be a "deposit account" as such term is defined in Article 9
of the UCC and (ii) such commercial bank or financial institution will comply
with the instructions directing disposition of the funds in the Lockbox Account
originated by the Collateral Agent without further consent by the Company or
such Subsidiary.
(d) So long as no Event of Default has occurred or is continuing
or would result therefrom, the Company may transfer funds from any of the
Lockbox Accounts to any other account maintained by the Company or any of its
Subsidiaries or for any other purpose.
8.15 Proprietary Rights.
The Company shall do, and shall cause each of its Subsidiaries to
do, all things reasonably necessary to preserve and keep in full force and
effect all Proprietary Rights, except to the extent any such Proprietary Rights
is no longer in use or is of immaterial value and except as set forth on
Schedule 8.15 hereto.
8.16 Minimum EBITDA.
The Company shall maintain at the end of each fiscal quarter
consolidated EBITDA of not less than the amount set forth below for such fiscal
quarter; provided that consolidated EBITDA shall be determined in each case on
the last date of each fiscal quarter on the basis of the rolling four fiscal
quarters ending on the date of determination:
For each Period Ending On: Minimum EBITDA
------------------------- --------------
May 31, 2002 $ 4,000,000
August 31, 2002 4,000,000
November 30, 2002 4,000,000
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February 28, 2003 6,000,000
May 31, 2003 7,000,000
August 31, 2003 8,000,000
November 30, 2003 9,000,000
February 29, 2004 10,000,000
May 31, 2004 10,500,000
August 31, 2004 11,000,000
November 30, 2004 11,500,000
February 28, 2005 12,000,000
; and for each period ending on each fiscal quarter thereafter, $13,000,000.
8.17 Repayment of Certain Debt.
Simultaneously upon the receipt of the proceeds from the issuance
and sale of the Notes hereunder, the Company shall use a portion of such
proceeds to repay or cause to be repaid in full the outstanding Debt of the
borrowers under the DDJ Loan Agreement.
8.18 Collateral Agent Fees.
The Company shall pay to the Collateral Agent, for its own
account, the collateral agency fee payable in the amount and at the times set
forth in the Collateral Agent Fee Agreement, dated as of March 19, 2002, entered
into by the Company and the Collateral Agent.
SECTION 9. NEGATIVE COVENANTS OF THE COMPANY
In order to induce the Holders to enter into this Agreement and
to purchase the Notes as contemplated hereby, as long as any of the Obligations
remain outstanding, the Company covenants and agrees that:
9.1 Debt and Guarantees.
The Company shall not create, incur, assume or permit to be
outstanding, and shall not permit any Subsidiary to create, incur, assume or
permit to be outstanding, any Debt other than:
(a) Debt incurred pursuant to this Agreement;
(b) Debt outstanding on the Closing Date and identified on
Schedule 5.11;
(c) Debt incurred under the New Notes;
(d) Refinancing of Debt with respect to Debt that was incurred on
or prior to the Closing Date (other than the Debt incurred hereunder or under
the Notes); provided, however, that (i) the principal amount of the Debt
refinanced (plus the amount of fees, costs, and expenses incurred and the amount
of any premium, penalties, breaking costs and other similar amounts required to
be paid, in connection with such refinancing pursuant to the terms of the
instrument governing the Debt being refinanced) shall (i) not be greater than
the amount of the Debt being refinanced, (ii) not extend the maturity date of
the Debt being refinanced, (iii) have a
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Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of the Debt being refinanced, (iv) rank no more senior than the
Debt being refinanced, and (v) contain terms and conditions at least as
favorable to the Company as the terms and conditions of the Debt being
refinanced;
(e) Debt secured by Liens permitted by Sections 9.4(d) and
9.4(e); and
(f) Intercompany Debt owed to the Company or its Subsidiaries
(other than the Foreign Subsidiaries).
The Company shall not, and shall not permit any of its Subsidiaries to,
refinance, amend, restructure, reconstitute, replace or otherwise alter any
tenor, covenant, condition or provision of any instrument evidencing any Debt
outstanding on the Closing Date without the prior written consent of the Holders
(which consent shall not be unreasonably withheld or delayed); provided that the
Company and its Subsidiaries may refinance such Debt as permitted pursuant to
Section 9.1(d) above without such consent.
9.2 Restricted Payments.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on its Capital Stock or Stock Equivalents to the holders of its
Capital Stock or Stock Equivalents other than (A) dividends or distributions
payable in its Capital Stock or dividends or distributions (or series of
dividends of distributions) made by any of the Subsidiaries of the Company to
the Company or any other Subsidiary of the Company or (B) non-cash dividends or
distributions payable on the Series C Convertible Preferred Stock issued by the
Company in connection with the Exchange or (ii) redeem, repurchase or otherwise
acquire or retire for value any such Capital Stock or Stock Equivalents (except
shares acquired upon the conversion thereof into other shares of Capital Stock
or rights to acquire such Capital Stock, odd lot shares, and except for the
repurchase or acquisition of such Capital Stock held by directors, officers or
employees of the Company or any of its Subsidiaries upon death, disability,
retirement or termination of employment not to exceed $100,000 in the aggregate
in any fiscal year) or rights to acquire such Capital Stock or Stock
Equivalents, or (iii) directly or indirectly redeem, repurchase, defease or
otherwise acquire or retire for value, prior to any scheduled or mandatory
maturity, scheduled or mandatory repayment or scheduled sinking fund payment
(after giving effect to the exercise of any and all unconditional (other than as
to the giving of notice) options to extend the maturity), Debt of the Company or
any of its Subsidiaries (other than Notes pursuant to this Agreement or as set
forth in the Section 5.20 (Use of Proceeds) of this Agreement).
9.3 Investments.
The Company shall not make or acquire, or permit any of its
Subsidiaries to make or acquire, any Investment in any Person other than:
(a) Investments by the Company or any of its Subsidiaries (other
than Foreign Subsidiaries) in any Subsidiary (other than Foreign Subsidiaries);
(b) Permitted Investments;
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(c) Investments consisting of purchase money notes received in
connection with the sale or disposition of any asset, provided that such sale or
disposition was made in accordance with the terms of this Agreement; and
(d) Investments in Foreign Subsidiaries which Investments are
existing on the Closing Date and disclosed on Schedule 9.3.
9.4 Negative Pledge.
The Company shall not, and shall not permit any of its
Subsidiaries to, create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it except:
(a) Liens existing on the Closing Date and listed in Schedule 9.4
hereto;
(b) any Lien arising pursuant to any order of attachment,
distrain or similar legal process arising in connection with court proceedings
so long as the execution or other enforcement thereof is effectively stayed and
the claims secured thereby are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP have been set aside;
(c) Liens created by and existing under the Operative Agreements;
(d) Purchase money Liens or purchase money security interests
upon or in any property acquired or held by the Company or any such Subsidiary
of the Company in the ordinary course of business to secure the purchase price
of such property or to secure Debt incurred solely for the purpose of financing
the acquisition of such property, and Liens existing on such property at the
time of its acquisition (other than any such Lien created in contemplation of
such acquisition); provided, however, that the aggregate principal amount of the
Debt secured by the Liens referred to in this clause (d) and in clause (e) below
shall not exceed $5,000,000 in the aggregate at any time outstanding;
(e) Liens to secure Capitalized Lease Obligations; provided,
however, that: (i) any such Lien is created solely for the purpose of securing
Debt representing, or incurred to finance, refinance or refund, the cost
(including, without limitation, the cost of construction) of the property
subject thereto, (ii) the principal amount of the Debt secured by such Lien does
not exceed 100% of such cost, and (iii) such Lien does not extend to or cover
any other property other than such item of property and any improvements on such
item and (iv) the aggregate principal amount of Debt secured by the Liens
referred to in this clause (e) and in clause (d) above shall not exceed
$5,000,000 in the aggregate at any time outstanding;
(f) any Permitted Liens; and
(g) any extension, renewal or substitution of or for any of the
foregoing Liens described in clauses (a) and (f) above or this clause (g);
provided in each case that (i) the Debt or other obligation or liability secured
by the applicable Lien shall not exceed the Debt or other obligation or
liability existing immediately prior to such extension, renewal, or substitution
and (ii) the Lien securing such Debt or other obligation or liability shall be
limited to the property which, immediately prior to such extension, renewal or
substitution, secured such Debt or other obligation or liability, and
improvements on or additions to such property.
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9.5 Consolidations, Mergers and Sales of Assets.
(a) The Company shall not complete (or agree to complete), and
shall not permit any Subsidiary to complete (or agree to complete), an Asset
Disposition unless (i) prior to such Asset Disposition, the Company or such
Subsidiary, as the case may be, has received the written consent of the Required
Holders and (ii) the Company or such Subsidiary, as the case may be, applies the
Net Cash Proceeds from such Asset Disposition in accordance with Section 7.1(a)
of this Agreement. Notwithstanding the foregoing and in addition to the
liquidation and dissolution of the Company's inactive Subsidiaries set forth on
Schedule 9.5 permitted by Section 8.8, the Company and its Subsidiaries may
complete an Asset Disposition with respect to its inactive Subsidiaries set
forth on Schedule 9.5 without the consent of the Required Holders; provided that
the Company or such Subsidiary, as the case may be, apply the Net Cash Proceeds
from such Asset Disposition in accordance with Section 7.1(a) of this Agreement.
(b) The Company shall, and shall cause each of its Subsidiaries
to: (a) conduct, its business in the ordinary course and consistent with past
practice; (b) use, and cause each of its Subsidiaries to use, its reasonable
efforts, in the ordinary course and consistent with past practice, to (i)
preserve its business and the goodwill and business of the customers, suppliers
and others having business relations with the Company or any of its
Subsidiaries, and (ii) keep available the services and goodwill of its present
employees; and (c) shall continue to operate, and shall cause each of its
Subsidiaries to continue to operate, only in the same general types of
businesses as now conducted thereby and reasonable extensions thereof.
(c) The Company shall not merge or consolidate, and shall not
permit any Subsidiary to merge or consolidate, with or into any other Person.
9.6 Capital Expenditures.
Consolidated Capital Expenditures shall not, for each of the
periods ending on the dates set forth below, exceed:
Consolidated
Capital
For each Fiscal Year Ending On: Expenditures
------------------------------- ------------
May 31, 2002 $3,000,000
May 31, 2003 3,500,000
May 31, 2004 4,000,000
Thereafter 4,500,000
; provided, however, that to the extent the actual Consolidated Capital
Expenditures in any period are less than the maximum permitted amount of
Consolidated Capital Expenditures set forth above for such period (such
difference shall hereinafter be referred to as the "Unused Capital
Expenditures"), the Company and each of its Subsidiaries may make additional
Consolidated Capital Expenditures in the immediately succeeding period (the
"Immediately Succeeding Period") equal to the sum of: (i) the Unused Capital
Expenditures and (ii) the maximum permitted amount of Consolidated Capital
Expenditures for the Immediately Succeeding Period.
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9.7 Transactions with Affiliates.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into or suffer to exist any contract, agreement,
arrangement or transaction with any Affiliate (an "Affiliate Transaction"), or
any series of related Affiliate Transactions, (other than Exempted Affiliate
Transactions), (i) unless the Company reasonably and in good faith determines
that the terms of such Affiliate Transaction are fair and reasonable to the
Company, and no less favorable to the Company than could have been obtained in
an arm's length transaction with a non-Affiliate, and (ii) if involving
consideration to either party in excess of $1,000,000, unless such Affiliate
Transaction(s) is evidenced by an Officers' Certificate addressed and delivered
to the Holders certifying that such Affiliate Transaction (or Transactions) has
been approved by a majority of the members of the Board of Directors that are
disinterested in such transaction and (iii) if involving consideration to either
party in excess of $5,000,000, unless in addition the Company, prior to the
consummation thereof, obtains a written favorable opinion as to the fairness of
such transaction to the Company from a financial point of view from an
independent investment banking firm of national reputation or, if pertaining to
a matter for which such investment banking firms do not customarily render such
opinions, an appraisal or valuation firm of national reputation. Notwithstanding
the foregoing, the Company and its Subsidiaries shall be permitted to enter into
transactions with Affiliates pursuant to agreements or other documents entered
into simultaneously herewith on the Closing Date, including without limitation,
the agreements and other documents relating to the New Notes and the issuance of
the Company's Series C Preferred Stock and those existing Affiliate transactions
set forth on Schedule 5.22 hereof.
9.8 Restrictions on Foreign Subsidiary Support.
The Company shall not permit to exist, and shall not permit any
of its Subsidiaries to permit to exist, any transfers by the Company or any of
its Subsidiaries of goods of any kind, loans, capital contributions or any other
financial support to any Foreign Subsidiary.
9.9 Environmental Matters.
The Company shall not, and shall not permit any of its
Subsidiaries to, use, generate, manufacture, produce, store, Release, discharge
or dispose of, on, under or about any real property owned, operated or leased by
the Company or any such Subsidiary or transport to or from any such property,
any Hazardous Substance, or (to the extent within the Company's or any such
Subsidiary's control) permit any other Person to do so except in the ordinary
course and in compliance with applicable law, and where such non-compliances
could not reasonably be expected to have a Material Adverse Effect.
9.10 Amendments to Certificates of Incorporation and By-Laws.
The Company shall not alter or modify, and shall not permit any of its
Subsidiaries to alter or modify, its Articles of Incorporation or Certificate of
Incorporation or By-Laws or other organizational documents in any manner which
could reasonably be expected to have a Material Adverse Effect; provided that
the Company may amend its Certificate of Incorporation to increase the number of
its authorized shares of common stock as contemplated by the Exchange and the
Company may liquidate or dissolve its inactive Subsidiaries set forth on
Schedule 9.5. The Company shall not change, and shall not permit any of its
Subsidiaries to
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change, its corporate name, mailing address, or principal place of business or
jurisdiction of incorporation, unless it shall have complied with the
requirements of Section 8.12 hereof.
9.11 ERISA.
The Company shall not, and shall not permit any of its
Subsidiaries to, do any of the following if such action could reasonably be
expected to result in the Company or any such Subsidiary incurring a liability,
individually or in the aggregate equal to or in excess of $300,000:
(a) Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction which is reasonably likely to result in a civil penalty
or excise tax described in Sections 502(i) of ERISA or 4975 of the Code for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the DOL;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the Code), whether or not waived;
(c) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any Benefit
Plan;
(d) terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan;
(e) fail, or permit any ERISA Affiliate to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any ERISA Affiliate to fail, to pay any
required installment or any other payment required under Section 412 of the Code
on or before the due date for such installment or other payment;
(g) amend, or permit any ERISA Affiliate to amend, a Benefit Plan
resulting in an increase in current liability for the plan year such that the
Company or any of its Subsidiaries or any ERISA Affiliate is required to provide
security to such Benefit Plan under Section 401(a)(29) of the Code;
(h) withdraw, or permit any ERISA Affiliate to withdraw, from any
Multiemployer Plan; or
(i) permit any Termination Event to occur.
9.12 No Additional Bank Accounts.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, open, maintain or otherwise have any
checking, savings or other accounts at any bank or other financial institution,
or any other account where money is or may be deposited or maintained with any
Person, other than the accounts set forth on Schedule 9.12, except to the extent
permitted hereunder.
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9.13 No Additional Subsidiaries.
The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, incorporate, form or acquire any new Subsidiaries or
purchase or otherwise acquire all or substantially all of the assets of any
Person.
SECTION 10. EVENTS OF DEFAULT; ACCELERATION
10.1 Events of Default.
The occurrence of any of the following events shall constitute an
"Event of Default" hereunder:
(a) failure of the Company to pay any principal or Offer Payment,
if any, on any Note when due, whether at stated maturity or at a date fixed for
payment, prepayment, by an acceptance of an Offer, by acceleration or otherwise;
or
(b) failure of the Company to pay any other Obligation when due,
whether at stated maturity, or at a date fixed for payment, prepayment, by an
acceptance of an Offer by acceleration or otherwise and such failure shall
continue for a period of five (5) days; or
(c) (i) failure of the Company to perform, comply with or observe
any term, covenant or agreement applicable to it contained in Section 9; or (ii)
failure of the Company or any of its Subsidiaries to perform, comply with or
observe any other term, covenant or agreement applicable to it in this Agreement
(other than a provision covered by subparagraph (i) above) or in any other
Operative Agreement and the failure shall continue unremedied for five (5)
Business Days after the delivery by the Holders of written notice to the Company
of such failure; or
(d) any representation or warranty made or deemed made by the
Company or any of its Subsidiaries in this Agreement, the other Operative
Agreements or any other agreement, document, instrument or in any certificate
furnished to the Holders pursuant to the terms of any thereof shall prove to
have been false or misleading as of the time made or furnished in any material
respect; or
(e) (i) the Company or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Company or any
of its Subsidiaries shall make a general assignment for the benefit of
creditors; or (ii) there shall be commenced against the Company or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for sixty (60) days after the entry thereof; or (iii) there shall be
commenced against the Company or any of its Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distrain or
similar process
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against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal for sixty (60) days; or
(f) the Company or any of its Subsidiaries shall (i) default in
any payment of principal of or interest on any Debt or in the payment of any
Guarantee the aggregate principal amount of the series of Debt under which such
Debt is issued and the aggregate principal amount of the obligation guaranteed
by such Guarantee equals or exceeds $200,000; or (ii) default in the observance
or performance of any other agreement or condition relating to any such Debt or
Guarantee or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Debt or beneficiary or beneficiaries of such Guarantee
(or a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such Debt to
become due prior to its stated maturity or such Guarantee to become due prior to
its stated maturity or such Guarantee to become payable; or
(g) any covenant, agreement or obligation of any party contained
in or evidenced by any Operative Agreement shall cease to be enforceable in
accordance with its terms, or the Company or any of its Subsidiaries shall deny
or disaffirm its obligations under any Operative Agreement, or any Operative
Agreement shall be cancelled, terminated, revoked or rescinded without the
Holders' express prior written consent; or
(h) any of the other Operative Agreements shall cease for any
reason to be in full force and effect (other than in accordance with the terms
hereof or thereof) or any action or proceeding shall have been commenced by any
Person seeking to cancel, revoke, rescind or disaffirm the obligations of any
party to any Operative Agreement; or
(i) any court or other governmental authority shall issue a final
judgment, order, decree or ruling for the payment of money (a "Judgment"), and
such Judgment is in an amount (determined after an allowance for the application
of any insurance proceeds to such Judgment) in excess of $200,000 and
enforcement proceedings shall have been commenced upon any such Judgment or any
such Judgment shall remain unpaid after a period of ten (10) consecutive days
during which a stay of such enforcement of any such Judgment, including, without
limitation, by reason of a pending appeal or otherwise, shall not be in effect;
or
(j) any security interest or Lien purported to be created by any
of the Collateral Documents shall cease to be valid and (to the extent required
by the Collateral Documents) perfected or the Company or any of its Subsidiaries
shall so have asserted, except that the failure of any security interest or Lien
purported to be created by the Collateral Documents to be valid and perfected
shall not in itself constitute a default hereunder if the value of the
Collateral purported to be covered thereby is, in the aggregate, not in excess
of $200,000; or
(k) the holders of all or any of the New Notes shall accelerate
the maturity of all or any the New Notes or any of the New Notes shall be
prepaid, redeemed or repurchased in whole or part.
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10.2 Acceleration.
Upon the occurrence of an Event of Default which has not been
cured within the applicable cure period, if any, or waived by the Required
Holders, by delivery of written notice to Company, the Required Holders may take
any or all of the following actions: declare all or any part of the Obligations
hereunder to be immediately due and payable (except with respect to any Event of
Default set forth in Section 10.1(e) hereof, in which case all such Obligations
shall automatically become immediately due and payable without the necessity of
any notice or other demand) without presentment, demand, protest or any other
action or obligation of the Required Holders.
If at any time after acceleration of the Obligations hereunder,
the Company or any of its Subsidiaries shall pay all arrears of interest and all
payments on account of principal of such Notes which shall have become due
otherwise than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and any Default and all Events of Default (other than nonpayment of principal of
and accrued interest on such Notes and other Obligations hereunder due and
payable solely by virtue of acceleration) shall be remedied or waived, then by
written notice to Company, the Required Holders may elect, in the Required
Holders' sole discretion, to rescind and annul the acceleration and its
consequences; but such action shall not affect any subsequent Default or Event
of Default or impair any right or remedy consequent thereon. The provisions of
the preceding sentence are not intended to benefit the Company or any of its
Subsidiaries and do not give the Company or any of its Subsidiaries the right to
require the Holders to rescind or annul any acceleration hereunder, even if the
conditions set forth herein are met.
SECTION 11. COLLATERAL AGENT
11.1 Appointment of Collateral Agent; Powers and Immunities.
(a) Subject to Section 11.8 hereof, each Holder in its capacity
as such hereby irrevocably appoints and authorizes the Collateral Agent to act
as its agent hereunder, under the Collateral Documents and under all other
Operative Agreements to which the Collateral Agent is a party, with such powers
as are expressly delegated to the Collateral Agent by the terms of this
Agreement, the Collateral Documents and such other Operative Agreements,
together with such other powers as are reasonably incidental thereto.
(b) The Collateral Agent (which term, when used in this sentence,
the next two sentences of this Section 11.1 and in Sections 11.5 and 11.7 hereof
shall include reference to its Affiliates and to its own and its Affiliates'
officers, directors, employees and agents) shall not have any duties or
responsibilities except those expressly set forth in this Agreement, the
Collateral Documents or any other Operative Agreement to which the Collateral
Agent is a party, or be a trustee for or have any fiduciary obligation to any
Holder, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement, the Collateral
Documents or any other Operative Agreement or otherwise exist against the
Collateral Agent. Notwithstanding anything to the contrary contained herein, the
Collateral Agent shall not be required to take any action which is contrary to
this Agreement, any Collateral Document or any other Operative Agreement to
which the Collateral Agent is a party or applicable law. The Collateral Agent
shall not be responsible for any action taken or omitted to be taken by it
hereunder, under any Collateral Document or under any other Operative Agreement
to which the
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Collateral Agent is a party or in connection herewith or therewith, except for
its own gross negligence or willful misconduct. In no event shall the Collateral
Agent be liable for indirect, punitive, special or consequential damage or loss
(including but not limited to lost profits) whatsoever, even if the Collateral
Agent has been informed of the likelihood of such loss or damage and regardless
of the form of action. Except as otherwise provided under this Agreement or as
expressly provided in the Collateral Documents or the other Operative Agreements
to which the Collateral Agent is a party, the Collateral Agent shall take such
action with respect to the Collateral Documents and the other Operative
Agreements to which it is a party as it shall be directed by the Required
Holders, it being understood, however, that all such Collateral Documents shall
continue at all times to secure, on the terms and conditions set forth therein,
the Obligations.
(c) In connection with performing its duties under this
Agreement, any Collateral Document or any other Operative Agreement to which it
is a party, the Collateral Agent may employ agents, counsel and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents, counsel or attorneys-in-fact selected by it in good faith
and may consult with and rely on the advise of its agents, counsel,
attorneys-in-fact and advisors. Any such agent may do all acts and things and
exercise all discretion which it is authorized or permitted to do or exercise
for and on behalf and in the name of the Collateral Agent. In the event the
Collateral Agent shall assign any of its rights or obligations to an agent
pursuant to this Section 11.1(c), such agent shall be subject to, and shall have
the benefits of, the provisions of this Agreement insofar as they apply to the
Collateral Agent.
11.2 Reliance by Collateral Agent.
The Collateral Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation reasonably believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of any Holder, legal counsel
(including counsel to the Company and its Subsidiaries, and including the
Collateral Agent's own in-house counsel), independent accountants and other
experts selected by the Collateral Agent. The Collateral Agent shall be fully
justified in failing or refusing to take any action under this Agreement, the
Collateral Documents or any other Operative Agreement unless it shall first
receive such advice or concurrence of the Holders as it deems appropriate. The
Collateral Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement, the Collateral Documents or any
other Operative Agreement in accordance with a request or consent of the
Required Holders (except where the consent of all of the Holders is required per
Section 11.9, and in any such event, the Collateral Agent shall be fully
protected as provided in this sentence when acting or refraining from acting in
accordance with the instructions of all of the Holders) and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Holders.
11.3 Default Events.
(a) The Collateral Agent shall not be deemed to have knowledge or
notice of the occurrence of an Event of Default unless the Collateral Agent has
received written notice from a Holder or the Company referring to this
Agreement, describing such Event of Default and stating that such notice is a
"Notice of an Event of Default". In the event that the Collateral
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Agent receives a notice from a Holder, the Company or any other Person of the
occurrence of an Event of Default, the Collateral Agent shall give notice
thereof to the Holders; provided, however, that the Collateral Agent shall not
incur any liability to any Holder on account of any failure to provide such
notice, except for its own gross negligence or willful misconduct. The
Collateral Agent shall take such action with respect to such Event of Default as
so directed by the Required Holders pursuant to this Agreement; provided that,
unless and until the Collateral Agent shall have received such directions and,
if it so requests, an indemnification from the Holders satisfactory to the
Collateral Agent, the Collateral Agent may (but shall not be obligated to) take
such action, or refrain from taking any action, with respect to such Event of
Default as it shall deem advisable in the best interest of the Holders.
(b) If the Collateral Agent does not receive any amount due it
from the Company hereunder or under any Collateral Document or other Operative
Agreement, the Collateral Agent may notify the Holders, and the Holders shall
notify the Company that failure to pay such amount shall constitute a Event of
Default.
11.4 Rights as a Secured Party.
With respect to its Notes, if any, the Collateral Agent shall
have the same rights and powers hereunder as any Holder and may exercise the
same as though it was not acting as the Collateral Agent. All defined terms
contained herein that would include a Person notwithstanding that such Person is
acting in the capacity of the Collateral Agent shall, unless the context
otherwise indicates, include such Person in its individual capacity. The Person
acting in the capacity of the Collateral Agent and its Affiliates may (without
having to account therefor to any Holder) make loans to, issue letters of credit
for the account of, accept deposits from, extend credit (on a secured or
unsecured basis) to, acquire equity interests in and generally engage in any
kind of banking, trust, financial, advisory, underwriting or other business with
the Company or any of its Affiliates, as if it was not acting as the Collateral
Agent.
11.5 Indemnification.
The Collateral Agent shall be fully justified in refusing to take
or to continue to take any action hereunder, under any Collateral Document or
under any other Operative Agreement to which the Collateral Agent is a party
unless it shall first be indemnified to its satisfaction by the Holders against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
11.6 Documents.
The Collateral Agent will forward to each Holder, promptly after
the Collateral Agent's receipt thereof (and will use commercially reasonable
efforts to forward within five (5) Business Days of such receipt), a copy of
each document furnished to the Collateral Agent by any Holder or the Company
under the Collateral Documents. The Collateral Agent will forward to each
Holder, promptly upon such Holder's request therefor, a copy of any other
document furnished to the Collateral Agent under the Collateral Documents or any
other Operative Agreement to which the Collateral Agent is a party.
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11.7 Non-Reliance on Collateral Agent and Other Secured Parties.
Each Holder acknowledges that the Collateral Agent has not made
any representation or warranty to it on or prior to the date hereof. Each Holder
represents that it has, independently and without reliance on the Collateral
Agent or any other Holder, and based on such documents and information as it has
deemed appropriate, made its own appraisal of the financial condition and
affairs of the Company and its Subsidiaries and decision to enter into this
Agreement and the other Operative Agreements to which it is a party and agrees
that it will, independently and without reliance upon the Collateral Agent or
any other Holder, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own appraisals and decisions in
taking or not taking action under this Agreement and the other Operative
Agreements to which it is a party. Neither the Collateral Agent nor any Holder
nor any of their respective Affiliates shall be responsible to any other Holder
for any recitals, statements, representations or warranties made by the Company
or any of its Subsidiaries contained in this Agreement or any Operative
Agreement or in any certificate or other document referred to or provided for
in, or received by any Holder under, this Agreement or any other Operative
Agreement, for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Operative Agreement or any other
document referred to or provided for herein or therein or for any failure by the
Company to perform its obligations hereunder or thereunder. Neither the
Collateral Agent nor any Holder shall be required to monitor or otherwise inform
itself as to the performance or observance by the Company or any of its
Subsidiaries under this Agreement or any other document referred to or provided
for herein or to make inquiry of, or to inspect the properties or books of, the
Company or any of its Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Holders by
the Collateral Agent hereunder and under the Collateral Documents, the
Collateral Agent shall not have any duty or responsibility to provide any Holder
with any credit or other information concerning the Company or any of its
Subsidiaries, or any of their respective Affiliates, which may come into the
possession of the Collateral Agent or any of its Affiliates.
11.8 Resignation or Removal of Collateral Agent.
(a) Subject to the appointment and acceptance of a successor
Collateral Agent as provided in this Section 11.8, the Collateral Agent may
resign at any time as Collateral Agent under this Agreement and any Collateral
Document and any other Operative Agreement to which it is a party by giving 30
days' written notice thereof to the Holders and the Company, and the Collateral
Agent may be removed at any time with or without cause by the vote of the
Required Holders. Upon any such resignation or removal, the Required Holders
shall have the right to appoint a successor Collateral Agent. If no successor
Collateral Agent shall have been appointed by the Required Holders and shall
have accepted such appointment prior to the scheduled effective date of the
resignation or removal of the Collateral Agent, then the retiring Collateral
Agent may, on behalf of the Holders appoint a successor Collateral Agent, which
shall be a Holder acceptable to the Required Holders or a bank or trust company
reasonably acceptable to the Required Holders. If no successor Collateral Agent
shall have been appointed by the Required Holders and shall have accepted such
appointment prior to the scheduled effective date of the resignation of the
Collateral Agent, then the Collateral Agent may petition any court of competent
jurisdiction for the appointment of a successor Collateral Agent. Such court may
thereupon, after such notice, if any, as it may deem proper and as it may
prescribe, appoint a
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successor Collateral Agent, and such determination shall be binding upon all the
parties hereto and shall not be appealable. The Holders agree to pay or
reimburse the Collateral Agent for all fees, charges and expenses, including
attorneys' fees, relating to or incurred by the Collateral Agent in connection
with any such court proceedings.
(b) Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, (i) such successor Collateral Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Collateral Agent, and the retiring
Collateral Agent shall be discharged from its duties and obligations hereunder
and (ii) the retiring Collateral Agent shall promptly transfer all Collateral
within its possession or control to the possession or control of the successor
Collateral Agent and shall execute and deliver such notices, instructions and
assignments as the Required Holders shall instruct based on their conclusion
that such notices, instructions and assignments are necessary or desirable to
transfer the rights of the Collateral Agent with respect to the Collateral to
the successor Collateral Agent. After any retiring Collateral Agent's
resignation or removal hereunder as Collateral Agent, the provisions of this
Section 11 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Collateral Agent.
Notwithstanding anything in this Agreement to the contrary, the Collateral Agent
shall not be required in any event or under any circumstance, including its
resignation or removal, to provide (nor be deemed to have provided) to any
successor Collateral Agent any indemnity (or similar obligation) of any kind
whatsoever.
11.9 Authorization.
The Collateral Agent is hereby authorized by the Holders to
execute, deliver and perform each of the Collateral Documents and other
Operative Agreements to which the Collateral Agent is or is intended to be a
party, and each Holder agrees to be bound by all of the agreements of the
Collateral Agent contained in, and all of the other terms and conditions of, the
Collateral Documents and other Operative Agreements to which the Collateral
Agent is a party. Without receiving prior written consent from the Required
Holders, the Collateral Agent will not consent to any modification, supplement
or waiver under any of the Collateral Documents or under any other Operative
Agreement to which the Collateral Agent is a party, provided that without the
prior written consent of each Holder, the Collateral Agent shall not (a) release
any Collateral or otherwise terminate any Lien under any Collateral Document,
(b) consent to any modification of this Section 11.9 or of the definition of the
terms "Obligations", "Required Holders" or "Holders" or (c) consent to any Lien
under any Collateral Document securing obligations other than the Obligations.
For the avoidance of doubt, nothing in this Section 11.9 or elsewhere in this
Agreement or in any Collateral Document or other Operative Agreement shall limit
the obligations of the Company or any of its Subsidiaries under any Operative
Agreement, including, without limitation, any obligation of the Company to
obtain any consent or approval of one or more Holders required to be obtained by
the Company prior to any amendment of, modification or supplement to or waiver
under any Operative Agreement, and the Collateral Agent shall not consent to any
amendment of, modification or supplement to or waiver under any Operative
Agreement unless and until the Company shall have first obtained all such
required consents and approvals.
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SECTION 12. DEFINITIONS
12.1 Defined Terms.
As used herein the following terms have the following respective
meanings:
"Account" or "Accounts" means all of the Company's or any of its
Subsidiaries' accounts, whether now existing or existing in the future,
including, without limitation, all (i) accounts receivable (whether or not
specifically listed on schedules furnished to the Holders), including, without
limitation, all accounts created by or arising from all of the Company's or any
of its Subsidiaries' sales of goods or rendition of services made under the
Company's or any of its Subsidiaries' trade names or styles, or through the
Company's or any of its Subsidiaries' divisions; (ii) unpaid or unexercised
seller's rights (including any right of rescission, replevin, reclamation and
stopping in transit) relating to the foregoing or arising therefrom; (iii)
rights to any goods represented by any of the foregoing, including returned or
repossessed goods; (iv) reserves and credit balances held by the Company or any
of its Subsidiaries with respect to any such accounts receivable or account
debtors; (v) guarantees or collateral for any of the foregoing; (vi) insurance
policies; or (vii) rights relating to any of the foregoing.
"Accreted Principal Amount" of any Note, at any date, shall equal
the (i) the Original Issue Price of such Note plus (ii) the accrued amortization
of the Original Issue Discount attributable ratably on a daily basis, using a
daily level yield, to the period from and including the Closing Date to (but
excluding) the Maturity Date.
"Affiliate" or "Affiliates" means with respect to any Person, (i)
any Subsidiary of such Person and any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person and (ii) each director, officer or general partner of such Person. For
purposes of the Agreement, control of a Person means the power, direct or
indirect, (a) to vote 20% or more of the outstanding stock or other ownership
interests having ordinary voting power for the election of directors of such
Person or (b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Affiliate Transaction" has the meaning specified in Section 9.7.
"Agreement" has the meaning specified in Section 1.
"Asset Disposition" means any sale or other disposition, or
series of sales or other dispositions (including, without limitation, by merger
or consolidation, and whether by operation of law or otherwise), made on or
after the Closing Date by the Company or any of its Subsidiaries to any Person
of (a) all or substantially all of the outstanding Capital Stock of any of its
Subsidiaries, (b) all or substantially all of its assets or the assets of any
division of the Company or any of its Subsidiaries, or (c) any other asset or
assets which, when taken together with all sales or other dispositions of assets
not covered by the foregoing clauses (a) and (b) yield proceeds or involve
assets having a fair market value in excess of $150,000 in any twelve-month
period; provided, however, that (i) any sale or disposition by the Company or
any of its Subsidiaries of Inventory in the ordinary course of business, and
(ii) any sale or disposition of the Company or any of its Subsidiaries of
assets, not in the ordinary course of business in instances where the proceeds
of such dispositions do not exceed $50,000 for any individual
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transaction or $150,000 in the aggregate following the Closing shall not
constitute an Asset Disposition for purposes of this Agreement.
"Auditors" means a nationally-recognized firm of independent
public accountants selected by the Company and satisfactory to the Holders in
the Holders' reasonable discretion.
"Benefit Plan" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) that is subject to Title IV of
ERISA and in respect of which the Company or any of its Subsidiaries or any
ERISA Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which commercial banks are required by law or authorized to close
in New York, New York.
"Capital Lease" means, as to any Person, any lease of property,
real or personal, by such Person as lessee which would be capitalized on the
balance sheet of such Person prepared in conformity with GAAP.
"Capital Lease Obligation" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in accordance
with GAAP.
"Capital Stock" means shares of capital stock, beneficial,
partnership or limited liability company interests, participations or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity, whether voting or non-voting,
and includes, without limitation, common stock and preferred stock.
"Cash Equivalent" means (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States government or any agency thereof, (b) certificates of
deposit, eurodollar time deposits, overnight bank deposits and bankers'
acceptances of any financial institution having maturities of one year or less
from the date of acquisition, (c) commercial paper of an issuer rated at least
"A-1" by S&P or "P-1" by Xxxxx'x, or carrying an equivalent rating by a
nationally recognized rating agency if both of S&P and Xxxxx'x cease publishing
ratings of investments, and (d) mutual funds investing solely in investments of
the type described in the foregoing clauses (a) through (c).
"Casualty Loss" shall have the meaning specified in Section
8.4(b).
"Change of Control" means any transaction or series of
transactions in which any of the following occurs: (a) any "person" or "group"
(as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act, whether or not applicable) (other than any of the Excluded Persons) becomes
following the date of the first issuance of the New Notes (the "Issue Date") the
"beneficial owner," directly or indirectly, of more than 50% of the issued and
outstanding Capital Stock entitled to vote in the election of directors,
managers, or trustees, as applicable, of the Company or any Subsidiary Guarantor
or the surviving entity or entities (if other than the Company or any Subsidiary
Guarantor); or (b) individuals who immediately following the Issue Date after
giving effect to the transactions contemplated by Section 6.6 of the Exchange
Agreement constituted the Board of Directors of the Company or any Subsidiary
Guarantor (together with any new directors whose election by such Board of
Directors or whose
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nomination for election by the shareholders of the Company or any Subsidiary
Guarantor, as applicable, was approved by a vote of at least a majority of the
directors of the Company or any Subsidiary Guarantor then still in office who
were either directors at the Issue Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company or any Subsidiary Guarantor
then in office. Notwithstanding the foregoing to the contrary, a "Change of
Control" shall expressly exclude the Exchange and subsequent conversion of the
Company's Series C Preferred Stock into common stock.
"Change of Control Offer" has the meaning specified in Section
7.3(a).
"Change of Control Payment" has the meaning specified in Section
7.3(a).
"Closing" has the meaning specified in Section 3.
"Closing Date" has the meaning specified in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder from time to
time, and any successor statute.
"Collateral" means any and all assets and rights and interests in
or to property and proceeds thereof, whether now owned or hereafter acquired by
the Company or any of its Subsidiaries, upon which a Lien is granted under any
of the Collateral Documents.
"Collateral Agent" has the meaning specified in the Introduction.
"Collateral Documents" means the Security Agreement, each of the
Deeds of Trust, the Pledge Agreement, the Lockbox Agreement and any other
document or instrument executed and delivered by a Person granting a Lien on any
of its property to secure payment of the Obligations.
"Company" has the meaning specified in the Introduction.
"Company Indemnified Person" has the meaning specified in Section
15(c).
"Compliance Certificate" shall have the meaning specified in
Section 8.2(b).
"Confidential Information" has the meaning specified in Section
25.
"Consolidated Capital Expenditures" means, for any period, the
additions to property, plant and equipment and other capital expenditures of the
Company and each of its Subsidiaries for such period, as the same are (or, in
accordance with GAAP, would be) set forth in the consolidated statement of cash
flows of the Company and its Subsidiaries for such period.
"Consolidated Net Income" means, for any period, the consolidated
net income (or loss) of the Company and its Subsidiaries for such period,
excluding (i) gains or losses from dispositions of assets, (ii) any
extraordinary items, and (iii) other non-recurring items not related to
operations, in the case of (i), (ii) and (iii), as determined in accordance with
GAAP.
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"Contractual Obligation" of any Person means any obligation,
agreement, undertaking or similar provision of any security issued by such
Person or of any agreement, undertaking, contract, lease, indenture, mortgage,
deed of trust or other instrument (excluding an Operative Agreement) to which
such Person is a party or by which it or any of its property is bound or to
which any of its properties is subject.
"DDJ Loan Agreement" means the Loan Agreement dated as of March
1, 2001, as amended, between the Company and Aeromet America, Inc., Balo
Precision Parts, Inc., Cashmere Manufacturing Co., Inc., Ceramic Devices, Inc.,
Electronic Specialty Corporation, Northwest Technical Industries, Inc., Pacific
Coast Technologies, Inc., Seismic Safety Products, Inc., Skagit Engineering &
Manufacturing Inc., and PA&E International, Inc., as borrowers, and Pacific A&E
Limited, Pacific Aerospace & Electronics (UK) Limited and Aeromet International
PLC, as foreign subsidiaries, each of the lenders set forth on Schedule I
thereto, as lenders and DDJ Capital Management, LLC, as agent for the lenders.
"Debt" means of any Person at any date, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, (d) all obligations of such Person under Capital Leases, (e) all
contingent or non-contingent obligations of such Person to reimburse any Person
in respect of amounts paid or payable (currently or in the future, on a
contingent or non-contingent basis) under a letter of credit or similar
instrument, (f) all Debt of others secured by a Lien on any asset of such
Person, and (g) all Debt of others Guaranteed by such Person.
"Deeds of Trust" means the mortgages or the deed of trust,
security agreement and fixture filings, deeds to secured debt, assignment or
rent or other similar instruments or documents, as the case may be,
substantially in the form of Exhibit E.
"Default" means an event, condition or default which with the
giving of notice, the passage of time or both would be an Event of Default.
"DOL" means the United States Department of Labor and any
successor department or agency.
"Dollar" and sign "$" means lawful money of the United States of
America.
"EBITDA" means, with respect to any period, Consolidated Net
Income for such period before payment or provision of taxes measured by income
plus, without duplication, all interest charges (to the extent deducted in
computing Consolidated Net Income), all fees payable in connection with this
Agreement and the Exchange Agreement, amortization and depreciation expense
(including any amortization and depreciation associated with "fresh start
accounting") and other gains or losses arising from extraordinary items or from
any other non-recurring item that reduces Consolidated Net Income for such
period, in each case determined on a consolidated basis for the Company and its
Subsidiaries in accordance with GAAP or as agreed to by the Holders.
"Eligible Purchaser" has the meaning specified in Section
6.1(ii).
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"Environmental Law" means any federal, state or local law,
statute, ordinance, regulation, rule, order, decree, judgment, ordinance,
permit, license, registration, approval or requirement or authorization of any
government or governmental department or agency or court pertaining to health,
industrial hygiene, or environmental or natural resources.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute thereto and all
final or temporary regulations promulgated thereunder, and all published,
generally applicable rulings entitled to precedential effect.
"ERISA Affiliate" means any (i) corporation which is or was at
any time during the immediately preceding six years a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Company or any of its Subsidiaries; (ii) partnership or other trade
or business (whether or not incorporated) at any time during the immediately
preceding six years under common control (within the meaning of Section 414(c)
of the Code) with the Company or any of its Subsidiaries; and (iii) member of
the same affiliated service group (within the meaning of Section 414(m) of the
Code) as the Company or any of its Subsidiaries, any corporation described in
clause (i) above, or any partnership or trade or business described in clause
(ii) above.
"Event of Default" or "Events of Default" shall have the meaning
provided for in Section 10.1 of this Agreement.
"Excess Cash Flow" means for the Company for any period, 50% of
EBITDA for such Period minus the sum of (without duplication ) (i) optional,
mandatory and scheduled cash principal payments of the Notes during such period
and optional, mandatory and scheduled cash principal payments on other Debt made
by the Company or any of its Subsidiaries during such period to the extent such
other Debt is permitted herein and such payments are permitted herein to be
made, (ii) scheduled payments made by the Company or any of its Subsidiaries on
Capital Lease Obligations to the extent such Capital Lease Obligations are
permitted herein, (iii) Non-Financed Capital Expenditures made by the Borrower
or any of its Subsidiaries during such period to the extent permitted herein,
(iv) all cash interest expenses of the Company and its Subsidiaries for such
period and (v) all cash tax expenses of the Company and its Subsidiaries for
such period.
"Excess Cash Flow Offer" shall have the meaning specified in
Section 7.3(b).
"Excess Cash Flow Payment" shall have the meaning specified in
Section 7.3(b).
"Exchange" shall have the meaning specified in the Exchange
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agreement" means the Exchange Agreement, dated as of
March 19, 2002, among the Company, certain of its Subsidiaries and the holders
of the Old Notes.
"Excluded Persons" means any officer or director of the Company,
the other Persons listed on Exhibit I hereto, any Persons related to such
Persons by kinship or marriage,
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and any trust, corporation, partnership or other entity which is beneficially
owned 80% or more by any such Persons.
"Exempt Resale" means the sales or offers to sell some or all of
the Notes purchased by the Initial Purchaser pursuant to Rule 144A of the
Securities Act.
"Exempted Affiliate Transactions" means (a) customary employee
compensation arrangements approved by a majority of independent (as to such
transactions) members of the Board of Directors of the Company, (b) dividends
permitted pursuant to Section 9.2 hereof and payable, in form and amount, on a
pro rata basis to all holders of common stock of the Company and (c)
transactions solely between the Company and any of its wholly owned Subsidiaries
or solely among wholly owned Subsidiaries of the Company.
"Financials" has the meaning specified in Section 5.4.
"Foreign Subsidiary" means any Subsidiary of a Person not
incorporated in or having material assets or operations in the United States.
"GAAP" means generally accepted accounting principles in the
United States of America, as in effect from time to time and with respect to the
Foreign Subsidiaries, accounting principles used in the United Kingdom as in
effect from time to time.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hazardous Substance" means those substances included within the
definitions of "hazardous substances", "hazardous materials", "toxic
substances", or "solid waste" under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sections
6901 et seq. and the Hazardous Materials Transportation Act, 49 U.S.C. Sections
1801 et seq., and in the regulations promulgated pursuant to said laws, and such
other substances, materials and wastes which are or become regulated, restricted
or addressed by or under any Environmental Law.
"Holder" means the Initial Purchaser and each other Person which
acquires or becomes the owner of a Note.
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"Immediately Succeeding Period" shall have the meaning specified
in Section 9.6.
"Indemnified Party" has the meaning specified in Section 15(b).
"Initial Discount" means the greater of 0.25% of the Original
Issue Price and $55,000.
"Initial Purchaser" has the meaning specified in Section 2.1.
"Institutional Investor" means (a) any original purchaser of a
Note, (b) any holder of a Note holding $1,000,000 or more of the aggregate
principal amount of the Notes then outstanding, and (c) any bank, trust company,
savings and loan association or other financial institution, any pension plan,
any investment company, any insurance company, any broker or dealer, or any
other similar financial institution or entity, regardless of legal form.
"Internal Revenue Service" means the Internal Revenue Service and
any successor agency.
"Inventory" means all of the Company's and each of its
Subsidiaries' inventory as defined by GAAP, including without limitation: (i)
all raw materials, work in process, parts, components, assemblies, supplies and
materials used or consumed in the Company's or any of its Subsidiaries'
businesses; (ii) all goods, wares and merchandise, finished or unfinished, held
for sale or lease or leased or furnished or to be furnished under contracts of
service; and (iii) all goods returned or repossessed by the Company or any of
its Subsidiaries net of any reserves required by GAAP.
"Investment" means any investment in any Person, whether by means
of share purchase, capital contribution, loan, advance, time deposit or
otherwise.
"Judgment" shall have the meaning set forth in Section 10.1(i).
"KeyBank" means KeyBank National Association.
"KeyBank Promissory Notes" means, collectively, that certain
Promissory Note, dated as of September 30, 1998, made by the Company in favor of
KeyBank in the aggregate principal amount of $1,200,000 and that certain
Promissory Note, dated as of March 18, 1998, made by the Company in favor of
KeyBank in the aggregate principal amount of $712,086.
"Leased Real Property" means all of the real property leased by
the Company and each of its Subsidiaries at any time, including, without
limitation, all of the material real property leased by the Company and each of
its Subsidiaries as of the date of this Agreement as set forth on Schedule
5.12(a) hereto.
"Leases" shall mean the leases with respect to the Leased Real
Property.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of the Agreement, the Company and each of its
Subsidiaries shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement
relating to such asset.
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"Lockbox" has the meaning specified in Section 8.14(a).
"Lockbox Account" has the meaning specified in Section 8.14(a).
"Lockbox Agreement" means the 3rd Party Lockbox Agreement
executed by the Company, the Collateral Agent and KeyBank in favor of the
Holders in the form attached to this Agreement as Exhibit D.
"Material Adverse Effect" means a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise) or
prospects (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, (b) the ability of the Company or any of its Subsidiaries to perform
its obligations under this Agreement or any other Operative Agreement to which
it is a party, (c) the validity or enforceability of this Agreement or any other
Operative Agreement or of the rights or remedies of the holder of any Notes, or
(d) the perfection or priority of the Liens granted pursuant to the Collateral
Documents.
"Maturity Date" has the meaning specified in Section 2.2.
"Moody's" means Xxxxx'x Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA and (i) which is, or within the immediately
preceding six (6) years was, contributed to by the Company or any of its
Subsidiaries or any ERISA Affiliate or (ii) with respect to which the Company or
any of its Subsidiaries or any ERISA Affiliate may incur any liability.
"Net Cash Proceeds" means, with respect to any Asset Disposition,
the aggregate amount of cash received by the Company and each of its
Subsidiaries (including cash payments received in respect of deferred payment
pursuant to any note or installment receivable or otherwise and state or federal
income tax refunds attributable to such sale or disposition, but in each case
only as and when received and any amount eliminated from any reserve referred to
in clause (b) below, but only as and when eliminated) in respect of such Asset
Disposition net of (a) all fees, commissions, expenses and taxes incurred in
connection with such sale or disposition, (b) deduction of appropriate amounts,
in an amount determined by the Company and agreed to by the Required Holders, in
their sole judgment exercised reasonably, to be provided by the Company or any
of its Subsidiaries as a reserve, in conformity with GAAP, against any
liabilities retained by the Company or any or its Subsidiaries associated with
such assets after such Asset Disposition, including, without limitation, any
indemnification associated with such Asset Disposition, and (c) proceeds that
are reinvested in similar capital assets of any of the Company's wholly owned
Subsidiaries within 180 days of the date of such Asset Disposition or receipt of
cash payment therefor (if later); provided that the Company has certified to the
Holders promptly, and in any event within 30 days after the date of such Asset
Disposition or receipt of such proceeds (if later), that such proceeds are to be
reinvested. For purposes of this definition, (i) if taxes or other expenses
payable in connection with the sale or disposition of any asset are not known as
of the date of such sale or disposition, then such fees, commissions, expenses
or taxes shall be estimated by the Company or its Subsidiaries, as the case may
be, in good faith, and agreed to by the Required Holders, in their sole judgment
exercised reasonably, and such estimated amounts shall be deducted therefrom,
and (ii) Net Cash Proceeds shall be deemed to include, without limitation, any
award of compensation for any asset or property or
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group thereof taken by condemnation or eminent domain and insurance proceeds for
the loss of or damage to any asset or property if such award or proceeds equals
or exceeds $250,000 (per occurrence) and within 180 days after the receipt
thereof replacement or repair of such asset or property has not commenced or
reasonable steps have not been taken to commence such replacement or repair,
except that in the event that at any time such replacement or repair is
abandoned or is otherwise discontinued or is not diligently pursued, the
remaining award or proceeds, as the case may be, shall constitute Net Cash
Proceeds at such time.
"New Notes" means the Company's 10% Senior Subordinated
Pay-in-Kind Notes due 2007, together with any additional notes that may be
issued to the holders thereof as payment for accrued interest on such notes.
"New Notes Indenture" has the meaning specified in the Exchange
Agreement.
"Non-Financed Capital Expenditures" shall mean any and all
expenditures (net of any trade-ins, rebates or discounts) in respect of the
purchase, lease or other acquisition of fixed or capital assets for which there
is no specific funding through a loan, capital lease or other financing that
directly finances such assets.
"Notes" has the meaning specified in Section 1.
"Obligations" means the Notes and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Company to the
Collateral Agent, any Holder, any Affiliate of any of them or any Indemnified
Party, of every type and description, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under this
Agreement or under any other Operative Agreement, whether or not for the payment
of money, whether arising by reason of an extension of credit, loan, guaranty,
indemnification, foreign exchange transaction or interest rate contract or in
any other manner, whether direct or indirect (including, without limitation,
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term "Obligations"
includes, without limitation, all interest, charges, expenses, fees, reasonable
attorneys' fees and disbursements and any other sum chargeable to the Company
under this Agreement or any other Operative Agreement.
"Offer" means an Excess Cash Flow Offer or a Change of Control
Offer, as applicable.
"Offer Payment" means an Excess Cash Flow Payment or a Change of
Control Payment, as applicable.
"Offering Circular" means the Offering Circular, dated as of the
Closing Date, prepared by the Company and provided to the Initial Purchaser, and
any amendment or supplement thereto.
"Officers' Certificate" means, as to any corporation, a
certificate executed on its behalf by the Chairman of the board of directors (if
an officer) or its President or one of its Vice Presidents and its Treasurer, or
Controller, or one of its Assistant Treasurers or Assistant Controllers, and, as
to any partnership, a certificate executed on behalf of such partnership by its
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managing general partner in a manner which would qualify such certificate as an
Officers' Certificate of such managing general partner hereunder.
"Old Notes" has the meaning specified in the Exchange Agreement.
"Old Notes Indenture" means that certain Indenture, dated as of
July 30, 1998, by any among the Company, the Guarantors (as defined therein) and
the Bank of New York (as successor to IBJ Xxxxxxxxx Bank & Trust Company), as
Trustee.
"Operative Agreements" means this Agreement, the Notes, the
Subsidiary Guaranty, and the Collateral Documents, in each case, as the same may
be modified, amended, extended, restated or supplemented from time to time.
"Original Issue Discount" means $14,000,000.
"Original Issue Price" means, for any Note, and amount equal to
the product of the face amount of such Note on the Closing Date and 61.11%.
"OSHA" means the Occupational Safety and Health Act, as amended
from time to time, and any successor statute thereto and all final or temporary
regulations promulgated thereunder, and all published, generally applicable
rulings entitled to precedential effect.
"Owned Real Property" means the real property owned by the
Company and each of its Subsidiaries at any time, including, without limitation,
all of the material real property owned by the Company and each of its
Subsidiaries as of the date of the Agreement as set forth on Schedule 5.12(a).
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"Permitted Investments" means (i) Cash Equivalents, (ii)
interest-bearing demand or time deposits (including certificates of deposit)
which are insured by the Federal Deposit Insurance Corporation ("FDIC") or a
similar federal insurance program; (iii) securities distributed in connection
with the confirmation of a plan of reorganization following the bankruptcy of
any Person indebted to the distributee at the time such bankruptcy is filed and
(iv) such other investments as the Holders may approve in the Holders' sole
discretion.
"Permitted Liens" means, without duplication:
(a) Liens for taxes, assessments, governmental charges or levies
not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company and each of its Subsidiaries, as
the case may be, in accordance with GAAP;
(b) statutory Liens of landlords and carriers', or other
warehousemen's, mechanics', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which are not overdue
for a period of more than sixty (60) days or which are being contested
in good faith and by appropriate proceedings in a manner which is not
reasonably likely to jeopardize or diminish the Holders' interest in any
of the Collateral
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subject to the other Operative Agreements or materially interfere with
the ordinary conduct of the businesses of the Company and each of its
Subsidiaries;
(c) pledges or deposits and Liens (other than any Lien imposed by
ERISA) under bonds required in connection with workers compensation,
unemployment insurance and other social security legislation;
(d) Liens (other than any Lien imposed by ERISA or by
Environmental Laws) incurred on deposits to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
performance and return-of-money bonds and other obligations of alike
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which do not in
the aggregate materially detract from the value of the property subject
thereto or interfere, in any material manner, with the ordinary conduct
of the business of the Company or any of its Subsidiaries; and
(f) Liens affecting assets existing at the time such assets are
acquired provided that such Liens are not created in contemplation of
such acquisition.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or government (including
any division, agency or department thereof), and, as applicable, the successors,
heirs and assigns of each.
"Plan" means any "employee benefit plan" as defined in Section
3(3) of ERISA, maintained or contributed to by the Company or any of its
Subsidiaries or with respect to which the Company or any of its Subsidiaries may
incur liability.
"Pledge Agreement" means the Stock Pledge Agreement executed by
the Company and certain of its Subsidiaries in favor of the Collateral Agent for
the benefit of the Holders, in the form attached to the Agreement as Exhibit F.
"Premium Amount" has the meaning specified in Section 7.2.
"Principal Amount" has the meaning specified in Section 2.1.
"Proposed Repurchase Date" has the meaning specified in Section
7.3(c).
"Proprietary Rights" has the meaning specified in Section
5.12(b).
"QIB" has the meaning specified in Section 6.1.
"Real Estate" means, collectively, the Owned Real Property and
the Leased Real Property.
"Release" means any release, pumping, pouring, emptying,
injecting, escaping, leaching, migrating, dumping, seepage, spill, leak, flow,
discharge, disposal or emission.
"Remedial Work" shall have the meaning specified in Section
8.10(b).
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"Reportable Event" means any of the events described in Section
4043 of ERISA and the regulations thereunder.
"Required Holders" means the holders of more than 50% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates other than GSC Partners CDO Fund,
Limited or any of GSC Partners CDO Fund, Limited's Affiliates).
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides health care benefits
to persons after termination of employment, other than as required by Section
601 of ERISA.
"S&P" means Standard and Poor's Ratings Services, a division of
XxXxxx-Xxxx, Inc.
"Scheduled Closing Date" has the meaning specified in Section
15(f).
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement between the
Collateral Agent and the Company and certain of its Subsidiaries, in the form
attached to the Agreement as Exhibit G.
"Stock Equivalent" means all securities convertible into or
exchangeable for Capital Stock and all warrants, options or other rights to
purchase or subscribe for any Capital Stock, whether or not presently
convertible, exchangeable or exercisable.
"Structures" means all plants, offices, manufacturing facilities,
warehouses, administration buildings and related facilities of the Company and
each of its Subsidiaries located at the Real Property.
"Subsidiary" means, with respect to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other persons performing similar
functions are at the time, directly or indirectly through one or more
intermediaries, or both, owned or controlled, by such Person. Unless otherwise
expressly indicated to the contrary herein, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to any direct or indirect
Subsidiary or Subsidiaries of the Company and each Subsidiary Guarantor and
shall include the Foreign Subsidiaries.
"Subsidiary Guaranty" means each of the Subsidiary Guaranties of
the Subsidiary Guarantors in the form specified in Exhibit H.
"Subsidiary Guarantor" means Aeromet America, Inc., Balo
Precision Parts, Inc., Cashmere Manufacturing Co., Inc., Ceramic Devices, Inc.,
Electronic Specialty Corporation, Northwest Technical Industries, Inc., Pacific
Coast Technologies, Inc., PA&E International, Inc., Seismic Safety Products,
Inc., Skagit Engineering & Manufacturing, Inc. and any other Subsidiaries of the
Company that executes a Subsidiary Guaranty guaranteeing the Notes.
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"Tax" or "Taxes" shall mean any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions,
levies and liabilities, including, without limitation, taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, gains, franchise, withholding, payroll,
recapture, employment, excise, unemployment, insurance, social security,
business license, occupation, business organization, stamp, environmental and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts. For purposes of this Agreement, "Taxes" also includes
any obligations under any agreements or arrangements with any Person with
respect to the liability for, or sharing of, Taxes (including pursuant to Treas.
Reg. Section 1.1502-6 or comparable provisions of state, local or foreign Tax
law) and including any liability for Taxes as a transferee or successor, by
contract or otherwise.
"Tax Return" means any report, return, election, notice,
estimate, declaration, information statement and other forms and documents
(including, without limitation, all schedules, exhibits and other attachments
thereto) related to and filed or required to be filed with a taxing authority in
connection with any Taxes (including, without limitation, estimated Taxes)
"Termination Event" means (i) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan which is likely to constitute grounds for
termination of such Benefit Plan or Multiemployer Plan; (ii) the withdrawal
(within the meaning of Section 4063 of ERISA) of the Company or any of its
Subsidiaries or any ERISA Affiliate from a Benefit Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Benefit Plan in
a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan; (v) any event or condition (a) described in Section 4042(a)
of ERISA and which could reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (b) described in Section
4041A(a) of ERISA and that could reasonably be expected to result in termination
of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial
or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
the Company or any of its Subsidiaries or any ERISA Affiliate from a
Multiemployer Plan.
"Unused Capital Expenditures" shall have the meaning specified in
Section 9.6.
"Weighted Average Life to Maturity" means, when applied to any
Debt at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal including payment at final maturity in respect thereof, and (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Debt.
12.2 Terms Generally.
The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will"
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shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
restated, supplemented or otherwise modified (subject to any restrictions on
such amendments, restatements, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and permitted assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein or in any other Operative Agreement to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement or such other Operative Agreement,
as applicable, (e) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights,
(f) any reference to time herein shall be to New York City time; and (g) any
reference to a law includes any amendment, supplement, or modification thereto
and any rules and regulations issued thereunder or any law enacted in
substitution or replacement therefor.
SECTION 13. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES
13.1 Note Register; Ownership of Notes.
Any Notes issued in substantially the form of Exhibit A are in
"registered form". The Company will keep at its principal office a register in
which the Company will provide for the registration of Notes in registered form
and the registration of transfers of Notes in registered form. The Company may
treat the Person in whose name any Note is registered on such register as the
owner thereof for the purpose of receiving payment of the principal of and the
Premium Amount, if any, and interest on such Note and for all other purposes,
whether or not such Note shall be overdue, and the Company shall not be affected
by any notice to the contrary. All references in this Agreement or in a Note to
a "Holder" of any Note shall mean the Person in whose name such Note is at the
time registered on such register.
13.2 Transfer and Exchange of Notes.
Upon surrender of any Note for registration of transfer or for
exchange to the Company at its principal office (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered Holder or its attorney
duly authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company at its expense will
execute and deliver in exchange therefor a new Note or Notes in denominations of
at least $1,000,000 (except one Note may be issued in a lesser principal amount
if the unpaid principal amount of the surrendered Note is not evenly divisible
by, or is less than, $1,000,000), as requested by the holder or transferee,
which aggregate the unpaid principal amount of such surrendered Note. Each such
new Note shall be in registered form. Each such Note shall be dated so that
there will be no loss of interest on such surrendered Note and otherwise of like
tenor, and shall be registered in the name or names of such Person as such
Holder or transferee may request. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Any Note in lieu of which any such
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new Note has been executed and delivered shall not be deemed to be an
outstanding Note for any purpose of this Agreement.
13.3 Replacement of Notes.
Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of any Note and, in the case of
any such loss, theft or destruction of any Note, upon delivery of an indemnity
bond in such reasonable amount as the Company may determine (or, in the case of
any Note held by a Holder or another Institutional Investor or such Holder's or
Institutional Investor's nominee, of an unsecured indemnity agreement from such
Holders or such Institutional Investor), or, in the case of any such mutilation,
upon the surrender of such Note for cancellation to the Company at its principal
office, the Company at its expense will execute and deliver, in lieu thereof, a
new Note in the unpaid principal amount of such lost, stolen, destroyed or
mutilated Note, dated so that there will be no loss of interest on such Note and
otherwise of like tenor. Any Note in lieu of which any such new Note has been so
executed and delivered by the Company shall not be deemed to be an outstanding
Note for any purpose of this Agreement.
13.4 Notes Held by Company, Etc. Deemed Not Outstanding.
For the purposes of determining whether the Holders of the Notes
of the requisite principal amount at the time outstanding have taken any action
authorized by this Agreement or any Operative Agreement with respect to the
giving of consents or approvals or with respect to the acceleration upon an
Event of Default, any Notes directly or indirectly owned by the Company or any
of its Subsidiaries shall be disregarded and deemed not to be outstanding.
SECTION 14. PAYMENTS ON NOTES
14.1 Place of Payment.
Payments of principal, Premium Amount or premium, if any, and
interest becoming due and payable on the Notes shall be made to the Holders at
their respective addresses referred to in Section 19 by 2:00 p.m. (New York City
time) on the date when due, in Dollars, in immediately available funds without
set-off or counterclaim, unless such Holder, by written notice to the Company,
shall designate another address as such place of payment, in which case such
address shall thereafter be such place of payment.
14.2 Home Office Payment.
So long as any Holder or its nominee shall be the holder of any
Note, and notwithstanding anything contained in Section 14.1 or in such Note to
the contrary, the Company will pay all sums becoming due on such Note for
principal and Premium Amount, if any, and interest no later than 2:00 p.m. (New
York City time) and by the method and at the address specified in Section 19, or
by such other reasonable method or at such other address as such Holder shall
have from time to time specified to the Company in writing for such purpose,
without the presentation or surrender of such Note or the making of any notation
thereon, except that any Note paid or prepaid in full shall, after such payment
or prepayment in full, be surrendered to the Company at its principal office or
at the place of payment maintained by the Company pursuant to Section 14.1 for
cancellation. Prior to any sale or other disposition of any
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Note held by a Holder or its nominee, such Holder will, at its election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor which is the direct
or indirect transferee of any Note purchased by a Holder under this Agreement
and which has made the same agreement relating to such Note as such Holder has
made in this Section 14.2.
SECTION 15. EXPENSES, INDEMNIFICATION, ETC.
(a) Whether or not the transactions contemplated hereby shall be
consummated, the Company will pay all reasonable expenses in connection with
such transactions and in connection with any amendments or waivers (whether or
not the same become effective) under or in respect of this Agreement or the
other Operative Agreements, including, without limitation: (i) the cost and
expenses of preparing and reproducing this Agreement and the other Operative
Agreements, of furnishing all opinions by counsel for the Company or its
Subsidiaries (including any opinions requested by the Holders' special counsel,
Mayer, Brown, Xxxx & Maw and Xxxxx Xxxxxxxxxx LLP, as to any legal matter
arising hereunder) and all certificates on behalf of the Company or any of its
Subsidiaries, and of the Company's or any of its Subsidiaries' performance of
and compliance with all agreements and conditions contained herein on its part
to be performed or complied with; (ii) the cost of delivering to each Holder's
principal office, insured to such Holder's reasonable satisfaction, the Notes
issued in exchange for the Notes sold to such Holder hereunder and any Notes
delivered to such Holder upon any substitution thereof pursuant to this
Agreement and of a Holder's delivery of any Notes, insured to such Holder's
reasonable satisfaction, upon any such substitution; (iii) the reasonable fees,
expenses and disbursements of the Holders' special counsel, Mayer, Brown, Xxxx &
Maw and Xxxxx Xxxxxxxxxx LLP (or such other counsel as may be selected by the
Holders) and the Holders' local counsel in connection with such transactions and
any such amendments or waivers; (iv) the costs and expenses, including
reasonable attorneys' fees, incurred by the Collateral Agent and the Holders or
any subsequent Holder of a Note in enforcing or defending any rights under this
Agreement or any other Operative Agreement or in responding to any subpoena or
other legal process in connection with (A) this Agreement, (B) any Operative
Agreement, (C) the Notes, or (D) the transactions contemplated hereby; and (v)
the reasonable out-of-pocket expenses incurred by the Collateral Agent and the
Holders in connection with such transactions and any such amendments or waivers;
provided that the Company shall be required to pay the cost and expenses of only
one firm (and any local counsel) retained by the Holders in connection with any
waivers or amendments. The Company also will pay, and will save each Holder
harmless from, all claims in respect of the fees, if any, of brokers and finders
(unless engaged by the Holders) and any and all liabilities with respect to any
Taxes (including interest and penalties) (other than income taxes) which may be
payable in respect of the execution and delivery hereof, the issuance of the
Notes hereunder, any payment of principal, interest, Premium Amount, if any,
arising under the Notes and any amendment or waiver under or in respect hereof
or of the Notes.
(b) The Company will protect, indemnify and save harmless the
Collateral Agent, Initial Purchaser and each Person who controls the Initial
Purchaser within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and each present, future and former Holder of any Note and
their respective officers, directors, trustees, employees,
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agents and representatives (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") from and against all losses,
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) imposed upon or incurred by or asserted against any Indemnified Party
by reason of (i) any failure on the part of the Company or any of its
Subsidiaries to perform or comply with any of the terms of this Agreement or any
other Operative Agreement, (ii) any negligence or tortious act on the part of
the Company or any of its Subsidiaries or any of their respective agents,
contractors, sublessees, licensees or invitees, (iii) any untrue statement or
alleged untrue statement of any material fact contained in the Offering
Circular, (iv) the omission or alleged omission to state in the Offering
Circular, a 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, (v) any breach by the Company or any of its Subsidiaries of
their respective representations, warranties and agreements set forth herein,
(vi) the execution or delivery of any of the Operative Agreements or any
agreement or instrument contemplated thereby or any of the transactions
contemplated thereby or (vii) any investigation, litigation or other proceeding
(whether or not any Indemnified Party is a party thereto) related to the
entering into and or performance of any Operative Agreement or the consummation
of any transactions contemplated by any of the Operative Agreements, including
the reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or proceeding; provided that nothing contained
herein shall be deemed to require the Company to indemnify the Indemnified
Parties for their respective gross negligence, bad faith or willful misconduct,
or for their breach of their respective obligations under this Agreement or the
other Operative Agreements. This indemnity agreement will be in addition to any
liability that the Company may otherwise have to the Indemnified Parties.
Notwithstanding, anything in this Section 15(b) to the contrary, the Company
shall not be liable in any such case for any indemnification to the extent (but
only to the extent) that any such loss, liability, obligation, claim, damage,
penalty, cause of action, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Offering Circular in reliance upon and in conformity with written
information furnished to the Company by the Initial Purchaser, about the Initial
Purchaser, expressly for use therein.
(c) The Initial Purchaser will indemnify and hold harmless the
Company, its officers, directors, employees, agents, representatives, and each
Person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Company Indemnified
Person") against any losses, liabilities, obligations, claims, damages,
penalties, causes of action, costs or expenses to which any Company Indemnified
Party may become subject, under the Securities Act or otherwise, insofar as such
losses, liabilities, obligations, claims, damages, penalties, causes of action,
costs or expenses (or actions in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact contained in
the Offering Circular, 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, 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 the Offering Circular in reliance upon and in conformity
with written information furnished to the Company by the Initial Purchaser,
about the Initial Purchaser, expressly for use therein; and will reimburse any
Company Indemnified Party for any legal or other expenses reasonably incurred by
any Company Indemnified Party in connection with investigating or defending any
such action or claim as such expenses are incurred.
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(d) Promptly after receipt by an Indemnified Party of notice of
the commencement of any action (including governmental action), such Indemnified
Party will, if a claim in respect thereof is to be made against the Company
under this Section 15, deliver to the Company a written notice of the
commencement thereof. The Company may, and upon the request of such Indemnified
Party will, at the Company's expense resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel for the
insurer of the liability or by counsel designated by the Company and reasonably
satisfactory to the Indemnified Party, as the case may be; provided that any
Indemnified Party shall be entitled to participate in any such action, suit or
proceeding with counsel of its own choice but at its own expense; and provided,
further, that if any Indemnified Party reasonably determines that a conflict of
interest exists with respect to the representation by such counsel of such
Indemnified Party, the Company shall pay the reasonable fees and expenses of
counsel selected by such Indemnified Party. In any event, if the Company fails
to assume the defense within a reasonable time after any such request, the
Indemnified Party may assume such defense or other indemnification obligation
and the reasonable fees and expenses of its attorney will be paid by the
Company. The failure to deliver written notice to the Company within a
reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve the Company of
any liability to the Indemnified Party under this Section 15(b), but the
omission to so deliver written notice to the Company will not relieve it of any
liability that it may have to any Indemnified Party otherwise than under this
Section 15. The obligations of the Company under this Section 15 shall survive
any termination or satisfaction of this Agreement. Any amounts payable to any
Indemnified Party under this Section 15 which are not paid within fifteen (15)
days after written demand therefor by any Indemnified Party shall bear interest
at a rate per annum equal to the rate of interest stated on the face of the
Notes plus 3.0% from the date of such demand. In the event that the Company
shall be required to pay any indemnity under this Section 15, the Company shall
pay the Indemnified Party an amount which, after deduction of all Taxes required
to be paid by such Indemnified Party in respect of the receipt or accrual
thereof (but not for any taxes payable with respect to amounts received for the
payment of income taxes), shall be equal to the amount of such indemnity.
(e) The Company shall not, without the prior written consent of
an Indemnified Party (which consent shall not be unreasonably withheld or
delayed), effect any settlement or compromise of any pending or threatened
proceeding in respect of which an Indemnified Party is a party, or indemnity is
sought hereunder by such Indemnified Party, unless such settlement (A) includes
an unconditional written release of such Indemnified Party, in form and
substance reasonably satisfactory to such Indemnified Party, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of the Indemnified Party.
(f) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 15 is unavailable to, or
insufficient to hold harmless, an Indemnified Party in respect of any loss,
liability, obligation, claim, damage, penalty, cause of action, cost or expense
(or actions in respect thereof), the Company, in order to provide for just and
equitable contributions, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, obligation, claim,
damage, penalty, cause of action, cost or expense (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the Company on the one hand and the Indemnified Party on
the other from the offering of the Notes or (ii) if the allocation provided by
the foregoing clause (i) is
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not permitted by applicable law, not only such relative benefits but also the
relative fault of the Company on the one hand and the Indemnified Party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such loss, liability, obligation, claim, damage,
penalty, cause of action, cost or expense (or actions in respect thereof). The
relative benefits received by the Company on the one hand and the Initial
Purchaser on the other shall be deemed to be in the same proportion as the total
proceeds from the offering of the Notes (before deducting expenses) received by
the Company bear to the total discounts and commissions received by the Initial
Purchaser. 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 omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand, or the Initial
Purchaser on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission or
alleged statement or omissions, and any other equitable considerations
appropriate in the circumstances.
(g) The Company and the Initial Purchaser agree that it would not
be equitable if the amount of such contribution determined pursuant to the
immediately preceding paragraph (f) were determined by pro rata or per capita
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the first sentence of the
immediately preceding paragraph (f). Notwithstanding any other provision of this
Section 15, the Initial Purchaser shall not be obligated to make contributions
hereunder that in the aggregate exceed the total discounts, commissions and
other compensation received by such Initial Purchaser under this Agreement, less
the aggregate amount of any damages that such Initial Purchaser has otherwise
been required to pay by reason of the untrue or alleged untrue statements or the
omissions or alleged omissions to state a material fact. 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 the immediately
preceding paragraph (f), each person, if any, who controls the Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Initial
Purchaser, and each director of the Company, each officer of the Company and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company.
(h) In connection with the Closing, the Company is requesting
that the Initial Purchaser make available for funding an amount equal to the
Original Issue Price less the Initial Discount. If, for any reason, on the date
scheduled by the Company as the date for the Closing (such date, the "Scheduled
Closing Date"), the Initial Purchaser shall at the Company's request have made
such amount available, and (i) the closing conditions are not satisfied by 11:00
a.m. on such scheduled date, (ii) the Company did not, by 11:00 a.m. on such
scheduled date reschedule such Closing for a subsequent date, and (iii) the
Closing in fact does not occur on such scheduled date, the Company shall return
to the Initial Purchaser, promptly but in any event no later than the Business
Day following the Scheduled Closing Date, the amount so funded by the Initial
Purchaser, unless otherwise directed by the Initial Purchaser. The Company will
protect, indemnify and hold the Initial Purchaser harmless from and against any
and all losses resulting from its failure or inability to invest on the
Scheduled Closing Date, and if directed by the Initial Purchaser to hold such
funds, for each subsequent day that the Closing does not occur, the purchase
price of the Notes to be purchased by it, for the period commencing on the
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Scheduled Closing Date and ending on the date the purchase price is returned to
the Initial Purchaser, at a rate of interest equal to the rate of interest on
the Notes.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties, covenants, indemnities and
expense reimbursement provisions contained in this Agreement and each of the
other Operative Agreements, or made in writing by or on behalf of the Company or
any of its Subsidiaries in connection with the transactions contemplated by this
Agreement or the other Operative Agreements, shall survive the execution and
delivery of this Agreement and the other Operative Agreements, any
investigation, or statement as to the results thereof, at any time made by the
Holders or on the Holders' behalf, the purchase of the Notes by the Holders
under this Agreement and any disposition or payment of the Notes and any
termination of this Agreement.
SECTION 17. AMENDMENTS AND WAIVERS
Any term of this Agreement or of the Notes may be amended and the
observance of any term of this Agreement or of the Notes may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and the Required Holders; provided
that, without the prior written consent of the holders of all the Notes at the
time outstanding, no such amendment or waiver shall (a) change the maturity or
the principal amount of, or change the rate of interest or the time of payment
of interest on, or change the amount or the time of payment of any principal or
Premium Amount on any prepayment of, any Note, (b) reduce the percentage of the
principal amount of the Notes the Holders of which are required to consent to
any such amendment or waiver or change the rights of the Holders of a Note with
respect thereto, (c) change the percentage of the principal amount of the Notes
the Holders of which may declare the Notes to be due and payable as provided in
Section 10.2 or change the rights of the Holders of a Note with respect thereto,
(d) change the percentage of the principal amount of the Notes the Holders of
which may rescind and annul any such declaration as provided in Section 10.2,
(e) release any of the Collateral except as shall otherwise be provided herein,
(f) change any of the terms or provisions of the Subsidiary Guaranties or (g)
modify the provisions of this Section 17. Any amendment or waiver effected in
accordance with this Section 17 shall be binding upon each Holder of any Note at
the time outstanding, each future Holder of any Note and the Company. No
amendment, waiver or consent shall, unless in writing and signed by the
Collateral Agent in addition to the Holders required above to take such action,
affect the rights or duties of the Collateral Agent under this Agreement or the
other Operative Agreements.
SECTION 18. TERMINATION
The Initial Purchaser may terminate this Agreement at any time
prior to the Closing Date by written notice to the Company if any of the
following has occurred:
(a) since the date of the Offering Circular, any Material Adverse
Effect or development involving or reasonably expected to result in a
prospective Material Adverse Effect that could, in the Initial Purchaser's
judgment, be expected to (i) make it impracticable or inadvisable to proceed
with the offering or delivery of the Notes on the terms and in the manner
contemplated hereby, or (ii) materially impair the investment quality of any of
the Notes;
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(b) the failure of the Company to satisfy the conditions
contained in Section 4 hereof on or prior to the Closing Date;
(c) any outbreak or escalation of hostilities or other national
or international calamity or crisis, including acts of terrorism, or material
adverse change or disruption in economic conditions in, or in the financial
markets of, the United States or elsewhere (it being understood that any such
change or disruption shall be relative to such conditions and markets as in
effect on the date hereof), if the effect of such outbreak, escalation,
calamity, crisis or material adverse change in the economic conditions in, or in
the financial markets of, the United States or elsewhere could be reasonably
expected to make it, in the Initial Purchaser's judgment, impracticable or
inadvisable to market or proceed with the offering or delivery of the Notes on
the terms and in the manner contemplated hereby or to enforce contracts for the
sale of any of the Notes; or
(d) the enactment, publication, decree or other promulgation
after the date hereof of any law that in the Initial Purchaser's counsel's
opinion materially and adversely affects, or could be reasonably expected to
materially and adversely affect, the properties, business, prospects,
operations, earnings, assets, liabilities or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole.
SECTION 19. NOTICES, ETC.
Except as otherwise provided in this Agreement, notices and other
communications under this Agreement shall be in writing and shall be delivered
by hand, by express courier service or by registered or certified mail, return
receipt requested, postage prepaid, addressed,
(a) if to the Initial Purchaser, at 00000 Xxxxx Xxxxxx Xxxxxxxxx,
00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxx, Esq.,
Telephone No.: (000) 000-0000, Facsimile No.: (000) 000-0000, or at such other
address as the Initial Purchaser shall have specified to the Company and the
Collateral Agent in writing, with a copy to Mayer, Brown, Xxxx & Maw, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, Attention: Xxxxxx X. Xxxxx, Esq.,
Telephone No.: (000) 000-0000, Facsimile No.: (000) 000-0000,
(b) if to any other Holder of any Note, to such Holder at such
address as such other Holder shall have specified to the Company and the
Collateral Agent in writing,
if to the Collateral Agent, at, 000 Xxxxx Xxxxx Xxxxxx - Xxxxx 0000, Mail Code
NC-1179, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Xxxxx Xxxxxxxx, Trust
Administration, Telephone No.: (000) 000-0000, Facsimile No.: (000) 000-0000, or
at such other address as the Collateral Agent shall have specified to the
Company in writing, or
(c) if to the Company, at the address specified at the beginning
of this Agreement to the attention of the President or the Chief Financial
Officer, Telephone No.: (000) 000-0000, Facsimile No.: (000) 000-0000, or at
such other address as the Company shall have specified to the Collateral Agent
in writing
or at such other address, or to the attention of such other officer, as the
Company shall have furnished to the Holders in writing. All notices and other
communications provided for under this Section 19 will be deemed given and
effective only when actually received.
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SECTION 20. REPRODUCTION OF DOCUMENTS
This Agreement, each other Operative Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
notifications which may hereafter be executed, (b) documents received by the
Holders at the Closing (except the Notes themselves), and (c) financial
statements, certificates and other information previously or hereafter furnished
to the Holders, may be reproduced by the Holders by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and the Holders may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Holders in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 20 shall not prohibit the Company, the Collateral Agent or any Holder
from contesting any such reproduction to the same extent that it could contest
the original, or from introducing evidence to demonstrate the inaccuracy of any
such reproduction.
SECTION 21. MISCELLANEOUS
This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto, whether so expressed or not, and, in particular, shall inure to the
benefit of and be enforceable by any Holder or Holders at the time of the Notes
or any part thereof. This Agreement embodies the entire agreement and
understanding among the Holders, the Collateral Agent and the Company and
supersedes all prior agreements and understandings, either oral or written,
relating to the subject matter hereof. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
SECTION 22. SUBMISSION TO JURISDICTION
For the purpose of assuring that any Holder of Notes may enforce
its rights under this Agreement, the Notes and the other Operative Agreements,
the Company for itself and its successors and assigns, hereby, to the fullest
extent permitted by applicable law, irrevocably (a) agrees that any legal or
equitable action, suit or proceeding brought against it arising out of or
relating to this Agreement or any other Operative Agreement, or any transaction
contemplated hereby or the subject matter of any of the foregoing or for
recognition or enforcement of any judgment rendered in any such action, suit or
proceeding may be instituted in any state or federal court sitting in the
Borough of Manhattan in the State of New York, (b) waives any objection which it
may now or hereafter have to the laying of venue of any such action, suit or
proceeding brought in any such court, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum, or any right to require the proceeding to be conducted in any other
jurisdiction by reason of its present or future domicile, (c) irrevocably
submits itself to the non-exclusive jurisdiction of any state or federal court
of competent jurisdiction sitting in the Borough of Manhattan in the State of
New York for purposes of any such action, suit or proceeding, and (d)
irrevocably waives any immunity from jurisdiction to which it might
-65-
otherwise be entitled in any such action, suit or proceeding which may be
instituted in any state or federal court sitting in the Borough of Manhattan in
the State of New York, and irrevocably waives any immunity from, or objection
to, the maintaining of an action against it to enforce any judgment for money
obtained in any such action, suit or proceeding and any immunity from execution.
SECTION 23. WAIVER OF JURY TRIAL
EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES
THE RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER OPERATIVE
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT
MATTER OF ANY OF THE FOREGOING.
SECTION 24. GOVERNING LAW
THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED IN XXX XXXX XX XXX
XXXX, XXXXX XX XXX XXXX, XXXXXX XXXXXX OF AMERICA. THIS AGREEMENT AND (UNLESS
OTHERWISE EXPRESSLY PROVIDED) ALL AMENDMENTS AND SUPPLEMENTS TO, AND ALL
CONSENTS AND WAIVERS PURSUANT TO, THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF (OTHER
THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
SECTION 25. CONFIDENTIAL INFORMATION
For the purposes of this Section 25, "Confidential Information"
means materials, documents and other information delivered to the Holders by or
on behalf of the Company or any of its Subsidiaries in connection with the
transactions contemplated by or otherwise pursuant to this Agreement, whether
before or after the Closing, that is proprietary in nature and that was, prior
to the Closing, clearly marked or orally represented, and after the Closing, is
clearly marked or labeled or otherwise adequately identified when received by
the Holders as being confidential information of the Company or such Subsidiary;
provided that such term does not include information that (a) was publicly known
or otherwise known to the Holders prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by the Holders or
any person acting on the Holders' behalf or any other Person breaching any
obligation of confidentiality or fiduciary duty to the Company, (c) otherwise
becomes known to the Holders other than through disclosure by the Company or any
of its Subsidiaries or any other Person breaching any obligation of
confidentiality or fiduciary duty to the Company or (d) constitutes financial
statements delivered to the Holders hereunder that are otherwise publicly
available. The Holders will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by the Holders in good faith
to protect confidential information of third parties delivered to the Holders;
provided that the Holders may deliver or disclose Confidential Information to
(i) the Holders' directors, trustees, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
-66-
administration of the investment represented by the Holders' Notes), (ii) the
Holders' financial advisors and other professional advisors who agree in writing
prior to its receipt of the Confidential Information to be bound by the
provisions of this Section 25, (iii) any other Holder of any Note, (iv) any
Institutional Investor to which the Holders sell or offer to sell such Note or
any part thereof or any participation therein (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 25), (v) any Person from which the Holders offer to
purchase any security of the Company (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 25), (vi) any federal or state regulatory authority having
jurisdiction over the Holders, (vii) the National Association of Insurance
Commissioners or any similar organization, or any nationally recognized rating
agency that requires access to information about the Holders' investment
portfolio or (viii) any other Person to which such delivery or disclosure may be
necessary or appropriate and who agrees in writing to be bound by the provisions
of this Section 25 (w) to effect compliance with any law, rule, regulation or
order applicable to the Holders, (x) in response to any subpoena or other legal
process; provided, however, that the Holders shall cooperate with the Company or
any of its Subsidiaries if the Company or any such Subsidiary seeks to have such
information requested pursuant to such subpoena or other legal process subject
to a protective order, (y) in connection with any litigation to which the
Holders are a party or (z) if an Event of Default has occurred and is
continuing, to the extent the Holders may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under the Holders' Notes and this
Agreement. Each Holder of a Note, by its acceptance of a Note, will be deemed to
have agreed to be bound by and to be entitled to the benefits of this Section 25
as though it were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any Holder of a Note of information
required to be delivered to such Holder under this Agreement or requested by
such Holder (other than a Holder that is a party to this Agreement or its
nominee), such Holder will enter into an agreement with the Company embodying
the provisions of this Section 25.
[SIGNATURE PAGE FOLLOWS]
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If you are in agreement with the foregoing, please sign the
accompanying counterpart of this Agreement and return the same to the
undersigned, whereupon this Agreement shall become a binding agreement among the
Holders, the Collateral Agent and the undersigned.
Very truly yours,
THE COMPANY:
PACIFIC AEROSPACE & ELECTRONICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer and President
The foregoing Agreement is hereby accepted and agreed to as of he date first
above written.
THE INITIAL PURCHASER:
XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
THE COLLATERAL AGENT:
FIRST UNION NATIONAL BANK, as Collateral Agent
By: /s/ Xxxx Xxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President
S-1
TABLE OF CONTENTS
PAGE
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SECTION 1. AUTHORIZATION OF NOTES.......................................................1
SECTION 2. SALE AND PURCHASE OF NOTES; PAYMENTS ON THE NOTES............................1
2.1 Sale and Purchase of the Notes....................................................1
2.2 Payments of Principal.............................................................1
2.3 Interest on the Notes.............................................................1
2.4 Payments Free of Taxes............................................................2
SECTION 3. CLOSING......................................................................2
SECTION 4. CONDITIONS TO CLOSING........................................................3
4.1 Representations and Warranties....................................................3
4.2 Performance; No Default...........................................................3
4.3 Compliance Certificates...........................................................3
4.4 Opinions of Counsel...............................................................3
4.5 Legal Investment..................................................................4
4.6 Operative Agreements..............................................................4
4.7 Use of Proceeds...................................................................4
4.8 Proceedings and Documents.........................................................4
4.9 Rating............................................................................4
4.10 Insurance.........................................................................4
4.11 CUSIP Number......................................................................5
4.12 Exchange..........................................................................5
4.13 Release of Liens; Financing Statements............................................5
4.14 Corporate Documents...............................................................5
4.15 Secretary's Certificates..........................................................5
4.16 Offering Circular.................................................................6
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................6
5.1 Corporate Existence; Qualification; Power; Licenses and Permits...................6
5.2 Corporate and Governmental Authorization; Contravention...........................6
5.3 Binding Effect....................................................................7
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TABLE OF CONTENTS
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5.4 Information.......................................................................7
5.5 Litigation and Judgments..........................................................7
5.6 Compliance with ERISA.............................................................7
5.7 Taxes.............................................................................8
5.8 Subsidiaries......................................................................9
5.9 Not Investment Companies..........................................................9
5.10 No Conflicting Requirements......................................................10
5.11 Debt.............................................................................10
5.12 Title to Properties and Assets...................................................10
5.13 Compliance with Law..............................................................12
5.14 Compliance with Environmental Laws...............................................12
5.15 Security Interests and Liens; Inventory and Equipment............................13
5.16 Labor Relations..................................................................13
5.17 UCC Filing Information...........................................................14
5.18 Solvency.........................................................................14
5.19 Fictitious Business Names........................................................14
5.20 Use of Proceeds..................................................................14
5.21 Margin Stock.....................................................................15
5.22 Affiliate Transactions...........................................................15
5.23 Accuracy and Completeness of Information.........................................15
5.24 Capital Stock....................................................................15
5.25 Private Offering by the Company..................................................16
SECTION 6. INITIAL PURCHASER'S REPRESENTATIONS.........................................16
6.1 Initial Purchaser's Representations..............................................16
SECTION 7. PREPAYMENT OF NOTES.........................................................16
7.1 Required Prepayments of the Notes................................................16
7.2 Optional Prepayments of the Notes................................................17
7.3 Offers to Purchase Notes upon Certain Events.....................................17
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TABLE OF CONTENTS
(Continued)
PAGE
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7.4 Notice of Prepayments; Officers' Certificate.....................................19
7.5 Allocation of Partial Prepayments................................................19
7.6 Maturity; Surrender, etc.........................................................19
7.7 Acquisition of Notes.............................................................19
SECTION 8. AFFIRMATIVE COVENANTS OF THE COMPANY........................................20
8.1 Financial Statements.............................................................20
8.2 Reporting Requirements...........................................................21
8.3 Payment of Obligations...........................................................22
8.4 Maintenance of Property; Insurance...............................................22
8.5 Compliance with Laws.............................................................24
8.6 Inspection of Property, Books and Records; Change of Name, Principal Place
of Business, Location of Collateral, Etc.........................................24
8.7 Compliance with Operative Agreements.............................................24
8.8 Corporate Existence..............................................................25
8.9 ERISA............................................................................25
8.10 Environmental Matters............................................................27
8.11 Collateral Records...............................................................28
8.12 Security Interests...............................................................28
8.13 Taxes............................................................................29
8.14 Accounts.........................................................................29
8.15 Proprietary Rights...............................................................30
8.16 Minimum EBITDA...................................................................30
8.17 Repayment of Certain Debt........................................................31
8.18 Collateral Agent Fees............................................................31
SECTION 9. NEGATIVE COVENANTS OF THE COMPANY...........................................31
9.1 Debt and Guarantees..............................................................31
9.2 Restricted Payments..............................................................32
9.3 Investments......................................................................32
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TABLE OF CONTENTS
(Continued)
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9.4 Negative Pledge..................................................................33
9.5 Consolidations, Mergers and Sales of Assets......................................34
9.6 Capital Expenditures.............................................................34
9.7 Transactions with Affiliates.....................................................35
9.8 Restrictions on Foreign Subsidiary Support.......................................35
9.9 Environmental Matters............................................................35
9.10 Amendments to Certificates of Incorporation and By-Laws..........................35
9.11 ERISA............................................................................36
9.12 No Additional Bank Accounts......................................................36
9.13 No Additional Subsidiaries.......................................................37
SECTION 10. EVENTS OF DEFAULT; ACCELERATION.............................................37
10.1 Events of Default................................................................37
10.2 Acceleration.....................................................................39
SECTION 11. COLLATERAL AGENT............................................................39
11.1 Appointment of Collateral Agent; Powers and Immunities...........................39
11.2 Reliance by Collateral Agent.....................................................40
11.3 Default Events...................................................................40
11.4 Rights as a Secured Party........................................................41
11.5 Indemnification..................................................................41
11.6 Documents........................................................................41
11.7 Non-Reliance on Collateral Agent and Other Secured Parties.......................42
11.8 Resignation or Removal of Collateral Agent.......................................42
11.9 Authorization....................................................................43
SECTION 12. DEFINITIONS.................................................................44
12.1 Defined Terms....................................................................44
12.2 Terms Generally..................................................................56
SECTION 13. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES............................57
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TABLE OF CONTENTS
(Continued)
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13.1 Note Register; Ownership of Notes................................................57
13.2 Transfer and Exchange of Notes...................................................57
13.3 Replacement of Notes.............................................................58
13.4 Notes Held by Company, Etc. Deemed Not Outstanding...............................58
SECTION 14. PAYMENTS ON NOTES...........................................................58
14.1 Place of Payment.................................................................58
14.2 Home Office Payment..............................................................58
SECTION 15. EXPENSES, INDEMNIFICATION, ETC..............................................59
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................................63
SECTION 17. AMENDMENTS AND WAIVERS......................................................63
SECTION 18. TERMINATION.................................................................63
SECTION 19. NOTICES, ETC................................................................64
SECTION 20. REPRODUCTION OF DOCUMENTS...................................................65
SECTION 21. MISCELLANEOUS...............................................................65
SECTION 22. SUBMISSION TO JURISDICTION..................................................65
SECTION 23. WAIVER OF JURY TRIAL........................................................66
SECTION 24. GOVERNING LAW...............................................................66
SECTION 25. CONFIDENTIAL INFORMATION....................................................66
v
Schedule 5.4 -- Information
Schedule 5.5 -- Litigation and Judgments
Schedule 5.6 -- ERISA
Schedule 5.7(a) -- Tax Returns
Schedule 5.8 -- Subsidiaries
Schedule 5.10 -- Defaults
Schedule 5.11 -- Debt
Schedule 5.12(a) -- Real Estate
Schedule 5.12(b) -- Proprietary Rights
Schedule 5.15 -- Consents
Schedule 5.17 -- UCC Filing Information
Schedule 5.19 -- Fictitious Business Names
Schedule 5.22 -- Affiliate Transactions
Schedule 5.24 -- Capital Stock
Schedule 8.15 -- Excluded Proprietary Rights
Schedule 9.3 -- Investments in Foreign Subsidiaries
Schedule 9.4 -- Liens
Schedule 9.5 -- Inactive Subsidiaries
Schedule 9.12 -- Bank Accounts
Exhibit A -- Form of Note
Exhibit B-1 -- Form of Opinion of New York Counsel
Exhibit B-2 -- Form of Opinion of Washington Counsel
Exhibit C -- Form of Compliance Certificate
Exhibit D -- Form of Lockbox Agreement
Exhibit E -- Form of Deed of Trust, Security Agreement and Fixture Filing
Exhibit F -- Form of Pledge Agreement
Exhibit G -- Form of Security Agreement
Exhibit H -- Form of Subsidiary Guaranty
Exhibit I -- List of Excluded Persons
-1-
PACIFIC AEROSPACE & ELECTRONICS, INC.
DISCLOSURE SCHEDULE
TO
NOTE PURCHASE AGREEMENT
DATED AS OF MARCH 19, 2002
This Disclosure Schedule is furnished by Pacific Aerospace &
Electronics, Inc., a Washington corporation ("PA&E," "PACIFIC AEROSPACE" or the
"COMPANY") on behalf of itself and each of its Subsidiaries, as of the date
hereof pursuant to and as part of the Note Purchase Agreement dated as of March
19, 2002 (the "AGREEMENT"), by and between the Company, the initial purchaser
identified therein (the "Initial Purchaser") and First Union National Bank, a
national banking association, as Collateral Agent for the Holders (as defined
therein). Unless otherwise provided herein, the defined terms in this Disclosure
Schedule have the same meaning as under the Agreement. All attachments hereto
are incorporated into this Disclosure Schedule.
Headings have been provided for the sections of this Disclosure Schedule
for convenience of reference only and shall to no extent have the effect of
amending or changing any express description of the sections set forth in the
Agreement.
This Disclosure Schedule relates to certain matters concerning the
disclosures required and transactions contemplated by the Agreement. This
Disclosure Schedule is qualified in its entirety by reference to specific
provisions of the Agreement, and is not intended to constitute, and shall not be
construed as an admission that such information is material except to the extent
required by the Agreement.
Copies of all agreements, contracts and documents referenced in this
Disclosure Schedule have been made available for inspection by the Holders.
SCHEDULE 5.4
INFORMATION
In KPMG's report on the Company's consolidated financial statements for the
fiscal year ended May 31, 2001, KPMG's opinion was a disclaimer of opinion.
SCHEDULE 5.5
LITIGATION AND JUDGMENTS
LITIGATION
The Company has the three following litigation matters outstanding:
1. XXXXXXXXX V. PACIFIC AEROSPACE & ELECTRONICS, INC., CHELAN
COUNTY (WA) SUPERIOR COURT CAUSE NO. 00-2-00523-1
Date filed: June 2000
Location: Wenatchee, WA
Nature of dispute: A former employee whose position was
eliminated in 1999 has asserted claims for, among other things, unlawful
termination and age discrimination. This matter is in the discovery stage, and
trial is currently scheduled on June 17, 2002. The Company took Xxxxxxxxx'x
deposition on January 15 and 16, 2002, and is in the process of preparing a
summary judgment motion.
Amount at issue: Unknown
Settlement: The Company has made a settlement offer of $10,000,
which was rejected. The plaintiff also agreed to mediate and then changed his
mind.
2. BOTHELL, D/B/A ATLAS TECHNOLOGIES V. HITACHI ZOSEN CORP.,
NORTHWEST TECHNICAL INDUSTRIES, INC., AND K. SHIMOTSUMA ASSOCIATES, INC.,
JEFFERSON COUNTY (WA) SUPERIOR COURT CAUSE NO. 99-2-00230-9
Date filed: August 1999
Location: Port Angeles, WA
Nature of dispute: Northwest Technical Industries, Inc. ("NTI"),
a wholly owned subsidiary of the Company, was sued on a 1994/1995 contract under
which NTI bonded metals for vacuum flanges produced by Atlas for Hitachi prior
to the Company's acquisition of NTI. Hitachi did not accept or pay for all of
the flanges. Atlas claims that, if it is proved that the flanges were defective,
NTI must have provided Atlas with defective materials and that NTI violated
provisions of a confidentiality agreement. NTI produced discovery materials for
plaintiff's counsel in approximately November 1999, which plaintiff's counsel
has yet to pick up. A trial date was set recently for Fall 2002 after the Court
threatened to dismiss the case for lack of activity, but the plaintiff's counsel
has not yet followed up regarding discovery.
Amount at issue: Unknown
Settlement: N/A
3. SUPERIOR FORGE, INC. V. PACIFIC AEROSPACE & ELECTRONICS, INC.,
SUPERIOR COURT OF THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CENTRAL JUSTICE
CENTER, CASE NO. 02CC02864
Served on PA&E February 19, 2002
Collection claim for $51,631.04
SCHEDULE 5.6
COMPLIANCE WITH ERISA
The Company maintains the following Plans:
Mutual of Omaha Medical, Dental & Vision Insurance
ADP 401(k) Retirement Plan
Xxxxxxx Flexible Benefits Plan
SCHEDULE 5.7(a)
TAX RETURNS
The Company is in the process of discussions with the Inland Revenue
service in the United Kingdom regarding the amount of taxes owing in the United
Kingdom. The main issue concerns the interest on the loan of Sterling Pounds
23,700,000 from the Company to Pacific A&E (UK) Limited.
The Company has not filed U.S. federal income tax returns for the years
ending May 31, 2000 and May 31, 2001. Both returns are currently being completed
by KPMG; and it is anticipated that no tax or penalties will be due with respect
to either of these returns.
SCHEDULE 5.8
SUBSIDIARIES
Subsidiary 100% Parent Shares Outstanding
---------- ----------- ------------------
Aeromet America, Inc. PA&E 100,000
Balo Precision Parts, Inc. PA&E 100,000
Cashmere Manufacturing Co., Inc. PA&E 1,000
Ceramic Devices, Inc. PA&E 1,000
Electronic Specialty Corporation PA&E 100,000
Northwest Technical Industries, Inc. PA&E 100,000
Pacific Coast Technologies, Inc. PA&E 10,714,726
Seismic Safety Products, Inc. PA&E 100,000
Skagit Engineering & Manufacturing, Inc. PA&E 100
PA&E International, Inc. PA&E 100,000
Pacific A & E Limited PA&E International, Inc. 1
Pacific Aerospace & Electronics (UK)
Limited Pacific A&E Ltd. 1
Aeromet International PLC Pacific Aerospace &
Electronics (UK) Limited 1,000,000
PA&E Engineering, Inc. PA&E 100,000
Aeromet International PLC also has several wholly-owned dormant U.K.
subsidiaries. They are:
Subsidiary 100% Parent Shares O/S
---------- ----------- ----------
Xxxxx Xxxx (Aircraft Components)
Limited Aeromet International PLC 1,000
Kent Aerospace Limited Aeromet International PLC 100
TKR Aerospace Limited Aeromet International PLC 13,520
TKR Group Limited Aeromet International PLC 30,000
TKR International Limited Aeromet International PLC 9,272,000
(two classes of stock) 6,600,000
Truflo Gas Turbines Limited Aeromet International PLC 250,000
SCHEDULE 5.10
DEFAULTS
The Company failed to make a semi-annual interest payment of approximately $3.6
million as required under the terms of its 11 1/4% Senior Subordinated Notes
(the "Subordinated Notes") that was due on August 1, 2001, and the Company also
failed to make that payment within the 30-day grace period that expired on
August 31, 2001. The Company also failed to make a payment of interest that was
due on the Subordinated Notes on February 1, 2002 and did not make such payment
during the 30-day grace period provided therein. The Subordinated Notes will be
exchanged for the New Notes on the Closing Date.
In addition, the Company did not make a quarterly interest payment of
approximately $618,000 that was due on its existing senior secured loan (the
"Senior Debt") on September 30, 2001, or before the expiration of the 5-day
grace period. The Company has entered into a forbearance agreement with the
holders of the Senior Debt to waive payment defaults and certain other defaults
on the Senior Debt. This agreement expired on December 31, 2001. Additionally,
the Company failed to repay the Senior Debt on December 31, 2001, its maturity
date. The Senior Debt will be repaid in full on the Closing Date with a portion
of the proceeds of the Notes issued and sold under this Agreement.
The Company has been notified by KeyBank National Association ("KeyBank") that
it is not in compliance with certain covenants of loans that are secured by the
Company's headquarters building and certain fixtures and improvements on what is
known as "Building #7". KeyBank has agreed pursuant to a forbearance letter
dated March 15, 2002, to forbear from exercising its remedies under the KeyBank
Promissory Notes until May 31, 2003. Such forbearance is conditioned upon there
being no loan or lease payment delinquency or defaults after April 1, 2002.
SCHEDULE 5.11
DEBT
PACIFIC AEROSPACE & ELECTRONICS, INC. AND SUBSIDIARIES
ACTUAL DETAIL DEBT LISTING
AS OF JANUARY 31, 2002
Creditor Balance
-------- ------------
PACIFIC AEROSPACE:
Term Debt:
KeyBank $ 1,111,090
Ford Credit 19,707
Ford Credit 29,078
Ford Credit 15,634
Ford Credit 24,878
Ford Credit 12,411
Ford Credit 18,731
DDJ 13,731,446
Senior Subordinated Notes 63,700,000
CASHMERE MANUFACTURING:
Term Debt:
KeyBank 121,959
Ford Credit 25,447
Xxxxxxx Machinery Company 54,197
Xxxxxxx Machinery Company 43,549
Xxxxxxx Machinery Company 42,112
Xxxxxxx Machinery Company 42,112
Xxxxxxx Machinery Company 47,327
Xxxxxxx Machinery Company 47,327
Xxxxxxx Machinery Company 11,189
Xxxxxxx Machinery Company 337,525
Xxxxxxx Machinery Company 198,995
Capital Leases:
GE Capital 41,980
GE Capital 41,980
NEC 83,999
Xxxxx Leasing Corp. 34,078
PACIFIC COAST TECHNOLOGIES:
Term Debt:
KeyBank $ 487,839
Capital Leases:
GE Capital 35,256
GE Capital 35,744
GE Capital 41,196
============
Creditor Balance
-------- ------------
GE Capital 98,759
CIT Group 70,397
CIT Group 98,444
PACIFIC A&E LIMITED:
Term Debt:
PA&E International, Inc. 38,908,000
PACIFIC AEROSPACE & ELECTRONICS (UK) LIMITED:
Term Debt:
Pacific A&E Limited 29,481,000
AEROMET INTERNATIONAL:
Capital Lease:
Lloyds Bowmaker 476,000
------------
Total term debt and capital leases $149,569,386
============
PRO FORMA DEBT*
Pacific Aerospace & Electronics, Inc.
ProForma Debt Listing
(AS OF JANUARY 31, 2002)
Creditor Balance
------- ------------
PACIFIC AEROSPACE:
Term Debt:
KeyBank $ 1,111,090
Ford Credit 19,707
Ford Credit 29,078
Ford Credit 15,634
Ford Credit 24,878
Ford Credit 12,411
Ford Credit 18,731
Xxxxxx Xxxxx Note** 750,000
DDJ --
Old Notes 1,000,000
New Notes 15,000,000
Notes 22,000,000
CASHMERE MANUFACTURING:
Term Debt:
KeyBank 121,959
Ford Credit 25,447
Xxxxxxx Machinery Company 54,197
Xxxxxxx Machinery Company 43,549
Xxxxxxx Machinery Company 42,112
Xxxxxxx Machinery Company 42,112
Xxxxxxx Machinery Company 47,327
Xxxxxxx Machinery Company 47,327
Xxxxxxx Machinery Company 11,189
Xxxxxxx Machinery Company 337,525
Xxxxxxx Machinery Company 198,995
Capital Leases:
GE Capital 41,980
GE Capital 41,980
NEC 83,999
Xxxxx Leasing Corp. 34,078
--------
* This pro forma Schedule has been prepared as if the Debt incurred by the
issuance of the Notes had been incurred as of the date hereof and the existing
Debt under the DDJ Loan Agreement has been repaid in full.
** This promissory note will be issued pursuant to a Settlement Agreement
between the Company and Xxxxxx X. Xxxxx dated February 28, 2002 (the Settlement
Agreement"). Although this obligation was not outstanding as of January 31,
2002, we have included it in this table. The amount of this promissory note
could increase by $200,000 if the Company fails to transfer its Cashmere, WA
warehouse to Xx. Xxxxx pursuant to the Settlement Agreement by June 1, 2002.
Creditor Balance
------- ------------
PACIFIC COAST TECHNOLOGIES:
Term Debt:
KeyBank $ 487,839
Capital Leases:
GE Capital 35,256
GE Capital 35,744
GE Capital 41,196
GE Capital 98,759
Jules and Associates 70,397
CIT Group 98,444
PACIFIC A & E LIMITED:
Term Debt:
PA&E International, Inc. 38,908,000
PACIFIC AEROSPACE & ELECTRONICS (UK) LIMITED:
Term Debt:
Pacific A & E Limited 29,481,000
AEROMET INTERNATIONAL:
Capital Lease:
------------
Lloyds Bowmaker 476,000
------------
Total term debt and capital leases $110,887,940
============
SCHEDULE 5.12(a)
REAL PROPERTY OWNED AND LEASED
OWNED REAL PROPERTY (U.S.):
Owner Location Use
----- -------- ---
1. PA&E 000 Xxxx Xxxxxxx Xxxx XX&X xxxxxxxxxxxx
Xxxxxxxxx, XX 00000
2. Cashmere 000 Xxxxxxx Xxxxxx Warehouse
Manufacturing Co., Inc. Xxxxxxxx, XX 00000
3. Northwest Technical 0000 Xxxxxxx Xxxxx Xxxx Bonded Metals Div.
Industries, Inc. Xxxxxx, XX 00000 operations
LEASED REAL PROPERTY (U.S.):
Date
Lessee and Address Lessor Leased Use
------------------ ------ ------ ---
1. Cashmere Manufacturing Co., Inc. Port of Chelan 9/1/95 Mach. Div. Operations
000 Xxxx Xxxxxxx Xx.
Xxxxxxxxx, XX 00000
2. Pacific Coast Technologies, Inc. Port of Chelan 8/1/93 Electr. Group Operations
000 Xxxx Xxxxxxx Xx.
Xxxxxxxxx, XX 00000
3. PA&E Port of Chelan 1/1/99 Mach. Div. Operations
000 Xxxx Xxxxxxx Xx.
Xxxxxxxxx, XX 00000
4. PA&E Port of Chelan 6/13/00 Mach. Div. Operations
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
5. Electronic Specialty Corporation Xxxxxxxx Realty, Ltd. 3/31/94 Display Div.
00000 XX 00xx Xxx. Operations (not in
Xxxxxxxxx, XX 00000 use)
6. Skagit Engineering & Manufacturing, Inc. Sea-Land Development 7/1/98 Eng. & Fab. Div.
000 Xxxxxxx Xxxxxx Operations (not in
Xxxxx-Xxxxxxx, XX 00000 use. Partially terminated)
Date
Lessee and Address Lessor Leased Use
------------------ ------ ------ ---
7. Skagit Engineering & Manufacturing, Inc. 000xx Xxxxxx LLC 11/1/00 Eng. & Fab. Office
0000 000xx Xx. XX (subleased to Nova-Tech,
Suite 200 Inc. pursuant to a sublease
Xxxxxxxxx Xxxxxxx, XX 00000 agreement dated as of
12/21/01)
RIGHTS OF OTHERS WITH RESPECT TO REAL PROPERTY (EXCLUDING LIENS):
Agreement
Description Lessee Lessor Date
----------- ------ ------ ----
1. Option to Purchase condo Xxxxxx X. Xxxxxx PA&E 1/29/99
Xxxx 0
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
2. Co-Location Agreement Northwest PA&E 8/1/00
(use of roof space) Telephone, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
3. Right of First Refusal Northwest Explosive Northwest Technical 4/30/97
0000 Xxxxxxx Xxxxx Xxxx Bonding, Inc. Industries, Inc.
Xxxxxx, XX 00000
4. Sublease of #7 above Nova-Tech, Inc. Skagit Engineering & 12/21/01
6808 220th SW Manufacturing, Inc.
Xxxxxxxxx Xxxxxxx, XX
0. Remote blasting site Northwest Technical Rayonier, Inc. 3/15/00
(site has no address) Industries, Inc.
6. Sublease of second floor and part North Central PA&E 8/6/01
of first floor of headquarters Educational Service
building District
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
SCHEDULE 5.12(b)
PATENTS AND TRADEMARKS
PACIFIC COAST TECHNOLOGIES, INC.
PATENT STATUS CHART
-------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/ ATTORNEY
ASSIGNEE DOCKET FILING PATENT ISSUE
COUNTRY NO. INVENTORS SERIAL NO. DATE NO. DATE
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 07.16.81 4,507,000 00.00.00
USA Xxxx 12
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 05.02.84 4,512,000 00.00.00
USA Xxxx 13
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 05.02.84 4,514,000 00.00.00
USA Xxxx 14
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 10.08.82 4,514,000 00.00.00
USA Xxxx 15
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 11.04.82 4,518,000 00.00.00
USA Xxxx 16
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 05.02.84 4,593,000 00.00.00
USA Xxxx 17
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 12.04.84 4,654,000 00.00.00
USA Xxxx 18
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 06.29.84 4,657,000 00.00.00
USA Xxxx 19
-------------------------------------------------------------------------------------------------------------
PCT, Inc.(1) 42474/5 Xxxxx X. Xxxx 10.20.83 4,925,607 5.15.90
USA Xxxx 20
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/
ASSIGNEE EXPIRATION MAINTENANCE
COUNTRY DATE TITLE STATUS FEE DUE DATES
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 03.26.02 TERMINAL ASSEMBLY IN FORCE No further fees
USA due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 04.23.02 HERMETICALLY SEALED INSULATING IN FORCE No further fees
USA ASSEMBLY due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 04.30.02 METHOD FOR MAKING TERMINAL ASSEMBLY IN FORCE No further fees
USA FOR HEART PACEMAKER due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 10.08.02 ELECTRICAL TERMINAL ASSEMBLY IN FORCE No further fees
USA due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 11.04.02 TERMINAL ASSEMBLY FOR HEART PACEMAKER IN FORCE No further fees
USA due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 06.10.03 HERMETICALLY SEALED INSULATING IN FORCE No further fees
USA ASSEMBLY due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 12.04.04 TERMINAL ASSEMBLY AND METHOD OF IN FORCE No further fees
USA MAKING TERMINAL ASSEMBLY due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 06.29.04 ELECTRICAL CONNECTOR & METHOD OF IN FORCE No further fees
USA PRODUCING ELECTRICAL CONNECTOR due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc.(1) 05.15.07 ELECTRICAL INSULATING MATERIAL IN FORCE Release of Sec'y
USA FORMED FROM AT LEAST ONE FLUX AND A Int. sent to
CRYSTALLINE STUFFING MATERIAL Xxxx for
signature
01.02. Sec'y
Int. not yet
released; need
to correct fee
payment.
-------------------------------------------------------------------------------------------------------------------
--------
(1) Assignment to PCT, Inc. included security interest to Xxxx. Obligation to
Xxxx has been satisfied. Requested and have not yet received the executed
release of the security interest.
-------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/ ATTORNEY
ASSIGNEE DOCKET FILING PATENT ISSUE
COUNTRY NO. INVENTORS SERIAL NO. DATE NO. DATE
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/5 Xxxxx X. Xxxx 09.20.82 4,935,000 00.00.00
USA Xxxx 21
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/6 Xxxxxx X. Xxxxxx 01.07.92 5,298,000 00.00.00
USA Xxxxxx 1
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/7 Xxxxxx X. Xxxxxx 06.02.94 5,433,000 00.00.00
USA Xxxxxx 2
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/7 Xxxxxx X. Xxxxxx 06.19.95 5,675,000 00.00.00
USA Xxxxxx 3
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/19c1 Xxxxxx 09/006,696 01.14.98 5,986,000 00.00.00
USA Xxxxxx 5 X.Xxxxxx;
Xxxxxxxx Xxxx
Xxxxxxx
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/801 Xxxxx Xxxxxxx 09/076,230 5.12.98 6,221,000 00.00.00
USA Xxxxxxx 1
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/801 Xxxxx Xxxxxxx 99 921 874.6 Priority
EUROPE PCT Date 05.11.99
Xxxxxxx 1 PCT/US99/10313
PCT Int'l Published
11.18.99 as
WO 99/58332.
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/80 Xxxxx Xxxxxxx 09/235,223 01.22.99 6,232,000 00.00.00
USA 2a Xxxxxxx
4
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/
ASSIGNEE EXPIRATION MAINTENANCE
COUNTRY DATE TITLE STATUS FEE DUE DATES
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 06.19.07 INSULATED CONDUCTOR WITH IN FORCE No further fees
USA CERAMIC-CONNECTED ELEMENTS due
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 01.07.12 DISSIMILAR METAL CONNECTORS IN FORCE 09.29.05
USA
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 07.27.12 SEALABLE ELECTRONIC PACKAGES & IN FORCE 01.18.03,
USA METHODS OF PRODUCING & SEALING SUCH 01.18.07
PACKAGES
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 07.27.12 SEALABLE ELECTRONIC PACKAGES IN FORCE 04.07.05
USA 04.07.09
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 03.19.16 WAVEGUIDE WINDOW ASSEMBLY AND IN FORCE 05.16.03,
USA MICROWAVE ELECTRONICS PACKAGE 05.16.07,
05.16.11
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 05.12.18 METHODS FOR HERMETI-CALLY SEALING IN FORCE BROADENING
USA CERAMIC TO METALLIC SURFACES AND REISSUE DEADLINE
ASSEMBLIES INCORPORATING SUCH SEALS 04.24.03; MAINT.
FEES DUE:
10.24.04,
10.24.08,
10.24.12
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. METHODS AND MATERIALS FOR SEALING Pending; Designated Maintenance fee
EUROPE CERAMIC TO METALLIC SURFACES countries are: due annually.
Switzerland-
Liechtenstein,
Germany; Denmark
France, Great
Britain, Italy,
Netherlands and
Sweden.
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 05.06.18 METHODS FOR TREATING CERAMIC IN FORCE BROADENING
USA MATERIALS AND CERAMIC MATERIALS REISSUE DEADLINE
PRODUCED THEREBY (Zirconia treatment 05.15.03; MAINT.
with metals) FEES DUE:
11.15.04;
11.15.08;
11.15.12
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/ ATTORNEY
ASSIGNEE DOCKET FILING PATENT ISSUE
COUNTRY NO. INVENTORS SERIAL NO. DATE NO. DATE
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 2474/802 PCT Xxxxx Xxxxxxx 99 920 345.8 Priority
EUROPE Xxxxxxx 3 Date 05.05.99
PCT/US99/09819
Published
11.18.99 as
WO 99/58690.
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/17-5 Xxxxxx X. Xxxxxx 07.09.91 5,110,000 00.00.00
USA Xxxxxx 1
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/17 Xxxxxx X. Xxxxxx 05.04.92 5,405,000 00.00.00
USA Xxxxxx 2
-------------------------------------------------------------------------------------------------------------
UK(2) 42474/17 Xxxxxx X. Xxxxxx 92303983.8 05.01.92 EP 0 522 687 03.05.97
Xxxxxx 3 B1
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/17 Xxxxxx X. Xxxxxx Can. 20676671 04.30.92 2,067,000 00.00.00
Xxxxxx 4
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/17 Xxxxxxx X. 11.01.90 5,041,000 00.00.00
USA Sharp 1 Sharp, et al.
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/17 Xxxxxxx X. 03.18.91 5,109,000 00.00.00
USA Sharp 2 Sharp, et al.
-------------------------------------------------------------------------------------------------------------
PCT, Inc. 42474/17 Xxxxx X. Xxxx, 09.26.85 4,690,000 00.00.00
USA Snow 1 et. al.
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/
ASSIGNEE EXPIRATION MAINTENANCE
COUNTRY DATE TITLE STATUS FEE DUE DATES
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
PCT, Inc. METHODS FOR TREATING CERAMIC Pending; Maintenance fee
EUROPE MATERIALS AND IMPROVED TREATED Switzerland- due annually
CERAMIC MATERIALS PRODUCED THEREBY Liechtenstein
(Zirconia staining with titanium) Germany; Denmark
France, Great Britain,
Italy, Netherlands
and Sweden
-------------------------------------------------------------------------------------------------------------------
PCT, Inc. 07.09.11 LASER WELDABLE HERMETIC CONNECTOR IN FORCE 11.05.03
USA
--------------------------------------------------------------------------------------------------------------------
PCT, Inc. 04.11.12 LASER WELDABLE HERMETIC CONNECTOR IN FORCE 10.11.02,
USA 10.11.06
--------------------------------------------------------------------------------------------------------------------
UK(2) 05.01.12 LASER WELDABLE HERMETIC CONNECTOR EU patent ANNUALLY ON MAY
enforceable in UK 3RD
--------------------------------------------------------------------------------------------------------------------
PCT, Inc. 04.30.12 LASER WELDABLE HERMETIC CONNECTOR IN FORCE ANNUALLY ON
APRIL 30TH
--------------------------------------------------------------------------------------------------------------------
PCT, Inc. 11.01.10 TRANSITION JOINT FOR MICROWAVE IN FORCE 02.20.03
USA PACKAGE
--------------------------------------------------------------------------------------------------------------------
PCT, Inc. 11.01.10 METHOD OF MAKING SEALED TRANSITION IN FORCE 11.05.03
USA JOINT
--------------------------------------------------------------------------------------------------------------------
PCT, Inc. 09.26.05 TUBULAR BI-METAL CONNECTOR IN FORCE No further fees
USA due
-------------------------------------------------------------------------------------------------------------------
--------
(2) Assignment to PCT, Inc. not yet recorded in UK; we are following up to
record.
PACIFIC AEROSPACE & ELECTRONICS, INC.
PATENT STATUS CHART
------------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/
ASSIGNEE ATTORNEY FILE PATENT ISSUE
COUNTRY DOCKET NO. INVENTORS SERIAL NO. DATE NO. DATE
------------------------------------------------------------------------------------------------------------------
Pacific Aerospace & 42474/900 Xxxxx X. Xxxxx 09/200,204 11.25.98 6,150,000 00.00.00
Electronics, Inc.
USA
------------------------------------------------------------------------------------------------------------------
Pacific Aerospace & 42474/901 Xxxxxx X. 09/302,590 04.30.99
Electronics, Inc.(3) ("Xxxx") Xxxxx;
USA Xxxxxx X. Xxxxxx
------------------------------------------------------------------------------------------------------------------
Pacific Aerospace & 42474/902 Xxxxxx X. 09/303,196 04.30.99 6,284,389 09.04.01
Electronics, Inc. ("Xxxx") Xxxxx;
USA Xxxxxx X. Xxxxxx
------------------------------------------------------------------------------------------------------------------
Pacific Aerospace & 42474/ Xxxxxx X. EP 00 11.15.01
Electronics, Inc. 901-2.EP ("Xxxx") Xxxxx; '928'580.0
Xxxxxx X. Xxxxxx Nat'l phase of
EUROPE PCT/US00/
11579
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------ -----------------------------------------
APPLICANT/
PATENTEE/ MAINTENANCE
ASSIGNEE EXPIRATION FEE DUE
COUNTRY DATE TITLE STATUS DATES
------------------------------------------------------------------------------ -----------------------------------------
Pacific Aerospace & 11.25.18 GAS DISCHARGE LAMP CONTROLLER IN FORCE BROADENING
Electronics, Inc. REISSUE
USA DEADLINE
11.21.02;
MAINT. FEES
DUE: 05.21.04,
05.21.08,
05.21.12
------------------------------------------------------------------------------ -----------------------------------------
Pacific Aerospace & ELECTRONICS PACKAGES HAVING A PENDING; Claims
Electronics, Inc.(3) COMPOSITE STRUCTURE AND METHODS FOR allowed; Issue Fee
USA MANUFACTURING SUCH ELECTRONICS paid and formal
PACKAGES drawings submitted.
IN NEGOTIATIONS WITH
XXXXX.
------------------------------------------------------------------------------ -----------------------------------------
Pacific Aerospace & 04.30.19 COMPOSITE MATERIALS AND METHODS FOR IN FORCE BROADENING
Electronics, Inc. MANUFACTURING COMPOSITE MATERIALS REISSUE
USA IN NEGOTIATIONS WITH DEADLINE
XXXXX. 09.04.03;
MAINT. FEES
DUE: 03.04.05
03.04.09
03.04.13
------------------------------------------------------------------------------ -----------------------------------------
Pacific Aerospace & COMPOSITE ELECTRONICS PACKAGES AND PENDING.
Electronics, Inc. METHODS FOR MANUFACTURE
IN NEGOTIATIONS WITH
EUROPE XXXXX.
------------------------------------------------------------------------------ -----------------------------------------
--------
(3) Xx. Xxxxx holds a Security Interest in these applications but has consented
to the granting by the Company of a second priority perfected security interest
in these applications.
SEISMIC SAFETY PRODUCTS, INC.
PATENT STATUS CHART
--------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/ ATTORNEY
ASSIGNEE DOCKET ISSUE
COUNTRY NO. INVENTORS SERIAL NO. FILE DATE PATENT NO. DATE
--------------------------------------------------------------------------------------------------------------
Seismic Safety 42474/28 Xxxxx X. XxXxxx 03.07.88 4,903,000 00.00.00
Prods., Inc. McGill 1
USA
--------------------------------------------------------------------------------------------------------------
Seismic Safety 42474/28 Xxxxx X. XxXxxx 02.26.91 5,119,000 00.00.00
Prods., Inc. McGill 2
USA
--------------------------------------------------------------------------------------------------------------
Seismic Safety 42474/28 Xxxxx X. 11.09.93 5,409,000 00.00.00
Prods., Inc. McGill 3 XxXxxx, Xxxxxxx
USA X. Xxxxxxxxx
--------------------------------------------------------------------------------------------------------------
Seismic Safety 42474/28 Xxxxx X. 03.13.95 5,704,000 00.00.00
Prods., Inc. XxXxxx 0 XxXxxx, Xxxxxxx
XXX X. Xxxxxxxxx
--------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/
ASSIGNEE EXPIRATION MAINTENANCE
COUNTRY DATE TITLE STATUS FEE DUE DATES
----------------------------------------------------------------------------------------------------------------------
Seismic Safety 03.07.08 SAFETY SHUTOFF DEVICE IN FORCE All fees paid
Prods., Inc.
USA
----------------------------------------------------------------------------------------------------------------------
Seismic Safety 02.26.11 SAFETY SHUT OFF APPARATUS IN FORCE 12.09.03
Prods., Inc.
USA
----------------------------------------------------------------------------------------------------------------------
Seismic Safety 04.25.12 SAFETY SHUT OFF VALVE IN FORCE 10.25.02,
Prods., Inc. 10.25.06
USA
----------------------------------------------------------------------------------------------------------------------
Seismic Safety 01.06.15 AUTOMATIC AND MANUALLY OPERABLE IN FORCE 07.06.05,
Prods., Inc. SAFETY SHUTOFF VALVE 07.06.09
USA
----------------------------------------------------------------------------------------------------------------------
AEROMET INTERNATIONAL PLC
PATENT STATUS CHART
-----------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/ ATTORNEY
ASSIGNEE DOCKET FILING ISSUE
COUNTRY NO. INVENTORS SERIAL NO. DATE PATENT NO. DATE
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Aeromet Int'l PLC 9804599.0 03.05.98
(initial)
9904741.7
(final)
-----------------------------------------------------------------------------------------------------------------
Aeromet Int'l PLC 99104277.1
EUROPE
-----------------------------------------------------------------------------------------------------------------
Aeromet Int'l PLC 2264214
CANADA
-----------------------------------------------------------------------------------------------------------------
Aeromet Int'l A00009359US Xxxxxx 09/262,446 03.04.99 6,126,000 00.00.00
USA priority to
03.05.98
-----------------------------------------------------------------------------------------------------------------
Aeromet Int'l 00-00000
XXXXX
-----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
APPLICANT/
PATENTEE/ MAINTENANCE
ASSIGNEE EXPIRATION FEE DUE
COUNTRY DATE TITLE STATUS DATES
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Aeromet Int'l PLC CAST ALUMINUM-COPPER ALLOY PENDING; no further
information.
----------------------------------------------------------------------------------------------------------------
Aeromet Int'l PLC CAST ALUMINUM-COPPER ALLOY PENDING; no further
EUROPE information.
----------------------------------------------------------------------------------------------------------------
Aeromet Int'l PLC CAST ALUMINUM-COPPER ALLOY PENDING; no further
CANADA information.
----------------------------------------------------------------------------------------------------------------
Aeromet Int'l 03.04.19 CAST ALUMINUM-COPPER ALLOY IN FORCE BROADENING
USA REISSUE
DEADLINE
10.03.02;
MAINT. FEES
DUE:
04.03.04,
04.03.08,
04.03.12
----------------------------------------------------------------------------------------------------------------
Aeromet Int'l CAST ALUMINUM-COPPER ALLOY PENDING; no further
JAPAN information.
----------------------------------------------------------------------------------------------------------------
TRADEMARK STATUS REPORT FOR
PACIFIC AEROSPACE & ELECTRONICS, INC.
------------------------------------------------------------------------------------------------------
CLIENT/
MATTER SERIAL FILING
ASSIGNEE NO. XXXX COUNTRY NO. DATE
------------------------------------------------------------------------------------------------------
PCT, Inc. 42174/10 KRYOFLEX USA 73/117,000 00.00.00
------------------------------------------------------------------------------------------------------
PCT, Inc. 42174/11 HERMETIC ADVANTAGE USA 74/521,000 00.00.00
------------------------------------------------------------------------------------------------------
PCT, Inc. 42174/12 PARTNERS WITH USA 74/522,000 00.00.00
TOMORROW
------------------------------------------------------------------------------------------------------
Seismic Safety 42174/16 NORTHRIDGE VALVE USA 75/169,000 00.00.00
Products, Inc.
------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
REGISTRATION INT'L
ASSIGNEE NO./DATE GOODS/SERVICES CLASS STATUS
-------------------------------------------------------------------------------------------------------------------------
PCT, Inc. 1,114,452 CERAMIC MATERIALS SOLD AS A COMPONENT 10;21 REGISTERED;
Mar. 6, 1979 OF HEART PACEMAKERS Next renewal due
03.06.09
-------------------------------------------------------------------------------------------------------------------------
PCT, Inc. 1,998,984 ELECTRONIC COMPONENTS, NAMELY 9 REGISTERED;
Sept. 10, 1996 ELECTRONIC CONNECTORS AND HERMETIC SEC. 8/15 DECL due
SEALING DEVICES 9.10.01 - 9.10.02;
Renewal due 3.10.06 -
9.10.06
-------------------------------------------------------------------------------------------------------------------------
PCT, Inc. 1,998,986 ELECTRONIC COMPONENTS, NAMELY 9 REGISTERED;
Sept. 10, 1996 ELECTRONIC CONNECTORS AND HERMETIC Sec 8/15 Decl due
SEALING DEVICES FOR ELECTRONIC 9.10.01 - 9.10.02;
PACKAGES AND CONNECTORS Renewal due 3.10.06 -
9.10.06
-------------------------------------------------------------------------------------------------------------------------
Seismic Safety 2,119,389 VALVES FOR NATURAL GAS DISTRIBUTION 7 REGISTERED;
Products, Inc. Dec. 9, 1997 SYSTEMS Sec 8/15 Decl due
12.9.02 - 12.9.03;
RENEWAL due 6.9.07 -
12.9.07
-------------------------------------------------------------------------------------------------------------------------
SCHEDULE 5.15
SECURITY INTERESTS CONSENTS
Consent of KeyBank dated March 19, 2002 made by KeyBank in favor of the Company
and Pacific Coast Technologies, Inc. (relating to the KeyBank Promissory Notes)
Consent of Xxxxxx X. Xxxxx dated March 19, 2002 (relating to the Settlement
Agreement) (the "Xxxxx Consent")
SCHEDULE 5.17
UCC FILING INFORMATION
The Company and each of its Subsidiaries (other than its Foreign Subsidiaries)
is incorporated in the State of Washington.
OWNED REAL PROPERTY (U.S.):
---------------------------------------------------------------------------------------------------------------------
Owner Location Use
---------------------------------------------------------------------------------------------------------------------
1. PA&E 000 Xxxx Xxxxxxx Xxxx X&X xxxxxxxxxxxx
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
2. Northwest Industries, Inc. 0000 Xxxxxxx Xxxxx Xxxx Bonded Metals Div. Technical operations
Xxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
LEASED REAL PROPERTY (U.S.):
---------------------------------------------------------------------------------------------------------------------
Lessee and Address Lessor Use
---------------------------------------------------------------------------------------------------------------------
1. Cashmere Manufacturing Co., Inc. Port of Chelan Mach. Div. Operations
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
2. Pacific Coast Technologies, Inc. Port of Chelan Electr. Group operations
000 Xxxx Xxxxxxx Xx.
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
3. PA&E Port of Chelan Mach. Div operations
000 Xxxx Xxxxxxx Xx.
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
4. PA&E Port of Chelan Mach. Div operations
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
5. Electronic Specialty Corporation Xxxxxxxx Realty, Ltd Display Div operations
00000 XX 00xx Xxx
Xxxxxxxxx XX 00000
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Lessee and Address Lessor Use
---------------------------------------------------------------------------------------------------------------------
6. Skagit Engineering & Sea-Land Development Eng. & Fab. Div. Operations (not in use.
Manufacturing, Inc. Partially terminated)
000 Xxxxxxx Xxxxxx
Xxxxx-Xxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
7. Skagit Engineering & 000xx Xxxxxx LLC Eng. & Fab. Office (subleased)
Manufacturing, Inc. 0000
000xx Xx. XX Xxxxx 000
Xxxxxxxxx Xxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
SCHEDULE 5.19
FICTITIOUS BUSINESS NAMES
DBA'S The following is a list of trade names that are registered with the State
of Washington, and are the names currently used by the Subsidiaries of the
Company in their operations.
Pacific Aerospace & Electronics, Inc. - U.S. Aerospace Group - Casting Division
(Aeromet America)
Pacific Aerospace & Electronics, Inc. - Electronics Group - Interconnect
Division (Balo Precision Parts)
Pacific Aerospace & Electronics, Inc. - U.S. Aerospace Group - Machining
Division (Cashmere Manufacturing Co., Inc.)
Pacific Aerospace & Electronics, Inc. - U.S. Electronics Group - Filter Division
(Ceramic Devices, Inc.)
Pacific Aerospace & Electronics, Inc. - U.S. Electronics Group - Display
Division (Electronic Specialty Corporation)
Pacific Aerospace & Electronics, Inc. - U.S. Electronics Group - Bonded Metals
Division (Northwest Technical Industries, Inc.)
Pacific Aerospace & Electronics, Inc. - U.S. Electronics Group - Interconnect
Division (Pacific Coast Technologies, Inc.)
Pacific Aerospace & Electronics, Inc. - U.S. Aerospace Group - Machining
Division (Seismic Safety Products, Inc.)
Pacific Aerospace & Electronics, Inc. - U.S. Aerospace Group - Engineering &
Fabrication Division (Skagit Engineering & Manufacturing, Inc.)
Pacific Aerospace & Electronics, Inc. - European Aerospace Group
(Aeromet International PLC)
PREVIOUS NAMES USED IN OPERATIONS:
Xxxxx Industries, Inc. (former name of Aeromet America, Inc.)
Xxxxx Castparts, Inc. (name of company whose assets were acquired by
Aeromet America, Inc.)
Displays & Technologies, Inc. (name of company merged into Electronic Specialty
Corporation)
Nova-Tech Engineering, Inc. (name of company whose assets were acquired by
Skagit Engineering & Manufacturing, Inc.)
PCT Holdings, Inc. (former name of PA&E)
SCHEDULE 5.22
AFFILIATE TRANSACTIONS
Employment agreement with Xxxxxx X. Xxxxxx. The existing employment agreement
employs Xx. Xxxxxx through fiscal 2003.
On August 15, 2001, Xxxx Xxxxx, who served as Vice President Finance of the
Company, as well as Treasurer and Assistant Secretary, left his employment with
the Company. In accordance with Xx. Xxxxx'x employment agreement and separation
letter executed by Xx. Xxxxx and the Company, Xx. Xxxxx will receive severance
pay of $150,000, which is the equivalent of one year's salary. This severance is
payable on regular payroll days over a 12-month period. Xx. Xxxxx will also
receive medical benefits for one year.
On February 28, 2002, Xxxxxx X. Xxxxxxx, who served as Vice President
Administration and General Counsel, left her employment with the Company. In
accordance with Xx. Xxxxxxx' employment agreement and separation letter executed
by Xx. Xxxxxxx and the Company, Xx. Xxxxxxx will receive $205,710, which is the
equivalent of one year's salary. This severance is payable on regular payroll
days over a 12-month period. Xx. Xxxxxxx will also receive medical benefits for
one year.
Xxxxxx Xxxxxxxxxxx who is currently the Vice President Operations and Chief
Operating Officer, will continue serving as the Vice President Operations and
Chief Operating Officer until May 17, 2002. In accordance with Xx. Xxxxxxxxxxx'x
employment agreement and separation letter executed by Xx. Xxxxxxxxxxx and the
Company, Xx. Xxxxxxxxxxx will receive $210,000, which is the equivalent of one
year's salary. This severance is payable on regular payroll days over a 12-month
period. Xx. Xxxxxxxxxxx will also receive medical benefits for one year.
Xxxxxx X. Xxxxxx rents the fourth floor condominium in the headquarters building
from the Company and has an option to purchase the condominium for $250,000. The
option terminates ten business days after Xx. Xxxxxx'x employment with the
Company ceases for any reason other than death.
GSC Partners CDO Fund, Limited, GSC Partners CDO Fund II, Limited, GSC Recovery
II, L.P. and GSC Recovery IIA, L.P., affiliates of GSCP Recovery, Inc, and as
applicable, GSC Recovery II, L.P. (participating noteholders in the Exchange),
which will collectively own approximately 54% of the Company's Common Stock on a
fully-diluted basis following the Exchange, intend to purchase the Notes from
the Initial Purchaser.
In August 2001, the Company entered into a lease agreement with the North
Central Educational Services District (the "NCESD"), pursuant to which the NCESD
leased the second floor of the Company's Wenatchee headquarters building from
the Company for $6,183 per month for a term of 24 months. In authorizing the
lease, the Board of Directors determined that the lease was made for fair market
value. Xxxx X. Xxxxxxxx, a director of the Company, is Superintendent of the
NCESD.
SCHEDULE 5.24
CAPITAL STOCK
PA&E CAPITALIZATION
1. Authorized Capital: 100,000,000 shares of common stock, $.001 par value
5,000,000 shares of preferred stock, $.001 par value
2. Issued and Outstanding: 39,315,309 shares of common stock
No shares of preferred stock
3. Options Outstanding under Stock Incentive Plan: 3,599,948
4. Warrants Outstanding:
Pacific Aerospace & Electronics, Inc.
Warrant Ledger
-------------------------------------------------------------------------------------------------------------------------------
WARRANT WARRANT
#/OTHER WARRANT EXERCISE NON EXPIRATION SHARES
DATE ISSUED WARRANT HOLDER INFO SHARES PRICE VESTED VESTED DATE REMAINING
-------------------------------------------------------------------------------------------------------------------------------
PUBLIC WARRANTS
-------------------------------------------------------------------------------------------------------------------------------
6/01/96 Interwest Transfer Co. 693259-11-1 2,295,000 4.6875 0 6/15/03
-------------------------------------------------------------------------------------------------------------------------------
NON-PUBLIC WARRANTS
-------------------------------------------------------------------------------------------------------------------------------
11/30/96(1) Xxxxxx X. Xxxxxx 001 100,000 $2.0000 100,000 0 12/24/04 100,000
-------------------------------------------------------------------------------------------------------------------------------
11/30/96(1) Xxxx X. Xxxxx 001 25,000 $2.0000 25,000 0 02/01/05 25,000
-------------------------------------------------------------------------------------------------------------------------------
11/30/96(2) Xxxxxx X. Xxxxxx 003 35,000 $2.0000 35,000 0 05/31/02 35,000
-------------------------------------------------------------------------------------------------------------------------------
06/03/97 Xxxxxxx X. Xxxxx 20,000 $3.4500 50,000 0 06/03/02 20,000
-------------------------------------------------------------------------------------------------------------------------------
06/03/97 Xxxxxx Xxxxxxx 5,000 $3.4500 5,000 0 06/03/02 5,000
-------------------------------------------------------------------------------------------------------------------------------
Continental Capital &
04/17/00 Equity Corporation CCEC1 50,000 $3.5000 50,000 0 04/17/03 50,000
-------------------------------------------------------------------------------------------------------------------------------
Continental Capital &
04/17/00 Equity Corporation CCEC2 50,000 $5.5000 50,000 0 04/17/03 50,000
-------------------------------------------------------------------------------------------------------------------------------
Continental Capital &
04/17/00 Equity Corporation CCEC3 50,000 $7.5000 50,000 0 04/17/03 50,000
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
WARRANT WARRANT
#/OTHER WARRANT EXERCISE NON EXPIRATION SHARES
DATE ISSUED WARRANT HOLDER INFO SHARES PRICE VESTED VESTED DATE REMAINING
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Continental Capital &
04/17/00 Equity Corporation CCEC4 50,000 $9.5000 50,000 0 04/17/03 50,000
-------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Capital Group,
07/27/00 Ltd. RCG 1 79,150 $1.7688 79,150 0 07/26/04 79,150
-------------------------------------------------------------------------------------------------------------------------------
Strong River
07/27/00 Investments CW 1 192,500 $2.0100 192,500 0 07/27/03 192,500
-------------------------------------------------------------------------------------------------------------------------------
Bay Harbor
07/27/00 Investments, Inc. CW 2 192,500 $2.0100 192,500 0 07/27/03 192,500
-------------------------------------------------------------------------------------------------------------------------------
B-III Capital
03/01/01 Partners, L.P. DDJ-1 1,883,923 $0.0010 1,883,923 0 03/01/06 1,883,923
-------------------------------------------------------------------------------------------------------------------------------
B-III A Capital
03/01/01 Partners, L.P. DDJ-2 807,396 $0.0010 807,396 0 03/01/06 807,396
-------------------------------------------------------------------------------------------------------------------------------
DDJ Canadian High
03/01/01 Yield Fund DDJ-3 538,263 $0.0010 538,263 0 03/01/06 538,263
-------------------------------------------------------------------------------------------------------------------------------
State Street Bank &
03/01/01 Trust, Custodian DDJ-4 807,396 $0.0010 807,396 03/01/06 807,396
-------------------------------------------------------------------------------------------------------------------------------
First Albany
04/09/01 Corporation FAC-1 692,074 $0.4062 692,074 04/09/06 692,074
-------------------------------------------------------------------------------------------------------------------------------
5. Capitalization of Subsidiaries of PA&E
Subsidiaries 100% Parent Shares O/S
------------ ----------- ----------
Aeromet America, Inc. PA&E 100,000
Balo Precision Parts, Inc. PA&E 100,000
Cashmere Manufacturing Co., Inc. PA&E 1,000
Ceramic Devices, Inc. PA&E 1,000
Electronic Specialty Corporation PA&E 100,000
Northwest Technical Industries, Inc. PA&E 100,000
Pacific Coast Technologies, Inc. PA&E 10,714,726
Seismic Safety Products, Inc. PA&E 100,000
Skagit Engineering & Manufacturing, Inc. PA&E 100
PA&E International, Inc. PA&E 100,000
Pacific A & E Limited PA&E International, Inc. 1
Pacific Aerospace & Electronics (UK) Pacific A&E Limited 1
Limited
Aeromet International PLC Pacific Aerospace & 1,000,000
Electronics (UK) Limited
PA&E Engineering, Inc. PA&E 100,000
Aeromet International PLC also has several wholly-owned dormant U.K.
subsidiaries:
Subsidiary 100% Parent Shares O/S
---------- ----------- ----------
Xxxxx Xxxx (Aircraft Components)
Limited Aeromet International PLC 1,000
Kent Aerospace Limited Aeromet International PLC 100
TKR Aerospace Limited Aeromet International PLC 13,520
TKR Group Limited Aeromet International PLC 30,000
TKR International Limited Aeromet International PLC 9,272,000
(two classes of stock) 6,600,000
Truflo Gas Turbines Limited Aeromet International PLC 250,000
SCHEDULE 8.15
EXCLUDED PROPRIETARY RIGHTS
The Company was in default under a technology transfer agreement dated
December 30, 1998 with Xxxxxx X. Xxxxx relating to the following U.S. patent
applications and one European patent application: (i) U.S. Serial No.
09/302,590, (ii) U.S. Serial No. 09/303,196 (now U.S. Patent No. 6,284,389) and
(iii) E.P. Serial No. 99'920'345.8 (the "Patents").
However, a settlement was reached between Xx. Xxxxx and the Company.
Pursuant to the Settlement Agreement, the Company is permitted to retain the
Patents upon payment by the Company to Xx. Xxxxx of an amount equivalent to
$950,000 (the "Purchase Price"). $200,000 of the Purchase Price will be paid by
the Company transferring to Xx. Xxxxx the building owned by the Company in
Cashmere, WA. The remaining sum of $750,000 will be paid pursuant to a
promissory note. If the building is not transferred to Xx. Xxxxx by June 1,
2002, $200,000 of the Purchase Price will be added to the outstanding principal
balance of the promissory note. Xx. Xxxxx will retain a security interest in the
Patents until the promissory note is fully paid. Pursuant to the Xxxxx Consent,
the Holders will be permitted to take a second priority lien on the Patents.
SCHEDULE 9.3
INVESTMENTS IN FOREIGN SUBSIDIARIES
Pacific Aerospace & Electronics, Inc.
Investments in Foreign Subsidiaries
as of January 31, 2001
Common Intercompany Total
Stock Investments Investment
---------- ------------ ----------
Subsidiary
PA&E International, Inc. 33,709,232 -- 33,709,232
---------- ----------
Total investment in foreign subsidiaries 33,709,232 33,709,232
Intercompany investments change on a daily basis due to PA&E's cash
management system which transfers funds to and from subsidiaries as needed.
SCHEDULE 9.4
LIENS
Below is a list of Liens that will exist after application of the proceeds from
the issuance of the Notes:
--------------------------------------------------------------------------------
DETAIL DEBT LISTING/LIENS/SECURITY INTERESTS
--------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Creditor Balance Security UCC Filing Information
($)
------------------------------------------------------------------------------------------------------------------------------
PACIFIC AEROSPACE &
ELECTRONICS, INC.:
------------------------------------------------------------------------------------------------------------------------------
Term Debt:
------------------------------------------------------------------------------------------------------------------------------
KeyBank 1,111,090 Real Estate - Corporate HQ Building N.A.
------------------------------------------------------------------------------------------------------------------------------
Ford Credit 19,707 Vehicle N.A.
------------------------------------------------------------------------------------------------------------------------------
Ford Credit 29,078 Vehicle N.A.
------------------------------------------------------------------------------------------------------------------------------
Ford Credit 15,634 Vehicle N.A.
------------------------------------------------------------------------------------------------------------------------------
Ford Credit 24,878 Vehicle N.A.
------------------------------------------------------------------------------------------------------------------------------
Ford Credit 12,411 Vehicle N.A.
------------------------------------------------------------------------------------------------------------------------------
Ford Credit 18,731 Vehicle N.A.
------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxx 750,000 Technology Patents 00-000-0000
5/10/1999
------------------------------------------------------------------------------------------------------------------------------
Capital Leases:
------------------------------------------------------------------------------------------------------------------------------
KeyCorp Leasing (a division -- Equipment 00-000-0000
of Key Corporate Capital, 6/12/1999
Inc.)
------------------------------------------------------------------------------------------------------------------------------
Toyota Motor Credit Corporation -- Forklift 00-000-0000
Finance 10/13/1999
------------------------------------------------------------------------------------------------------------------------------
Toyota Motor Credit Corp. -- Forklift 00-000-0000
11/08/1999
------------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp Leasing & Financial - -- Equipment - XXXX XX-3 Machine 00-000-0000
Machine Tool Finance Group Center (operating lease assumed by 11/19/1999
U.S. Castings, the purchaser of the
Casting Division)
------------------------------------------------------------------------------------------------------------------------------
Transamerica Equipment Financial -- Equipment - machinery 0000-000-0000
Services Corporation 4/18/2000
------------------------------------------------------------------------------------------------------------------------------
Polaris Industries, Inc. -- Th MB-1060c High Resolution SVHS 0000-000-0000
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Creditor Balance Security UCC Filing Information
($)
------------------------------------------------------------------------------------------------------------------------------
Digital color cameras secured by 5/11/2000
Inventory at Display Division)
------------------------------------------------------------------------------------------------------------------------------
Jules and Associates, Inc. -- Equipment - Machinery 00-000-0000
(Assignee:CIT Group/ 6/7/2000
Equipment Financing, Inc.) (Lease is also secured by
Pacific Coast Technologies,
Inc.)
------------------------------------------------------------------------------------------------------------------------------
Jules and Associates, Inc. -- Equipment - Machinery 00-000-0000
(Assignee:CIT Group/ 6/7/2000
Equipment Financing, Inc.) (Lease is also secured by
Pacific Coast Technologies,
Inc.)
------------------------------------------------------------------------------------------------------------------------------
IBM Credit Corporation -- Equipment - Computers (operating 0000-000-0000
lease) 8/21/2000
------------------------------------------------------------------------------------------------------------------------------
De Xxxx Xxxxxx Financial Services -- Equipment - Xxxxx XX-5800 Original
(assigned by United International 0000-000-0000 (9/20/2000)
L.L.C.) Assignment
000-000-0000
10/27/2000
------------------------------------------------------------------------------------------------------------------------------
De Xxxx Xxxxxx Financial Services -- Equipment - Xxxxx XX-5800 Original
(assigned by United International 0000-000-0000
L.L.C.) 9/20/2000
Assignment
000-000-0000
10/27/2000
------------------------------------------------------------------------------------------------------------------------------
The CIT Group -- Equipment - Xxxxx XX-5800 Original
0000-000-0000
10/6/2000
Amendment
0000-000-0000
6/4/2001
------------------------------------------------------------------------------------------------------------------------------
Xxxxx Leasing Corp. 34,078 Equipment - Hydraulic press brake 0000-000-0000
10/30/2000
(Lease is also
secured by Cashmere
Manufacturing Co.,
Inc.)
------------------------------------------------------------------------------------------------------------------------------
CASHMERE MANUFACTURING
CO., INC.:
------------------------------------------------------------------------------------------------------------------------------
Term Debt:
------------------------------------------------------------------------------------------------------------------------------
Ford Credit 25,447 Vehicle N.A.
------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Machinery Company 54,197 Fadal CNC machining center Original
00-000-0000
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Creditor Balance Security UCC Filing Information
($)
------------------------------------------------------------------------------------------------------------------------------
6/1/1995
Continuation
0000-000-0000
6/1/2000
------------------------------------------------------------------------------------------------------------------------------
LCA a division of Associates 43,549 Fadal CNC machining center Original
Commercial Corporation 00-000-0000
(assigned by 10/6/1997
Xxxxxxx Machinery Company) Assignment
00-000-0000
10/28/1977
------------------------------------------------------------------------------------------------------------------------------
Metlife Capital Corporation 42,112 Fadal CNC machining center Original
(assigned by 00-000-0000
Xxxxxxx Machinery Company) 10/20/1998
Assignment
00-000-0000
4/9/1998
------------------------------------------------------------------------------------------------------------------------------
Metlife Capital Corporation 42,112 Fadal CNC machining center Original
(assigned by 00-000-0000
Xxxxxxx Machinery Company) 1/20/1998
Assignment
00-000-0000
4/9/1998
------------------------------------------------------------------------------------------------------------------------------
Metlife Capital Corporation 47,327 Fadal CNC machining center Original
(assigned by 00-000-0000
Xxxxxxx Machinery Company) 1/20/1998
Assignment
00-000-0000
4/9/1998
------------------------------------------------------------------------------------------------------------------------------
Metlife Capital Corporation 47,327 Fadal CNC machining center Original
assigned by 00-000-0000
Xxxxxxx Machinery Company 3/31/1998
Assignment
00-000-0000
5/26/1998
------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Machinery Company 11,189 Komo CNC machining center Original
00-000-0000
3/10/1997
Assignment
00-000-0000
5/8/1997
------------------------------------------------------------------------------------------------------------------------------
Mitsui Vendor Leasing 337,525 2 Mori Seiki Horizontal Original
(U.S.A.) Inc. (assigned by CNC Machine Centers 00-000-0000
Xxxxxxx Machinery Company) 6/16/1997
Assignment
00-000-0000
8/22/1997
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Creditor Balance Security UCC Filing Information
($)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Metlife Capital Corporation 198,995 Mori Seiki machining cell Original
(assigned by Xxxxxxx Machinery 00-000-0000
Company) 2/27/1998
Assignment
00-000-0000
4/9/1998
------------------------------------------------------------------------------------------------------------------------------
Metlife Capital Corporation -- Equipment - Fadal CNC Machine Original
(assigned by Xxxxxxx Machinery Center 00-000-0000
Corporation)** 3/31/1998
Assignment
00-000-0000
5/26/1998
------------------------------------------------------------------------------------------------------------------------------
Capital Leases:
------------------------------------------------------------------------------------------------------------------------------
GE Capital 41,980 Okuma cadet Original
00-000-0000
10/1/1998
Continuation
0000-000-0000
5/10/2001
------------------------------------------------------------------------------------------------------------------------------
GE Capital 41,980 Okuma cadet Original
00-000-0000
10/1/1996
Continuation
0000-000-0000
5/10/2001
------------------------------------------------------------------------------------------------------------------------------
NEC America 83,999 Phone system 0000-000-0000
10/27/2000
------------------------------------------------------------------------------------------------------------------------------
Xxxxx Leasing Corp. 34,078 Amada press break 0000-000-0000
10/30/2000
(Lease is also secured by
Pacific Aerospace &
Electronics, Inc.)
------------------------------------------------------------------------------------------------------------------------------
PACIFIC COAST TECHNOLOGIES,
INC.:
------------------------------------------------------------------------------------------------------------------------------
Term Debt:
------------------------------------------------------------------------------------------------------------------------------
KeyBank 609,798 Real estate - building #7 expansion N.A.
------------------------------------------------------------------------------------------------------------------------------
Capital Leases:
------------------------------------------------------------------------------------------------------------------------------
GE Capital 35,256 Okuma cadet 00-000-0000
7/15/1997
------------------------------------------------------------------------------------------------------------------------------
GE Capital 35,744 Okuma cadet 00-000-0000
9/18/1977
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Creditor Balance Security UCC Filing Information
($)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
GE Capital 41,195 Okuma crown 00-000-0000
8/25/1997
(Lease is also secured by
Cashmere Manufacturing Co.
Inc.)
------------------------------------------------------------------------------------------------------------------------------
GE Capital 98,759 Okuma CNC machining center N.A.
------------------------------------------------------------------------------------------------------------------------------
CIT Group 70,397 Tornos screw machine 00-000-0000
6/7/2000
(Lease is also secured by
Pacific Aerospace &
Electronics, Inc.)
------------------------------------------------------------------------------------------------------------------------------
CIT Group 98,444 Okuma crown 00-000-0000
6/7/2000
(Lease is also secured by
Pacific Aerospace &
Electronics, Inc.)
------------------------------------------------------------------------------------------------------------------------------
Copelco Capital Inc. -- Copier system (operating lease) 00-000-0000
3/7/1997
------------------------------------------------------------------------------------------------------------------------------
General Electric Capital -- Accounts Receivables for which 00-000-0000
Corporation*** Allied Signal, Inc, is Account Debtor 7/15/1997
(pursuant to Purchase Agreement
dated 2/12/1998)
------------------------------------------------------------------------------------------------------------------------------
AEROMET INTERNATIONAL PLC:
------------------------------------------------------------------------------------------------------------------------------
Capital Lease:
------------------------------------------------------------------------------------------------------------------------------
Lloyds Bowmaker 476,000 Equipment N.A.
------------------------------------------------------------------------------------------------------------------------------
CERAMIC DEVICES INC.:
------------------------------------------------------------------------------------------------------------------------------
General Electric Capital -- Accounts Receivables for which 00-000-0000
Corporation** Allied Signal, Inc. is Account Debtor 3/25/1998
(pursuant to Purchase Agreement
dated 2/12/1998)
------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC SPECIALTY CORPORATION:
------------------------------------------------------------------------------------------------------------------------------
IKON Capital Inc. -- Copier (operating lease) 00-000-0000
2/9/1998
------------------------------------------------------------------------------------------------------------------------------
SKAGIT ENGINEERING &
MANUFACTURING, INC.:
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Creditor Balance Security UCC Filing Information
($)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
AT&T Capital Leasing Service -- Equipment - Programmable Milling Original
(assigned by Intech Funding Corp.)*** Matching and other parts and 00-000-0000
software 4/10/1996
Assignment
00-000-0000
6/12/1996
Continuation
0000-000-0000
2/27/2001
------------------------------------------------------------------------------------------------------------------------------
CIT Group/Equipment Financing, Inc. -- Equipment-Cadet mate Vert. Machine 00-000-0000
*** Center; Planer Mill 7/17/1997
------------------------------------------------------------------------------------------------------------------------------
Kenco Equipment Lease Co. (and Bank -- Equipment - Saw with Blade Break 00-000-0000
of America NT & SA as assignee)*** 8/11/1997
------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx X. Xxxxx *** -- Furniture, fixture, equipment, 00-000-0000
inventory and proceeds therefrom 11/7/1997
------------------------------------------------------------------------------------------------------------------------------
Toyota Motor Credit Corporation -- Forklift (operating lease) 00-000-0000
Equipment Finance 10/13/1999
------------------------------------------------------------------------------------------------------------------------------
DDJ Capital Management, LLC, as agent for the Lenders under the DDJ Loan
Agreement, has a security interest in substantially all of the Company's and its
U.S. Subsidiaries' assets. These Liens will be released on the Closing Date.
All the UCC liens listed in this schedule are filed in the Washington State
Department of Licensing.
* This promissory note was issued pursuant to a settlement agreement made
between the Company and Xxxxxx X. Xxxxx dated February 28, 2002 whereby the
Company is permitted to retain the Xxxxx Patents upon payment by the Company to
Xx. Xxxxx of an amount equivalent to $950,000 (the "Purchase Price"). $200,000
of the Purchase Price will be paid by the Company transferring to Xx. Xxxxx the
building owned by the Company in Cashmere, WA. The remaining sum of $750,000
will be paid pursuant to a promissory note. If the building in Cashmere, W.A. is
not transferred to Xx. Xxxxx by June 1, 2002, the $200,000 of the Purchase Price
will be added to the outstanding principal balance of the promissory note. Xx.
Xxxxx will retain a security interest in the Xxxxx Patents until the promissory
note is fully paid.
** The Company is unaware of why this filing was made or is or what it secures
or secured.
*** The underlying debt was paid off when the Company acquired Skagit
Engineering & Manufacturing, Inc.
SCHEDULE 9.5
INACTIVE SUBSIDIARIES
The following U.S. subsidiaries no longer have operations:
Aeromet America, Inc.
Balo Precision Parts, Inc.
Electronic Speciality Corporation
PA&E Engineering, Inc.
Skagit Engineering & Manufacturing Inc.
SCHEDULE 9.12
BANK ACCOUNTS
KEYBANK ACCOUNTS
ACCOUNT NUMBER COMPANY ACCOUNT
-------------------------------------------------------------------------------------------
472131002629 PACIFIC COAST TECHNOLOGIES, INC. GENERAL
-------------------------------------------------------------------------------------------
472131002611 PACIFIC COAST TECHNOLOGIES, INC. PAYROLL
-------------------------------------------------------------------------------------------
472131002645 CERAMIC DEVICES, INC. GENERAL
-------------------------------------------------------------------------------------------
472131002637 CERAMIC DEVICES, INC. PAYROLL
-------------------------------------------------------------------------------------------
472131002595 NORTHWEST TECHNICAL INDUSTRIES, INC. GENERAL
-------------------------------------------------------------------------------------------
472131002603 NORTHWEST TECHNICAL INDUSTRIES, INC. PAYROLL
-------------------------------------------------------------------------------------------
472131002678 CASHMERE MANUFACTURING CO., INC. GENERAL
-------------------------------------------------------------------------------------------
472131002660 CASHMERE MANUFACTURING CO., INC. PAYROLL
-------------------------------------------------------------------------------------------
472131002652 SEISMIC SAFETY PRODUCTS, INC. GENERAL
-------------------------------------------------------------------------------------------
472131001738 AEROMET AMERICA, INC. GENERAL
-------------------------------------------------------------------------------------------
472131001894 AEROMET AMERICA, INC. PAYROLL
-------------------------------------------------------------------------------------------
472131003890 AEROMET AMERICA, INC. GENERAL & PAYROLL
-------------------------------------------------------------------------------------------
473451001951 SKAGIT ENGINEERING & MANUFACTURING, INC. XXXXX CASH FUND
-------------------------------------------------------------------------------------------
472131003700 ELECTRONIC SPECIALTY CORPORATION GENERAL
-------------------------------------------------------------------------------------------
472131003718 ELECTRONIC SPECIALTY CORPORATION PAYROLL
-------------------------------------------------------------------------------------------
472131002389 PA&E GENERAL
-------------------------------------------------------------------------------------------
472131002694 PA&E PAYROLL
-------------------------------------------------------------------------------------------
472131005259 PA&E HEALTH INS
-------------------------------------------------------------------------------------------
472131003932 PA&E CLAIMS
-------------------------------------------------------------------------------------------
472131002686 PA&E BENEFITS
-------------------------------------------------------------------------------------------
Exhibit A
Form of Note
[Filed Separately]
Exhibit B-1
Form of Opinion of New York Counsel
[Intentionally Omitted]
Exhibit B-2
Form of Opinion of Washington Counsel
[Intentionally Omitted]
Exhibit C
Form of Compliance Certificate
[Intentionally Omitted]
Exhibit D
Form of Lockbox Agreement
[Intentionally Omitted]
Exhibit E
Form of Deed of Trust, Security Agreement and Fixture Filing
[Filed Separately]
Exhibit F
Form of Pledge Agreement
[Filed Separately]
Exhibit G
Form of Security Agreement
[Filed Separately]
Exhibit H
Form of Subsidiary Guaranty
[Filed Separately]
Exhibit I
EXCLUDED PERSONS
GSCP Recovery, Inc.
GSC Recovery II, L.P.
Xxxxxxx X. Xxxxx & Sons Special Situation Partners II, L.P.
M.W. Post Advisory Group L.L.C.
Alliance Capital Management L.P.
HBK Master Fund L.P.
================================================================================
PACIFIC AEROSPACE & ELECTRONICS, INC.
$36,000,000
5.0 % Senior Secured Notes due May 1, 2007
(CUSIP Number: 693758 AD 6)
-------------------------
NOTE PURCHASE AGREEMENT
-------------------------
Dated as of March 19, 2002
================================================================================
