As filed with the Securities and Exchange Commission on
April 13, 2006
Registration
No.
333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHART INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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3443
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34-1712937
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(State of Incorporation)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer Identification No.)
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One Infinity Corporate Centre Drive
Suite 300
Garfield Heights, Ohio 44125-5370
Tel.:
(440)
753-1490
Fax:
(440)
753-1491
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Matthew J. Klaben, Esq.
Vice President, General Counsel and Secretary
One Infinity Corporate Centre Drive
Suite 300
Garfield Heights, Ohio 44125-5370
Tel.:
(440)
753-1490
Fax:
(440)
753-1491
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
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Edward P. Tolley III, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3954
Tel.: (212) 455-2000
Fax: (212) 455-2502
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James S. Scott Sr., Esq.
Michael Benjamin, Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022-6069
Tel: (212) 848-4000
Fax: (212) 848-7179
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this Registration
Statement is declared effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, check the following
box.
o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following
box.
o
CALCULATION OF REGISTRATION FEE
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Proposed Maximum
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Title of Each Class of
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Aggregate Offering
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Amount of
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Securities to be Registered
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Price(1)
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Registration Fee
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Common stock, par value $0.01 per share
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$250,000,000
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$26,750
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(1)
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Estimated solely for the purpose of calculating the registration
fee under Rule 457(o) of the Securities Act of 1933, as
amended (the “Securities Act”).
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The information in this prospectus is
not complete and may be changed. We may not sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the
offer or sale is not permitted.
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PROSPECTUS (Subject to
Completion)
Issued ,
2006
Shares
Chart Industries, Inc.
Common Stock
Chart Industries, Inc. is offering shares of its common stock.
All of the shares of common stock are being sold by us. We
intend to use approximately
$ million
of the net proceeds from the sale of the shares being sold in
this offering to repay certain of our indebtedness and
approximately
$ million
of the net proceeds to pay a dividend to our stockholders
existing immediately prior to this offering, consisting of
affiliates of First Reserve and certain members of our
management.
This is our initial public offering and no public market
currently exists for our common stock. We anticipate that the
initial public offering price will be between
$ and
$ per
share. We intend to apply to list the common stock on the New
York Stock Exchange under the symbol “GTL.”
The underwriters have the option to purchase up to an
additional shares
of our common stock from us at the initial public offering
price, less the underwriting discount to cover over-allotments.
We intend to use the proceeds we receive from any shares sold
pursuant to the underwriters’ over-allotment option to pay
an additional dividend to our existing stockholders.
Investing in the common stock involves risks. See “Risk
Factors” beginning on page 11.
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Initial Public
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Underwriting
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Proceeds, before
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Offering Price
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Discount
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expenses, to us
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Per Share
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$
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$
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$
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Total
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$
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$
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$
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the shares to purchasers on
or
about ,
2006.
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Morgan Stanley
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Lehman Brothers
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UBS Investment Bank
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,
2006
TABLE OF CONTENTS
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We
are offering to sell shares of common stock and seeking offers
to buy shares of common stock only in jurisdictions where offers
and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any
sale of the shares of common stock.
Through and
including ,
2006 (the
25
th
day
after the date of this prospectus), all dealers that buy, sell
or trade shares, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to
the dealers’ obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or
subscriptions.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus, but it may not contain all of the information
that is important to you. We urge you to read this entire
prospectus including the section entitled “Risk
Factors” and the financial statements and related notes,
before investing in our common stock.
Unless the context otherwise requires, as used in this
prospectus, (i) the terms “we,” “our,”
“us,” “the Company,” “Chart
Industries” and similar terms refer to Chart Industries,
Inc. and its consolidated subsidiaries and (ii) the term
“issuer” refers to Chart Industries, Inc. and not any
of its subsidiaries.
Chart Industries, Inc.
Our Company
We are a leading independent global manufacturer of highly
engineered equipment used in the production, storage and end-use
of hydrocarbon and industrial gases. We believe we are a
preferred global supplier of engineered equipment used
throughout the liquid gas supply chain. The largest portion of
end-use applications for our products is energy-related,
accounting for 51% of sales in 2005, and 58% of orders and 77%
of backlog at December 31, 2005. We are a leading
manufacturer of standard and engineered equipment primarily used
for low-temperature and cryogenic applications. We have
developed an expertise in cryogenic systems and equipment, which
operate at low temperatures sometimes approaching absolute zero
(0° Kelvin; -273° Centigrade; -459° Fahrenheit).
The majority of our products, including vacuum-insulated
containment vessels, heat exchangers, cold boxes and other
cryogenic components, are used throughout the liquid gas supply
chain for the purification, liquefaction, distribution, storage
and use of hydrocarbon and industrial gases.
We have attained this position by capitalizing on our low-cost
global manufacturing footprint, technical expertise and
know-how, broad product offering, reputation for quality, and by
focusing on attractive, growing markets. We have an established
sales and customer support presence across the globe and
low-cost manufacturing operations in the United States, Central
Europe and China. We believe we are the number one or two
equipment supplier in all of our primary end-use markets. For
the combined year ended December 31, 2005, we generated
revenues of $403.1 million compared to revenues of
$305.6 million for the year ended December 31, 2004.
Our backlog at December 31, 2005 was $233.6 million
compared to $129.3 at December 31, 2004.
We believe that we are well-positioned to benefit from a variety
of long-term trends driving demand in our industry, including:
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increasing demand for natural gas and the geographic dislocation
of supply and consumption, which is resulting in the need for a
global network for liquefied natural gas (“LNG”);
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increasing demand for natural gas processing, particularly in
the Middle East, as crude oil producers look to utilize the gas
portions of their reserves; and
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increased demand for natural and industrial gases resulting from
rapid economic growth in developing areas, particularly Central
and Eastern Europe and China.
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We operate in three segments: (i) Energy and Chemicals
(“E&C”), (ii) Distribution and Storage
(“D&S”) and (iii) BioMedical. While each
segment manufactures and markets different cryogenic equipment
and systems to distinct end-users, they share a reliance on our
heat transfer and low temperature storage know-how and
expertise. The E&C and D&S segments manufacture products
used in energy-related applications. Through our E&C
segment, we are a leading global provider of cryogenic equipment
used in the separation, liquefaction and purification of
hydrocarbon and industrial gases. Our primary products include
heat exchangers, cold boxes and vacuum-insulated pipe
(“VIP”). Through our D&S segment, we are a leading
global provider of cryogenic equipment used in the distribution
and storage of hydrocarbon and industrial gases. Our primary
products include bulk storage systems for LNG and industrial
gases, packaged gas systems, VIP systems, LNG vehicle fueling
systems and beverage liquid
CO
2
systems. Through our BioMedical segment, we are a leading
independent supplier of cryogenic equipment used in the storage
and
1
distribution of biological materials and oxygen used primarily
in the medical and animal breeding industries. Our primary
products include respiratory liquid oxygen therapy systems,
biological storage systems and magnetic resonance imaging
(“MRI”) cryostat components.
The following charts show the proportion of our revenues
generated by each operating segment as well as our estimate of
the proportion of revenue generated by end-user for the combined
year ended December 31, 2005.
Sales By Segment
Sales By End-User
Competitive Strengths
We believe that the following competitive strengths position us
to enhance our growth and profitability:
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Focus on Attractive Growing End Markets.
We
anticipate growing demand in the end markets we serve, with
particularly strong growth in LNG, natural gas processing,
specific international markets across all segments and
biomedical equipment. Energy Ventures Analysis projects global
LNG liquefaction capacity to increase 15.2% per annum from
2005 through 2011 and the International Energy Agency expects
the natural gas industry to invest approximately
$250 billion in LNG facilities from 2001 to 2030. In
addition, international demand for our products is being driven
by growing manufacturing capacity and industrial activity in
developing areas, particularly Central and Eastern Europe and
China. Rapid economic development in these areas has caused a
significant increase in the demand for natural and industrial
gases. According to Spiritus Consulting, the global market for
industrial gas is projected to grow 7.0% per annum through
2009.
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Substantial Revenue Visibility.
We have a large
and growing backlog, which provides us with a high degree of
visibility in our forecasted revenue. Our backlog is comprised
of the portion of signed purchase orders or other written
contractual commitments received from customers that we have not
recognized as revenue under the percentage of completion method
or based upon shipment. Our backlog as of December 31, 2005
was $233.6 million compared to $129.3 million and
$49.6 million at December 31, 2004 and 2003,
respectively. Projects for energy-related applications totaled
approximately $180.0 million in backlog as of
December 31, 2005. Substantially all of our backlog as of
December 31, 2005 is scheduled to be recognized as sales
during the next twelve months.
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Leading Market Positions.
We believe we are
the #1 or #2 equipment supplier in each of our primary
end markets both domestically and internationally. Based on our
relationships with key customers, we believe that our strong
industry positioning makes us the preferred supplier and
typically one of only two or three suppliers qualified to
provide certain products to key customers. As our customers
continue to rationalize their vendors, we expect to gain
additional market share and that the benefit of our leading
position will become more pronounced.
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Diverse, Long-Standing Customer Base.
We currently
serve over 2,000 customers worldwide. Our primary customers are
large, multinational producers and distributors of hydrocarbon
and industrial gases that provide us with revenue stability.
Customers and end-users also include high growth LNG processors,
petrochemical processors and biomedical companies. We have
developed strong, long-
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standing relationships with these customers, many of whom have
been purchasing products from us or one of our predecessors for
over 20 years. Our primary customers and end-users include
Air Products, Praxair, Airgas, Air Liquide, JGC Corporation
(“JGC”), Bechtel Corporation, General Electric
(“GE”), ExxonMobil, British Petroleum (“BP”)
and ConocoPhillips.
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Highly Flexible and Low-Cost Manufacturing Base.
Given our long-term investment in global manufacturing
facilities and specialized equipment, we have developed a
substantial comparative scale and geographic advantage within
the markets for the cryogenic products that we manufacture. The
scale enables cost efficiencies and the geographic reach
provides access to customers that we believe would be difficult
for a potential competitor to replicate. With more than
1.5 million square feet of manufacturing space across 11
primary facilities and three continents, we have substantial
operational flexibility. We are a low-cost producer for our
products across all segments. In addition, the high cost of
capital and economies of scale required for this type of
manufacturing create significant barriers for new entrants.
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Product Expertise, Quality, Reliability and
Know-How.
Within our end markets, we have established a
reputation for quality, reliability and technical innovation. We
believe that the main drivers of our target customers’
purchasing decisions are a supplier’s product expertise,
quality, reliability and know-how rather than pricing and terms,
giving us an advantage based on our reputation and consequent
brand recognition. The value of this brand recognition is
significantly enhanced by the extended life cycle of our
products and the high cost to our target customers of product
failure. As a focused provider of highly engineered cryogenic
equipment, we believe it would be difficult for a new entrant to
duplicate our capabilities.
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Experienced Management Team.
We have assembled a
strong senior management team with over 250 combined years of
related experience. We have a balance of entrepreneurs,
internally developed leaders and experienced managers from
analogous industries. The team has grown into a cohesive unit
with complementary management and operational skills. The
current management team is directly responsible for the strong
sales growth and the significant margin improvements experienced
since 2003.
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Business Strategy
We believe that we are well-positioned to maintain our
leadership in providing highly engineered equipment for use in
low-temperature and cryogenic applications and meet the
world’s growing demand for hydrocarbon and industrial gases
with more economical, reliable and environmentally friendly
systems. The principal elements of our strategy are as follows:
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Continue to develop innovative, high-growth,
energy-specific products.
We plan to continue to focus
on extending our cryogenic technological leadership, both to
capitalize on increasing demand for energy and to create new
applications. We believe that we are well positioned to benefit
from increased demand for LNG, natural gas processing and gas to
liquid (“GTL”) solutions. Our engineering, technical
and marketing employees actively assist customers in specifying
their needs and in determining appropriate products to meet
those needs. Current product development includes subsea VIP,
synthetic gas, hydrogen recovery, small-scale bulk gas
distribution solutions and LNG/ GTL production systems.
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Leverage our global platform to capitalize on growing
international demand.
We expect growth in hydrocarbon
and industrial gas demand and investment over the next five
years in the Middle East, Central and Eastern Europe, Russia and
China. We believe that our historic and planned investment in
our manufacturing facilities in the Czech Republic and China and
the investment in sales and marketing capabilities in these
markets, supplemented by our continuing investment in our
U.S. facilities, has positioned us to increase our market
share in growing international markets. We believe we are
well-positioned to make acquisitions of complementary businesses
to expand our global infrastructure.
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Capitalize on our position as a market leader.
We
plan to continue to grow our long-standing relationships with
the leading users of cryogenic equipment. Our engineering and
development teams partner with our customers to better
understand and meet their cryogenic equipment needs,
particularly in the growing LNG and international markets. We
intend to grow our customer base as industrial gas producers
increasingly outsource bulk tank storage and other non-core
parts of their business.
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Maintain our position as a low-cost producer while
continuing to improve operating performance.
We believe
we are the lowest cost manufacturer for most of our products and
we intend to continue to leverage our scale, scope, technical
expertise and know-how to deliver to our customers higher
quality and more reliable products and services at lower cost.
Our largest manufacturing facility is in the Czech Republic,
which allows us to achieve considerable cost savings versus our
competitors. In addition, we believe China, where we are
experiencing significant growth, will be a sustainable low-cost
labor environment. We maintain a disciplined approach to capital
expenditures. We intend to make capacity investments in
energy-related markets where we expect to realize significant
and timely returns, and to also leverage our existing operating
capacity in other markets.
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Recent Developments
On February 9, 2006, we entered into a letter of intent to
purchase the common stock of a company that designs and
manufactures custom air cooled heat exchangers utilizing
advanced technology in thermal and mechanical design. The
aggregate purchase price for the acquisition is expected to be
approximately $16.5 million, which will be paid in cash.
The closing of this acquisition is subject to customary
conditions. We intend to finance this acquisition with our
available cash and/or borrowings under our senior secured credit
facility and expect the acquisition to close during the second
quarter of 2006.
Risk Factors
Investing in our common stock involves substantial risk. You
should carefully consider all the information in this prospectus
prior to investing in our common stock. Our ability to execute
our strategy is subject to the risks that are generally
associated with the production, storage and end-use of
hydrocarbon and industrial gases. We are also subject to a
number of risks related to our competitive position and business
strategies. For example, our acquisitive business strategy
exposes us to the risks involved in consummating and integrating
acquisitions, including the risk that in a future acquisition we
could incur additional debt and contingent liabilities which
could adversely affect our operating results. For additional
risks relating to our business and the offering, see “Risk
Factors” beginning on page 11 of this prospectus.
The Acquisition
On August 2, 2005, Chart Industries entered into an
agreement and plan of merger with certain of its stockholders,
First Reserve Fund X, L.P. (“First Reserve”), a
Delaware limited partnership, and CI Acquisition, Inc. (“CI
Acquisition”), a Delaware corporation and a wholly-owned
subsidiary of First Reserve, which provided for (i) the
sale of shares of common stock of Chart Industries, Inc. by
certain of its stockholders to CI Acquisition and (ii) the
merger of CI Acquisition with and into Chart Industries, with
Chart Industries surviving the merger as an indirect,
wholly-owned subsidiary of First Reserve. We refer to the stock
purchase, the merger and the related financing thereof
collectively as the “Acquisition.” The Acquisition
closed on October 17, 2005. In connection with the
Acquisition, entities affiliated with First Reserve contributed
$111.3 million in cash to fund a portion of the purchase
price of the equity interests in Chart Industries, and
management contributed $6.4 million in the form of rollover
options. The remainder of the cash needed to finance the
Acquisition, including related fees and expenses, was provided
by funds raised by the offering of our $170.0 million
senior subordinated notes due 2015 (the “notes”) and
borrowings under our $240.0 million senior secured credit
facility. The senior secured credit facility consists of a
$180.0 million term loan facility and a $60.0 million
revolving credit facility. See “The Transactions.”
Company Information
Chart Industries, Inc. is a Delaware corporation incorporated in
1992. Our principal executive offices are located at One
Infinity Corporate Centre Drive, Suite 300, Garfield
Heights, Ohio, 44125 and our telephone number is
(440)
753-1490.
The financial statements and other financial data presented in
this prospectus are of Chart Industries, Inc. and its direct and
indirect subsidiaries.
4
The Offering
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Shares of common stock offered by Chart Industries, Inc.
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shares.
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Shares of common stock to be outstanding after this offering
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shares
(including shares,
adjusted for the elimination of any fractional shares, that will
be dividended to our stockholders existing immediately prior to
this offering, consisting of affiliates of First Reserve and
certain members of our management, assuming the underwriters do
not exercise their option to purchase additional shares and
giving effect to
the -for-one
stock split we expect to effect prior to the consummation of
this offering).
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Over-allotment option
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shares.
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Use of proceeds
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We estimate that the net proceeds to us from this offering,
after deducting underwriting discounts, will be approximately
$ million.
We intend to use approximately
$ million
of the net proceeds to repay certain indebtedness. We intend to
use the remaining net proceeds of approximately
$ million
to pay a dividend to our stockholders existing immediately prior
to the offering, consisting of affiliates of First Reserve and
certain members of our management. See “Use of
Proceeds.” We also intend to use the proceeds we receive
from any shares sold pursuant to the underwriters’
over-allotment option to pay an additional dividend to our
existing stockholders.
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Proposed New York Stock Exchange symbol
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“GTL”
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Unless we specifically state otherwise, all information in this
prospectus:
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assumes no exercise by the underwriters of their option to
purchase additional shares;
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gives effect to
the -for
one stock split effected prior to the consummation of the
offering;
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assumes that we issue an
additional shares,
adjusted for the elimination of any fractional shares, of our
common stock to our existing stockholders pursuant to a stock
dividend that we will declare prior to the consummation of this
offering, the terms of which will require that shortly after the
expiration of the underwriters’ over-allotment option
(assuming the option is not exercised in full), we issue to our
existing stockholders the number of shares equal to (x) the
number of additional shares the underwriters have an option to
purchase minus (y) the actual number of shares the
underwriters purchase from us pursuant to that option;
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excludes 573,027 shares issuable to FR X Chart
Holdings LLC upon exercise of its warrant to purchase our
shares; and
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excludes shares
of our common stock reserved for issuance under our existing
stock option plans.
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The size of
the -for-one
stock split referenced herein is intended to achieve an
estimated share price between
$ and
$ per
share and has been calculated based on the mid-point of the
estimated price range shown on the cover page of this prospectus.
5
Summary Historical and Pro Forma Financial Information
The financial statements referred to as the Predecessor Company
financial statements include the consolidated audited financial
statements of Chart Industries, Inc. and its subsidiaries prior
to our Chapter 11 bankruptcy proceedings. Our emergence
from Chapter 11 bankruptcy proceedings in September 2003
resulted in a new reporting entity and the adoption of fresh
start accounting (“Fresh-Start accounting”) in
accordance with the American Institute of Certified Public
Accountants Statement of
Position
90-7,
“Financial Reporting by entities in Reorganization Under
the Bankruptcy Code.” The financial statements referred to
as the Reorganized Company financial statements include the
consolidated audited financial statements of Chart Industries,
Inc. and its subsidiaries after our emergence from
Chapter 11 bankruptcy proceedings and prior to the
Acquisition and related financing thereof. The financial
statements referred to as the Successor Company financial
statements include the consolidated audited financial statements
of Chart Industries, Inc. and its subsidiaries after the
Acquisition and the related financing thereof.
The following table sets forth our summary historical
consolidated financial and other data as of the dates and for
the periods indicated. The Predecessor Company summary
historical financial statements and other data for the nine
months ended September 30, 2003 are derived from our
audited financial statements for such period included elsewhere
in this prospectus, which have been audited by Ernst &
Young LLP, an independent registered public accounting firm. The
Reorganized Company summary historical financial statements and
other data for the year ended December 31, 2004, the three
months ended December 31, 2003 and the period from
January 1, 2005 to October 16, 2005 (the “2005
Reorganized Period”) are derived from our audited financial
statements for such periods included elsewhere in this
prospectus, which have been audited by Ernst & Young
LLP. The Successor Company summary historical financial
statements and other data as of December 31, 2005 and for
the period from October 17, 2005 to December 31, 2005
(the “2005 Successor Period”) are derived from our
audited financial statements for such periods included elsewhere
in this prospectus, which have been audited by Ernst &
Young LLP. The data should be read in conjunction with the
consolidated financial statements, related notes and other
financial information included herein.
The following summary unaudited pro forma balance sheet
information as of December 31, 2005 has been prepared to
give pro forma effect to this offering and the application of
the proceeds therefrom as if they had occurred on
December 31, 2005. The following summary unaudited pro
forma statements of operations information for the year ended
December 31, 2005 has been prepared to give pro forma
effect to this offering, the application of the proceeds
therefrom and the Acquisition as if they had occurred on
January 1, 2005. The pro forma adjustments used in
preparing the pro forma financial information reflect estimates,
which we believe are reasonable but may change upon finalization
of our analysis. The assumptions used in the preparation of
unaudited financial information may not prove to be correct. The
pro forma financial information is for informational purposes
only and should not be considered indicative of actual results
that would have been achieved had the Acquisition and this
offering actually been consummated on the dates indicated and do
not purport to indicate balance sheet information or results of
operations as of any future date or any future period.
6
The historical consolidated financial data presented below is
not necessarily indicative of our future performance. This
information is only a summary and should be read in conjunction
with “Selected Historical Consolidated Financial
Data,” “Unaudited Pro Forma Financial
Information,” “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
and our consolidated financial statements and related notes
included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
Successor
|
|
|
|
|
|
|
Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
Nine Months
|
|
|
Three Months
|
|
|
|
|
January 1,
|
|
|
October 17,
|
|
|
Year
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
2005 to
|
|
|
2005 to
|
|
|
Ended
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2003
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
197,017
|
|
|
$
|
68,570
|
|
|
$
|
305,576
|
|
|
$
|
305,497
|
|
|
$
|
97,652
|
|
|
$
|
403,149
|
|
|
|
Cost of sales(1)
|
|
|
141,240
|
|
|
|
52,509
|
|
|
|
211,770
|
|
|
|
217,284
|
|
|
|
75,733
|
|
|
|
293,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
55,777
|
|
|
|
16,061
|
|
|
|
93,806
|
|
|
|
88,213
|
|
|
|
21,919
|
|
|
|
110,132
|
|
|
|
Selling, general and administrative expense
|
|
|
44,211
|
|
|
|
14,147
|
|
|
|
53,374
|
|
|
|
59,826
|
|
|
|
16,632
|
|
|
|
84,764
|
|
|
|
Restructuring and other operating expenses, net(2)(3)
|
|
|
14,564
|
|
|
|
1,051
|
|
|
|
3,220
|
|
|
|
7,659
|
|
|
|
139
|
|
|
|
7,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,775
|
|
|
|
15,198
|
|
|
|
56,594
|
|
|
|
67,485
|
|
|
|
16,771
|
|
|
|
92,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(2,998
|
)
|
|
|
863
|
|
|
|
37,212
|
|
|
|
20,728
|
|
|
|
5,148
|
|
|
|
17,570
|
|
|
|
|
|
Interest expense, net(4)
|
|
|
10,300
|
|
|
|
1,344
|
|
|
|
4,712
|
|
|
|
4,164
|
|
|
|
5,556
|
|
|
|
27,401
|
|
|
|
Other expense (income)
|
|
|
(8,490
|
)
|
|
|
(407
|
)
|
|
|
(332
|
)
|
|
|
528
|
|
|
|
487
|
|
|
|
2,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,810
|
|
|
|
937
|
|
|
|
4,380
|
|
|
|
4,692
|
|
|
|
6,043
|
|
|
|
29,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes and
minority interest
|
|
|
(4,808
|
)
|
|
|
(74
|
)
|
|
|
32,832
|
|
|
|
16,036
|
|
|
|
(895
|
)
|
|
|
(12,017
|
)
|
|
|
Income tax (benefit) expense
|
|
|
3,047
|
|
|
|
(125
|
)
|
|
|
10,134
|
|
|
|
7,159
|
|
|
|
(441
|
)
|
|
|
(3,602
|
)
|
|
|
(Loss) income from continuing operations before minority interest
|
|
|
(7,855
|
)
|
|
|
51
|
|
|
|
22,698
|
|
|
|
8,877
|
|
|
|
(454
|
)
|
|
|
(8,415
|
)
|
|
|
Minority interest, net of taxes and other
|
|
|
(63
|
)
|
|
|
(20
|
)
|
|
|
(98
|
)
|
|
|
(19
|
)
|
|
|
(52
|
)
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
|
(7,918
|
)
|
|
|
31
|
|
|
|
22,600
|
|
|
|
8,858
|
|
|
|
(506
|
)
|
|
|
(8,486
|
)
|
|
|
Income from discontinued operations(5)
|
|
|
833
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(7,085
|
)
|
|
$
|
31
|
|
|
$
|
22,600
|
|
|
$
|
8,858
|
|
|
$
|
(506
|
)
|
|
$
|
(8,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share data(6):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share(7):
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
(0.29
|
)
|
|
|
—
|
|
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(506
|
)
|
|
|
—
|
|
|
Weighted average shares — basic(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,719
|
|
|
|
—
|
|
|
Cash flow data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities
|
|
$
|
19,466
|
|
|
$
|
4,988
|
|
|
$
|
35,059
|
|
|
$
|
15,641
|
|
|
$
|
18,742
|
|
|
$
|
—
|
|
|
|
Cash provided by (used in) investing activities
|
|
|
15,101
|
|
|
|
154
|
|
|
|
(3,317
|
)
|
|
|
(20,799
|
)
|
|
|
(362,250
|
)
|
|
|
—
|
|
|
|
Cash (used in) provided by financing activities
|
|
|
(15,907
|
)
|
|
|
(13,976
|
)
|
|
|
(35,744
|
)
|
|
|
1,708
|
|
|
|
348,489
|
|
|
|
—
|
|
|
Other financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization(8)
|
|
$
|
9,260
|
|
|
$
|
2,225
|
|
|
$
|
8,490
|
|
|
$
|
6,808
|
|
|
$
|
4,396
|
|
|
$
|
20,987
|
|
|
|
EBITDA(9)
|
|
|
15,522
|
|
|
|
3,475
|
|
|
|
45,936
|
|
|
|
26,989
|
|
|
|
9,005
|
|
|
|
36,337
|
|
|
|
Capital expenditures
|
|
|
1,907
|
|
|
|
518
|
|
|
|
9,379
|
|
|
|
11,038
|
|
|
|
5,601
|
|
|
|
—
|
|
|
|
Backlog
|
|
|
51,781
|
|
|
|
49,635
|
|
|
|
129,278
|
|
|
|
206,215
|
|
|
|
233,639
|
|
|
|
—
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,433
|
|
|
$
|
|
|
|
Working capital (deficit)(10)
|
|
|
55,454
|
|
|
|
|
|
|
Total assets
|
|
|
641,806
|
(11)
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
|
2,304
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
345,000
|
|
|
|
|
|
|
Total debt
|
|
|
347,304
|
|
|
|
|
|
|
Shareholders’ equity
|
|
$
|
116,330
|
|
|
$
|
|
|
|
|
|
|
|
|
(1)
|
The three months ended December 31, 2003 and the 2005
Successor Period include non-cash inventory valuation charges of
$5.4 million and $8.9 million, respectively, related
to Fresh-Start and purchase accounting.
|
|
|
|
|
(2)
|
In March 2003, we completed the closure of our Wolverhampton,
United Kingdom manufacturing facility, operated by Chart Heat
Exchangers Limited (“CHEL”). On March 28, 2003,
CHEL filed for voluntary administration under the U.K.
Insolvency Act of 1986. CHEL’s application for voluntary
administration was approved on April 1, 2003 and an
administrator was appointed. In accordance with
SFAS No. 94, “Consolidation of All Majority-Owned
Subsidiaries,” we are not consolidating the accounts or
financial results of CHEL subsequent to March 28, 2003 due
to the assumption of control of CHEL by the insolvency
administrator. Effective March 28, 2003, we recorded a
non-cash impairment charge of $13.7 million to write off
our net investment in CHEL.
|
|
|
|
|
(3)
|
In September 2003, in accordance with Fresh-Start accounting
related to our emergence from Chapter 11 bankruptcy, all
assets and liabilities were adjusted to their fair values. The
adjustment to record the assets and liabilities at fair value
resulted in net other income of $5.7 million. Further
information about the adjustment is included in the notes to our
audited consolidated financial statements included elsewhere in
this prospectus.
|
|
|
|
|
(4)
|
Includes derivative contract valuation income or expense for
interest rate collars to manage interest exposure relative to
term debt.
|
|
|
|
|
(5)
|
This relates to the sale of our Greenville Tube, LLC business in
July 2003. See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” for
additional information.
|
|
|
|
|
(6)
|
Unaudited pro forma basic and diluted earnings (loss) per share
have been calculated in accordance with the Securities and
Exchange Commission (“SEC”) rules for initial public
offerings. These rules require that the weighted average share
calculation give retroactive effect to any changes in our
capital structure as well as the number of shares whose sale
proceeds would be necessary to repay any debt or to pay any
dividend as reflected in the pro forma adjustments. Therefore,
pro forma weighted average shares for purposes of the unaudited
pro forma basic and diluted earnings per share calculation, has
been adjusted to reflect
(i) the -for-one
stock split we expect to effect immediately prior to
consummation of this offering and (ii) the stock dividend
of shares,
adjusted for the elimination of any fractional shares, to our
existing stockholders that will be made shortly after the
expiration of the underwriters’ over-allotment option
assuming no exercise of that option
and shares
of our common stock being offered hereby.
|
|
|
|
|
(7)
|
Earnings per share data on a diluted basis is not shown because
it is anti-dilutive as a result of our loss during the 2005
Successor Period.
|
|
|
|
|
(8)
|
The nine months ended September 30, 2003 and the 2005
Successor Period include financing costs amortization of
$1.7 million and $0.3 million, respectively.
|
|
|
|
|
(9)
|
“EBITDA” is calculated as net income (loss) before
income tax expense and interest expense plus depreciation and
amortization. Adjusted EBITDA is defined as EBITDA adjusted as
indicated below. EBITDA and Adjusted EBITDA are not intended to
represent cash flow from operations as defined by
|
8
|
|
|
|
|
|
|
GAAP and should not be used as an alternative to net income as
an indicator of operating performance or to cash flow as a
measure of liquidity. EBITDA and Adjusted EBITDA are included in
this prospectus because they are a basis upon which our
management assesses financial performance. The senior secured
credit facility also includes the definition of pro forma EBITDA
which is used in the calculation of certain covenants. Pro forma
EBITDA is calculated based on EBITDA and is adjusted in a manner
similar to that described herein. While EBITDA and Adjusted
EBITDA are frequently used as a measure of operations and the
ability to meet debt service requirements, they are not
necessarily comparable to other similarly titled captions of
other companies due to potential inconsistencies in the method
of calculation. The following table reconciles EBITDA to net
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
Successor
|
|
|
|
|
|
|
Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Three Months
|
|
|
|
|
January 1,
|
|
|
October 17,
|
|
|
Pro Forma
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
2005 to
|
|
|
2005 to
|
|
|
Year Ended
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2003
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
(Dollars in thousands)
|
|
|
Net income (loss)
|
|
$
|
(7,085
|
)
|
|
$
|
31
|
|
|
$
|
22,600
|
|
|
$
|
8,858
|
|
|
$
|
(506
|
)
|
|
$
|
(8,486
|
)
|
|
Income tax expense (benefit)
|
|
|
3,047
|
|
|
|
(125
|
)
|
|
|
10,134
|
|
|
|
7,159
|
|
|
|
(441
|
)
|
|
|
(3,602
|
)
|
|
Interest expense — net(a)
|
|
|
10,300
|
|
|
|
1,344
|
|
|
|
4,712
|
|
|
|
4,164
|
|
|
|
5,556
|
|
|
|
27,401
|
|
|
Depreciation and amortization(b)
|
|
|
9,260
|
|
|
|
2,225
|
|
|
|
8,490
|
|
|
|
6,808
|
|
|
|
4,396
|
|
|
|
20,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
15,522
|
|
|
$
|
3,475
|
|
|
$
|
45,936
|
|
|
$
|
26,989
|
|
|
$
|
9,005
|
|
|
$
|
36,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes derivative contract valuation income or expense for
interest rate collars to manage interest exposure relative to
term debt.
|
|
|
(b)
|
The nine months ended September 30, 2003 and the 2005
Successor Period include financing costs amortization of
$1.7 million and $0.3 million, respectively.
|
|
|
|
|
|
The following table reconciles EBITDA to Adjusted EBITDA as such
terms are defined in our senior secured credit facility and the
indenture governing the notes. Certain covenants under the
senior secured credit facility are also tied to ratios based on
Adjusted EBITDA and our ability to engage in activities such as
incurring additional debt, making investments and paying
dividends under both our indenture and senior secured credit
facility is also tied to ratios based on Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
Successor
|
|
|
|
|
|
|
Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Three Months
|
|
|
|
|
January 1,
|
|
|
October 17,
|
|
|
Pro Forma
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
2005 to
|
|
|
2005 to
|
|
|
Year Ended
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2003
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
(Dollars in thousands)
|
|
|
EBITDA
|
|
$
|
15,522
|
|
|
$
|
3,475
|
|
|
$
|
45,936
|
|
|
$
|
26,989
|
|
|
$
|
9,005
|
|
|
$
|
36,300
|
|
|
Stock-based compensation expense(a)
|
|
|
—
|
|
|
|
—
|
|
|
|
2,433
|
|
|
|
9,508
|
|
|
|
437
|
|
|
|
9,945
|
|
|
Inventory valuation charge(b)
|
|
|
—
|
|
|
|
5,368
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,903
|
|
|
|
8,903
|
|
|
Acquisition expenses(c)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,602
|
|
|
|
—
|
|
|
|
6,602
|
|
|
In-process research and development charge(d)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,768
|
|
|
|
—
|
|
|
|
2,768
|
|
|
Hurricane losses(e)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,057
|
|
|
|
406
|
|
|
|
1,463
|
|
|
Employee separation and plant closure costs(f)
|
|
|
1,338
|
|
|
|
1,010
|
|
|
|
3,346
|
|
|
|
1,700
|
|
|
|
255
|
|
|
|
1,955
|
|
|
Reorganization expenses(g)
|
|
|
369
|
|
|
|
357
|
|
|
|
706
|
|
|
|
1,470
|
|
|
|
88
|
|
|
|
1,558
|
|
|
Appraisal rights settlement(h)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
500
|
|
|
|
500
|
|
|
Management fees(i)
|
|
|
—
|
|
|
|
—
|
|
|
|
380
|
|
|
|
306
|
|
|
|
—
|
|
|
|
—
|
|
|
(Gain) loss on sale of assets(j)
|
|
|
8,929
|
|
|
|
(57
|
)
|
|
|
133
|
|
|
|
(131
|
)
|
|
|
78
|
|
|
|
(53
|
)
|
|
Income from discontinued operations(k)
|
|
|
(833
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
25,325
|
|
|
$
|
10,153
|
|
|
$
|
52,934
|
|
|
$
|
50,269
|
|
|
$
|
19,672
|
|
|
$
|
69,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
(a)
|
Represents stock-based compensation charges for stock and stock
options issued to key employees and directors, and an additional
charge for the cash-out of stock options in the 2005 Reorganized
Period as a result of the Acquisition. Although it may be of
limited relevance to holders of our debt instruments, it may be
of more relevance to our equity holders, since such equity
holders ultimately bear such expenses.
|
|
|
|
|
(b)
|
Represents a non-cash inventory valuation charge recorded in
cost of sales for the adjustment of inventory to fair value as a
result of Fresh-Start accounting as of September 30, 2003
and purchase accounting as of October 17, 2005, the closing
date of the Acquisition. Under Fresh-Start and purchase
accounting, inventory was adjusted to the fair value as of the
dates indicated above, and a corresponding charge was taken in
the subsequent three months ended December 31, 2003 and the
2005 Successor Period cost of sales as the inventory was sold.
|
|
|
|
|
(c)
|
Represents acquisition expenses, primarily professional fees,
incurred by us as a result of the Acquisition.
|
|
|
|
|
(d)
|
Represents a non-cash charge for purchased in-process research
and development in conjunction with the acquisition of Changzhou
CEM Cryo Equipment Co., Ltd (“CEM”) in 2005.
|
|
|
|
|
(e)
|
Represents losses and costs incurred related to the damaged
caused by Hurricane Rita at our New Iberia, Louisiana facilities.
|
|
|
|
|
|
|
(f)
|
Includes inventory valuation charges recorded in cost of sales,
and severance expenses, facility exit costs and non-operating
expenses related to the execution of our operational
restructuring plan, which primarily included moving the
Burnsville, Minnesota manufacturing operations to Canton,
Georgia, closing the Plaistow, New Hampshire and Wolverhampton,
United Kingdom manufacturing facilities and closing the
Westborough, Massachusetts engineering office. See
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” for additional
information.
|
|
|
|
|
|
|
(g)
|
Includes pre-bankruptcy debt restructuring-related fees,
Fresh-Start accounting adjustments and expenses, and a claim
settlement related to our 2003 bankruptcy reorganization. See
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” for additional
information.
|
|
|
|
|
(h)
|
Represents a charge for the settlement of former Reorganized
Company shareholders’ appraisal rights claims as a result
of the Acquisition.
|
|
|
|
|
|
|
(i)
|
Represents non-recurring management fees charged by our
Reorganized Company majority shareholders, which are not charged
by First Reserve.
|
|
|
|
|
(j)
|
Includes non-recurring gains and losses and charges on the sale,
disposal or impairment of assets. See “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” for additional information.
|
|
|
|
|
|
|
(k)
|
Represents income from our former Greenville Tube, LLC stainless
steel tubing business, which was sold in July 2003. See
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” for additional
information.
|
|
|
|
|
(10)
|
Working capital is defined as current assets excluding cash
minus current liabilities excluding short-term debt.
|
|
|
|
(11)
|
Includes $236.7 million of goodwill and $154.1 million
of finite-lived and indefinite-lived intangible assets as of
December 31, 2005.
|
10
RISK FACTORS
Investing in our common stock involves substantial risk. You
should carefully consider the risks described below, together
with the other information in this prospectus, prior to
investing in our common stock.
Risks Related to our Business
|
|
|
|
|
The markets we serve are subject to cyclical demand, which
could harm our business and make it difficult to project
long-term performance.
|
Demand for our products depends in large part upon the level of
capital and maintenance expenditures by many of our customers
and end users, in particular those customers in the global
hydrocarbon and industrial gas markets. These customers’
expenditures historically have been cyclical in nature and
vulnerable to economic downturns. Decreased capital and
maintenance spending by these customers could have a material
adverse effect on the demand for our products and our business,
financial condition and results of operations. In addition, this
historically cyclical demand limits our ability to make accurate
long-term predictions about the performance of our company.
For example, certain of our core businesses underperformed in
the years prior to 2004 due to a general downturn in capital
spending in the global and domestic industrial gas markets.
While we have experienced demand growth since late 2003 in the
global hydrocarbon and industrial gas markets, this growth may
not continue and our businesses’ performance may not be
markedly better or may be worse in the future. In addition,
changing world economic and political conditions may reduce the
willingness of our customers and prospective customers to commit
funds to purchase our products and services. Further, in 2005,
the U.S. government announced the reduction of the amount of
dollars it offered as reimbursement to our customers for
purchasing our medical oxygen therapy products, which has
adversely affected demand for these products.
|
|
|
|
|
The loss of, or significant reduction in, purchases by our
largest customers could adversely affect our revenues.
|
Although no single customer accounted for more than 9% of our
total sales for the year ended December 31, 2005, a small
number of customers has accounted for a substantial portion of
our historical net sales, and we expect that a limited number of
customers will continue to represent a substantial portion of
our sales for the foreseeable future. Approximately 33%, 39%,
36% and 26% of our sales for the years ended December 31,
2005, 2004, 2003 and 2002, respectively, were made to Praxair,
Air Liquide, Air Products, Bechtel, Airgas, BOC, JGC and Linde,
which management believes are the largest producers and
distributors of hydrocarbon and industrial gases, and their
suppliers. The loss of any of our major customers or a decrease
in orders or anticipated spending by such customers could have a
material adverse effect on our business, financial condition and
results of operations. Our largest customers, such as Linde and
BOC, could also engage in business combinations which could
increase their size and increase or decrease the portion of our
total sales concentration to any single customer. Additionally,
we currently sell all of our MRI components to GE, a leading
worldwide manufacturer of MRI equipment, which accounted for
$7.5 million in sales for the year ended December 31,
2005. The loss of, or significant reduction in, purchases of our
MRI components by GE could adversely effect our BioMedical
business.
|
|
|
|
|
We may be unable to compete successfully in the highly
competitive markets in which we operate.
|
Although many of our products serve niche markets, a number of
our direct and indirect competitors in these markets are major
corporations, some of which have substantially greater
technical, financial and marketing resources than we, and other
competitors may enter these markets. Any increase in competition
may cause us to lose market share or compel us to reduce prices
to remain competitive, which could result in reduced sales and
earnings. Companies that operate in our industry are Air
Products, Kobe, Linde, Nordon, Puritan-Bennett, a division of
Tyco International, Ltd., Sumitomo and Taylor-Wharton, a Harsco
Company. Additionally, we compete with several suppliers owned
by global industrial gas producers and many smaller
fabrication-only facilities around the world. Increased
competition with these companies could prevent the institution
of price increases or could require price reductions or
increased spending on research and
11
development and marketing and sales, any of which could
adversely affect our results of operation. In the event of an
industry downturn, customers who typically outsource their need
for cryogenic systems to us may use their excess capacity to
produce such systems themselves. We also compete in the sale of
a limited number of products with certain of our major customers.
|
|
|
|
|
We will soon be required to evaluate our internal controls
under Section 404 of the Sarbanes-Oxley Act of 2002 and any
adverse results from such evaluation could result in a loss of
investor confidence in our financial reports and have an adverse
effect on our stock.
|
As a result of this offering, we become subject to reporting and
other obligations under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Beginning with the year
ending December 31, 2007, pursuant to Section 404 of
the Sarbanes-Oxley Act of 2002, we will be required to furnish a
report by our management on our internal control over financial
reporting, and our auditors will be required to deliver an
attestation report on management’s assessment of and
operating effectiveness of internal controls. The report by our
management must contain, among other matters, an assessment of
the effectiveness of our internal control over financial
reporting and audited consolidated financial statements as of
the end of our fiscal year. This assessment must include
disclosure of any material weaknesses in our internal control
over financial reporting identified by management.
In June 2004, the Public Company Accounting Oversight Board, or
PCAOB, adopted rules for purposes of implementing
Section 404 of the Sarbanes-Oxley Act of 2002, which
included revised definitions of material weaknesses and
significant deficiencies in internal control over financial
reporting. The PCAOB defines a material weakness as “a
significant deficiency, or a combination of significant
deficiencies, that results in more than a remote likelihood that
a material misstatement of the annual or interim financial
statements will not be prevented or detected.” The rules
describe certain circumstances as being both significant
deficiencies and strong indicators that a material weakness in
internal control over financial reporting exists.
We have substantial effort ahead of us to complete documentation
of our internal control system and financial processes,
information systems, assessment of their design, remediation of
control deficiencies identified in these efforts and management
testing of the designs and operation of internal controls. We
may not be able to complete the required management assessment
by our reporting deadline. An inability to complete and document
this assessment could result in us receiving less than an
unqualified report from our auditors with respect to our
internal controls.
Each year, starting with 2007, we must perform the system and
process documentation and evaluation needed to comply with
Section 404, which is both costly and challenging. During
this process, if our management identifies one or more material
weaknesses in our internal control over financial reporting, we
will be unable to assert that such internal control is
effective. If material weaknesses are identified and not
remediated with respect to our internal control over financial
reporting, we would not be able to conclude that our internal
controls over financial reporting were effective, which could
result in the inability of our external auditors to deliver an
unqualified report, or any report, on our internal controls. If
we are unable to assert that our internal control over financial
reporting is effective, investors could lose confidence in the
accuracy and completeness of our financial reports, which could
have an adverse effect on our stock price.
|
|
|
|
|
As a global business, we are exposed to economic,
political and other risks in different countries which could
have a material adverse effect on our financial condition and
results of operations.
|
Since we manufacture and sell our products worldwide, our
business is subject to risks associated with doing business
internationally. In 2005, 51% of our sales were made in
international markets. Our future results could be harmed by a
variety of factors, including:
|
|
|
|
|
|
•
|
changes in foreign currency exchange rates;
|
|
|
|
|
•
|
exchange controls and currency restrictions;
|
12
|
|
|
|
|
|
•
|
changes in a specific country’s or region’s political,
social or economic conditions, particularly in emerging markets;
|
|
|
|
|
•
|
civil unrest, turmoil or outbreak of disease in any of the
countries in which we operate;
|
|
|
|
|
•
|
tariffs, other trade protection measures and import or export
licensing requirements;
|
|
|
|
|
•
|
potentially negative consequences from changes in U.S. and
international tax laws;
|
|
|
|
|
•
|
difficulty in staffing and managing geographically widespread
operations;
|
|
|
|
|
•
|
differing labor regulations;
|
|
|
|
|
•
|
requirements relating to withholding taxes on remittances and
other payments by subsidiaries;
|
|
|
|
|
•
|
different regulatory regimes controlling the protection of our
intellectual property;
|
|
|
|
|
•
|
restrictions on our ability to own or operate subsidiaries, make
investments or acquire new businesses in these jurisdictions;
|
|
|
|
|
•
|
restrictions on our ability to repatriate dividends from our
foreign subsidiaries;
|
|
|
|
|
•
|
difficulty in collecting international accounts receivable;
|
|
|
|
|
•
|
difficulty in enforcement of contractual obligations under
non-U.S.
law;
|
|
|
|
|
•
|
transportation delays or interruptions;
|
|
|
|
|
•
|
changes in regulatory requirements; and
|
|
|
|
|
•
|
the burden of complying with multiple and potentially
conflicting laws.
|
Our international operations also expose us to different local
political and business risks and challenges. For example, we are
faced with potential difficulties in staffing and managing local
operations and we have to design local solutions to manage
credit and legal risks of local customers and distributors. In
addition, because some of our international sales are to
suppliers that perform work for foreign governments, we are
subject to the political risks associated with foreign
government projects. For example, certain foreign governments
may require suppliers for a project to obtain products solely
from local manufacturers or may prohibit the use of products
manufactured in certain countries.
International growth and expansion into emerging markets, such
as China, Central and Eastern Europe, and the Middle East, may
cause us difficulty due to greater regulatory barriers than in
the United States, the necessity of adapting to new regulatory
systems, problems related to entering new markets with different
economic, social and political systems, and significant
competition from the primary participants in these markets, some
of which may have substantially greater resources than us.
Our overall success as a global business depends, in part, upon
our ability to succeed in differing economic, social and
political conditions. We may not succeed in developing and
implementing policies and strategies to counter the foregoing
factors effectively in each location where we do business and
the foregoing factors may have a material adverse effect on our
financial condition or results of operations.
|
|
|
|
|
If we are unable to successfully manage our growth, our
business could be adversely affected.
|
We expect to continue to expand our operations in the United
States and abroad, particularly in China and the Czech Republic.
Our ability to operate our business successfully and implement
our strategies depends, in part, on our ability to allocate our
resources optimally in each of our facilities in order to
maintain efficient operations as we expand. Ineffective
management of our growth could cause manufacturing
inefficiencies, increase our operating costs, place significant
strain on our management and administrative resources and could
have a material adverse effect on our business.
For example, we plan to invest over $20 million in new
capital expenditures in the United States in 2006 and 2007
related to the expected growth of our Energy &
Chemicals business. If we fail to implement this
13
capital project in a timely and effective manner, we may lose
the opportunity to obtain some customer orders. Even if we
effectively implement this project, the orders needed to support
the capital expenditure may not be obtained or may be less than
expected, which may result in sales or profitability at lower
levels than anticipated. In addition, potential cost overruns,
delays or unanticipated problems in any capital expansion could
make the expansion more costly than originally predicted.
In addition, we are in the process of establishing our internal
audit function, and adverse developments in the implementation
of this function may adversely affect our ability to manage our
growth.
|
|
|
|
|
If we lose our senior management or other key employees,
our business may be adversely affected.
|
Our ability to successfully operate and grow our business and
implement our strategies is largely dependent on the efforts,
abilities and services of our senior management and other key
employees. Our future success will also depend on, among other
factors, our ability to attract and retain qualified personnel,
such as engineers and other skilled labor, either through direct
hiring or the acquisition of other businesses employing such
professionals. The loss of the services of any of our senior
management or other key employees or the failure to attract or
retain other qualified personnel could have a material adverse
effect on our business or business prospects.
|
|
|
|
|
Fluctuations in the prices and availability of raw
materials and our exposure to fixed-price contracts could
negatively impact our financial results.
|
The pricing and availability of raw materials for use in our
businesses can be volatile due to numerous factors beyond our
control, including general, domestic and international economic
conditions, labor costs, production levels, competition,
consumer demand, import duties and tariffs and currency exchange
rates. This volatility can significantly affect the availability
and cost of raw materials for us, and may, therefore, have a
material adverse effect on our business, results of operations
and financial condition.
The commodity metals we use, including aluminum and stainless
steel, have experienced significant upward fluctuations in
price. On average, approximately half of our cost of sales is
represented by the cost of commodities metals. We have generally
been able to recover the cost increases through price increases
to our customers; however, during periods of rising prices of
raw materials, such as in 2004 and 2005, we may be unable to
pass a portion of such increases on to our customers.
Conversely, when raw material prices decline, customer demands
for lower prices could result in lower sale prices and, to the
extent we have existing inventory, lower margins. As a result,
fluctuations in raw material prices could have a material
adverse effect on our business, results of operations and
financial condition.
In addition, a substantial portion of our revenues is derived
from fixed-price contracts for large system projects. To the
extent that original cost estimates prove to be inaccurate or
the contracts do not permit us to pass increased costs on to our
customers, profitability from a particular contract may be
adversely affected, which, in turn, could have a material
adverse effect on our business, financial condition and results
of operations.
|
|
|
|
|
We may fail to successfully acquire or integrate companies
that provide complementary products or technologies.
|
A component of our growth strategy is the acquisition of
businesses that complement our existing products and services.
Our acquisition strategy involves the potential risks inherent
in assessing the value, strengths, weaknesses, contingent or
other liabilities and potential profitability of acquisition
candidates and in integrating the operations of acquired
companies. In addition, any acquisition of a foreign business
may increase our exposure to certain risks inherent in doing
business outside the United States, including currency exchange
rate fluctuations, restrictions on the repatriation of profits,
compliance with foreign laws and standards and political risks.
From time to time, we may have acquisition discussions with
potential target companies. We are unable to predict the
likelihood of a material acquisition being completed as a result
of any of these discussions. If an
14
opportunity arises and we proceed with a relatively large
acquisition for cash consideration, a substantial portion of our
surplus borrowing capacity could be used in order to consummate
any such acquisition. We may further seek to finance a potential
acquisition through a debt or equity financing. For large
potential acquisition opportunities, should any arise, one or
more of the potential risks described above may be particularly
acute.
Except as discussed under “Prospectus Summary—Recent
Developments,” we are not presently engaged in any
negotiations concerning any acquisition which may be material in
size and scope to our business. We anticipate, however, that one
or more potential acquisition opportunities could become
available in the future. If and when appropriate acquisition
opportunities become available, we may pursue them actively. No
assurance can be given that any acquisition will or will not
occur, that if an acquisition does occur that it will not
materially and adversely affect us or that any such acquisition
will be successful in enhancing our business for one or more of
the following reasons:
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Any business acquired may not be integrated successfully and may
not prove profitable;
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The price we pay for any business acquired may overstate the
value of that business or otherwise be too high;
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We may fail to achieve acquisition synergies; or
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The focus on the integration of operations of acquired entities
may divert management’s attention from the
day-to
-day operation of
our businesses.
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Inherent in any future acquisition is the risk of transitioning
company cultures and facilities. The failure to efficiently and
effectively achieve such transitions could have a material
adverse effect on our financial condition and results of
operations, particularly during the period immediately following
any acquisition. In addition to the risks inherent in completing
an acquisition, we are further subject to the risk that
acquisition opportunities may not continue to be available and
we may not have access to the capital required to finance
potential acquisitions that are available.
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If we are unable to continue our technological innovation
in our business and successful introduction of new commercial
products, our profitability could be adversely affected.
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The industries we serve, including the energy and biomedical
industries, experience periodic technological change and product
improvement. Manufacturers periodically introduce new
generations of products or require new technological capacity to
develop customized products or respond to industry developments
or needs. Our future growth will depend on our ability to gauge
the direction of the commercial and technological progress in
our markets, as well as our ability to acquire new product
technology or fund and successfully develop, manufacture and
market products in this constantly changing environment. We must
continue to identify, develop, manufacture and market innovative
products on a timely basis to replace existing products in order
to maintain our profit margins and competitive position. We may
not be successful in acquiring and developing new products or
technology and any of our new products may not be accepted by
our customers. If we fail to keep pace with evolving
technological innovations in the markets we serve, our business,
financial condition and results of operations could be adversely
affected.
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We carry significant goodwill and indefinite-lived
intangible assets on our balance sheet, which are subject to
impairment testing and could subject us to significant charges
to earnings in the future if impairment occurs.
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As of December 31, 2005, we had goodwill and
indefinite-lived intangible assets of approximately
$272 million, which represented 42% of our total assets.
Goodwill and indefinite-lived intangible assets are not
amortized but are tested for impairment annually or more often
if events or changes in circumstances indicate a potential
impairment may exist. Factors that could indicate that our
goodwill or indefinite-lived intangible assets are impaired
include a decline in stock price and market capitalization,
lower than projected operating results and cash flows, and
slower growth rates in our industry. To test for impairment, we
develop a model to estimate the fair market value of our
reporting segments. This fair market value model incorporates our
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estimates of future operating results and cash flows, estimates
of allocations of certain assets and cash flows among reporting
segments, estimates of future growth rates and our judgment
regarding the applicable discount rates to use to discount those
estimated operating results and cash flows. If an impairment is
determined to exist, we are required to record a charge to
earnings in our financial statements, which may be significant,
as in 2002 when we recorded a non-cash impairment charge of
$92.4 million to write off non-deductible goodwill of the
D&S segment. While we do not presently anticipate that any
of our goodwill or indefinite-lived intangible assets will be
impaired in the foreseeable future, if an impairment is
determined to exist and we are required to record a charge to
earnings, it may result in a material adverse impact on our
results of operations and shareholders’ equity.
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We may be required to make material expenditures in order
to comply with environmental, health and safety laws, or incur
additional liabilities under these laws.
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We are subject to numerous environmental, health and safety laws
and regulations that impose various environmental controls on us
or otherwise relate to environmental protection and various
health and safety matters, including the discharge of pollutants
in the air and water, the handling, use, treatment, storage and
clean-up
of solid and
hazardous materials and wastes, and the investigation and
remediation of soil and groundwater affected by hazardous
substances. These laws and regulations often impose strict,
retroactive and joint and several liability for the costs of,
and damages resulting from, cleaning up our, or our
predecessors’, past or present facilities and third party
disposal sites. Compliance with these laws generally increases
the costs of transportation and storage of raw materials and
finished products, as well as the costs of storing and disposing
waste, and could have a material adverse effect on our results
of operations and financial condition. If we are found to have
violated any of these laws, we may become subject to corrective
action orders and fines or penalties, and incur substantial
costs, including substantial remediation costs. Further, we also
could be subject to future liability resulting from conditions
that are currently unknown to us that could be discovered in the
future.
We are currently remediating or developing work plans for
remediation of environmental conditions involving certain
current or former facilities. For example, the discovery of
contamination arising from historical industrial operations at
our Clarksville, Arkansas property has exposed us, and in the
future may continue to expose us, to remediation obligations. To
date, our environmental remediation expenditures and costs for
otherwise complying with environmental laws and regulations have
not been material, but the uncertainties associated with the
investigation and remediation of contamination and the fact that
such laws or regulations change frequently makes predicting the
cost or impact of such laws and regulations on our future
operations uncertain. Stricter environmental, safety and health
laws, regulations or enforcement policies could result in
substantial costs and liabilities to us and could subject us to
more rigorous scrutiny. Consequently, compliance with these laws
could result in significant expenditures as well as other costs
and liabilities that could have a material adverse effect on our
business and results of operations.
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The insolvency of our formerly consolidated subsidiary,
Chart Heat Exchangers Limited, could have a material adverse
impact on our liquidity and financial position.
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On March 28, 2003, our U.K. subsidiary, Chart Heat
Exchangers Limited, or CHEL, which previously operated the
closed Wolverhampton, United Kingdom manufacturing facility,
filed for a voluntary administration under the U.K. Insolvency
Act 1986. CHEL’s application for voluntary administration
was approved on April 1, 2003 and an administrator was
appointed. Additionally, we received information that indicated
that CHEL’s net pension plan obligations had increased
significantly, primarily due to a decline in plan asset values
and interest rates, as well as increased plan liabilities,
resulting in an estimated plan deficit of approximately
$12 million as of March 2003. Based on our financial
condition, in March 2003 we determined not to advance funds to
CHEL in amounts necessary to fund CHEL’s obligations. Since
CHEL was unable to fund its net pension deficit, the trustees of
the CHEL pension plan requested a decision to
wind-up
the plan from a
U.K. pension regulatory board. That board approved the
wind-up
as of
March 28, 2003. While no claims related to the CHEL
insolvency presently are pending against us, persons impacted by
the insolvency or others could bring pension and/or benefit
related claims against us. Claims may be asserted against us for
pension or other
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obligations of CHEL related to these matters. To the extent we
are found to have significant liability with respect to
CHEL’s obligations, such liability could have a material
adverse impact on our liquidity, results of operations and
financial position as a result of CHEL’s insolvency.
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Due to the nature of our business and products, we may be
liable for damages based on product liability and warranty
claims.
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Due to the high pressures and low temperatures at which many of
our products are used and the fact that some of our products are
manufactured for relatively broad consumer use, we face an
inherent risk of exposure to claims in the event that the
failure, use or misuse of our products results, or is alleged to
result, in bodily injury and/or property damage. We believe that
we meet or exceed existing professional specification standards
recognized or required in the industries in which we operate. We
have been subject to claims in the past, none of which have had
a material adverse effect on our financial condition or results
of operations, and we may be subject to claims in the future.
Although we currently maintain product liability coverage, which
we believe is adequate for the continued operation of our
business, such insurance may become difficult to obtain or
unobtainable in the future on terms acceptable to us. A
successful product liability claim or series of claims against
us, including one or more consumer claims purporting to
constitute class actions, in excess of our insurance coverage
could have a material adverse effect on our financial condition
or results of operations.
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Increases in labor costs, potential labor disputes and
work stoppages at our facilities could materially adversely
affect our financial performance.
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Our financial performance is affected by the availability of
qualified personnel and the cost of labor. As of
December 31, 2005, we had 2,271 employees, including 1,402
domestic employees and 869 international employees. These
employees consisted of 766 salaried, 283 union hourly and 1,222
non-union hourly employees as of December 31, 2005. During
2005, the union that formerly represented our employees at one
facility was decertified. Employees represented by a union
presently are subject to one collective bargaining agreement
with a local union in the United States that expires in February
2007. If we are unable to enter into new, satisfactory labor
agreements with our unionized employees upon expiration of their
collective bargaining agreement, we could experience a
significant disruption to our operations, which could cause us
to be unable to deliver products to customers on a timely basis.
Other labor controversies may likewise impede our operations.
Such disruptions could result in a loss of business and an
increase in our operating expenses, which could reduce our
profit margins. In addition, our non-unionized labor force may
become subject to labor union organizing efforts, which could
cause us to incur additional labor costs and increase the
related risks that we now face.
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We may have to make significant cash payments to our
defined benefit pension plans, reducing the cash available for
our business.
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We have four defined benefit pension plans covering certain
U.S. hourly and salaried employees. All of these plans have
been frozen. Our current funding policy is to contribute at
least the minimum funding amounts required by law. Based on
current actuarial estimates, we expect to contribute
approximately $1.3 million to our U.S. defined benefit
pension plans during 2006. If the performance of our assets in
our pension plans does not meet our expectations or if other
actuarial assumptions are modified, our contributions for these
years could be higher than we expect, thus reducing the
available cash for our business.
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Fluctuations in exchange and interest rates may affect our
operating results.
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Fluctuations in the value of the U.S. dollar may adversely
affect our results of operations. Because our consolidated
financial results are reported in U.S. dollars, if we
generate sales or earnings in other currencies, the translation
of those results into U.S. dollars can result in a
significant increase or decrease in the amount of those sales or
earnings. We also bid for certain foreign projects in
U.S. dollars. If the U.S. dollar strengthens relative
to the value of the local currency, we may be less competitive
on those projects. In addition, our debt service requirements
are primarily in U.S. dollars and a portion of our cash
flow is generated in euros or other foreign currencies.
Significant changes in the value of the foreign currencies
relative to the U.S. dollar could
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have a material adverse effect on our financial condition and
our ability to meet interest and principal payments on our debt.
In addition, fluctuations in currencies relative to the
U.S. dollar may make it more difficult to perform
period-to
-period
comparisons of our reported results of operations. For purposes
of accounting, the assets and liabilities of our foreign
operations, where the local currency is the functional currency,
are translated using period-end exchange rates, and the revenues
and expenses of our foreign operations are translated using
average exchange rates during each period.
In addition to currency translation risks, we incur currency
transaction risk whenever we or one of our subsidiaries enters
into either a purchase or a sales transaction using a currency
other than the local currency of the transacting entity. Given
the volatility of exchange rates, we may not be able to
effectively manage our currency and/or translation risks.
Volatility in currency exchange rates may have a material
adverse effect on our financial condition or results of
operations. We have purchased and may continue to purchase
foreign currency forward purchase and sales contracts to manage
the risk of adverse currency fluctuations.
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Our operations could be impacted by the effects of
hurricanes, which could be more severe than the damage and
impact that our New Iberia, Louisiana operations encountered
from hurricanes in 2005.
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Some of our operations, including our operations in New Iberia,
Louisiana and Houston, Texas, are located in geographic regions
and physical locations that are susceptible to physical damage
and longer-term economic disruption from hurricanes. We also
expect to make significant capital expenditures in
hurricane-susceptible locations in the near future. These
weather events can disrupt our operations, result in damage to
our properties and negatively affect the local economy in which
these facilities operate. In 2005, for example, our New Iberia,
Louisiana operations encountered some damage from the storm
surge and flooding caused by Hurricane Rita. Future hurricanes
may cause production or delivery delays as a result of the
physical damage to the facilities, the unavailability of
employees and temporary workers, the shortage of or delay in
receiving certain raw materials or manufacturing supplies and
the diminished availability or delay of transportation for
customer shipments, any of which may have an adverse affect on
our financial position and results of operations. Although we
maintain insurance subject to certain deductibles, which may
cover some of our losses, that insurance may become unavailable
or prove to be inadequate.
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Failure to protect our intellectual property and know-how
could adversely affect our business.
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We rely on a combination of internal procedures, nondisclosure
agreements, intellectual property rights assignment agreements,
licenses, patents, trademarks and copyright law to protect our
intellectual property and know-how. Our intellectual property
rights may not be successfully asserted in the future or may be
invalidated, circumvented or challenged. In addition, the laws
of certain foreign countries in which our products may be sold
do not protect our intellectual property rights to the same
extent as the laws of the United States. Our failure or
inability to protect our proprietary information could have a
material adverse effect on our business, financial condition and
results of operations.
We have obtained and applied for some U.S. and foreign trademark
and patent registrations and will continue to evaluate the
registration of additional trademarks and patents, as
appropriate. We cannot guarantee that any of our pending
applications will be approved by the applicable governmental
authorities. Moreover, even if the applications are approved,
third parties may seek to oppose or otherwise challenge these
registrations. A failure to obtain trademark or patent
registrations in the United States or elsewhere could limit our
ability to protect our trademarks and technologies and could
impede our business in those jurisdictions.
In addition, we may be unable to prevent third parties from
using our intellectual property rights and know-how without our
authorization or from independently developing intellectual
property that is the same as or similar to ours, particularly in
those countries where the laws do not protect our intellectual
property rights as fully as in the United States. The
unauthorized use of our know-how by third parties could reduce
or eliminate any competitive advantage we have developed, cause
us to lose sales or otherwise harm our business. If we must sue
to protect or enforce our intellectual property rights, any
suits or proceedings could be burdensome and costly, and we may
not prevail.
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We may be subject to claims that our products or processes
infringe the intellectual property rights of others, which may
cause us to pay unexpected litigation costs or damages, modify
our products or processes or prevent us from selling our
products.
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Although it is our intention to avoid infringing or otherwise
violating the intellectual property rights of others, third
parties may nevertheless claim that our processes and products
infringe their intellectual property rights. Whether or not
these claims have merit, we may be subject to costly and
time-consuming legal proceedings, and this could divert our
management’s attention from operating our businesses. In
order to resolve such proceedings, we may need to obtain
licenses from these third parties or substantially reengineer or
rename our products in order to avoid infringement. In addition,
we might not be able to obtain the necessary licenses on
acceptable terms, or at all, or be able to reengineer or rename
our products successfully.
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The continued threat of terrorism, the occurrence of
terrorist acts and ongoing military actions could adversely
affect our financial condition and results of operations.
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The continued threat of terrorism and ongoing military actions,
as well as heightened security measures in response to these
threats and actions, may cause significant volatility in global
financial markets, reduced economic activity, reduced
availability of essential raw materials or supplies and
disruptions to commerce, our company, our employees and our
customers, thereby adversely affecting our business. The
continued threat of terrorism also could lead to changes in the
amount and scope of available insurance coverage as well as
higher premiums. Terrorist actions also could disrupt our
operations in the United States or abroad.
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We are subject to regulations governing the export of our
products.
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Due to our significant foreign sales, our export activities are
subject to regulation, including the U.S. Treasury
Department’s Office of Foreign Assets Control’s
regulations. While we believe we are in compliance with these
regulations, there can be no assurance that we are not
currently, or may in the future be, in violation of these
regulations. Any violations may subject us to government
scrutiny, investigation and civil and criminal penalties and may
have a material adverse affect on our results of operations and
financial condition.
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As a provider of products to the U.S. government, we
are subject to federal rules, regulations, audits and
investigations, the violation or failure of which could
adversely affect our business.
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We sell certain of our products to the U.S. government and,
therefore, we must comply with and are affected by laws and
regulations governing purchases by the U.S. government.
Government contract laws and regulations affect how we do
business with our government customers and, in some instances,
impose added costs on our business. For example, a violation of
specific laws and regulations could result in the imposition of
fines and penalties or the termination of our contracts or
debarment from bidding on contracts. In some instances, these
laws and regulations impose terms or rights that are more
favorable to the government than those typically available to
commercial parties in negotiated transactions.
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We are controlled by First Reserve, whose interest may not
be aligned with yours or ours.
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Upon completion of this offering, First Reserve may continue to
control a majority of our capital stock. As a result, First
Reserve has the ability to control our policies and operations,
including the election of directors, the appointment of
management, the entering into of mergers, sales of substantially
all of our assets and other extraordinary transactions, future
issuances of our common stock or other securities, the
implementation of stock repurchase programs, the payments of
dividends, if any, on our common stock, the incurrence of debt
by us and amendments to our certificate of incorporation and
bylaws. Additionally, First Reserve is in the business of making
investments in companies and may from time to time acquire and
hold interests in businesses that compete directly or indirectly
with us. First Reserve may also pursue acquisition opportunities
that may be complementary to our business, and, as a result,
those acquisition opportunities may not be available to us. So
long as First Reserve continues to own a significant amount of
our equity, even if
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such amount is less than 50%, it will continue to be able to
strongly influence or effectively control our decisions.
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As a “controlled company” within the meaning of
the New York Stock Exchange rules, we will qualify for, and
intend to rely on, exemptions from certain corporate governance
requirements.
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Upon completion of this offering, First Reserve may continue to
control a majority of our outstanding common stock. As a result,
we would be a “controlled company” within the meaning
of the New York Stock Exchange corporate governance standards.
Under the New York Stock Exchange rules, a company of which more
than 50% of the voting power is held by another company is a
“controlled company” and may elect not to comply with
certain New York Stock Exchange corporate governance
requirements, including (1) the requirement that a majority
of the board of directors consist of independent directors,
(2) the requirement that we have a nominating/corporate
governance committee that is composed entirely of independent
directors with a written charter addressing the committee’s
purpose and responsibilities and (3) the requirement that
we have a compensation committee that is composed entirely of
independent directors with a written charter addressing the
committee’s purpose and responsibilities. If available, we
intend to utilize these exemptions. As a result, we would not
have a majority of independent directors nor would our
nominating and corporate governance and compensation committees
consist entirely of independent directors. Accordingly, you
would not have the same protections afforded to stockholders of
companies that are subject to all of the New York Stock Exchange
corporate governance requirements.
Risks Related To Our Leverage
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Our substantial leverage and significant debt service
obligations could adversely affect our financial condition and
prevent us from fulfilling our debt service obligations.
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We are highly leveraged and have significant debt service
obligations. Our financial performance could be affected by our
substantial leverage. As of December 31, 2005, our total
indebtedness was $347.3 million. In addition, at that date,
we had $22.4 million of letters of credit and bank
guarantees outstanding and borrowing capacity of approximately
$37.6 million under the revolving portion of our senior
secured credit facility, after giving effect to the letters of
credit and bank guarantees outstanding. We may also incur
additional indebtedness in the future. This high level of
indebtedness could have important negative consequences to us
and you, including:
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we may have difficulty generating sufficient cash flows to pay
interest and satisfy our debt obligations;
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we may have difficulty obtaining financing in the future for
working capital, capital expenditures, acquisitions or other
purposes;
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we need to use a substantial portion of our available cash flow
to pay interest and principal on our debt, which will reduce the
amount of money available to finance our operations and other
business activities;
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some of our debt, including our borrowings under our senior
secured credit facility, has variable rates of interest, which
exposes us to the risk of increased interest rates;
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our debt level increases our vulnerability to general economic
downturns and adverse industry conditions;
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our debt level could limit our flexibility in planning for, or
reacting to, changes in our business and in our industry in
general;
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our substantial amount of debt and the amount we must pay to
service our debt obligations could place us at a competitive
disadvantage compared to our competitors that have less debt;
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our customers may react adversely to our significant debt level
and seek or develop alternative suppliers;
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our failure to comply with the financial and other restrictive
covenants in our debt instruments which, among other things,
require us to maintain specified financial ratios and limit our
ability to incur debt and sell assets, could result in an event
of default that, if not cured or waived, could have a material
adverse effect on our business or prospects.
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Our net cash flow generated from operating activities was
$37.8 million (on a combined basis), $35.1 million and
$24.5 million (on a combined basis) for fiscal years 2005,
2004 and 2003, respectively. Our high level of indebtedness
requires that we use a substantial portion of our cash flow from
operations to pay principal of, and interest on, our
indebtedness, which will reduce the availability of cash to fund
working capital requirements, capital expenditures, research and
development or other general corporate or business activities,
including future acquisitions.
In addition, a substantial portion of our indebtedness bears
interest at variable rates. If market interest rates increase,
debt service on our variable-rate debt will rise, which would
adversely affect our cash flow. Although our senior secured
credit facility requires us to employ hedging strategies such
that not less than 50% of our total debt carries a fixed rate of
interest for a period of three years following consummation of
the Acquisition, any hedging arrangement put in place may not
offer complete protection from this risk. Additionally, the
remaining portion of the senior secured credit facility may not
be hedged and, accordingly, the portion that is not hedged will
be subject to changes in interest rates.
If our cash flows and capital resources are insufficient to fund
our debt service obligations, we may be forced to sell assets,
seek additional capital or seek to restructure or refinance our
indebtedness. These alternative measures may not be successful
and may not permit us to meet our scheduled debt service
obligations.
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Despite our current leverage, we may still be able to
incur substantially more debt. This could further exacerbate the
risks that we face.
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We may be able to incur substantial additional indebtedness in
the future. The terms of our debt instruments do not fully
prohibit us from doing so. The revolving credit portion of our
senior secured credit facility provides commitments of up to
$60.0 million, approximately $37.6 million of which
would have been available for future borrowings (after giving
effect to letters of credit and bank guarantees outstanding) as
of December 31, 2005 on a pro forma basis after giving
effect to this offering and the application of the proceeds
therefrom. If new debt is added to our current debt levels, the
related risks that we now face could intensify.
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We may be unable to generate sufficient cash to service
all of our indebtedness and may be forced to take other actions
to satisfy our obligations under our indebtedness, which may be
unsuccessful.
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Our ability to make scheduled payments or to refinance our debt
obligations depends on our financial and operating performance,
which is subject to prevailing economic and competitive
conditions and to certain financial, business and other factors
beyond our control. Our business may not generate sufficient
cash flow from operations and future borrowings may not be
available to us under our senior secured credit facility or
otherwise in an amount sufficient to permit us to pay the
principal and interest on our indebtedness or fund our other
liquidity needs. We may need to refinance all or a portion of
our debt on or before maturity. We may be unable to refinance
any of our debt, including our senior secured credit facility or
the notes, on commercially reasonable terms. See
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations— Liquidity and Capital
Resources.”
If our cash flows and capital resources are insufficient to fund
our debt service obligations, we may be forced to reduce or
delay capital expenditures, seek additional capital or seek to
restructure or refinance our indebtedness. These alternative
measures may be unsuccessful and may not permit us to meet our
scheduled debt service obligations. In the absence of such
operating results and resources, we could face substantial
liquidity problems and might be required to sell material assets
or operations to attempt to meet our debt service and other
obligations. The senior secured credit facility and the
indenture under which the notes were issued restrict our ability
to use the proceeds from asset sales. We may be unable to
consummate those asset sales to raise capital or sell assets at
prices that we believe are fair and proceeds that we do receive
may be
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inadequate to meet any debt service obligations then due. See
“Description of Other Indebtedness—Senior Secured
Credit Facility.”
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The senior secured credit facility and the indenture
governing the notes contain a number of restrictive covenants
which limit our ability to finance future operations or capital
needs and engage in other business activities that may be in our
interest.
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The senior secured credit facility and the indenture governing
the notes impose, and the terms of any future indebtedness may
impose, operating and other restrictions on us and our
subsidiaries. Such restrictions affect or will affect, and in
many respects limit or prohibit, among other things, our ability
and the ability of our restricted subsidiaries to:
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incur additional indebtedness;
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create liens;
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pay dividends and make other distributions in respect of our
capital stock;
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redeem our capital stock;
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make certain investments or certain other restricted payments;
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sell certain kinds of assets;
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enter into certain types of transactions with
affiliates; and
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effect mergers or consolidations.
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The senior secured credit facility also requires us to achieve
certain financial and operating results and maintain compliance
with specified financial ratios. Our ability to comply with
these ratios may be affected by events beyond our control.
The restrictions contained in our senior secured credit facility
and the indenture governing the notes could:
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limit our ability to plan for or react to market or economic
conditions or meet capital needs or otherwise restrict our
activities or business plans; and
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adversely affect our ability to finance our operations,
acquisitions, investments or strategic alliances or other
capital needs or to engage in other business activities that
would be in our interest.
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A breach of any of these covenants or our inability to comply
with the required financial ratios could result in a default
under our senior secured credit facility and/or the indenture
governing the notes. If an event of default occurs under our
senior secured credit facility, which includes an event of
default under the indenture governing the notes, the lenders
could elect to:
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declare all borrowings outstanding, together with accrued and
unpaid interest, to be immediately due and payable;
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require us to apply all of our available cash to repay the
borrowings; or
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prevent us from making debt service payments on the notes;
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any of which would result in an event of default under the
notes. The lenders will also have the right in these
circumstances to terminate any commitments they have to provide
further financing.
If we were unable to repay or otherwise refinance these
borrowings when due, our lenders could sell the collateral
securing our senior secured credit facility, which constitutes
substantially all of our and our domestic wholly-owned
subsidiaries’ assets.
22
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We are a holding company and we depend upon cash from our
subsidiaries. If we do not receive cash distributions, dividends
or other payments from our subsidiaries, we may be unable to
meet our obligations.
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We are a holding company and all of our operations are conducted
through our subsidiaries. Accordingly, we are dependent upon the
earnings and cash flows of, and cash distributions, dividends
and other payments from, our subsidiaries to provide the funds
necessary to meet our obligations. If we do not receive such
cash distributions, dividends or other payments from our
subsidiaries, we may be unable to meet our obligations,
including the payment of principal or interest on our debt. In
addition, certain of our subsidiaries are holding companies that
rely on subsidiaries of their own as a source of funds to meet
any obligations that might arise.
Generally, the ability of a subsidiary to make cash available to
its parent is affected by its own operating results and is
subject to applicable laws and contractual restrictions
contained in its debt instruments and other agreements.
Moreover, there may be restrictions on payments by our
subsidiaries to us under applicable laws, including laws that
require companies to maintain minimum amounts of capital and to
make payments to shareholders only from profits. As a result,
although our subsidiaries may have cash, we may be unable to
obtain that cash to satisfy our obligations and make payments to
our stockholders, if any.
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Because most of the proceeds from this offering will be
used to pay a dividend to our current stockholders, only a
portion of the proceeds will be used to repay our existing debt
and none of such proceeds will be used to further invest in our
business.
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We estimate that the net proceeds from the sale by us of the
shares of common stock being offered hereby, after deducting
underwriting discounts, will be approximately
$ million.
We intend to use approximately
$ million
of the net proceeds to repay certain indebtedness. We intend to
use the net proceeds of approximately
$ million
to pay a dividend to our stockholders existing immediately prior
to this offering. This leaves no proceeds to further invest in
and grow our business. See “Use of Proceeds.”
Risks Related to this Offering
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There is no existing market for our common stock, and we
do not know if one will develop to provide you with adequate
liquidity.
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Prior to this offering, there has not been a public market for
our common stock. We intend to apply to list our common stock on
the New York Stock Exchange. However, we cannot predict the
extent to which investor interest in our company will lead to
the development of a trading market on the New York Stock
Exchange or otherwise or how liquid that market might become. If
an active trading market does not develop, you may have
difficulty selling any of our common stock that you buy. The
initial public offering price for the shares was determined by
negotiations between us and the representatives of the
underwriters based on numerous factors that we discuss in the
“Underwriting” section of this prospectus and may not
be indicative of prices that will prevail in the open market
following this offering.
Consequently, you may not be able to sell our common stock at
prices equal to or greater than the price you paid in this
offering.
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Future sales of our shares could depress the market price
of our common stock.
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The market price of our common stock could decline as a result
of sales of a large number of shares of common stock in the
market after the offering or the perception that such sales
could occur. These sales, or the possibility that these sales
may occur, also might make it more difficult for us to sell
equity securities in the future at a time and at a price that we
deem appropriate.
We, our executive officers and directors and affiliates of First
Reserve have agreed with the underwriters not to sell, dispose
of or hedge any shares of our common stock or securities
convertible into or exchangeable for shares of our common stock,
subject to specified exceptions, during the period from the date
of this prospectus continuing through the date that is
180 days after the date of this prospectus, except with the
prior
23
written consent of Morgan Stanley & Co. Incorporated,
Lehman Brothers Inc. and UBS Securities LLC on behalf of the
underwriters. See “Underwriting.”
After this offering, we will
have shares
of common stock outstanding. Of those shares,
the shares
we are offering will be freely tradable.
The shares
that were outstanding immediately prior to this offering, plus
up to an
additional shares,
adjusted for the elimination of any fractional shares, that will
be dividended to our existing stockholders in the event the
over-allotment option is not exercised in full, will be eligible
for resale from time to time after the expiration of the
180-day
lock-up,
subject to contractual and Securities Act restrictions,
including those relating to volume, manner of sale and other
conditions of Rule 144. None of those shares may currently
be resold under Rule 144(k) without regard to volume
limitations and no shares may currently be sold subject to
volume, manner of sale and other conditions of Rule 144.
After the expiration of the
180-day
lock-up
period, First
Reserve and its affiliates, which collectively beneficially own
approximately million
shares
(approximately million
shares in the event the over-allotment option is not exercised),
will have the ability to cause us to register the resale of
their shares and certain other holders of our unregistered
common stock will be able to participate in such registration.
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The market price of our common stock may be volatile,
which could cause the value of your investment to
decline.
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Securities markets worldwide experience significant price and
volume fluctuations. This market volatility, as well as general
economic, market or political conditions, could reduce the
market price of our common stock in spite of our operating
performance. In addition, our operating results could be below
the expectations of securities analysts and investors, and in
response, the market price of our common stock could decrease
significantly. As a result, the market price of our common stock
could decline below the initial public offering price. You may
be unable to resell your shares of our common stock at or above
the initial public offering price. Among other factors that
could affect our stock price are:
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actual or anticipated variations in operating results;
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changes in financial estimates by research analysts;
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actual or anticipated changes in economic, political or market
conditions, such as recessions or international currency
fluctuations;
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actual or anticipated changes in the regulatory environment
affecting our industry;
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changes in the market valuations of our industry peers; and
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announcements by us or our competitors of significant
acquisitions, strategic partnerships, divestitures, joint
ventures or other strategic initiatives.
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In the past, following periods of volatility in the market price
of a company’s securities, stockholders have often
instituted class action securities litigation against those
companies. Such litigation, if instituted, could result in
substantial costs and a diversion of management attention and
resources, which could significantly harm our profitability and
reputation.
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The book value of shares of common stock purchased in the
offering will be immediately diluted and may be subject to
additional dilution in the future.
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The initial public offering price per share of our common stock
is substantially higher than our pro forma net tangible book
value per common share immediately after the offering. As a
result, you may pay a price per share that substantially exceeds
the book value of our assets after subtracting our liabilities.
Investors who purchase common stock in the offering will be
diluted by
$ per
share after giving effect to the sale of shares of common stock
in this offering at an assumed initial public offering price of
$ per
share, the mid-point of the estimated price range on the cover
of this prospectus, assuming the dividend of shares, adjusted
for the elimination of any fractional shares, to the existing
stockholders in the event the over-allotment option
24
is not exercised. If we grant options in the future to our
employees, and those options are exercised or other issuances of
common stock are made, there will be further dilution.
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Provisions in our amended and restated certificate of
incorporation and amended and restated bylaws and Delaware law
may discourage a takeover attempt.
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Provisions contained in our amended and restated certificate of
incorporation and amended and restated bylaws and Delaware law
could make it more difficult for a third party to acquire us.
Provisions of our amended and restated certificate of
incorporation and amended and restated bylaws and Delaware law
impose various procedural and other requirements, which could
make it more difficult for stockholders to effect certain
corporate actions. For example, our amended and restated
certificate of incorporation authorizes our board of directors
to determine the rights, preferences, privileges and
restrictions of unissued series of preferred stock, without any
vote or action by our stockholders. Therefore, our board of
directors can authorize and issue shares of preferred stock with
voting or conversion rights that could adversely affect the
voting or other rights of holders of our common stock. These
rights may have the effect of delaying or deterring a change of
control of our company. These provisions could limit the price
that certain investors might be willing to pay in the future for
shares of our common stock. See “Description of Capital
Stock.”
25
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes “forward-looking statements.”
These forward-looking statements include statements relating to
our business. In some cases, forward-looking statements may be
identified by terminology such as “may,”
“will,” “should,” “expects,”
“anticipates,” “believes,”
“projects,” “forecasts,”
“continue” or the negative of such terms or comparable
terminology. Forward-looking statements contained herein
(including future cash contractual obligations) or in other
statements made by us are made based on management’s
expectations and beliefs concerning future events impacting us
and are subject to uncertainties and factors relating to our
operations and business environment, all of which are difficult
to predict and many of which are beyond our control, that could
cause our actual results to differ materially from those matters
expressed or implied by forward-looking statements. We believe
that the following factors, among others (including those
described in “Risk Factors”), could affect our future
performance and the liquidity and value of our securities and
cause our actual results to differ materially from those
expressed or implied by forward-looking statements made by us or
on our behalf:
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the cyclicality of the markets which we serve;
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the loss of, or a significant reduction in purchases by, our
largest customers;
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competition in our markets;
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our compliance obligations with the Sarbanes-Oxley Act of 2002;
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general economic, political, business and market risks
associated with our
non-U.S.
operations;
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our ability to successfully manage our growth;
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the loss of key employees;
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the pricing and availability of raw materials and our ability to
manage our fixed-price contract exposure;
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our ability to successfully acquire or integrate companies that
provide complementary products or technologies;
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our ability to continue our technical innovation in our product
lines;
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the impairment of our goodwill and other indefinite-lived
intangible assets;
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the costs of compliance with environmental, health and safety
laws and responding to potential liabilities under these laws;
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the insolvency of our formerly consolidated subsidiary, Chart
Heat Exchangers Limited, or CHEL, and CHEL’s administration
proceedings in the United Kingdom, including claims that may be
asserted against us with respect to CHEL’s obligations;
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litigation and disputes involving us, including the extent of
product liability, warranty, pension and severance claims
asserted against us;
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labor costs and disputes;
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our relations with our employees;
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our funding requirements in connection with our defined benefit
pension plans;
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fluctuations in foreign currency exchange and interest rates;
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disruptions in our operations due to hurricanes;
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our ability to protect our intellectual property and know-how;
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the threat of terrorism and the impact of responses to that
threat;
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regulations governing the export of our products;
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26
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the possibility that our existing stockholders’ interests
will conflict with ours or yours;
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our status as a “controlled company” under NYSE
corporate governance rules;
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risks associated with our substantial indebtedness, leverage,
debt service and liquidity;
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risks related to this offering; and
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other factors described in this prospectus.
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There may be other factors that may cause our actual results to
differ materially from the forward-looking statements.
All forward-looking statements attributable to us or persons
acting on our behalf apply only as of the date of this
prospectus and are expressly qualified in their entirety by the
cautionary statements included in this prospectus. We undertake
no obligation to update or revise forward-looking statements
which may be made to reflect events or circumstances that arise
after the date made or to reflect the occurrence of
unanticipated events.
27
MARKET AND INDUSTRY DATA
This prospectus includes industry data and forecasts that we
have prepared based, in part, upon industry data and forecasts
obtained from industry publications and surveys. These sources
include publications by Energy Ventures Analysis, the Energy
Information Administration, the International Energy Agency and
Spiritus Consulting. Third-party industry publications, surveys
and forecasts generally state that the information contained
therein has been obtained from sources believed to be reliable,
but there can be no assurance as to the accuracy or completeness
of included information. We have not independently verified any
of the data from third-party sources nor have we ascertained the
underlying economic assumptions relied upon therein. Forecasts
are particularly likely to be inaccurate, especially over long
periods of time. As an example of the unpredictable nature of
these forecasts, in 1983, the U.S. Department of Energy
forecast that oil would cost $74 per barrel in 1995;
however, the price of oil was actually $17 per barrel. In
addition, we do not know what assumptions regarding general
economic growth were used in preparing the forecasts we cite.
28
THE TRANSACTIONS
The following contains summaries of the terms of the material
agreements that were entered into in connection with the
Acquisition. The descriptions of such agreements do not purport
to be complete and are qualified in their entirety by reference
to such agreements. Such agreements have been filed as exhibits
to the registration statement of which this prospectus forms a
part.
The Acquisition
On August 2, 2005, Chart Industries entered into an
agreement and plan of merger (the “merger agreement”)
with certain of its then-existing stockholders (the
“Principal Stockholders”), First Reserve Fund X,
L.P., a Delaware limited partnership (“First
Reserve”), and CI Acquisition, Inc., a Delaware
corporation (“CI Acquisition”) and a wholly-owned
subsidiary of First Reserve. The merger agreement provided for:
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the sale of shares of common stock of Chart Industries, par
value $0.01 per share, owned by the Principal Stockholders
(the “Principal Stockholder Shares”) to
CI Acquisition, which we refer to as the “stock
purchase;” and
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the merger of CI Acquisition with and into Chart
Industries, with Chart Industries surviving the merger as an
indirect, wholly-owned subsidiary of First Reserve, which we
refer to as the “merger.”
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We refer to the stock purchase and the merger, collectively as
the “Acquisition.” The Acquisition closed on
October 17, 2005.
Upon satisfaction of the conditions to the stock purchase,
CI Acquisition purchased the Principal Stockholder Shares
from the Principal Stockholders for a purchase price (the
“Per Share Purchase Price”) equal to $64.75 per
share in cash.
Chart Industries, First Reserve and CI Acquisition caused
the merger to occur immediately after the closing of the stock
purchase. At the effective time of the merger, each share of
common stock of Chart Industries outstanding (other than
treasury stock, shares held by First Reserve or
CI Acquisition, and shares with respect to which appraisal
rights were exercised under Delaware law) were converted into
the right to receive the Per Share Purchase Price in cash,
without interest, which we refer to as the merger consideration.
At the effective time of the merger, all those shares of common
stock of Chart Industries were cancelled and ceased to be
outstanding and each holder of a certificate representing that
common stock ceased to have any rights with respect to the
common stock of Chart Industries, except the right to receive
the merger consideration.
In addition, in general the holders of outstanding Chart
Industries warrants and stock options received, without the need
to exercise those warrants and stock options, the same per share
cash purchase price less the exercise price of the Chart
Industries warrants and stock options. Notwithstanding this
general treatment, the compensation committee of Chart
Industries’ board of directors, in accordance with the
terms of the merger agreement and Chart Industries’ stock
option plans, adjusted some Chart Industries stock options (or
portions of Chart Industries stock options) held by certain
employees, following the merger, to represent options to acquire
shares of common stock of Chart Industries after the merger.
After the merger, FR X Chart Holdings LLC became the
direct owner of all of the outstanding capital stock of Chart
Industries.
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Agreement and Plan of Merger
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The merger agreement contains customary representations and
warranties of the Principal Stockholders, Chart Industries,
First Reserve and CI Acquisition and customary covenants
and other agreements among the parties. None of the
representations and warranties in the merger agreement survived
the completion of the merger and the merger agreement did not
provide for any post-closing indemnification obligations. The
29
representations and warranties of each party set forth in the
merger agreement were made solely for the benefit of specified
parties to the merger agreement (on the terms set forth in the
merger agreement) and such representations and warranties may
not be relied on by any other person.
The Financing
In connection with the Acquisition, First Reserve contributed
$111.3 million to FR X Chart Holdings LLC, the
direct parent of CI Acquisition in exchange for all of
FR X Chart Holdings LLC’s equity.
FR X Chart Holdings LLC then contributed
$111.3 million to CI Acquisition in exchange for all
of CI Acquisition’s capital stock. After the merger,
FR X Chart Holdings LLC became the direct owner of all
of the outstanding capital stock of Chart Industries. The
remainder of the cash needed to finance the acquisition,
including related fees and expenses, was provided by the
offering of the notes and the borrowings under the senior
secured credit facility provided by affiliates of the
underwriters, as joint bookrunners, lead arrangers or lenders,
and a syndicate of banks and other financial institutions.
The following table illustrates the approximate sources and uses
for the Acquisition.
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Sources
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Uses
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(In millions)
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Senior secured credit facility:
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Revolving credit facility(1)
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$
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Purchase of equity(2)
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$
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378.8
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Term loan B facility
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180.0
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Repayment of then-existing debt(3)
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66.8
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Senior subordinated notes
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170.0
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Funded cash(2)
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3.4
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Equity contribution(4)
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117.7
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Fees and expenses
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18.7
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Total Sources of Funds
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$
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467.7
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Total Uses of Funds
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$
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467.7
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(1)
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As of October 17, 2005, we had approximately
$40.9 million available for borrowing under the revolving
credit portion of the senior secured credit facility, subject to
certain conditions, after giving effect to approximately
$19.1 million outstanding letters of credit and bank
guarantees.
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(2)
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Represents a purchase price of $378.8 million in respect of
the equity, resulting in a gross cash purchase price of
$449.0 million for the Acquisition. We had approximately
$3.4 million of cash on hand upon consummation of the
Acquisition, resulting in the net purchase price reflected above.
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(3)
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We used an estimated $14.3 million of cash on our balance
sheet to repay existing debt immediately prior to the closing of
the Acquisition.
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(4)
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Prior to the consummation of the Acquisition, management held
options valued at $6.4 million, together with other options
that were cashed out in the Acquisition. In connection with the
Acquisition, our compensation committee elected to adjust these
options to represent options to acquire shares of our common
stock after consummation of the Acquisition. This amount
includes $6.4 million representing the value of these
options.
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Equity Sponsor
First Reserve Corporation is the leading private equity firm
specializing in the energy industry with $4.7 billion under
management in four active funds. Founded in 1980, First Reserve
Corporation was the first private equity firm to actively pursue
building a broadly diversified investment portfolio within the
energy and energy-related sectors. Since raising its initial
pure buyout fund in 1992 First Reserve Corporation has made 50
principal transactions investing over $3.0 billion in
equity. In addition, First Reserve Corporation portfolio
companies have completed more than 200 add-on transactions. Past
and present public First Reserve Corporation portfolio companies
include Alpha Natural Resources, Inc., Cal Dive
International, Inc., Chicago Bridge and Iron N.V., Dresser Inc.,
Dresser-Rand Group Inc., Foundation Coal Corporation, Maverick
Tube Corporation, National Oilwell, Inc., Natural Resource
Partners, Pride International, Inc., Superior Energy Services
Inc. and Weatherford International Ltd.
30
USE OF PROCEEDS
We estimate that the net proceeds from the sale by us of the
shares of common stock being offered hereby, after deducting
underwriting discounts and other fees and expenses payable by
us, will be approximately
$ million.
We intend to use approximately
$ million
of the net proceeds to repay a portion of the term loan under
our senior secured credit facility. We intend to use
approximately
$ million
of the net proceeds to pay a dividend to our stockholders
existing immediately prior to the offering, consisting of
affiliates of First Reserve and certain members of our
management. Of such amount, approximately
$ million
will be received by affiliates of First Reserve. In addition,
approximately
$ million
will be received by certain of our executive officers and other
key employees. We will pay the estimated offering expenses of
$ million
out of cash on hand.
We also intend to use the net proceeds we receive from any
shares sold pursuant to the underwriters’ over-allotment
option, after deducting underwriting discounts, to pay an
additional dividend to our existing stockholders. In the event
the underwriters fully exercise their over-allotment option, the
amount of this dividend will be approximately
$ million.
Of such amount, approximately
$ million
will be received by affiliates of First Reserve. In addition,
approximately
$ million
will be received by certain of our executive officers and other
key employees.
Any increase or decrease in the amount of net proceeds raised in
this offering from the amount stated above will increase or
decrease the cash dividend to be paid to our existing
stockholders, respectively, but will not materially affect the
amount of debt we intend to repay as described above. A $0.25
increase (decrease) in the assumed public offering price per
share of the common stock (the mid-point of the range on the
cover page of this prospectus) would increase (decrease) the net
proceeds that we receive in this offering (and, accordingly,
that we dividend to our stockholders) by approximately
$ million,
after deducting underwriting discounts and other fees and
expenses payable by us, assuming the number of shares being
offered, as set forth on the cover page of this prospectus does
not change.
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DIVIDEND POLICY
Immediately prior to the consummation of this offering, we
intend to declare three dividends, which will be payable to our
stockholders existing prior to the offering.
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The first dividend will be a cash dividend of
$ million,
assuming an initial public offering price per share of
$ ,
which we will pay to our existing stockholders out of a portion
of the net proceeds from this offering.
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The second dividend will be a cash dividend of up to
$ million,
assuming an initial public offering price per share of
$ ,
which we will pay to our existing stockholders with all of the
proceeds we receive from the shares sold pursuant to the
underwriters’ over-allotment option, if exercised.
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The third dividend will be a stock dividend of up
to shares
of our common stock, which we will pay to our existing
stockholders, the terms of which will require that shortly after
the expiration of the underwriters’ over-allotment option
(assuming the option is not exercised in full), we issue to our
existing stockholders the number of shares equal to (x) the
number of additional shares the underwriters have an option to
purchase minus (y) the actual number of shares the
underwriters purchase from us pursuant to that option.
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The purpose of the cash dividend described in the first bullet
above is to distribute a portion of the proceeds from this
offering to our existing stockholders. As the intended use of
proceeds from the exercise of the over-allotment option by the
underwriters is a dividend to our existing stockholders, we have
assumed that investors will factor into their analysis the
dilutive effect of those shares being issued and the proceeds
being dividended out of our company by reducing their valuation
of our company. Accordingly, in the event the option is not
exercised, we have contemplated that the shares subject to the
option will be dividended to our existing stockholders as
described in the third bullet above. Such stock dividend would
have the same dilutive effect as selling those shares upon the
exercise of the over-allotment option and dividending the
proceeds to our existing owners.
Other than the dividends described above, we do not currently
intend to pay any cash dividends on our common stock, and
instead intend to retain earnings, if any, for future operations
and debt reduction. The amounts available to us to pay cash
dividends will be restricted by our senior secured credit
facility. The indenture governing the notes also limits our
ability to pay dividends. In connection with this offering, we
intend to amend our senior secured credit facility to remove
certain restrictions on our ability to consummate the offering
and use the proceeds as described in “Use of
Proceeds.” Any decision to declare and pay dividends in the
future will be made at the discretion of our board of directors
and will depend on, among other things, our results of
operations, financial condition, cash requirements, contractual
restrictions and other factors that our board of directors may
deem relevant.
32
CAPITALIZATION
The following table sets forth our cash, cash equivalents and
capitalization as of December 31, 2005 (1) on an
actual basis and (2) on an as adjusted basis to reflect:
|
|
|
|
|
|
•
|
the sale by us of
approximately shares
of our common stock in this offering, after deducting
underwriting discounts and estimated offering expenses;
|
|
|
|
|
•
|
the application of the estimated net proceeds as described in
“Use of Proceeds;”
|
|
|
|
|
•
|
the -for-one
stock split we expect to effect immediately prior to the
consummation of this offering; and
|
|
|
|
|
•
|
the stock dividend
of shares,
adjusted for the elimination of any fractional shares, to our
existing stockholders shortly after the expiration of the
underwriters’ over-allotment option, assuming no exercise
of that option.
|
The information in this table should be read in conjunction with
“The Transactions,” “Use of Proceeds,”
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our consolidated
financial statements and related notes included elsewhere in
this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
As Adjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, in millions,
|
|
|
|
|
except share and per
|
|
|
|
|
share data)
|
|
|
Cash and cash equivalents
|
|
$
|
15.4
|
|
|
$
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
Senior secured credit facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit facility(1)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Term loan facility
|
|
|
175.0
|
|
|
|
|
|
|
|
9
1
/
8
% senior subordinated notes due 2015
|
|
|
170.0
|
|
|
|
|
|
|
|
Other debt(2)
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
347.3
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder’s equity:
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $0.01 per share,
9,500,000 shares authorized and 1,718,896 shares
issued and outstanding(3)
|
|
|
—
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
117.4
|
|
|
|
|
|
|
|
|
Retained (deficit)
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
Accumulated other comprehensive (loss)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
116.3
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As of December 31, 2005, we had approximately
$37.6 million available for borrowing under the revolving
portion of the senior secured credit facility, subject to
certain conditions, after giving effect to approximately
$22.4 million of letters of credit and bank guarantees
outstanding thereunder. See “The Transactions” and
“Description of Indebtedness.”
|
|
|
|
(2)
|
This relates to the indebtedness of Chart Ferox, a.s. and CEM,
our subsidiaries located in the Czech Republic and China,
respectively. See “Description of Indebtedness—Chart
Ferox Credit Facility.”
|
|
|
|
(3)
|
To the extent we change the number of shares of common stock we
sell in this offering from
the shares
we expect to sell or we change the initial public offering price
from the
$ per
share assumed initial offering price, or any combination of
these events occurs, our net proceeds from this offering and as
adjusted additional paid-in capital may increase of decrease. A
$0.25 increase (decrease)
|
33
|
|
|
|
|
in the assumed initial public offering price per share of the
common stock, assuming no change in the number of shares of
common stock to be sold, would increase (decrease) the net
proceeds that we receive in this offering (and accordingly that
we dividend to our stockholders) and our as adjusted additional
paid-in capital by
$ million
and an increase (decrease) of 1,000,000 shares from the
expected number of shares to be sold in the offering, assuming
no change in the assumed initial public offering price per
share, would increase (decrease) our net proceeds from this
offering and our as adjusted additional paid-in capital by
approximately
$ million.
|
34
DILUTION
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share and the net tangible book value per
share after this offering. The net tangible book value per share
presented below is equal to the amount of our total tangible
assets (total assets less intangible assets) less total
liabilities as of December 31, 2005, divided by the number
of shares of our common stock that would have been held by our
existing stockholders had the stock dividend
of additional
shares, adjusted for the elimination of any fractional shares,
to our existing stockholders shortly after the expiration of the
underwriters’ over-allotment option, assuming no exercise
of that option, been made as
of ,
2005. As of December 31, 2005, we had a net tangible book
deficit of
$ million,
or
$ per
share. On a pro forma basis, after giving effect to:
|
|
|
|
|
|
•
|
the sale of shares of common stock in this offering at an
assumed initial public offering price of
$ per
share, the mid-point of the price range on the cover of this
prospectus;
|
|
|
|
|
•
|
the payment of the
$ million
dividend that we intend to declare prior to the consummation of
the offering to the existing stockholders;
|
|
|
|
|
•
|
the application of the estimated net proceeds as described under
“Use of Proceeds;” and
|
|
|
|
|
•
|
the effect of any other pro forma adjustments
|
our pro forma net tangible book value as of December 31,
2005 would have been
$ million,
or
$ per
share of common stock. This represents an immediate increase in
net tangible book value (or a decrease in net tangible book
deficit) of
$ per
share to existing stockholders and an immediate dilution in net
tangible book value of
$ per
share to new investors.
The following table illustrates this dilution on a per share
basis:
|
|
|
|
|
|
|
|
|
|
|
|
Initial public offering price per share
|
|
|
|
|
|
$
|
|
|
|
|
Net tangible book deficit per share at December 31, 2005
|
|
$
|
|
|
|
|
|
|
|
|
Increase in net tangible book value per share attributable to
new investors
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book deficit per share after the offering
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Dilution per share to new investors
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
A $0.25 increase (decrease) in the initial public offering price
from the assumed initial public offering price of
$ per
share would decrease (increase) our net tangible book deficit
after giving effect to this offering by approximately
$ million,
our pro forma net tangible book deficit per share after giving
effect to the offering by
$ per
share and the dilution in net tangible book deficit per share to
new investors in this offering by
$ per
share, after deducting the estimated underwriting discounts and
commissions and estimated aggregate offering expenses payable by
us and assuming no other change to the number of shares offered
by us as set forth on the cover page of this prospectus. An
increase (decrease) of 1,000,000 shares from the expected
number of shares to be sold in the offering, assuming no change
in the initial public offering price from the price assumed
above, would decrease (increase) our net tangible book deficit
after giving effect to this offering by approximately
$ million,
decrease (increase) our pro forma net tangible book deficit per
share after giving effect to this offering by
$ per
share, and increase (decrease) the dilution in net tangible book
deficit per share to new investors in this offering by
$ per
share, after deducting the estimated underwriting discounts and
commissions and estimated aggregate offering expenses payable by
us. We will reduce the number of shares that we will issue to
our existing stockholders in the stock dividend described in the
first paragraph above by the number of shares sold to the
underwriters pursuant to their over-allotment option. We will
also pay to our existing stockholders a cash dividend equal to
all proceeds we receive from any such sale to the underwriters.
As a result, our pro forma net tangible book value will not be
affected by the underwriters’ exercise of their
over-allotment option.
35
The following table summarizes, on the same pro forma basis as
of December 31, 2005, the total number of shares of common
stock purchased from us, the total consideration paid to us and
the average price per share paid by the existing stockholders
and by new investors purchasing shares in this offering:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Price
|
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
Existing stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New investors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consideration and average price per share paid by the
existing stockholders in the table above give effect to the
$ million
dividend and the stock dividend
of shares,
adjusted for the elimination of any fractional shares, we intend
to pay to the existing stockholders in connection with this
offering. As the table indicates, the total consideration for
the existing stockholders’ shares is
$ million,
with an average share price of
$ ,
which means that the existing stockholders in the aggregate will
have received
$ million
more than they originally invested.
The number of shares held by existing stockholders will be
reduced to the extent the underwriters exercise their
over-allotment option. If the underwriters fully exercise their
option, the existing stockholders will own a total
of shares
or approximately % of our total
outstanding shares which will decrease the average price paid by
the existing stockholders per share to
$ .
To the extent that we grant options to our employees in the
future, and those options are exercised or other issuances of
common stock are made, there will be further dilution to new
investors.
36
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information has been
derived by the application of pro forma adjustments to the
historical combined financial statements for the period from
January 1, 2005 to October 16, 2005 and for the period
from October 17, 2005 to December 31, 2005. The
unaudited pro forma statements of operations for the year ended
December 31, 2005 give effect to (i) the Acquisition,
(ii) the notes offering of October 17, 2005 and the
borrowings under our senior secured credit facility and
(iii) this offering of common stock and the estimated use
of proceeds from this offering, as if they had been consummated
on January 1, 2005. The unaudited pro forma balance sheet
as of December 31, 2005 gives effect to this offering and
the estimated use of proceeds from this offering, as if they had
occurred on December 31, 2005. The adjustments necessary to
fairly present this pro forma financial information have been
made based on available information and in the opinion of
management are reasonable and are described in the accompanying
notes. The unaudited pro forma financial information should not
be considered indicative of actual results that would have been
achieved had these transactions been consummated on the
respective dates indicated and do not purport to indicate
results of operations as of any future date or for any future
period. The assumptions used in the preparation of the unaudited
pro forma financial information may not prove to be correct. You
should read the unaudited pro forma financial information
together with “Risk Factors,” “Use of
Proceeds,” “Capitalization” and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our historical
consolidated financial statements and the notes thereto included
elsewhere in this prospectus.
37
CHART INDUSTRIES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Offering Adjustments
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Assets
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,433
|
|
|
|
(a
|
)
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
62,463
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
53,132
|
|
|
|
|
|
|
|
|
|
|
|
Unbilled contract revenue
|
|
|
23,813
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
3,037
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
12,102
|
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale
|
|
|
3,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
173,064
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
64,265
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
236,742
|
|
|
|
|
|
|
|
|
|
|
Identifiable intangible assets, net
|
|
|
154,063
|
|
|
|
|
|
|
|
|
|
|
Other assets, net
|
|
|
13,672
|
|
|
|
(b
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
641,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
34,435
|
|
|
|
|
|
|
|
|
|
|
|
Customer advances and billings in excess of contract revenue
|
|
|
26,741
|
|
|
|
|
|
|
|
|
|
|
|
Accrued salaries, wages and benefits
|
|
|
19,797
|
|
|
|
|
|
|
|
|
|
|
|
Warranty reserve
|
|
|
3,598
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
|
17,606
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
|
2,304
|
|
|
|
(b
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
104,481
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
345,000
|
|
|
|
(b
|
)
|
|
|
|
|
|
Long-term deferred tax liabilities
|
|
|
56,038
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
19,957
|
|
|
|
|
|
|
|
|
|
|
Shareholder equity
|
|
|
116,330
|
|
|
|
(a
|
)(b)(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholder equity
|
|
$
|
641,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Reflects payment, using cash on-hand, of
$ million
of expenses in connection with this offering.
|
|
|
|
(b)
|
Reflects the use of a portion of the proceeds from the offering,
net of fees and expenses, to repay
$ million
of term loans under our senior secured credit facility and the
write-off of deferred financing costs of
$ million.
See “Use of Proceeds.”
|
|
|
|
(c)
|
Reflects the assumed gross proceeds of
$ million
from the offering, net of fees and expenses of
$ million.
On a pro forma basis as of December 31, 2005,
$ million
of the net proceeds from the offering is assumed to be used to
pay a dividend to our existing stockholders. See “Use of
Proceeds.”
|
38
CHART INDUSTRIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
|
|
|
October 17,
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
2005 to
|
|
|
2005 to
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
October 16,
|
|
|
December 31,
|
|
|
Pro Forma
|
|
|
Offering
|
|
December 31,
|
|
|
|
|
2005(1)
|
|
|
2005(2)
|
|
|
Adjustments(3)
|
|
|
Adjustments(4)
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands except per share data)
|
|
|
Sales
|
|
$
|
305,497
|
|
|
$
|
97,652
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
403,149
|
|
|
Cost of sales
|
|
|
217,284
|
|
|
|
75,733
|
|
|
|
—
|
|
|
|
—
|
|
|
|
293,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
88,213
|
|
|
|
21,919
|
|
|
|
—
|
|
|
|
—
|
|
|
|
110,132
|
|
|
Selling, general and administrative expense
|
|
|
59,826
|
|
|
|
16,632
|
|
|
|
8,306
|
(a)(b)
|
|
|
—
|
|
|
|
84,764
|
|
|
Transaction expense
|
|
|
6,602
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,602
|
|
|
Employee separation and plant closure costs
|
|
|
1,057
|
|
|
|
139
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,485
|
|
|
|
16,771
|
|
|
|
8,306
|
|
|
|
—
|
|
|
|
92,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
20,728
|
|
|
|
5,148
|
|
|
|
(8,306
|
)
|
|
|
—
|
|
|
|
17,570
|
|
|
Other expense (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on sale of assets
|
|
|
(131
|
)
|
|
|
78
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(53
|
)
|
|
|
Interest expense, net
|
|
|
4,192
|
|
|
|
5,565
|
|
|
|
17,681
|
(c)
|
|
|
—
|
|
|
|
27,438
|
|
|
|
Financing costs amortization
|
|
|
—
|
|
|
|
308
|
|
|
|
1,171
|
(d)
|
|
|
—
|
|
|
|
1,479
|
|
|
|
Derivative contracts valuation expense (income)
|
|
|
(28
|
)
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(37
|
)
|
|
|
Foreign currency loss (gain)
|
|
|
659
|
|
|
|
101
|
|
|
|
—
|
|
|
|
—
|
|
|
|
760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,692
|
|
|
|
6,043
|
|
|
|
18,852
|
|
|
|
—
|
|
|
|
29,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations before income taxes and minority
interest
|
|
|
16,036
|
|
|
|
(895
|
)
|
|
|
(27,158
|
)
|
|
|
—
|
|
|
|
(12,017
|
)
|
|
Income tax (benefit) expense
|
|
|
7,159
|
|
|
|
(441
|
)
|
|
|
(10,320
|
)(e)
|
|
|
—
|
|
|
|
(3,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations before minority interest
|
|
|
8,877
|
|
|
|
(454
|
)
|
|
|
(16,838
|
)
|
|
|
—
|
|
|
|
(8,415
|
)
|
|
Minority interest, net of taxes
|
|
|
(19
|
)
|
|
|
(52
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
8,858
|
|
|
$
|
(506
|
)
|
|
$
|
(16,838
|
)
|
|
$
|
—
|
|
|
$
|
(8,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Earnings Per Share Data(5)(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share
|
|
|
|
|
|
$
|
(0.29
|
)(f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares — basic
|
|
|
|
|
|
|
1,719
|
(f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares — diluted
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
Our capital structure changed as a result of the Acquisition.
Due to required purchase accounting adjustments relating to such
transaction, the consolidated financial and other information
for the period subsequent to the Acquisition (the “2005
Successor Period”) is not comparable to such information
for the periods prior to the Acquisition (the “2005
Reorganized Period”). The pro forma information, including
the allocation of the purchase price, is based on
management’s estimates and valuations of the tangible and
intangible that were acquired.
|
|
|
|
(1)
|
The amounts in this column represent the reported results of
Chart Industries, Inc. prior to the Acquisition, from
January 1, 2005 through October 16, 2005.
|
|
(2)
|
The amounts in this column represent the reported results of
Chart Industries, Inc. subsequent to the Acquisition, for the
period from October 17, 2005 to December 31, 2005.
|
|
(3)
|
The amounts in this column represent the adjustments to reflect
the pro forma impact of the Acquisition as follows:
|
|
|
|
|
|
|
(a)
|
Reflects the adjustment to historical expense for management
fees of $306 charged by our Reorganized Company majority
shareholders, which are not charged by First Reserve.
|
|
|
(b)
|
Reflects the adjustment to historical expense for the change in
amortization expense due to the revaluation of our identifiable
finite-lived intangible assets in purchase accounting. Annual
amortization expense under the new basis of accounting is
estimated to be $14,271, of which $2,973 was recognized during
the 2005 Successor Period, and $2,686 of amortization expense
relating to finite-lived intangibles assets was recorded during
the 2005 Reorganized Period, resulting in a pro forma adjustment
of $8,612.
|
|
|
(c)
|
Reflects the adjustment to historical interest expense for
interest on the senior secured credit facility entered into in
conjunction with the Acquisition of $11,925 assuming an
outstanding balance of $180,000 and an interest rate of 6.625%
per annum. Also, reflects the adjustment to historical interest
expense for interest on the notes issued in conjunction with the
Acquisition of $15,513, assuming an outstanding balance of
$170,000 and an interest rate of 9.125% per annum. During the
2005 Successor Period, $5,565 of interest expense was recorded
for the senior secured credit facility and the notes and $4,192
of interest expense was recorded in the 2005 Reorganized Period
for our then existing senior credit facility. This results in a
pro forma adjustment of $17,681.
|
|
|
(d)
|
Reflects the adjustment to historical expense for the change in
amortization expense for deferred financing costs that were paid
in conjunction with the Acquisition. The annual amortization
expense is estimated to be $1,479, of which $308 was recorded in
the 2005 Successor Period, and no amortization expense was
recorded in the 2005 Reorganized Period, resulting in a pro
forma adjustment of $1,171.
|
|
|
(e)
|
Reflects the income tax of our pro forma adjustments to the
income statement at an estimated statutory tax rate of 38%.
|
|
|
|
|
|
|
(f)
|
For the 2005 Successor Period, basic earnings per share is
calculated by dividing net loss available to common shareholders
by the weighted average shares outstanding during this period.
|
|
|
|
|
(4)
|
The amounts in this column represent the adjustments to reflect
the pro forma impact of this offering and the estimated use of
proceeds therefrom.
|
|
(5)
|
Unaudited pro forma basic and diluted earnings per share have
been calculated in accordance with the SEC rules for initial
public offerings. These rules require that the weighted average
share calculation give retroactive effect to any changes in our
capital structure as well as the number of shares whose sale
proceeds would be necessary to repay any debt or to pay any
dividend as reflected in the pro forma adjustments. Therefore,
pro forma weighted average shares for purposes of the unaudited
pro forma basic and diluted earnings per share calculation, has
been adjusted to reflect
(i) the
-for-one stock split we expect to effect immediately prior to
the consummation of this offering and (ii) the stock
dividend
of shares,
adjusted for the elimination of any fractional shares, to our
existing stockholders that will be made shortly after the
expiration of the underwriters’ over-allotment option
assuming no exercise of that option, and
includes shares
of our common stock being offered hereby and the stock dividend
of shares.
|
|
(6)
|
Earnings per share data on a diluted basis for the 2005
Successor Period is not shown because it is anti-dilutive as a
result of our loss during this period.
|
40
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The financial statements referred to as the Predecessor Company
financial statements include the consolidated audited financial
statements of Chart Industries, Inc. and its subsidiaries prior
to our Chapter 11 bankruptcy proceedings. Our emergence
from Chapter 11 bankruptcy proceedings resulted in a new
reporting entity and the adoption of Fresh-Start accounting in
accordance with the American Institute of Certified Public
Accountants Statement of
Position
90-7,
“Financial Reporting by entities in Reorganization Under
the Bankruptcy Code.” The financial statements referred to
as the Reorganized Company financial statements include the
consolidated audited financial statements of Chart Industries,
Inc. and its subsidiaries after our emergence from
Chapter 11 bankruptcy proceedings and prior to the
Acquisition and related financing thereof. The financial
statements referred to as the Successor Company financial
statements include the consolidated audited financial statements
of Chart Industries, Inc. and its subsidiaries after the
Acquisition and the related financing thereof.
The following table sets forth the selected historical
consolidated financial information as of the dates and for each
of the periods indicated. The Predecessor Company selected
historical consolidated financial data as of and for the years
ended December 31, 2001 and 2002 is derived from our
audited financial statements for such periods which have been
audited by Ernst & Young LLP, an independent registered
public accounting firm, and which are not included in this
prospectus. The Predecessor Company selected historical
consolidated financial data for the nine months ended
September 30, 2003 is derived from our audited financial
statements for such period included elsewhere in this
prospectus, which have been audited by Ernst & Young
LLP. The Reorganized Company selected historical consolidated
financial data as of September 30, 2003, December 31,
2003 and October 16, 2005 is derived from our audited
financial statements for such periods which have been audited by
Ernst & Young LLP, and which are not included in this
prospectus. The Reorganized Company selected historical
consolidated financial data for the three months ended
December 31, 2003, as of and for the year ended
December 31, 2004 and for the period from January 1,
2005 to October 16, 2005 (the “2005 Reorganized
Period”) is derived from our audited financial statements
for such periods included elsewhere in this prospectus, which
have been audited by Ernst & Young LLP. The Successor
Company selected historical consolidated financial statements
and other data as of December 31, 2005 and for the period
from October 17, 2005 to December 31, 2005 (the
“2005 Successor Period”) is derived from our audited
financial statements for such period included elsewhere in this
prospectus, which have been audited by Ernst & Young
LLP.
You should read the following table together with
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our consolidated
financial statements and related notes, included elsewhere in
this prospectus.
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
Predecessor Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Nine Months
|
|
|
Months
|
|
|
|
|
January 1,
|
|
|
October 17,
|
|
|
|
|
December 31,
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
2005 to
|
|
|
2005 to
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
305,288
|
|
|
$
|
276,353
|
|
|
$
|
197,017
|
|
|
$
|
68,570
|
|
|
$
|
305,576
|
|
|
$
|
305,497
|
|
|
$
|
97,652
|
|
|
|
Cost of sales(1)
|
|
|
226,266
|
|
|
|
205,595
|
|
|
|
141,240
|
|
|
|
52,509
|
|
|
|
211,770
|
|
|
|
217,284
|
|
|
|
75,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
79,022
|
|
|
|
70,758
|
|
|
|
55,777
|
|
|
|
16,061
|
|
|
|
93,806
|
|
|
|
88,213
|
|
|
|
21,919
|
|
|
|
Selling, general and administrative expense
|
|
|
55,128
|
|
|
|
65,679
|
|
|
|
44,211
|
|
|
|
14,147
|
|
|
|
53,374
|
|
|
|
59,826
|
|
|
|
16,632
|
|
|
|
Restructuring and other operating expenses, net(2)(3)
|
|
|
6,867
|
|
|
|
105,897
|
|
|
|
14,564
|
|
|
|
1,051
|
|
|
|
3,220
|
|
|
|
7,659
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,995
|
|
|
|
171,576
|
|
|
|
58,775
|
|
|
|
15,198
|
|
|
|
56,594
|
|
|
|
67,485
|
|
|
|
16,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
17,027
|
|
|
|
(100,818
|
)
|
|
|
(2,998
|
)
|
|
|
863
|
|
|
|
37,212
|
|
|
|
20,728
|
|
|
|
5,148
|
|
|
|
Interest expense, net(4)
|
|
|
21,589
|
|
|
|
17,612
|
|
|
|
10,300
|
|
|
|
1,344
|
|
|
|
4,712
|
|
|
|
4,164
|
|
|
|
5,556
|
|
|
|
Other expense (income)
|
|
|
3,905
|
|
|
|
4,384
|
|
|
|
(8,490
|
)
|
|
|
(407
|
)
|
|
|
(332
|
)
|
|
|
528
|
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,494
|
|
|
|
21,996
|
|
|
|
1,810
|
|
|
|
937
|
|
|
|
4,380
|
|
|
|
4,692
|
|
|
|
6,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes and
minority interest
|
|
|
(8,467
|
)
|
|
|
(122,814
|
)
|
|
|
(4,808
|
)
|
|
|
(74
|
)
|
|
|
32,832
|
|
|
|
16,036
|
|
|
|
(895
|
)
|
|
|
Income tax (benefit) expense
|
|
|
398
|
|
|
|
11,136
|
|
|
|
3,047
|
|
|
|
(125
|
)
|
|
|
10,134
|
|
|
|
7,159
|
|
|
|
(441
|
)
|
|
|
(Loss) income from continuing operations before minority interest
|
|
|
(8,865
|
)
|
|
|
(133,950
|
)
|
|
|
(7,855
|
)
|
|
|
51
|
|
|
|
22,698
|
|
|
|
8,877
|
|
|
|
(454
|
)
|
|
|
Minority interest, net of taxes and other
|
|
|
(199
|
)
|
|
|
(52
|
)
|
|
|
(63
|
)
|
|
|
(20
|
)
|
|
|
(98
|
)
|
|
|
(19
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
|
(9,064
|
)
|
|
|
(134,002
|
)
|
|
|
(7,918
|
)
|
|
|
31
|
|
|
|
22,600
|
|
|
|
8,858
|
|
|
|
(506
|
)
|
|
|
Income from discontinued operations(5)
|
|
|
3,906
|
|
|
|
3,217
|
|
|
|
833
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(5,158
|
)
|
|
$
|
(130,785
|
)
|
|
$
|
(7,085
|
)
|
|
$
|
31
|
|
|
$
|
22,600
|
|
|
$
|
8,858
|
|
|
$
|
(506
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share data(6):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.29
|
)
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(506
|
)
|
|
Weighted average shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,179
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities
|
|
$
|
7,458
|
|
|
$
|
5,249
|
|
|
$
|
19,466
|
|
|
$
|
4,988
|
|
|
$
|
35,059
|
|
|
$
|
15,641
|
|
|
$
|
18,742
|
|
|
|
Cash (used in) provided by investing activities
|
|
|
(6,261
|
)
|
|
|
1,288
|
|
|
|
15,101
|
|
|
|
154
|
|
|
|
(3,317
|
)
|
|
|
(20,799
|
)
|
|
|
(362,250
|
)
|
|
|
Cash (used in) provided by financing activities
|
|
|
504
|
|
|
|
(17,614
|
)
|
|
|
(15,907
|
)
|
|
|
(13,976
|
)
|
|
|
(35,744
|
)
|
|
|
1,708
|
|
|
|
348,489
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization(7)
|
|
$
|
17,783
|
|
|
$
|
14,531
|
|
|
$
|
9,260
|
|
|
$
|
2,225
|
|
|
$
|
8,490
|
|
|
$
|
6,808
|
|
|
$
|
4,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
2Predecessor Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
As of
|
|
|
As of
|
|
|
As of
|
|
|
As of
|
|
|
As of
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,801
|
|
|
$
|
7,225
|
|
|
$
|
27,815
|
|
|
$
|
18,600
|
|
|
$
|
14,814
|
|
|
$
|
11,470
|
|
|
$
|
15,433
|
|
|
|
Working capital(8)(9)
|
|
|
57,438
|
|
|
|
8,853
|
|
|
|
35,826
|
|
|
|
47,161
|
|
|
|
51,292
|
|
|
|
43,486
|
|
|
|
55,454
|
|
|
|
Total assets
|
|
|
408,980
|
|
|
|
279,294
|
|
|
|
299,745
|
|
|
|
299,637
|
|
|
|
307,080
|
|
|
|
343,107
|
|
|
|
641,806
|
(10)
|
|
|
Long-term debt
|
|
|
259,120
|
|
|
|
1,161
|
|
|
|
122,537
|
|
|
|
109,081
|
|
|
|
76,406
|
|
|
|
74,480
|
|
|
|
345,000
|
|
|
|
Total debt
|
|
|
272,083
|
|
|
|
263,900
|
|
|
|
126,012
|
|
|
|
112,561
|
|
|
|
79,411
|
|
|
|
80,943
|
|
|
|
347,304
|
|
|
|
Shareholders’ equity (deficit)
|
|
|
49,340
|
|
|
|
(81,617
|
)
|
|
|
89,865
|
|
|
|
90,807
|
|
|
|
115,640
|
|
|
|
121,321
|
|
|
|
116,330
|
|
(footnotes on next page)
42
|
|
|
|
|
|
(1)
|
In March 2003, we completed the closure of our Wolverhampton,
United Kingdom manufacturing facility, operated by CHEL. On
March 28, 2003, CHEL filed for voluntary administration
under the U.K. Insolvency Act of 1986. CHEL’s application
for voluntary administration was approved on April 1, 2003
and an administrator was appointed. In accordance with
SFAS No. 94, “Consolidation of All Majority-Owned
Subsidiaries,” we are not consolidating the accounts or
financial results of CHEL subsequent to March 28, 2003 due
to the assumption of control of CHEL by the insolvency
administrator. Effective March 28, 2003, we recorded a
non-cash impairment charge of $13.7 million to write off
our net investment in CHEL.
|
|
|
|
|
(2)
|
In 2002, we recorded a non-cash impairment charge of
$92.4 million to write off non-deductible goodwill of the
D&S segment. Further information about this charge is found
in Note A to our audited consolidated financial statements
included elsewhere in this prospectus.
|
|
|
|
|
(3)
|
In September 2003, in accordance with Fresh-Start accounting,
all assets and liabilities were adjusted to their fair values.
See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” for further
discussion. The adjustment to record the assets and liabilities
at fair value resulted in net other income of $5.7 million.
Further information about the adjustment is located in
Note A to our audited consolidated financial statements
included elsewhere in this prospectus.
|
|
|
|
|
(4)
|
Includes derivative contracts valuation income or expense for
interest rate collars to manage interest exposure relative to
term debt.
|
|
|
|
|
(5)
|
This relates to the sale of our Greenville Tube, LLC business in
July 2003. See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” for
additional information.
|
|
|
|
|
(6)
|
Earnings per share data on a diluted basis is not shown for the
2005 Successor Period because it is anti-dilutive as a result of
our loss during this period.
|
|
|
|
|
(7)
|
Includes financing costs amortization for the years ended
December 31, 2001 and 2002, the nine months ended
September 30, 2003 and the 2005 Successor Period of
$1.5 million, $3.2 million, $1.7 million and
$0.3 million, respectively.
|
|
|
|
|
(8)
|
As of December 31, 2002, we were in default on our senior
debt due to violation of financial covenants. In April 2003, the
lenders under our then-existing credit facility waived all
defaults existing at December 31, 2002 and through
April 30, 2003. Since the waiver of defaults did not extend
until January 1, 2004, this debt was classified as a
current liability on our consolidated balance sheet as of
December 31, 2002.
|
|
|
|
|
(9)
|
Working capital is defined as current assets excluding cash
minus current liabilities excluding short-term debt.
|
|
|
|
|
(10)
|
Includes $236.7 million of goodwill and $154.1 million
of finite-lived and indefinite-lived intangible assets as of
December 31, 2005.
|
43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our results of
operations includes periods prior to the consummation of the
Acquisition and periods after the consummation of the
Acquisition. Accordingly, the discussion and analysis of
historical periods does not reflect fully the significant impact
that the Acquisition will have on us, including significantly
increased leverage and liquidity requirements. You should read
the following discussion of our results of operations and
financial condition in conjunction with the “Selected
Historical Consolidated Financial Data” and “Unaudited
Pro Forma Financial Information” sections and our
consolidated financial statements and related notes appearing
elsewhere in this prospectus. Actual results may differ
materially from those discussed below. This discussion contains
forward-looking statements. See “Special Note Regarding
Forward-Looking Statements” and “Risk Factors”
for a discussion of certain of the uncertainties, risks and
assumptions associated with these statements.
Overview
We are a leading independent global manufacturer of highly
engineered equipment used in the production, storage and end-use
of hydrocarbon and industrial gases. We believe we are a
preferred global supplier of engineered equipment used
throughout the liquid gas supply chain. The largest portion of
end-use applications for our products is energy-related. We are
a leading manufacturer of standard and engineered equipment
primarily used for low-temperature and cryogenic applications.
We have developed an expertise in cryogenic systems and
equipment, which operate at low temperatures sometimes
approaching absolute zero (0° Kelvin; -273°
Centigrade; -459° Fahrenheit). The majority of our
products, including vacuum-insulated containment vessels, heat
exchangers, cold boxes and other cryogenic components, are used
throughout the liquid gas supply chain for the purification,
liquefaction, distribution, storage and use of hydrocarbon and
industrial gases.
In 2005, we experienced increased orders, backlog, sales and
gross profit compared to 2004, which was primarily driven by
continued growth in the global industrial and hydrocarbon
processing markets served by our D&S and E&C segments.
Combined orders for 2005 were $511.2 million, which
represented an increase of $118.4 million, or 30.1%,
compared to 2004 orders of $392.8 million, while backlog
was $233.6 million at December 31, 2005 compared to
$129.3 million at December 31, 2004, and represented
growth of 80.7%. In 2005, combined sales were
$403.1 million compared to sales in 2004 of
$305.6 million, reflecting an increase of
$97.5 million, or 31.9%. Our combined gross profit in 2005
was $110.1 million, or 27.3% of sales, and gross profit in
2004 was $93.8 million, or 30.7% of sales. While we
benefited from higher volumes in 2005, our combined gross profit
was negatively impacted by an $8.9 million, or 2.2% of
sales, non-cash charge for adjusting inventory to fair value as
a result of the Acquisition and higher manufacturing costs due
to the move of our medical respiratory product line production
from Burnsville, Minnesota to Canton, Georgia.
The continued growth in many of the markets we serve, our
present customer order trends, our 2005 year end backlog
level, our focus on the energy-related industry, and the
completion of our operational restructuring initiatives provide
a good opportunity for continued improvement in our operating
results in 2006. We believe that our cash flow from operations,
available cash and available borrowings under the senior secured
credit facility will be adequate to meet our working capital,
capital expenditure, debt service and other funding requirements
for the next twelve months and our long-term future contractual
obligations. However, a significant decline in orders and sales
in the U.S. medical respiratory product line, as a result
of announced reductions in U.S. government reimbursement
programs, could have a negative impact on our 2006 operating
results and cash flows.
On August 2, 2005, Chart Industries, Inc. entered into an
agreement and plan of merger with certain of its then-existing
stockholders (the “Principal Stockholders”), First
Reserve and CI Acquisition to purchase shares of common stock
owned by the Principal Stockholders. The Acquisition closed on
October 17, 2005. First Reserve contributed
$111.3 million, which was used to fund a portion of the
Acquisition. The remainder of the cash needed to finance the
Acquisition, including related fees and expenses, was provided
by proceeds of $170.0 million from the issuance of senior
subordinated notes due 2015 and borrowings under the senior
44
secured credit facility. See “The Transactions.” We
refer to our company after the Acquisition as the
“Successor Company.”
Chapter 11 Filing and Emergence
On July 8, 2003, we and all of our then majority-owned
U.S. subsidiaries (the “Predecessor Company”)
filed voluntary petitions for reorganization relief under
Chapter 11 of the U.S. Bankruptcy Code to implement an
agreed upon senior debt restructuring plan through a
pre-packaged plan of reorganization. On September 15, 2003,
we (as reorganized, the “Reorganized Company”) and all
of our then majority-owned U.S. subsidiaries emerged from
Chapter 11 proceedings pursuant to the Amended Joint
Prepackaged Reorganization Plan of Chart Industries, Inc. and
Certain Subsidiaries, dated September 3, 2003.
Our emergence from Chapter 11 bankruptcy proceedings
resulted in a new reporting entity and the adoption of
fresh-start accounting in accordance with the American Institute
of Certified Public Accountants (“AICPA”) Statement of
Position
90-7,
“Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code”
(“SOP
90-7”)
(“Fresh-Start accounting”). We used September 30,
2003 as the date for adopting Fresh-Start accounting in order to
coincide with our normal financial closing for the month of
September 2003. Upon adoption of Fresh-Start accounting, a new
reporting entity was deemed to be created and the recorded
amounts of assets and liabilities were adjusted to reflect their
estimated fair values. Accordingly, the reported historical
financial statements of the Predecessor Company prior to the
adoption of Fresh-Start accounting for periods ended prior to
September 30, 2003 are not necessarily comparable to those
of the Reorganized Company. In this prospectus, references to
our nine-month period ended September 30, 2003 and all
periods ended prior to September 30, 2003 refer to the
Predecessor Company.
SOP
90-7
requires
that financial statements for the period following the
Chapter 11 filing through the bankruptcy confirmation date
distinguish transactions and events that are directly associated
with the reorganization from the ongoing operations of the
business. Accordingly, revenues, expenses, realized gains and
losses and provisions for losses directly associated with the
reorganization and restructuring of the business, including
adjustments to fair value assets and liabilities and the gain on
the discharge of
pre-petition
debt, were
reported separately as reorganization items, net, in the other
income (expense) section of the Predecessor Company’s
consolidated statement of operations for the nine months ended
September 30, 2003. In accordance with Fresh-Start
accounting, all assets and liabilities were recorded at their
respective fair values as of September 30, 2003. Such fair
values represented our best estimates based on independent
appraisals and valuations. In applying Fresh-Start accounting,
adjustments to reflect the fair value of assets and liabilities,
on a net basis, and the restructuring of our capital structure
and resulting discharge of the senior lenders’ pre-petition
debt, resulted in net other income of $5.7 million in the
nine months ended September 30, 2003. The reorganization
value exceeded the fair value of the Reorganized Company’s
assets and liabilities, and this excess is reported as
reorganization value in excess of amounts allocable to
identifiable assets in the Reorganized Company’s
consolidated balance sheet.
45
Operating Results
The following table sets forth the percentage relationship that
each line item in our consolidated statements of operations
represents to sales for the nine months ended September 30,
2003, the three months ended December 31, 2003, the year
ended December 31, 2004, the period from January 1,
2005 to October 16, 2005 (the “2005 Reorganized
Period”) and the period from October 17, 2005 to
December 31, 2005 (the “2005 Successor Period”).
The Predecessor, Reorganized and Successor Company are further
described in our audited financial statements and related notes
thereto included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
Successor
|
|
|
|
|
Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Three Months
|
|
|
|
|
January 1,
|
|
|
October 17,
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
2005 to
|
|
|
2005 to
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
|
|
2003
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
Cost of sales(1)
|
|
|
71.7
|
|
|
|
76.6
|
|
|
|
69.3
|
|
|
|
71.1
|
|
|
|
77.6
|
|
|
Gross profit
|
|
|
28.3
|
|
|
|
23.4
|
|
|
|
30.7
|
|
|
|
28.9
|
|
|
|
22.4
|
|
|
Selling, general and administrative expense(2)(3)(4)(5)(6)
|
|
|
22.5
|
|
|
|
20.6
|
|
|
|
17.5
|
|
|
|
19.6
|
|
|
|
17.0
|
|
|
Acquisition expenses(7)
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
2.2
|
|
|
|
0.0
|
|
|
Employee separation and plant closure costs
|
|
|
0.4
|
|
|
|
1.5
|
|
|
|
1.0
|
|
|
|
0.3
|
|
|
|
0.1
|
|
|
Loss on insolvent subsidiary
|
|
|
6.9
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
Equity expense in joint venture
|
|
|
0.0
|
|
|
|
0.1
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
Operating income (loss)
|
|
|
(1.5
|
)
|
|
|
1.2
|
|
|
|
12.2
|
|
|
|
6.8
|
|
|
|
5.3
|
|
|
(Loss) gain on sale of assets
|
|
|
2.4
|
|
|
|
0.1
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
(0.1
|
)
|
|
Interest expense, net
|
|
|
(5.0
|
)
|
|
|
(2.1
|
)
|
|
|
(1.6
|
)
|
|
|
(1.4
|
)
|
|
|
(5.7
|
)
|
|
Financing costs amortization
|
|
|
(0.9
|
)
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
(0.3
|
)
|
|
Derivative contracts valuation income (expense)
|
|
|
(0.2
|
)
|
|
|
0.1
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
Foreign currency income (loss)
|
|
|
(0.1
|
)
|
|
|
0.5
|
|
|
|
0.1
|
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
|
Reorganization items, net
|
|
|
2.8
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
Income tax (benefit) expense
|
|
|
1.5
|
|
|
|
(0.2
|
)
|
|
|
3.3
|
|
|
|
2.3
|
|
|
|
(0.5
|
)
|
|
(Loss) income from continuing operations
|
|
|
(4.0
|
)
|
|
|
0.0
|
|
|
|
7.4
|
|
|
|
2.9
|
|
|
|
(0.4
|
)
|
|
Income from discontinued operation, net of tax
|
|
|
0.4
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
Net (loss) income
|
|
|
(3.6
|
)
|
|
|
0.0
|
|
|
|
7.4
|
|
|
|
2.9
|
|
|
|
(0.4
|
)
|
|
|
|
|
(1)
|
Includes non-cash inventory valuation charges of
$9.0 million, $0.6 million, $0.2 million,
$5.4 million, and $0.5 million, representing 9.2%,
0.2%, 0.1%, 7.9%, and 0.2%, of sales, for the 2005 Successor
Period, the 2005 Reorganized Period, the year ended
December 31, 2004, the three months ended December 31,
2003, and the nine months ended September 30, 2003,
respectively.
|
|
|
|
(2)
|
Includes $1.5 million, $0.7 million, and
$6.4 million, representing 0.5%, 0.2%, and 3.2% of sales,
for claim settlements, professional fees incurred by us related
to our debt restructuring and bankruptcy reorganization
activities for the 2005 Reorganized Period, the year ended
December 31, 2004, and the nine months ended
September 30, 2003, respectively.
|
|
|
|
(3)
|
Includes stock-based compensation expense of $0.4 million,
$9.5 million and $2.4 million, representing 0.4%, 3.1%
and 0.8% of sales, for the 2005 Successor Period, the 2005
Reorganized Period and the year ended December 31, 2004,
respectively.
|
46
|
|
|
|
(4)
|
Includes charges and losses related to damages caused by
Hurricane Rita of $0.4 million and $1.1 million,
representing 0.4% and 0.4% of sales, for the 2005 Successor
Period and the 2005 Reorganized Period, respectively.
|
|
|
|
(5)
|
Includes a charge for the settlement of former
shareholders’ appraisal rights claims related to the
Acquisition of $0.5 million, or 0.5% of sales, and a charge
for the write-off of purchased in-process research and
development of $2.8 million, or 0.1% of sales, for the 2005
Successor Period and the 2005 Reorganized Period, respectively.
|
|
|
|
(6)
|
Includes amortization expense for intangible assets of
$3.0 million, $2.7 million, $2.8 million,
$0.7 million, and $1.2 million, representing 3.0%,
0.9%, 0.9%, 1.0%, and 0.6%, of sales, for the 2005 Successor
Period, the 2005 Reorganized Period, the year ended
December 31, 2004, the three months ended December 31,
2003, and the nine months ended September 30, 2003,
respectively.
|
|
|
|
(7)
|
Represents expenses incurred by us related to the Acquisition.
|
Segment Information
The following table sets forth sales, gross profit and gross
profit margin for our three operating segments for the periods
indicated during the last three years:
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|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
|
|
Successor
|
|
|
|
|
Company
|
|
|
|
Reorganized Company
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Three Months
|
|
|
|
|
January 1,
|
|
|
|
October 17,
|
|
|
|
|
Ended
|
|
|
|
Ended
|
|
|
Year Ended
|
|
|
2005 to
|
|
|
|
2005 to
|
|
|
|
|
September 30,
|
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|
|
December 31,
|
|
|
December 31,
|
|
|
October 16,
|
|
|
|
December 31,
|
|
|
|
|
2003
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy & Chemicals
|
|
$
|
42,910
|
|
|
|
$
|
15,699
|
|
|
$
|
69,609
|
|
|
$
|
86,920
|
|
|
|
$
|
34,135
|
|
|
|
Distribution and Storage
|
|
|
102,469
|
|
|
|
|
37,863
|
|
|
|
162,508
|
|
|
|
161,329
|
|
|
|
|
47,832
|
|
|
|
Biomedical
|
|
|
51,638
|
|
|
|
|
15,008
|
|
|
|
73,459
|
|
|
|
57,248
|
|
|
|
|
15,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
197,017
|
|
|
|
$
|
68,570
|
|
|
$
|
305,576
|
|
|
$
|
305,497
|
|
|
|
$
|
97,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy & Chemicals
|
|
$
|
12,683
|
|
|
|
$
|
5,405
|
|
|
$
|
21,475
|
|
|
$
|
23,391
|
|
|
|
$
|
10,494
|
|
|
|
Distribution and Storage
|
|
|
25,515
|
|
|
|
|
8,682
|
|
|
|
46,588
|
|
|
|
47,120
|
|
|
|
|
8,861
|
|
|
|
Biomedical
|
|
|
17,579
|
|
|
|
|
1,974
|
|
|
|
25,743
|
|
|
|
17,702
|
|
|
|
|
2,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
55,777
|
|
|
|
$
|
16,061
|
|
|
$
|
93,806
|
|
|
$
|
88,213
|
|
|
|
$
|
21,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy & Chemicals
|
|
|
29.6
|
%
|
|
|
|
34.4
|
%
|
|
|
30.9
|
%
|
|
|
26.9
|
%
|
|
|
|
30.7
|
%
|
|
|
Distribution and Storage
|
|
|
24.9
|
%
|
|
|
|
22.9
|
%
|
|
|
28.7
|
%
|
|
|
29.2
|
%
|
|
|
|
18.5
|
%
|
|
|
Biomedical
|
|
|
34.0
|
%
|
|
|
|
13.2
|
%
|
|
|
35.0
|
%
|
|
|
30.9
|
%
|
|
|
|
16.4
|
%
|
|
Total
|
|
|
28.3
|
%
|
|
|
|
23.4
|
%
|
|
|
30.7
|
%
|
|
|
28.9
|
%
|
|
|
|
22.4
|
%
|
We moved the management and reporting of the LNG alternative
fuel systems product line from the E&C segment to the
D&S segment effective December 31, 2004. All segment
information for all previous periods has been restated to
conform to this presentation.
2005 Successor Period
Sales for the 2005 Successor Period were $97.7 million.
E&C segment sales were $34.1 million and benefited from
volume increases in both heat exchangers and LNG Systems,
primarily due to continued demand growth in the hydrocarbon
processing market. D&S segment sales were $47.8 million
as bulk storage
47
systems and packaged gas systems volume remained strong due to
stable demand in the global industrial gas market and higher
product pricing. BioMedical segment sales for this two month
period were $15.7 million. Sales of medical respiratory
products were unfavorably affected by lower volume in the United
States, and in particular to one of our major customers, due to
announced reductions in government reimbursement programs for
liquid oxygen therapy systems. This unfavorable volume trend in
domestic medical respiratory product sales was partially offset
by continued volume growth in medical respiratory product sales
in Europe and Asia and biological storage systems in the United
States as we further penetrated these markets.
|
|
|
|
|
Gross Profit and Gross Margin
|
For the 2005 Successor Period, gross profit was
$21.9 million, or 22.4% of sales. Overall, the gross profit
was favorably affected by higher volumes in the D&S and
E&C segments. The E&C gross profit of
$10.5 million, or 30.7% of sales, benefited from the
completion of a high margin ethylene heat exchanger and LNG
system emergency order. The D&S segment gross profit of
$8.9 million, or 18.5% of sales, was also favorably
impacted by improved product pricing. The BioMedical gross
profit of $2.6 million, or 16.4% of sales, benefited from
productivity improvements at the Canton, Georgia facility
related to the manufacturing of medical respiratory products.
The BioMedical segment margins in the 2005 Reorganized Period
were negatively impacted by higher costs related to
inefficiencies from
ramping-up
production
of the medical respiratory product line after completing the
move from the Burnsville, Minnesota facility to the Canton,
Georgia facility. In addition, overall company gross profit
included a $8.9 million, or 9.1% of sales, charge for the
fair value adjustment of finished goods and
work-in
-process
inventory recorded under purchase accounting as a result of the
Acquisition. This fair value inventory adjustment was charged to
cost of sales as the inventory was sold. The D&S and
BioMedical segments’ gross profit charges were
$6.4 million, or 13.4% of sales, and $2.5 million, or
15.9% of sales, respectively, for this fair value inventory
adjustment. The E&C segment was not required to record an
inventory fair value adjustment due to the use of the percentage
of completion method for revenue recognition in this segment.
|
|
|
|
|
Selling, General and Administrative Expenses
(“SG&A”)
|
SG&A expense for the 2005 Successor Period was
$16.6 million, or 17.0% of sales. SG&A expense was
affected by higher employee-related and marketing costs in the
D&S and E&C segments to support their continued sales
growth. SG&A expense included $3.0 million, or 3.1% of
sales, of amortization expense for finite-lived intangible
assets. In addition, SG&A expense included a
$0.5 million, or 0.5% of sales, charge for the settlement
of former shareholders’ appraisal rights claims as a result
of the Acquisition and $0.4 million, or 0.4% of sales, of
losses and charges related to damage caused by Hurricane Rita,
at our New Iberia, Louisiana facilities.
|
|
|
|
|
Employee Separation and Plant Closure Costs
|
For the 2005 Successor Period, we recorded $0.1 million of
employee separation and plant closure costs, primarily related
to the closure of the Plaistow, New Hampshire and Burnsville,
Minnesota facilities.
|
|
|
|
|
Other Expenses and Income
|
Net interest expense and financing costs amortization for the
2005 Successor Period, was $5.6 million and
$0.3 million, respectively, and related to the senior
secured credit facility that was entered into, and the senior
subordinated notes that were issued, on October 17, 2005 in
connection with the Acquisition.
We recorded $0.1 million of foreign currency losses due to
certain of our subsidiaries entering into transactions in
currencies other than their functional currencies.
48
Income tax benefit of $0.4 million for the 2005 Successor
Period represents taxes on both domestic and foreign earnings at
an annual effective income tax rate of 49.3%. Our taxes were
affected by tax benefits from foreign sales and research and
development and foreign tax credits.
As a result of the foregoing, we reported a net loss for the
2005 Successor Period of $0.5 million.
2005 Reorganized Period
Sales for the 2005 Reorganized Period were $305.5 million.
E&C segment sales were $86.9 million and benefited from
volume increases in both heat exchangers and LNG systems as a
result of strong order levels over the past seven quarters,
which has included three large orders each of approximately
$20.0 million, driven by continued growth in the LNG and
natural gas segments of the hydrocarbon processing market.
D&S segment sales were $161.3 million as bulk storage
systems and packaged gas systems volume remained strong due to
continued demand growth in the global industrial gas market.
Other factors contributing favorably to D&S segment sales
for this period were higher product pricing, and favorable
foreign currency translation of approximately $3.5 million
as a result of the weaker U.S. dollar compared to the Euro
and Czech Koruna. BioMedical segment sales were
$57.2 million. Sales of medical respiratory products were
unfavorably affected by lower volume in the United States, and
in particular to one of our major customers, primarily resulting
from announced U.S. government reimbursement reductions for
liquid oxygen therapy systems. This unfavorable volume trend in
U.S. medical respiratory product sales was partially offset
by continued sales volume growth in medical respiratory product
sales in Europe and Asia and biological storage systems in the
United States, Europe and Asia as we further penetrated these
markets.
|
|
|
|
|
Gross Profit and Gross Margin
|
For the 2005 Reorganized Period gross profit was
$88.2 million, or 28.9% of sales. Overall, gross profit was
favorably affected by higher volumes in the D&S and E&C
segments, while gross profit margin was unfavorably affected by
higher manufacturing costs in the BioMedical segment and a shift
in product mix in the E&C segment. The gross profit margins
in the E&C segment of $23.4 million, or 26.9% of sales,
during the period saw overall mix shifts in sales from higher
margin heat exchanger projects to lower margin LNG systems
projects and also a shift within heat exchangers to lower margin
projects. In addition, the D&S segment gross profit of
$47.1 million, or 29.2% of sales, benefited from price
increases that were implemented during the year to offset higher
raw material steel costs that had been incurred in previous
years. Gross profit in the BioMedical segment of
$17.7 million, or 30.9% of sales, deteriorated primarily
due to lower U.S. medical respiratory product volume and
lower productivity and inventory valuation adjustments of
$0.6 million primarily in the first half of 2005, as a
result of the transition of the medical respiratory product line
manufacturing from Burnsville, Minnesota to Canton, Georgia.
SG&A expense for the 2005 Reorganized Period was
$59.8 million or 19.6% of sales. SG&A expense was
affected by an increase in employee-related and marketing costs
in the D&S and E&C segments to support their continued
sales growth. SG&A expense during this period included
stock-based compensation expense of $9.5 million. A
significant portion of this charge was incurred as a result of
stock options that were exercised in conjunction with the
Acquisition further described above. SG&A expense included a
charge of $2.8 million, or 0.9% of sales, for the
write-off
of purchased
in-process
research and
development. In addition, SG&A expense included
$1.1 million of costs and losses related to damage caused
by Hurricane Rita at the New Iberia, Louisiana facilities and a
$1.1 million charge for the settlement of a finders’
fee claim asserted by a former shareholder in connection with
our 2003 bankruptcy reorganization.
49
During the 2005 Reorganized Period, we incurred
$6.6 million in expenses related to the Acquisition.
|
|
|
|
|
Employee Separation and Plant Closure Costs
|
For the 2005 Reorganized Period, we recorded $1.1 million
of employee separation and plant closure costs, primarily
related to the closure of the Plaistow, New Hampshire and
Burnsville, Minnesota facilities.
|
|
|
|
|
Other Expenses and Income
|
We recorded a net gain on the sale of assets of
$0.1 million, which included a gain of $1.7 million on
the settlement of a promissory note receivable related to the
2003 sale of our former Greenville Tube, LLC stainless tubing
business, a $1.2 million loss for the write-off of several
assets that were deemed to be impaired, and a loss of
$0.5 million for the write down of the Plaistow facility
held for sale to its estimated fair value.
Net interest expense for the 2005 Reorganized Period was
$4.2 million. We experienced higher interest expense during
this period as a result of higher interest rates and the
increase in the outstanding balance under the revolving credit
line of our then existing credit facility.
We recorded $0.7 million of foreign currency losses due to
certain of our subsidiaries entering into transactions in
currencies other than their functional currencies.
Income tax expense of $7.2 million for the 2005 Reorganized
Period represents taxes on both domestic and foreign earnings at
an annual effective income tax rate of 44.6%. Our income tax
expense was unfavorably impacted by approximately
$1.4 million due to the non-deductible charge for purchased
in-process research and development of $2.8 million and
Acquisition costs of $1.2 million.
As a result of the foregoing, we reported net income of
$8.9 million for the 2005 Reorganized Period.
Year Ended December 31, 2004
Sales for 2004 of $305.6 million were positively affected
by volume and price increases, a recovery of the global
industrial gas market and favorable foreign currency translation
as a result of the weakening of the U.S dollar compared to the
Euro and Czech Koruna. Sales in the E&C segment for 2004
were $69.6 million and both the heat exchanger and LNG
system product lines benefited from higher volume primarily in
the Asian, African and Middle Eastern markets. D&S segment
sales were $162.5 million in 2004 and benefited favorably
from volume increases in cryogenic bulk storage systems,
cryogenic packaged gas systems and beverage liquid
CO
2
systems driven primarily by a recovery in the global industrial
gas market. Price increases and surcharges driven by higher raw
material costs and favorable foreign currency translation as a
result of the weakening of the U.S. Dollar compared to the
Euro and Czech Koruna also had a positive impact on D&S
segment sales. Sales in the BioMedical segment were
$73.4 million. Sales of our biological storage systems and
medical products experienced volume increases in both the U.S.
and European markets. Sales of MRI and other products
deteriorated in 2004 as this product line’s primary
customer continued to transfer volume to lower cost
manufacturing regions.
50
|
|
|
|
|
Gross Profit and Gross Margin
|
Gross profit for 2004 was $93.8 million or 30.7% of sales.
The gross profit was positively affected by volume increases
across all operating segments, and product price increases and
favorable foreign currency translation in the D&S segment.
The E&C segment gross profit and related margin were
$21.5 million and 30.9% of sales, respectively, in 2004.
The E&C segment benefited from higher volumes and the
delivery of a premium-priced, expedited order that was needed to
put a natural gas producer’s ethane recovery plant back in
service. A shift to lower margin industrial heat exchangers and
LNG VIP had an unfavorable impact on the E&C segment gross
profit margin. D&S segment gross profit and related margin
were $46.6 million and 28.7% of sales, respectively. The
D&S segment gross profit margin was positively affected by
product price increases and surcharges to offset higher raw
material costs that had been incurred, higher sales volume and
the realization of savings from our restructuring efforts. The
D&S segment gross profit margin was unfavorably affected by
a shift to lower margin bulk products. Gross profit and related
margin for the BioMedical segment were $25.7 million and
35.0% of sales, respectively. Gross profit margins for medical
and biological storage systems products were positively impacted
by higher volume and cost reductions, and MRI and other products
margins were unfavorably affected by higher material costs and
unabsorbed overhead costs due to lower sales volume.
SG&A expense for 2004 was $53.4 million, or 17.5% of
sales. In 2004, we benefited from cost savings realized as a
result of our continued restructuring efforts, including the
lower professional expenses that had been incurred previously to
restructure our senior debt in 2003 and $0.9 million of
life insurance proceeds from our voluntary deferred income plan.
In 2004, we incurred $5.3 million, or 1.7% of sales, of
incentive compensation expense for achieving our operating
targets, $2.4 million, or 0.8% of sales, of compensation
expense resulting from the sale of 28,797 shares of our
common stock to our chief executive officer at a price below the
closing market price on the date of sale and the issuance of new
stock options to certain key employees in 2004,
$2.8 million of expense, or 0.9% of sales, in 2004 related
to the amortization of certain intangible assets recorded in
September 2003 under Fresh-Start accounting, and
$0.9 million of selling expense, or 0.3% of sales related
to the settlement of two specific customer product claims that
were outside of our normal warranty period.
|
|
|
|
|
Employee Separation and Plant Closure Costs
|
In 2004, we continued our manufacturing facility restructuring
plan, which commenced with the 2003 closure of our E&C
segment sales and engineering office in Westborough,
Massachusetts. We announced in December 2003 and January 2004
the closure of our D&S segment manufacturing facility in
Plaistow, New Hampshire and the BioMedical segment manufacturing
and office facility in Burnsville, Minnesota, respectively. In
each of these facility closures, we did not exit the product
lines manufactured at those sites, but moved manufacturing to
other facilities with available capacity, most notably New
Prague, Minnesota for engineered tank production and Canton,
Georgia for medical tank production. The Plaistow facility
closure was completed in the third quarter of 2004. We incurred
capital expenditures in 2004 of $2.5 million for
improvements and additions to the Canton, Georgia facility, and
completed the closure of the Burnsville, Minnesota facility in
the first quarter of 2005.
During 2004, we recorded employee separation and plant closure
costs of $3.2 million related to the manufacturing facility
reduction efforts and overall headcount reduction programs
described above. The total charges for 2004 included
$0.4 million of expense for contract termination costs,
$1.3 million severance and other benefits related to
terminating certain employees at these and other sites, and
$1.5 million for other associated costs. In addition, we
recorded a non-cash inventory valuation charge of
$0.2 million, included in cost of sales, for the write-off
of inventory at these sites. At December 31, 2004, we had a
reserve of $2.8 million remaining for the closure of these
facilities, primarily for lease termination and severance costs.
51
We recorded $0.1 million of equity loss related to our
Coastal Fabrication joint venture in 2004. In February 2004, our
Coastal Fabrication joint venture executed an agreement to
redeem the joint venture partner’s 50% equity interest. As
a result of the elimination of the joint venture partner and the
assumption of 100% of control by us, the assets, liabilities and
operating results of Coastal Fabrication are included in the
consolidated financial statements subsequent to February 2004.
In conjunction with the closure of the Burnsville, Minnesota
facility, we sold this facility in October 2004 for gross
proceeds of $4.5 million and recorded a loss on the sale of
$0.4 million. The proceeds of this sale were used to pay
down $0.9 million of debt outstanding under an industrial
revenue bond and the balance was used for working capital
purposes. In April 2004, we sold for $0.6 million of cash
proceeds a vacant building and a parcel of land at our New
Prague, Minnesota facility that was classified as an asset held
for sale in our consolidated balance sheet as of
December 31, 2003. In August 2004, we sold for
$1.1 million in cash proceeds, equipment at our Plaistow,
New Hampshire facility, resulting in a $0.6 million gain on
the sale of assets. We recorded a $0.4 million loss on the
sale of assets related to adjusting the Plaistow land and
building to fair value less cost to sell based upon an agreement
executed in September 2004 to sell the Plaistow land and
building. The land and building related to the Plaistow facility
are included in “assets held for sale” on our
consolidated balance sheet as of December 31, 2004.
Net interest expense for 2004 was $4.8 million. This lower
expense is attributable primarily to our debt restructuring in
September 2003 in conjunction with the Reorganization Plan and
the reduction in the debt balance as a result of
$40.0 million of aggregate voluntary prepayments on our
then existing term loan at the end of 2003 and during 2004.
|
|
|
|
|
Derivative Contracts Valuation Income and Expense
|
We entered into an interest rate derivative contract in the form
of a collar in March 1999 to manage interest rate risk exposure
relative to our debt. This collar had a notional value of
$19.1 million at December 31, 2004 and expired in
March 2006. The fair value of the contract related to the collar
outstanding at December 31, 2004 is a liability of
$0.3 million and is recorded in accrued interest. The
change in fair value of the contracts related to the collars
during 2004 of $0.1 million is recorded in derivative
contracts valuation income.
We recorded a $0.5 million of foreign currency
remeasurement gain in 2004 as result of certain of our
subsidiaries entering into transactions in currencies other than
their functional currency.
In 2004, we recorded income tax expense of $10.1 million,
which primarily reflects the income tax expense associated with
U.S. and foreign earnings and a reduction in tax accruals for
prior tax periods at an annual effective tax rate of 30.9%.
52
As a result of the foregoing, we recorded net income of
$22.6 million in 2004.
Three Months Ended December 31, 2003
Sales for the three months ended December 31, 2003 were
$68.6 million and continued to be negatively impacted by
our prolonged debt restructuring initiatives and the resultant
reorganization under Chapter 11 of the U.S. Bankruptcy
Code, but not as significantly as during the first nine months
of 2003. Sales in the E&C segment were $15.7 million.
Heat exchanger and process system sales were favorably impacted
by volume and price increases in the hydrocarbon processing
market and began to recover from the prolonged impact of the
debt restructuring and bankruptcy reorganization. D&S
segment sales were $37.9 million during this period as
continued weakness in the global industrial gas market had an
unfavorable impact on bulk storage systems sales. In addition,
LNG fueling systems were affected by lower volume primarily as a
result of a decline in the economies of West Coast and South
Central states of the United States and our financial
difficulties. However, packaged gas and beverage liquid
CO
2
systems benefited from higher sales volumes. Sales in the
BioMedical segment for the three months ended December 31,
2003 were $15.0 million. Sales of biological storage
systems and medical products benefited from higher volume, while
the MRI components sales declined due to lower volume as this
product line’s primary customer transferred volume to lower
cost manufacturing regions.
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Gross Profit and Gross Margin
|
For the three months ended December 31, 2003, gross profit
was $16.1 million or 23.4% of sales. During this three
month period, we included as a component of cost of sales a
charge for the fair value
write-up
in inventory
value as required under Fresh-Start accounting at
September 30, 2003. The charge was included as a component
of cost of sales as the inventory was sold during the three
months ended December 31, 2003. The dollar value of this
adjustment and its percentage reduction on gross profit margin
by operating segment for the three months ended
December 31, 2003 was as follows: $2.2 million and
5.8% of sales for the D&S segment, and $3.2 million and
21.3% of sales for the BioMedical segment. A similar valuation
adjustment for inventory in the E&C segment was not required
due to our use of the percentage of completion method for
revenue recognition in this segment.
In addition, the gross profit margin in the E&C segment
benefited from improved pricing in the hydrocarbon processing
market, cost savings recognized due to the closures of our
Wolverhampton, U.K. heat exchanger manufacturing facility and
Westborough, Massachusetts engineering facility. The D&S
segment gross profit margin was positively impacted by the
overhead cost savings from the closure of our Costa Mesa,
California and Columbus, Ohio manufacturing facilities. Gross
profit margin in the BioMedical segment was negatively impacted
further by lower margins for MRI cryostat components due to
lower pricing and unabsorbed overhead costs due to reduced
volume.
SG&A expense for the three months ended December 31,
2003 was $14.1 million, or 20.6% of sales. During this
three month period, we realized cost savings from the
elimination of a significant number of salaried employees from
its operational restructuring efforts described further below.
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Employee Separation and Plant Closure Costs
|
During the three months ended December 31, 2003, we
recorded employee separation and plant closure costs of
$1.0 million related to the manufacturing facility
reduction efforts and overall employee reduction programs
described further below. These charges included
$0.8 million for severance and other benefits related to
terminating certain employees and $0.2 million of plant
closure costs. At December 31, 2003, we
53
had a reserve of $3.4 million remaining for the closure of
these facilities, primarily for lease termination and severance
costs.
We recorded $0.04 million of equity loss from our Coastal
Fabrication joint venture for the three months ended
December 31, 2003.
Net interest expense for the three months ended
December 31, 2003 was $1.4 million and reflects
interest expense recorded under the credit facility entered into
on September 15, 2003 under the Reorganization Plan.
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Derivative Contracts Valuation Expense
|
For the three months ended December 31, 2003, we recorded
$0.05 million of derivative contracts valuation income for
our interest rate collar that expired in March 2006 and had a
notional value of $25.5 million at September 30, 2003.
We recorded $0.4 million foreign currency remeasurement
gain for the three months ended December 31, 2003 as result
of certain of our subsidiaries entering into transactions in
currencies other than their functional currency.
We recorded an income tax benefit of $0.1 million for the
three months ended December 31, 2003 for losses incurred
primarily as a result of the inventory valuation adjustment
under Fresh-Start accounting explained above and a reduction in
tax accruals for prior tax periods.
As a result of the foregoing, we had net income of
$0.03 million for the three months ended December 31,
2003.
Nine Months Ended September 30, 2003
Sales for the nine months ended September 30, 2003 were
negatively impacted by our prolonged debt restructuring
initiatives and the resultant reorganization under
Chapter 11 of the U.S. Bankruptcy Code, as certain
customers reduced order quantities, delayed signing significant
new orders, did not automatically renew supply contracts that
expired in 2003, and contracted with other competitors, due to
the uncertainty created by our leverage situation and bankruptcy
filing. We believe our E&C segment experienced the most
significant negative impact of the Chapter 11 filing, since
products in this segment frequently have extended production
times and significant dollar values.
For the nine months ended September 30, 2003, sales were
$197.0 million. E&C segment sales were
$42.9 million in the first nine months of 2003. The E&C
segment was unfavorably impacted by lower sales volume in the
process system market, and benefited from higher sales volume
for heat exchangers in the hydrocarbon processing market.
D&S segment sales were $102.5 million for the first
nine months of 2003 and were negatively affected by the
continued weak global market for industrial bulk storage
systems. BioMedical segment sales were $51.6 million in the
first nine months of 2003. Medical products and biological
storage systems sales were positively affected by increased
international volume, while MRI product sales were unfavorably
impacted by lower volume.
54
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Gross Profit and Gross Margin
|
Gross profit and the related margin for the first nine months of
2003 were $55.8 million and 28.3% of sales. The gross
profit and related margin were favorably affected in the E&C
and D&S segments primarily by the realization of operational
cost savings from our manufacturing facility rationalization
plan that commenced in early 2002. Gross profit margin in the
BioMedical segment was negatively impacted by a temporary
shut-down of our Denver, Colorado manufacturing plant in the
last half of March 2003 due to an unanticipated deferral until
the second quarter of 2003 of MRI product orders at the request
of the product line’s only customer, and by a temporary
shut-down of this same facility in June 2003 due to a
weather-related extended power outage.
SG&A expense for the first nine months of 2003 was
$44.2 million, or 22.4% of sales. We recorded
$6.0 million, or 3.1% of sales, of SG&A expense in the
first nine months of 2003 for fees paid to professional advisors
related to our efforts to restructure our senior debt.
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Employee Separation and Plan Closure Costs
|
We recorded $0.9 million of employee separation and plant
closure costs in the first nine months of 2003. This expense
relates substantially to the closure of the E&C
segment’s Wolverhampton, U.K. manufacturing facility and
the engineering office in Westborough, Massachusetts and the
closure of the D&S segment’s manufacturing facilities
in Costa Mesa, California and Columbus, Ohio and consisted
primarily of lease termination costs and severance.
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Loss on Insolvent Subsidiary
|
In March 2003, we completed the closure of our Wolverhampton,
U.K. manufacturing facility, operated by Chart Heat Exchangers
Limited (“CHEL”). We have continued to manufacture
heat exchangers at our La Crosse, Wisconsin facility. On
March 28, 2003, CHEL filed for a voluntary administration
under the U.K. Insolvency Act of 1986. CHEL’s application
for voluntary administration was approved on April 1, 2003
and an administrator was appointed. In accordance with
Statements of Financial Accounting Standards (“SFAS”)
No. 94, “Consolidation of All Majority-Owned
Subsidiaries,” we are not consolidating the accounts or
financial results of CHEL subsequent to March 28, 2003 due
to the assumption of control of CHEL by the insolvency
administrator. Effective March 28, 2003, we recorded a
non-cash impairment charge of $13.7 million to write off
our net investment in CHEL.
On July 3, 2003, we sold certain assets and liabilities of
our former Greenville Tube, LLC stainless steel tubing business,
which we previously reported as a component of our E&C
segment. We received gross proceeds of $15.5 million,
consisting of $13.5 million in cash and $2.0 million
in a long-term subordinated note, and recorded a gain of
$3.7 million in the third quarter of 2003. In accordance
with SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets,” we classified the
operating results of this business as a discontinued operation
on our consolidated statement of operations for the nine-month
period ended September 30, 2003. We reported income from
discontinued operation, net of taxes of $0.8 million in the
first nine months of 2003.
As part of closing our Columbus, Ohio manufacturing facility, we
sold our cryopump and valves product lines in the second quarter
of 2003 for net proceeds of $2.3 million and recorded a
$0.9 million gain in other income, and sold various fixed
assets of the Columbus, Ohio facility in the first quarter of
2003 for net proceeds of $0.2 million and recorded a
$0.2 million gain in other income.
55
Net interest expense was $9.9 million for the nine months
ended September 30, 2003. We recorded interest expense on
amounts outstanding under the term loan portion and revolving
credit loan portion of our credit facility negotiated by the
Predecessor Company in March 1999 and under the Series 1
Incremental Revolving Credit Facility and the Series 2
Incremental Revolving Credit Facility entered into by the
Predecessor Company in November 2000 and in April 2001,
respectively until July 8, 2003, the date we filed our
Chapter 11 bankruptcy petitions, but not thereafter. As a
result, interest expense for the nine month period ended
September 30, 2003 does not include approximately
$3.8 million that would have been payable under the terms
of these facilities had we not filed for Chapter 11
bankruptcy protection.
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Financing Costs Amortization
|
Financing costs amortization expense was $1.7 million for
the nine months ended September 30, 2003. We recorded
financing costs amortization expense related to the credit
facility negoatiated by the Predecessor Company in March 1999
until July 8, 2003, the date we filed our Chapter 11
bankruptcy petitions, but not thereafter. We did not record any
financing costs amortization expense subsequent to the third
quarter of 2003 related to our post-bankruptcy credit facilities.
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Derivative Contracts Valuation Expense
|
We recorded $0.4 million of derivative contracts valuation
expense in the nine month period ended September 30, 2003
for our interest rate collar that expired in March 2006 and has
a notional value of $26.7 million at September 30,
2003.
We recorded a $0.3 million of foreign currency
remeasurement loss for the nine months ended September 30,
2003 as result of certain of our subsidiaries entering into
transactions in currencies other than their functional currency.
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Reorganization Items, Net
|
The Predecessor Company recorded a net gain of $5.7 million
for the nine months ended September 30, 2003 as a result of
adopting Fresh-Start accounting. This net gain was comprised of
certain adjustments to the fair value of assets and liabilites
resulting in a net charge of $38.6 million, restructuring
of the Predecessor Company’s capital structure, including a
discharge of the senior lenders pre-petition debt, resulting in
a net gain of $52.2 million, and charges of
$7.9 million for advisory fees and severance directly
related to the reorganization. In accordance with Fresh-Start
accounting, all assets and liabilities were recorded at their
estimated fair values as of September 30, 2003. Such fair
values represented our best estimates based on independent
appraisals and valuations.
Income tax expense of $3.0 million in the first nine months
of 2003 consisted of tax benefit from reversals of domestic
income tax reserves associated with resolved tax contingencies,
partially offset by taxes on earnings of foreign subsidiaries.
At September 30, 2003, we had a net deferred tax liability
of $6.7 million, which represents foreign deferred tax
liabilities. At September 30, 2003, we had a full valuation
allowance against our domestic net deferred tax assets in
accordance with SFAS No. 109, “Accounting for
Income Taxes,” based upon management’s assessment that
it was more likely than not that the net deferred tax assets
would not be realized. Pursuant to Section 108 of the
Internal Revenue Code, we materially reduced certain tax
attributes on January 1, 2004 due to the recognition of
cancellation of indebtedness income in the three-month period
ended September 30, 2003.
56
As a result of the foregoing, we reported a net loss of
$7.1 million for the first nine months of 2003.
Orders and Backlog
We consider orders to be those for which we have received a firm
signed purchase order or other written contractual commitment
from the customer. Backlog is comprised of the portion of firm
signed purchase orders or other written contractual commitments
received from customers that we have not recognized as revenue
upon shipment or under the percentage of completion method.
Backlog can be significantly affected by the timing of orders
for large projects, particularly in the E&C segment, and is
not necessarily indicative of future backlog levels or the rate
at which backlog will be recognized as sales. Our backlog at
December 31, 2005, 2004 and 2003 was $233.6 million,
$129.3 million and $49.6 million, respectively. This
significant increase in backlog is primarily attributable to the
growth in the global industrial gas and the LNG and natural gas
segments of the hydrocarbon processing markets served by the
E&C and D&S segments. Substantially all of our
December 31, 2005 backlog is scheduled to be recognized as
sales during 2006.
The table below sets forth orders and backlog by segment for the
last three years:
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Predecessor
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Successor
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Company
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Reorganized Company
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Company
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Nine Months
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Three Months
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January 1,
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October 17,
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Ended
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Ended
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Year Ended
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2005 to
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2005 to
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September 30,
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December 31,
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December 31,
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October 16,
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December 31,
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2003
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2003
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2004
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2005
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|
2005
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(Dollars in thousands)
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Orders
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Energy & Chemicals
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$
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28,621
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$
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15,262
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$
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121,793
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$
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130,786
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$
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67,232
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Distribution & Storage
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105,233
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37,696
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193,156
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191,188
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45,859
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Biomedical
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52,751
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14,492
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77,893
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62,396
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13,768
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Total
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$
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186,605
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$
|
67,450
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|
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$
|
392,842
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|
|
$
|
384,370
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|
|
$
|
126,859
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Backlog
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Energy & Chemicals
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$
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20,673
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$
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19,834
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|
|
$
|
70,766
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$
|
114,633
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$
|
147,732
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Distribution & Storage
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28,591
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|
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27,993
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|
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53,900
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|
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83,194
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|
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79,524
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Biomedical
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2,517
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|
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1,808
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|
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4,613
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|
|
|
8,388
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|
|
|
|
6,383
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
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$
|
51,781
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|
|
|
$
|
49,635
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|
|
$
|
129,279
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|
|
$
|
206,215
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|
|
$
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233,639
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Over the last two years, orders have increased significantly,
particularly in the E&C and D&S segments, as a result of
continued demand growth in the global industrial and the LNG and
natural gas segments of the hydrocarbon processing markets. In
addition, the E&C segment has benefited from several large
heat exchanger and LNG systems, and emergency orders during this
period.
For the 2005 Successor Period, orders were $126.9 million.
E&C segment orders of $67.2 million remained strong
during this period and included several large heat exchanger and
LNG systems orders, including an air separation heat exchanger
order of $16.0 million. D&C segment orders of
$45.9 million were driven by continued strong packaged gas
system orders. Bulk storage systems and packaged gas systems
orders were $26.9 million and $18.9 million,
respectively for this period. Biomedical segment orders were
$13.8 during this period as orders in the European and Asian
market medical respiratory and U.S. biological storage
system products order levels remained strong, while
U.S. medical respiratory product orders continued to
decline. This decline is explained further below.
Orders for the 2005 Reorganized Period were $384.4 million.
E&C segment orders of $130.8 million remained strong
during this period and included a $21.0 million LNG VIP
order and a $10.7 million hydrocarbon processing heat
exchanger order. D&C segment orders of $191.2 million
were driven by continued strong bulk storage systems orders and
strong packaged gas system orders, which were $118.5 mil-
57
lion and $72.7 million, respectively. This strong order
level in the D&S segment is driven by continued demand in
the global industrial gas markets served by us. Biomedical
segment orders were $62.4 million, as orders for European
and Asian medical respiratory products and U.S. biological
storage system products continued favorable growth trends due to
both continued market penetration and market growth.
U.S. medical respiratory product orders during this period
were unfavorably impacted by lower orders from a significant
customer and announced government reimbursement reductions for
liquid oxygen therapy systems.
For the year ended December 31, 2004, orders of
$392.8 million were positively affected by improvements in
the markets served by all three segments. During 2004, the
E&C segment showed a significant increase in orders to
$121.8 million, due to increased orders for both the heat
exchangers and LNG systems product lines, including orders of
$20.4 million and $19.3 million. The demand increase
was mainly due to the recovery of the global industrial gas
markets and the continuing development of a worldwide natural
gas market. The D&S segment orders significantly increased
in 2004 to $193.2 million as bulk storage and packaged gas
products experienced increased demand as a result of a recovery
in the global industrial gas market. During 2004, the BioMedical
segment continued its previous trend of increasing order
performance with orders of $77.9 million, driven by strong
demand for medical respiratory products and biological storage
systems both in the U.S. and international markets. Orders for
MRI components continued to decline during 2004 as the product
line’s single customer continued to move business to lower
cost manufacturing countries.
For the three months ended December 31, 2003, orders were
$67.5 million and for the nine months ended
September 30, 2003 were $186.6 million. Although order
levels began to improve during the last three months of 2003,
orders during the first nine months of 2003 were negatively
affected by customer concerns of uncertainty relating to the
prolonged debt restructuring initiative and Chapter 11
bankruptcy reorganization, particularly within the E&C
segment. BioMedical segment orders during both periods of 2003
were fueled by strong demand for medical respiratory products,
but were unfavorably impacted by a reduction in orders for MRI
components from its sole customer as they continue to source the
product from suppliers in low cost manufacturing countries.
Liquidity and Capital Resources
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Debt Instruments and Related Covenants
|
In connection with the Acquisition, we entered into a
$240.0 million senior secured credit facility and completed
the $170.0 million offering of
9
1
/
8
% senior
subordinated notes due 2015. We repaid the term loan portion of
our then existing credit facility (the term loan portion and
revolving credit portion of the facility are referred to
collectively as the “2003 Credit Facility”) and
certain other debt on or before October 17, 2005, the
closing date of the Acquisition. The senior secured credit
facility consists of a $180.0 million term loan credit
facility and a $60.0 million revolving credit facility, of
which $35.0 million may be used for the issuance of letters
of credit. The term loan was fully funded on the closing date.
The term loan matures on October 17, 2012 and the revolving
credit portion of the senior secured credit facility matures on
October 17, 2010. As a result of a $5.0 million
voluntary principal prepayment in December 2005, the term loan
requires quarterly principal payments that equal 0.8% per
annum of the funded balance commencing in September 2008 and a
remaining balloon payment on the maturity date. Future principal
payments will be adjusted for any voluntary prepayments. The
interest rate under the senior secured credit facility is, at
our option, the Alternative Base Rate (“ABR”) plus
1.0% or LIBOR plus 2.0% on the term loan, and ABR plus 1.5% or
LIBOR plus 2.5% on the revolving credit portion of the senior
secured credit facility. In addition, we are required to pay an
annual administrative fee of $0.1 million, a commitment fee
of 0.5% on the unused revolving credit balance, a letter of
credit participation fee of 2.5% per annum on the letter of
credit exposure and letter of credit issuance fee of 0.25%. The
obligations under the senior secured credit facility are secured
by substantially all of the assets of our domestic subsidiaries
and 65% of the capital stock of our
non-U.S.
subsidiaries.
See “Description of Indebtedness—Senior Secured Credit
Facility.”
The notes are due in 2015 with interest payable semi-annually on
April 15th and October 15th. Any of the notes may be
redeemed beginning on October 15, 2010. The initial
redemption price is 104.563% of the principal amount, plus
accrued interest. Also, any of the notes may be redeemed solely
at our option at any
58
time prior to October 15, 2010, plus accrued interest and a
“make-whole” premium. In addition, before
October 15, 2008, up to 35% of the notes may be redeemed
solely at our option at a price of 109.125% of the principal
amount, plus accrued interest, using the proceeds from sales of
certain kinds of capital stock. The notes are our general
unsecured obligations and are subordinated in right of payment
to all of our existing and future senior debt, including the
senior secured credit facility,
pari passu
in right of
payment with all of our future senior subordinated indebtedness,
senior in right of payment with any of our future indebtedness
that expressly provides for its subordination to the notes, and
unconditionally guaranteed jointly and severally by
substantially all of our domestic subsidiaries.
The senior secured credit facility and provisions of the
indenture governing the notes contain a number of customary
covenants, including, but not limited to, restrictions on our
ability to incur additional indebtedness, create liens or other
encumbrances, sell assets, enter into sale and lease-back
transactions, make certain payments, investments, loans,
advances and guarantees, make acquisitions and engage in mergers
and consolidations, pay dividends and distributions, and make
capital expenditures. Our senior secured credit facility also
includes covenants relating to leverage and interest coverage
ratios. See “Description of Indebtedness.” At
December 31, 2005, we had $175.0 million outstanding
under the term loan and $170.0 million in aggregate
principal amount of notes outstanding, and letters of credit and
bank guarantees totaling $22.4 million supported by the
revolving credit portion of the senior secured credit facility.
Chart Ferox, a.s. (“Ferox”), our majority-owned
subsidiary that operates in the Czech Republic, maintains
secured revolving credit facilities with borrowing capacity,
including overdraft protection, of up to $9.6 million, of
which $4.4 million is available only for letters of credit
and bank guarantees. Under the revolving credit facilities,
Ferox may make borrowings in Czech Koruna, Euros and
U.S. dollars. Borrowings in Koruna are at PRIBOR,
borrowings in Euros are at EUROBOR and borrowings in
U.S. dollars are at LIBOR, each with a fixed margin of
0.6%. Ferox is not required to pay a commitment fee to the
lenders under the revolving credit facilities with respect to
the unutilized commitments thereunder. Ferox must pay letter of
credit and guarantee fees equal to 0.75% on the face amount of
each guarantee. Ferox’s land and buildings, and accounts
receivable secure $4.6 million and $2.5 million,
respectively, of the revolving credit facilities. At
December 31, 2005, there was $0.8 million of
borrowings outstanding under, and $1.5 million of bank
guarantees, supported by the Ferox revolving credit facilities.
Our debt and related covenants are further described in the
notes to our consolidated financial statements.
Cash provided by operating activities for the 2005 Successor
Period was $18.7 million, which included cash provided by
changes in working capital components of $7.6 million.
During the 2005 Successor Period, we used $362.3 million of
cash for investing activities. Cash of $356.6 million was
used to pay proceeds to our former shareholders as a result of
the Acquisition and $5.6 million was used for capital
expenditures. The significant capital expenditures were for the
construction of the new manufacturing facility in China, the
expansion of the biological storage product line manufacturing
facility in New Prague, Minnesota and reinvestment to upgrade
existing facilities to support business growth.
Cash provided by financing activities for the 2005 Successor
Period, was $348.5 million. In connection with the
Acquisition, we received proceeds of $350.0 million from
the senior secured credit facility and senior subordinated notes
and proceeds of $111.3 million from the sale of stock to
affiliates of First Reserve. These proceeds were used to pay our
former shareholders, repay $76.5 million of long-term debt
under the 2003 Credit Facility, pay former stock option holders
$15.8 million and pay financing and transaction costs of
$11.6 million and $1.8 million, respectively. In
addition, we made a voluntary principal prepayment of
$5.0 million on the term loan.
59
Cash provided by operating activities for the 2005 Reorganized
Period was $15.6 million and included cash used in working
capital components of $10.6 million to support the growth
in business, particularly in the E&C and D&S segments.
During the 2005 Reorganized Period, we used $20.8 million
of cash for investing activities. Cash of $12.0 million,
net of cash acquired, was used to acquire 100% of the equity
interest in Changzhou CEM Cryo Equipment Co., Ltd
(“CEM”). The CEM acquisition is further described in
the notes to our consolidated financial statements included
elsewhere in this prospectus. Cash used for capital expenditures
for the period was $11.0 million. The significant capital
expenditures were for the construction of the new manufacturing
facility in China, the expansion of the biological storage
product line manufacturing facility in New Prague, Minnesota and
reinvestments to upgrade existing facilities to support growth
in our businesses. In addition, we received proceeds of
$1.7 million from the settlement of a promissory note
related to the 2003 sale of our former Greenville Tube, LLC
stainless steel tubing business.
For the 2005 Reorganized Period, $1.7 million of cash was
provided by financing activities. We borrowed $18.9 million
under our revolving credit facilities, including
$10.0 million in the second quarter of 2005 under the
revolving credit portion of the 2003 Credit Facility to finance
our acquisition of CEM. In addition, we made net payments under
the revolving credit portion of our 2003 Credit Facility and
other revolving credit facilities of $15.9 million and
$1.9 million of scheduled principal payments under the term
loan portion of the 2003 Credit Facility, and $1.1 million
of payments on other long-term debt. Proceeds from the sale of
stock during this period were $1.7 million.
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Year Ended December 31, 2004
|
Cash provided by operations was $35.1 million for the year
ended December 31, 2004, which was primarily a result of
improved operating performance of all of our business segments,
including increased sales, realized savings due to continued
restructuring efforts and our successful reorganization under
the Bankruptcy Code enabling us to return to normal payment
terms with most of our vendors. This positive cash flow was
partially offset by increased inventory levels, particularly at
the BioMedical segment to ensure uninterrupted service to
customers during the transfer of manufacturing operations from
the Burnsville, Minnesota facility to the Canton, Georgia
facility.
In 2004, net cash used for investing activities was
$3.3 million. Capital expenditures were $9.4 million
and included the expansion of the Canton, Georgia facility to
accommodate the transfer of medical product line manufacturing
to that facility from the Burnsville, Minnesota facility, the
expansion of our operations in China and reinvestment into other
facilities. In addition, we received cash proceeds on the sale
of assets of $6.1 million in 2004, which included
$4.3 million from the sale of the Burnsville, Minnesota
facility, $0.6 million from the sale of a vacant building
and parcel of land at the New Prague, Minnesota facility, and
$1.1 million from the sale of equipment at the Plaistow,
New Hampshire facility.
We used $35.7 million of cash for financing activities in
2004. We paid $33.1 million to reduce our long-term debt.
This amount included voluntary prepayments made in April,
September and December 31, 2004, of $10.0 million,
$12.0 million and $8.0 million respectively, on the
term loan portion of our 2003 Credit Facility. The prepayments
were made due to the significant amount of cash provided by the
operating activities in 2004. Each prepayment reduced all future
scheduled quarterly amortization payments on a pro-rata basis.
Also, we used $1.9 million of cash for our debt
restructuring initiatives including costs associated with the
reorganization. We were required to delay until January 2004,
when our fee applications were approved by the
U.S. Bankruptcy Court, payments of approximately
$0.9 million in bankruptcy related fees to various
professional service providers.
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Three Months Ended December 31, 2003
|
Our cash provided by operating activities was $5.0 million
for the three months ended December 31, 2003. This cash
flow was primarily generated from working capital improvements
as we continued to benefit
60
from our successful Chapter 11 bankruptcy reorganization by
improved timeliness of customer cash collections on trade
receivables, reduced inventory levels and improved vendor
payment terms.
Cash provided by investing activities was $0.2 million,
while cash used in financing activities was $14.0 million
for this three month period. We made term loan principal
payments of $10.9 million, including a voluntary
$10.0 million prepayment in December 2003 under the term
loan portion of our 2003 Credit Facility that reduced all future
scheduled quarterly principal payments on a pro-rata basis. In
addition, we had net payments under the revolving credit portion
of our 2003 Credit Facility and other revolving credit
facilities of $2.6 million.
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|
|
|
Nine Months Ended September 30, 2003
|
Cash provided by operating activites for the nine months ended
September 30, 2003 was $19.5 million. The cash
provided from operations and working capital improvements was
$16.9 million and $2.6 million, respectively. The
working capital improvements were primarily attributable to the
successful Chapter 11 bankruptcy reorganization as we
strengthened our credit and collection policies and improved our
cash collections of trade receivables, reduced cash requirements
for inventory purchases due to the closure of several
manufacturing facilities and the return to normal payments terms
with a significant number of our vendors.
During this nine-month period, $15.1 million of cash was
provided by investing activities. $16.1 million was
provided by the proceeds from the sale of assets, including
$13.5 from the sale of certain assets and liabilities from our
Greenville Tube, LLC stainless steel tubing business, and
$2.5 million from the sale of certain fixed assets of the
cyropump and valves product line from our closed Columbus, Ohio
manufacturing facility. The proceeds from these sales were
primarily used to fund certain senior debt interest payments,
pay certain professional fees, and provide increased liquidity
for working capital and other corporate needs.
Our cash used in financing activities was $15.9 million. We
used $12.6 million to pay fees for our debt restructuring
initiatives, $1.3 million for net payments under our
then-existing credit facilities and $1.2 million for
long-term debt payments. The remaining cash of $0.8 million
was used for interest rate collar payments and purchases of
treasury stock.
We do not expect any unusual cash requirements for working
capital needs in 2006. We estimate that we will use
approximately $15 to $20 million of cash for capital
expenditures subject to restrictions under the senior secured
credit facility. A significant portion of capital expenditures
will be used for facility expansions and related equipment in
the E&C segment to increase capacity. Management believes
this expansion is necessary to support our significant growth in
sales, order and backlog levels and our expected growth in
business due to demand in the industrial gas and LNG and GTL
segments of the hydrocarbon gas markets. In addition, we expect
to pursue strategic business acquisitions in 2006 to complement
our existing product offerings and to alleviate some capacity
constraints at certain of our E&C and D&S facilities and
expect to fund these acquisitions through working capital,
borrowings under our senior secured credit facility or as
otherwise appropriate, subject to market conditions.
In 2006, cash requirements for debt service are forecasted to be
approximately $28 million for scheduled interest payments
under the senior secured credit facility and the senior
subordinated notes. We are not required to make any principal
payments under the term loan portion of the senior secured
credit facility due to the $5.0 million voluntary principal
prepayment made in December 2005. In addition, we made an
additional $5.0 million voluntary prepayment in March 2006
and will consider making additional voluntary principal payments
in 2006 based on cash levels and requirements. Finally, in 2006,
we expect to use approximately $16.0 million of cash for
both U.S. and foreign taxes and, based on current actuarial
estimates, to contribute approximately $1.3 million to our
four defined benefit pension plans to meet ERISA minimum funding
requirements. As of February 28, 2006, all four of these
defined benefit plans have been frozen and benefits will no
longer be accruing to the participants.
61
Our known contractual obligations as of December 31, 2005
and cash requirements resulting from those obligations are as
follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
2011 and
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|
|
|
|
Total
|
|
|
2006
|
|
|
2007-2008
|
|
|
2009-2010
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Long-term debt(1)
|
|
$
|
345,000
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|
|
$
|
—
|
|
|
$
|
720
|
|
|
$
|
2,880
|
|
|
$
|
341,400
|
|
|
Interest on long-term debt(1)
|
|
|
236,531
|
|
|
|
27,729
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|
|
|
54,957
|
|
|
|
54,689
|
|
|
|
99,156
|
|
|
Operating leases
|
|
|
9,255
|
|
|
|
2,040
|
|
|
|
3,568
|
|
|
|
2,939
|
|
|
|
708
|
|
|
Pension obligations
|
|
|
16,596
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|
|
|
1,176
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|
|
|
2,589
|
|
|
|
3,010
|
|
|
|
9,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
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|
$
|
607,382
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|
|
$
|
30,945
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|
|
$
|
61,834
|
|
|
$
|
63,518
|
|
|
$
|
451,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
(1)
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We intend to repay indebtedness using the net proceeds of this
offering. This will reduce our long-term debt and interest
obligations. See “Use of Proceeds” and “Unaudited
Pro Forma Financial Information.”
|
The interest payments in the above table were estimated based
upon our existing debt structure at December 31, 2005,
which included the senior secured credit facility and senior
subordinated notes, less scheduled debt payments each year, and
the interest rates in effect at December 31, 2005. The
planned funding of the pension and other post-employment
obligations were based upon actuarial and management estimates
taking into consideration the current status of the plans.
Our commercial commitments as of December 31, 2005, which
include standby letters of credit and bank guarantees, represent
potential cash requirements resulting from contingent events
that require performance by us or our subsidiaries pursuant to
funding commitments, and are as follows:
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Total
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|
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2006
|
|
|
2007-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
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|
|
Standby letters of credit
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|
$
|
12,325
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|
|
$
|
10,585
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|
|
$
|
1,740
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|
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Bank guarantees
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|
|
11,623
|
|
|
|
9,279
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|
|
|
2,344
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|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial commitments
|
|
$
|
23,948
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|
|
$
|
19,864
|
|
|
$
|
4,084
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the Acquisition, we had 1,718,896 shares of
common stock issued and outstanding at December 31, 2005.
Also, in connection with the Acquisition, 573,027 warrants
to purchase our common stock were granted in November 2005 to FR
X Chart Holdings LLC and 218,408 stock options (“New
Options”) under the 2005 Stock Incentive Plan were granted
to management to purchase shares of our common stock at an
exercise price of $64.75 per share. In addition, certain
members of management rolled over 131,823 stock options
(“Rollover Options”) in the Acquisition from our 2004
Stock Option and Incentive Plan, the exercise price of which was
adjusted to $16.19 per share.
The warrants may be exercised anytime, including on a cashless
basis, and expire in March 2014. The New Options are exercisable
for a period of ten years and have two different vesting
schedules. 77,094 of the New Options are time-based
(“Time-based Options”) and vest 20% per year over
a five-year period, and 141,314 of the New Options are
performance-based (“Performance-based Options”) and
vest based upon specified returns on First Reserve’s
investment in the company. In addition, 122,470 of the Rollover
Options were vested on the closing date of the Acquisition and
9,353 of the Rollover Options vest based upon the attainment of
certain performance criteria. As of March 22, 2006, 128,543
of the Rollover Options were vested. On October 17, 2005,
we adopted SFAS 123(R) “Share-Based Payments” to
account for our 2005 Stock Incentive Plan. See
“—Recently Adopted Accounting Standards” below
for further information regarding the adoption of
SFAS 123(R).
62
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in
the Securities Act.
Contingencies
In conjunction with the Acquisition and the Notice of Merger,
dated October 25, 2005 provided to our former shareholders,
certain of the former shareholders, representing
244,180 shares of common stock, gave notice of their right
under Delaware General Corporation Law to exercise appraisal
rights. In February 2006, before the former shareholders filed
suit in court under Delaware law, we settled this appraisal
rights matter. This resulted in us paying additional proceeds to
these former shareholders of $0.5 million. This settlement
amount was accrued at December 31, 2005.
We are involved with environmental compliance, investigation,
monitoring and remediation activities at certain of our
operating facilities, and accrue for these activities when
commitments or remediation plans have been developed and when
costs are probable and can be reasonably estimated. Historical
annual cash expenditures for these activities have been charged
against the related environmental reserves. Future expenditures
relating to these environmental remediation efforts are expected
to be made over the next 8 to 14 years as ongoing costs of
remediation programs. Management believes that any additional
liability in excess of amounts accrued, which may result from
the resolution of such matters should not have a material
adverse effect on our financial position, liquidity, cash flows
or results of operations.
In March 2003, CHEL filed for a voluntary administration under
the U.K. Insolvency Act of 1986. It is uncertain whether we will
be subject to any significant liability resulting from
CHEL’s insolvency administration. See
“Business—Legal Proceedings.”
In 2004, as part of the Plaistow, New Hampshire manufacturing
facility closure, we withdrew from the multi-employer pension
plan related to the Plaistow employees. We continue to carry a
related estimated withdrawal liability of $0.2 million at
December 31, 2005. Any additional liability in excess of
the amount accrued is not expected to have a material adverse
impact on our financial position, liquidity, cash flow or
results of operations.
We are occasionally subject to various other legal actions
related to performance under contracts, product liability and
other matters, several of which actions claim substantial
damages, in the ordinary course of our business. Based on our
historical experience in litigating these actions, as well as
our current assessment of the underlying merits of the actions
and applicable insurance, we believe the resolution of these
other legal actions will not have a material adverse effect on
our financial position, liquidity, cash flows or results of
operations.
Foreign Operations
During 2005, we had operations in Australia, China, the Czech
Republic, Germany and the United Kingdom, which accounted for
23.3% of consolidated revenues and 13.5% of total assets at
December 31, 2005. Functional currencies used by these
operations include the Australian Dollar, the Chinese Renminbi
Yuan, the Czech Koruna, the Euro and the British Pound. We are
exposed to foreign currency exchange risk as a result of
transactions by these subsidiaries in currencies other than
their functional currencies, and from transactions by our
domestic operations in currencies other than the
U.S. Dollar. The majority of these functional currencies
and the other currencies in which we record transactions are
fairly stable. The use of these currencies, combined with the
use of foreign currency forward purchase and sale contracts, has
enabled us to be sheltered from significant gains or losses
resulting from foreign currency transactions. This situation
could change if these currencies experience significant
fluctuations in their value as compared to the U.S. Dollar.
Application of Critical Accounting Policies
Our consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting
principles and are based on the selection and application of
significant accounting policies, which require management to
make estimates and assumptions. Although Fresh-Start accounting
required the
63
selection of appropriate accounting policies for the Reorganized
Company, the significant accounting policies previously used by
the Predecessor Company have generally continued to be used by
the Reorganized Company and Successor Company. Management
believes the following are some of the more critical judgmental
areas in the application of its accounting policies that affect
its financial position and results of operations.
Allowance for Doubtful Accounts.
We evaluate the
collectibility of accounts receivable based on a combination of
factors. In circumstances where we are aware of a specific
customer’s inability to meet its financial obligations
(e.g., bankruptcy filings, substantial downgrading of credit
scores), a specific reserve is recorded to reduce the receivable
to the amount we believe will be collected. We also record
allowances for doubtful accounts based on the length of time the
receivables are past due and historical experience. If
circumstances change (e.g., higher-than-expected defaults or an
unexpected material adverse change in a customer’s ability
to meet its financial obligations), our estimates of the
collectibility of amounts due could be changed by a material
amount.
Inventory Valuation Reserves.
We determine inventory
valuation reserves based on a combination of factors. In
circumstances where we are aware of a specific problem in the
valuation of a certain item, a specific reserve is recorded to
reduce the item to its net realizable value. We also recognize
reserves based on the actual usage in recent history and
projected usage in the near-term. If circumstances change (e.g.,
lower-than-expected or higher-than-expected usage), estimates of
the net realizable value could be changed by a material amount.
Long-Lived Assets.
We monitor our long-lived assets for
impairment indicators on an ongoing basis in accordance with
SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.” If impairment indicators
exist, we perform the required analysis and record impairment
charges in accordance with SFAS No. 144. In conducting
our analysis, we compare the undiscounted cash flows expected to
be generated from the long-lived assets to the related net book
values. If the undiscounted cash flows exceed the net book
value, the long-lived assets are considered not to be impaired.
If the net book value exceeds the undiscounted cash flows, an
impairment loss is measured and recognized. An impairment loss
is measured as the difference between the net book value and the
fair value of the long-lived assets. Fair value is estimated
based upon either discounted cash flow analyses or estimated
salvage values. Cash flows are estimated using internal
forecasts as well as assumptions related to discount rates.
Changes in economic or operating conditions impacting these
estimates and assumptions could result in the impairment of
long-lived assets. In 2006, we expect to record approximately
$4.3 million of amortization expense related to backlog.
Goodwill and Other Indefinite Lived Intangible Assets.
Under SFAS No. 142, “Goodwill and Other
Intangible Assets”, we evaluate goodwill and indefinite
lived intangible assets for impairment on an annual basis. To
test for impairment, we are required to estimate the fair market
value of each of our reporting units. We developed a model to
estimate the fair market value of our reporting units. This fair
market value model incorporates our estimates of future cash
flows, estimates of allocations of certain assets and cash flows
among reporting units, estimates of future growth rates and
management’s judgment regarding the applicable discount
rates to use to discount those estimated cash flows. Changes to
these judgments and estimates could result in a significantly
different estimate of the fair market value of the reporting
units, which could result in a different assessment of the
recoverability of goodwill and other indefinite lived intangible
assets.
Pensions.
We account for our defined benefit pension
plans in accordance with SFAS No. 87,
“Employers’ Accounting for Pensions,” which
requires that amounts recognized in financial statements be
determined on an actuarial basis. Our funding policy is to
contribute at least the minimum funding amounts required by law.
SFAS No. 87 and the policies used by us, notably the
use of a calculated value of plan assets (which is further
described below), generally reduce the volatility of pension
expense from changes in pension liability discount rates and the
performance of the pension plans’ assets.
A significant element in determining our pension expense in
accordance with SFAS No. 87 is the expected return on
plan assets. We have assumed that the expected long-term rate of
return on plan assets as of December 31, 2005 will be
8.25%. These expected return assumptions were developed using a
simple averaging formula based upon the plans’ investment
guidelines and the historical returns of equities and bonds.
64
While over the long term, the investment strategy employed with
our pension plan assets has earned in excess of such rates, we
believe our assumptions for expected future returns are
reasonable. However, we cannot guarantee that we will achieve
these returns in the future. The assumed long-term rate of
return on assets is applied to the market value of plan assets.
This produces the expected return on plan assets that reduces
pension expense. The difference between this expected return and
the actual return on plan assets is deferred. The net deferral
of past asset gains or losses affects the calculated value of
plan assets and, ultimately, future pension expense.
At the end of each year, we determine the rate to be used to
discount plan liabilities. The discount rate reflects the
current rate at which the pension liabilities could be
effectively settled at the end of the year. In estimating this
rate, we look to rates of return on high quality, fixed-income
investments that receive one of the two highest ratings given by
a recognized rating agency and the expected timing of benefit
payments under the plan. At December 31, 2005, we
determined this rate to be 5.50%. Changes in discount rates over
the past three years have not materially affected pension
expense, and the net effect of changes in the discount rate, as
well as the net effect of other changes in actuarial assumptions
and experience, has been deferred as allowed by
SFAS No. 87.
At December 31, 2005, our consolidated net pension
liability recognized was $6.9 million, a decrease of
$2.3 million from December 31, 2004. The decrease is
primarily due to an increase in the fair value of plan assets
during 2005, and the recognition of the previously determined
net unamortized gain at the closing date of the Acquisition in
accordance with SFAS 141, “Business
Combinations.” For the 2005 Successor Period and the 2005
Reorganized Period, we recognized approximately
$0.01 million and $0.2 million, respectively, of
pension income. The consolidated pension expense for the year
ended December 31, 2004 was $0.8 million. The pension
expense has decreased in the 2005 periods primarily due to the
freezing of a third defined benefit pension plan at
December 31, 2004 and the elimination of amortization of
prior service costs at October 17, 2005 in accordance with
SFAS 141. We currently expect that the pension income in
2006 will be approximately $0.5 million, an improvement
from the 2005 and 2004 pension income and expense, respectively,
due to the freezing of all four defined benefit pension plans.
Environmental Remediation Obligations.
Our obligation for
known environmental problems at our current and former
manufacturing facilities have been recognized on an undiscounted
basis based on estimates of the cost of investigation and
remediation at each site. Management reviews our environmental
remediation sites quarterly to determine if additional cost
adjustments or disclosures are required. The characteristics of
environmental remediation obligations, where information
concerning the nature and extent of
clean-up
activities is
not immediately available and changes in regulatory requirements
frequently occur, result in a significant risk of increase to
the obligations as they mature. Expected future expenditures are
not discounted to present value and potential insurance
recoveries are not recognized until realized.
Product Warranty Costs.
We estimate product warranty
costs and accrue for these costs as products are sold. Estimates
are principally based upon historical product warranty claims
experience over the warranty period for each product line. Due
to the uncertainty and potential volatility of these warranty
estimates, changes in assumptions could materially affect net
income.
Revenue Recognition — Long-Term Contracts.
We
recognize revenue and gross profit as work on long-term
contracts progresses using the percentage of completion method
of accounting, which relies on estimates of total expected
contract revenues and costs. We follow this method since
reasonably dependable estimates of the revenue and costs
applicable to various stages of a contract can be made. Since
the financial reporting of these contracts depends on estimates,
which are assessed continually during the term of the contract,
recognized revenues and profit are subject to revisions as the
contract progresses toward completion. Revisions in profit
estimates are reflected in the period in which the facts that
give rise to the revision become known. Accordingly, favorable
changes in estimates result in additional profit recognition,
and unfavorable changes will result in the reversal of
previously recognized revenue and profits. When estimates
indicate a loss is expected to be incurred under a contract,
cost of sales is charged with a provision for such loss. As work
progresses under a loss contract, revenue and cost of sales
continue to be recognized in equal amounts, and the
65
excess of costs over revenues is charged to the contract loss
reserve. We use the percentage of completion method of
accounting primarily in the E&C segment, with the balance
made up by the D&S segment.
Recently Adopted Accounting Standards
In December 2004, the FASB issued SFAS No. 123
(revised 2004), “Share-Based Payment.”
SFAS No. 123(R) is a revision of
SFAS No. 123, “Accounting for Stock-Based
Compensation” and supersedes Accounting Principles Board
(“APB”) Opinion No. 25, “Accounting for
Stock Issued to Employees,” and amends
SFAS No. 95, “Statement of Cash Flows.”
SFAS 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in
the financial statements based on their fair values and
eliminates the pro forma disclosure option allowed under
SFAS 123. SFAS 123(R) is effective for nonpublic
entities for fiscal years beginning after December 15,
2005. We adopted SFAS 123(R) on October 17, 2005 in
conjunction with the Acquisition.
In December 2004, the FASB issued FASB Staff Position
(“FSP”) FSP No. 109-1, “Application for FASB
Statement No 109, Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the
American Jobs Creation Act of 2004.” FSP 109-1 is intended
to clarify that the domestic manufacturing deduction should be
accounted for as a special deduction (rather than a rate
reduction) under SFAS No. 109, “Accounting for
Income Taxes.” A special deduction is recognized under
SFAS 109 as it is earned. The adoption of this statement
did not have a material impact on our financial position or
results of operations.
In December 2004, the FASB issued FSP No. 109-2,
“Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs
Creation Act of 2004.” FSP 109-2 provides guidance under
SFAS No. 109, “Accounting for Income Taxes,”
with respect to recording the potential impact of the
repatriation provisions of the American Jobs Creation Act of
2004 (the “Jobs Act”) on enterprises’ income tax
expense and deferred tax liability. The Jobs Act was enacted on
October 22, 2004. FSP 109-2 states that an enterprise
is allowed time beyond the financial reporting period of
enactment to evaluate the effect of the Jobs Act on its plan for
reinvestment or repatriation of foreign earnings for purposes of
applying SFAS No. 109. We completed evaluating the
impact of the repatriation provisions, and the adjustment as
provided for in FSP 109-2, did not have a material impact
on our tax expense or deferred tax liability.
In March 2005, the FASB issued FASB Interpretation No. 47
“Accounting for Conditional Asset Retirement
Obligations.” This interpretation requires companies to
recognize a liability for the fair value of a legal obligation
to perform asset retirement activities that are conditional on a
future event if the amount can be reasonably estimated. This
statement is effective for the year ending December 31,
2005. The adoption of this statement did not have a material
affect on our financial position, results of operations,
liquidity or cash flows.
Recently Issued Accounting Standards
The Financial Accounting Standards Board (“FASB”) has
recently issued the following Statements of Financial Accounting
Standards that we have not adopted as of December 31, 2005:
In December 2004, the FASB issued SFAS No. 151,
“Inventory Costs.” SFAS No 151 requires
abnormal amounts of inventory costs related to idle facility,
freight handling and wasted material expenses to be recognized
as current period charges. Additionally, SFAS No. 151
requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the
production facilities. The standard is effective for fiscal
years beginning after June 15, 2005. We are currently
evaluating the effect the adoption of SFAS No. 151
will have on our financial position or results of operations.
In June 2005, the FASB issued SFAS No. 154,
“Accounting Changes and Error Corrections.”
SFAS 154 replaces APB Opinion No. 20, “Accounting
Changes” and SFAS 3, “Reporting Accounting
Changes in Interim Financial Statements.” SFAS 154
requires that a voluntary change in accounting principle be
applied retrospectively with all prior period financial
statements presented on the new accounting principle.
SFAS 154 also requires that a change in method of
depreciating and amortizing a long-lived asset be accounted for
prospectively as a change in estimate, and the correction of
errors in previously issued financial
66
statements should be termed a restatement. SFAS 154 is
effective for accounting changes and corrections of errors made
in fiscal years beginning after December 15, 2005. The
implementation of SFAS 154 does not have an impact our
present consolidated financial statements and will only affect
financial statements to the extent there are future accounting
changes or errors.
Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, our operations are exposed to
continuing fluctuations in foreign currency values and interest
rates that can affect the cost of operating and financing.
Accordingly, we address a portion of these risks through a
program of risk management.
Our primary interest rate risk exposure results from the current
senior secured credit facility’s various floating rate
pricing mechanisms. We entered into an interest rate derivative
contract, or collar, in March 1999 to manage interest rate risk
exposure relative to our debt. This collar had a notional amount
of $4.4 million at December 31, 2005 and expired in
March 2006. The fair value of the contract related to the collar
outstanding December 31, 2005 is a liability of less than
$0.1 million and is recorded in accrued interest. If
interest rates were to increase 100 basis points (1%) from
December 31, 2005 rates, and assuming no changes in debt
from the December 31, 2005 levels, our additional annual
expense would be approximately $1.8 million on a pre-tax
basis.
We have assets, liabilities and cash flows in foreign currencies
creating foreign exchange risk, the primary foreign currencies
being the British Pound, the Czech Koruna and the Euro. Monthly
measurement, evaluation and forward exchange contracts are
employed as methods to reduce this risk. We enter into foreign
exchange forward contracts to hedge anticipated and firmly
committed foreign currency transactions. We do not hedge foreign
currency translation or foreign currency net assets or
liabilities. The terms of the derivatives are one year or less.
Covenant Compliance
We believe that our senior secured credit facility and the
indenture governing our outstanding notes are material
agreements, that the covenants are material terms of these
agreements and that information about the covenants is material
to an investor’s understanding of our financial condition
and liquidity. The breach of covenants in the senior secured
credit facility that are tied to ratios based on Adjusted
EBITDA, as defined below, could result in a default under the
senior secured credit facility and the lenders could elect to
declare all amounts borrowed due and payable. Any such
acceleration would also result in a default under our indenture.
Additionally, under the senior secured credit facilities and
indenture, our ability to engage in activities such as incurring
additional indebtedness, making investments and paying dividends
is also tied to ratios based on Adjusted EBITDA.
Covenant levels and pro forma ratios for the four quarters ended
December 31, 2005 are as follows:
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Four Quarters Ended
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December 31, 2005
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Covenant Level
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Ratio
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Senior Secured Credit Facility(1)
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Minimum Adjusted EBITDA to cash interest ratio
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1.75x
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2.62x
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Maximum total debt to Adjusted EBITDA ratio
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6.75x
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4.85x
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Indenture(2)
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Minimum pro forma Adjusted EBITDA to pro forma fixed charge
coverage ratio required to incur additional debt pursuant to
ratio provisions(3)
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2.0x
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2.33x
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(1)
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The senior secured credit facility requires us to maintain an
Adjusted EBITDA to cash interest ratio starting at a minimum of
1.75x and a total net debt to Adjusted EBITDA ratio starting at
a maximum of 6.75x. Failure to satisfy these ratio requirements
would constitute a default under the senior secured credit
facility. If lenders under the senior secured credit facility
failed to waive any such default,
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67
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repayment obligations under the senior secured credit facility
could be accelerated, which would also constitute a default
under the indenture.
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(2)
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Our ability to incur additional debt and make certain restricted
payments under our indenture, subject to specified exceptions,
is tied to an Adjusted EBITDA to fixed charge ratio of at least
2.0 to 1.0.
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(3)
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The ratio is calculated giving pro forma effect to the
Acquisition and the incurrence of debt under the indenture and
the senior secured credit facility.
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Adjusted EBITDA as used herein is defined as net income before
interest expense, provision for income taxes, depreciation and
amortization and further adjusted to exclude non-recurring
items, non-cash items and other adjustments permitted in
calculating covenants contained in the related senior secured
credit facility and indenture governing the notes, as shown in
the table below. We believe that the inclusion of supplementary
adjustments to EBITDA applied in presenting Adjusted EBITDA are
appropriate to provide additional information to investors to
demonstrate compliance with financing covenants and our ability
to pay dividends. The presentation of Adjusted EBITDA, a
non-GAAP financial measure, and ratios based thereon, do not
comply with accounting principles generally accepted in the
United States.
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Predecessor
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Successor
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Company
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Reorganized Company
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Company
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Nine Months
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Three Months
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January 1,
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October 17,
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Ended
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Ended
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Year Ended
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2005 to
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2005 to
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September 30,
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December 31,
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December 31,
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October 16,
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December 31,
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2003
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2003
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2004
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2005
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2005
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(Dollars in thousands)
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Net income (loss)
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$
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(7,085
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)
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$
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31
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$
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22,600
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$
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8,858
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$
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(506
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)
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Income tax expense (benefit)
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3,047
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(125
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)
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10,134
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7,159
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(441
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)
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Interest expense — net
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10,300
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1,344
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4,712
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4,164
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5,556
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Depreciation and amortization(a)
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9,260
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2,225
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8,490
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6,808
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4,396
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EBITDA
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$
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15,522
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$
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3,475
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$
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45,936
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$
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26,989
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$
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9,005
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EBITDA
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$
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15,522
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$
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3,475
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$
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45,936
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$
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26,989
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$
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9,005
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Stock-based compensation expense(b)
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—
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—
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2,433
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9,508
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437
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Inventory valuation charge(c)
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—
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5,368
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—
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—
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8,903
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Acquisition expenses(d)
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—
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—
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—
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6,602
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—
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In-process research and development charge(e)
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—
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—
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—
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2,768
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—
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Hurricane losses(f)
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—
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—
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—
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1,057
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406
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Employee separation and plant closure costs(g)
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1,338
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1,010
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3,346
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1,700
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255
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Reorganization expenses(h)
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369
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357
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706
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1,470
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88
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Appraisal rights settlement(i)
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—
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—
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—
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—
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500
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Management fees(j)
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—
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—
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380
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306
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|
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—
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(Gain) loss on sale of assets(k)
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8,929
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(57
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)
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133
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|
|
|
(131
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)
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|
78
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Income from discontinued operations(l)
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(833
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)
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|
|
—
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|
|
—
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|
—
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|
|
|
|
—
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|
|
|
|
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Adjusted EBITDA
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$
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25,325
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|
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|
$
|
10,153
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|
$
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52,934
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|
|
$
|
50,269
|
|
|
|
$
|
19,672
|
|
|
|
|
|
|
|
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(a)
|
The nine months ended September 30, 2003 and the 2005
Successor Period include financing costs amortization of
$1.7 million and $0.3 million, respectively.
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(b)
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Represents stock-based compensation charges for stock and stock
options issued to key employees and directors, and an additional
charge for the cash-out of stock options in the 2005 Reorganized
Period as a result of the Acquisition. Although it may be of
limited relevance to holders of our debt instruments, it may be
of more relevance to our equity holders, since such equity
holders ultimately bear such expenses.
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|
(c)
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Represents a non-cash inventory valuation charge recorded in
cost of sales for the adjustment of inventory to fair value as a
result of Fresh-Start accounting as of September 30, 2003
and purchase accounting as of
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68
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October 17, 2005, the closing date of the Acquisition.
Under Fresh-Start and purchase accounting, inventory was
adjusted to the fair value as of the dates indicated above, and
a corresponding charge was taken in the subsequent three months
ended December 31, 2003 and the 2005 Successor Period cost
of sales as the inventory was sold.
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|
(d)
|
Represents acquisition expenses, primarily professional fees,
incurred by us as a result of the Acquisition.
|
|
|
|
|
(e)
|
Represents a non-cash charge for purchased in-process research
and development in conjunction with the acquisition of CEM in
2005.
|
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(f)
|
Represents losses and costs incurred related to the damaged
caused by Hurricane Rita at our New Iberia, Louisiana facilities.
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(g)
|
Includes inventory valuation charges recorded in cost of sales,
and severance expenses, facility exit costs and non-operating
expenses related to the execution of our operational
restructuring plan, which primarily included moving the
Burnsville, Minnesota manufacturing operations to Canton,
Georgia, closing the Plaistow, New Hampshire and Wolverhampton,
United Kingdom manufacturing facilities and closing the
Westborough, Massachusetts engineering office.
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(h)
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Includes pre-bankruptcy debt restructuring-related fees,
Fresh-Start accounting adjustments and expenses, and a claim
settlement related to our 2003 bankruptcy reorganization.
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(i)
|
Represents a charge for the settlement of former Reorganized
Company shareholders’ appraisal rights claims as a result
of the Acquisition.
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(j)
|
Represents non-recurring management fees charged by our
Reorganized Company majority shareholders, which are not charged
by First Reserve.
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(k)
|
Includes non-recurring gains and losses and charges on the sale,
disposal or impairment of assets.
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(l)
|
Represents income from our former Greenville Tube, LLC stainless
steel tubing business, which was sold in July 2003.
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69
INDUSTRY OVERVIEW
Our products and services are important components to the liquid
gas supply chain. They are employed in cryogenic liquid
production, purification, transportation, distribution, storage
and other processes in which cryogenic liquids are converted
into the desired gases. These processes are important to the use
of hydrocarbon and industrial gases. Important applications
include LNG liquefaction and regasification, gas to liquids,
natural gas and petrochemical processing, industrial gas
production, transportation and storage, home healthcare
applications and biomedical research. Accordingly, global demand
for natural gas and industrial gases are fundamental drivers of
our business.
Natural gas usage is increasing rapidly due to its advantageous
environmental characteristics, superior heat efficiency, and
growth in other applications such as petrochemical feedstock.
According to the International Energy Agency (“IEA”),
the consumption of natural gas will exceed that of coal by 2015.
The Energy Information Administration (“EIA”) projects
that global natural gas usage will grow 2.4% annually from 2002
to 2020 compared to 2.0% for oil and 2.3% for coal.
Growing Natural Gas Consumption
Source: “LNG World Energy Outlook” May 19-20, 2005
International Energy Agency presentation
LNG is expected to be the fastest growing segment of the natural
gas value chain. New supplies of natural gas are largely found
in areas that are long distances from the consumers of natural
gas. In circumstances where pipeline transport is not feasible,
natural gas must be converted into a more compact, liquid form,
in order to effectively transport it to the required location.
Products that enable the liquefaction of natural gas and
re-gasification of LNG for transportation and storage are
critical to the LNG industry.
The LNG liquefaction process is currently the largest LNG market
for our products. Our heat exchangers, cold boxes, VIP and other
products are used by customers in the LNG market to liquefy,
transport, distribute and store natural gas. According to the
IEA, investments in global LNG facilities are expected to total
approximately $250 billion from 2001 to 2030.
70
Energy Ventures Analysis projects LNG liquefaction capacity to
increase 15.2% per annum from 2005 through 2011.
Source: Energy Ventures Analysis, 2005
Commensurate with the increased LNG liquefaction investment and
capacity, transportation of LNG is expected to outpace pipeline
transport of natural gas over the next couple decades. The IEA
expects the transportation of LNG in 2030 to be more than six
times the level in 2001. Once this LNG reaches its end market it
will either be re-gasified for pipeline distribution or
distributed or stored in LNG format using cryogenic tanks where
there is no pipeline infrastructure.
Source: “LNG World Energy Outlook” May 19-20,
2005 International Energy Agency presentation
Hydrocarbon processing is another substantial market for our
products. In natural gas processing, customers employ cryogenic
equipment to separate and purify natural gas and then to further
separate natural gas into its component elements such as ethane,
propane, butane, other natural gas to liquids (“NGL”)
and by-products such as helium. In petrochemical processing,
customers use cryogenic separation and purification processes to
convert natural gas elements into ethylene (the basic building
block of plastics), propylene and numerous other industrial
chemicals. The hydrocarbon processing market uses many of the
products from our cryogenic categories in the gas separation and
purification processes and the subsequent storage and
distribution of liquid gases. Major customers for our products
in the hydrocarbon processing markets are large multinational
firms in the oil and gas industry, and large engineering and
construction firms.
Industrial gas demand is another fundamental driver of our
business. Growth in the industrial gas market is driven by the
underlying demand for products that require oxygen, nitrogen,
argon and other air gases. Producers of industrial gases
separate atmospheric air into its component gases using
cryogenic processes. The resultant liquid gases are then stored
and transported for ultimate use by a wide variety of customers
in the petrochemical, electronics, glass, paper, metals, food,
fertilizer, welding, enhanced oil recovery and medical
industries. The industrial gas market uses our products
throughout this process, for the separation, purification,
storage and distribution of gases. Notably, the oil and
chemicals sector is a substantial user of industrial gases, for
stimulating well pressure, refining oil, producing
petrochemicals and other applications.
71
According to Spiritus Consulting (“Spiritus”), revenue
in the industrial gas market grew at 6.6% per annum from
1999 to 2004. Spiritus projects the global industrial gas market
to grow at 7.0% per annum through 2009, fueled by growth of
9.0% per annum in Asia, the Middle East and Africa. The
following graph was prepared by us using data from the Spiritus
Consulting Report, 2004.
Industrial Gas Sales Growth by Region
Source: Spiritus Consulting Report, 2004
Our BioMedical segment is primarily driven by growth in home
healthcare and biomedical research. Growth in the home
healthcare market is being driven by the trend of decreased
hospital inpatient stays in favor of lower cost outpatient
treatments as well as by the aging U.S. population.
According to U.S. Census data, the U.S. population
aged 65 and over will grow from 36.7 million in 2005 to
46.8 million by 2015.
Growth in U.S. Elderly Population
Aged 65+
Source: U.S. Census Bureau, 2000
Growth in an aging population as well as increases in the number
of respiratory disease cases is expected to increase demand for
respiratory therapy and home-based oxygen devices. Respiratory
therapy, which includes liquid oxygen systems, oxygen
compression systems and oxygen concentrators, is a primary
product service of our BioMedical segment.
Similarly, the global expansion of bio-tech and stem cell
research, and cord blood storage is expected to increase demand
for our biological storage products for storing biological
material. Additionally, U.S. Homeland Security initiatives
in response to acts of bio-terrorism should drive greater demand
for our biological storage products. Global artificial
insemination is expected to grow as countries are moving toward
independence in their dairy and beef production.
We believe that equipment suppliers that are diversified in
terms of product offerings that span the entire supply chain for
users of hydrocarbon and industrial gases will continue to be
industry leaders.
72
BUSINESS
Overview
We are a leading independent global manufacturer of highly
engineered equipment used in the production, storage and end-use
of hydrocarbon and industrial gases. We believe we are a
preferred global supplier of engineered equipment used
throughout the liquid gas supply chain. The largest portion of
end-use applications for our products is energy-related,
accounting for 51% of sales in 2005, and 58% of orders and 77%
of backlog at December 31, 2005. We are a leading
manufacturer of standard and engineered equipment primarily used
for low-temperature and cryogenic applications. We have
developed an expertise in cryogenic systems and equipment, which
operate at low temperatures sometimes approaching absolute zero
(0° Kelvin; -273° Centigrade; -459° Fahrenheit).
The majority of our products, including vacuum-insulated
containment vessels, heat exchangers, cold boxes and other
cryogenic components, are used throughout the liquid gas supply
chain for the purification, liquefaction, distribution, storage
and use of hydrocarbon and industrial gases.
Our primary customers are large, multinational producers and
distributors of hydrocarbon and industrial gases and their
suppliers. We sell our products and services to more than 2,000
customers worldwide. We have developed long-standing
relationships with leading companies in the gas production, gas
distribution, gas processing, LNG, chemical and industrial gas
industries, including Air Products, Praxair, Airgas, Air
Liquide, JGC Corporation (“JGC”), Bechtel Corporation,
General Electric (“GE”), ExxonMobil, British Petroleum
(“BP”) and ConocoPhillips, many of whom have been
purchasing our products for over 20 years.
We have attained this position by capitalizing on our low-cost
global manufacturing footprint, technical expertise and
know-how, broad product offering, reputation for quality, and by
focusing on attractive, growing markets. We have an established
sales and customer support presence across the globe and
low-cost manufacturing operations in the United States, Central
Europe and China. We believe we are the number one or two
equipment supplier in all of our primary end-use markets. For
the combined year ended December 31, 2005, we generated
revenues of $403.1 million compared to revenues of $305.6
for the year ended December 31, 2004. Our backlog at
December 31, 2005 was $233.6 million, compared to $129.3 at
December 31, 2004.
We believe that we are well-positioned to benefit from a variety
of long-term trends driving demand in our industry, including:
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•
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increasing demand for natural gas and the geographic dislocation
of supply and consumption, which is resulting in the need for a
global network for LNG;
|
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|
|
•
|
increasing demand for natural gas processing, particularly in
the Middle East, as crude oil producers look to utilize the gas
portions of their reserves; and
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|
•
|
increased demand for natural and industrial gases resulting from
rapid economic growth in developing areas, particularly Central
and Eastern Europe and China.
|
Our Competitive Strengths
We believe that the following competitive strengths position us
to enhance our growth and profitability:
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|
Focus on Attractive Growing End Markets.
We
anticipate growing demand in the end markets we serve, with
particularly strong growth in LNG, natural gas processing,
specific international markets across all segments and
biomedical equipment. Energy Ventures Analysis projects global
LNG liquefaction capacity to increase 15.2% per annum from
2005 through 2011 and the International Energy Agency expects
the natural gas industry to invest approximately
$250 billion in LNG facilities from 2001 to 2030. In
addition, international demand for our products is being driven
by growing manufacturing capacity and industrial activity in
developing areas, particularly Central and Eastern Europe and
China. Rapid economic development in these areas has caused a
significant increase in the demand for natural and
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industrial gases. According to Spiritus Consulting, the global
market for industrial gas is projected to grow 7.0% per
annum from 2009.
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Substantial Revenue Visibility.
We have a large
and growing backlog, which provides us with a high degree of
visibility in our forecasted revenue. Our backlog is comprised
of the portion of signed purchase orders or other written
contractual commitments received from customers that we have not
recognized as revenue under the percentage of completion method
or based upon shipment. Our backlog as of December 31, 2005
was $233.6 million compared to $129.3 million and
$49.6 million at December 31, 2004 and 2003,
respectively. Projects for energy-related applications totaled
approximately $180.0 million in backlog as of
December 31, 2005. Substantially all of our backlog as of
December 31, 2005 is scheduled to be recognized as sales
during the next twelve months.
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Leading Market Positions.
We believe we are
the #1 or #2 equipment supplier in each of our primary
end markets both domestically and internationally. Based on our
relationships with key customers, we believe that our strong
industry positioning makes us the preferred supplier and
typically one of only two or three suppliers qualified to
provide certain products to key customers. As our customers
continue to rationalize their vendors, we expect to gain
additional market share and that the benefit of our leading
position will become more pronounced.
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Diverse, Long-Standing Customer Base.
We currently
serve over 2,000 customers worldwide. Our primary customers are
large, multinational producers and distributors of hydrocarbon
and industrial gases that provide us with revenue stability.
Customers and end-users also include high growth LNG processors,
petrochemical processors and biomedical companies. We have
developed strong, long-standing relationships with these
customers, many of whom have been purchasing products from us or
one of our predecessors for over 20 years. Our primary
customers and end-users include Air Products, Praxair, Airgas,
Air Liquide, JGC, Bechtel Corporation, GE, ExxonMobil, BP and
ConocoPhillips.
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Highly Flexible and Low-Cost Manufacturing Base.
Given our long-term investment in global manufacturing
facilities and specialized equipment, we have developed a
substantial comparative scale and geographic advantage within
the markets for the cryogenic products that we manufacture. The
scale enables cost efficiencies and the geographic reach
provides access to customers that we believe would be difficult
for a potential competitor to replicate. With more than
1.5 million square feet of manufacturing space across 11
primary facilities and three continents, we have substantial
operational flexibility. We are a low-cost producer for our
products across all segments. In addition, the high cost of
capital and economies of scale required for this type of
manufacturing create significant barriers for new entrants.
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Product Expertise, Quality, Reliability and
Know-How.
Within our end markets, we have established a
reputation for quality, reliability and technical innovation. We
believe that the main drivers of our target customers’
purchasing decisions are a supplier’s product expertise,
quality, reliability and know-how rather than pricing and terms,
giving us an advantage based on our reputation and consequent
brand recognition. The value of this brand recognition is
significantly enhanced by the extended life cycle of our
products and the high cost to our target customers of product
failure. As a focused provider of highly engineered cryogenic
equipment, we believe it would be difficult for a new entrant to
duplicate our capabilities.
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Experienced Management Team.
We have assembled a
strong senior management team with over 250 combined years of
related experience. We have a balance of entrepreneurs,
internally developed leaders and experienced managers from
analogous industries. The team has grown into a cohesive unit
with complementary management and operational skills. The
current management team is directly responsible for the strong
sales growth and the significant margin improvements experienced
since 2003.
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Business Strategy
We believe that we are well-positioned to maintain our
leadership in providing highly engineered equipment for use in
low-temperature and cryogenic applications and meet the
world’s growing demand for
74
hydrocarbon and industrial gases with more economical, reliable
and environmentally friendly systems. The principal elements of
our strategy are as follows:
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Continue to develop innovative, high-growth,
energy-specific products.
We plan to continue to focus
on extending our cryogenic technological leadership, both to
capitalize on increasing demand for energy and to create new
applications. We believe that we are well positioned to benefit
from increased demand for LNG, natural gas processing and gas to
liquid (“GTL”) solutions. Our engineering, technical
and marketing employees actively assist customers in specifying
their needs and in determining appropriate products to meet
those needs. Current product development includes subsea VIP,
synthetic gas, hydrogen recovery, small-scale bulk gas
distribution solutions and LNG/ GTL production systems.
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Leverage our global platform to capitalize on growing
international demand.
We expect growth in hydrocarbon
and industrial gas demand and investment over the next five
years in the Middle East, Central and Eastern Europe, Russia and
China. We believe that our historic and planned investment in
our manufacturing facilities in the Czech Republic and China and
the investment in sales and marketing capabilities in these
markets, supplemented by our continuing investment in our
U.S. facilities, has positioned us to increase our market
share in growing international markets. We believe we are
well-positioned to make acquisitions of complementary businesses
to expand our global infrastructure.
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Capitalize on our position as a market leader.
We
plan to continue to grow our long-standing relationships with
the leading users of cryogenic equipment. Our engineering and
development teams partner with our customers to better
understand and meet their cryogenic equipment needs,
particularly in the growing LNG and international markets. We
intend to grow our customer base as industrial gas producers
increasingly outsource bulk tank storage and other non-core
parts of their business.
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Maintain our position as a low-cost producer while
continuing to improve operating performance.
We believe
we are the lowest cost manufacturer for most of our products and
we intend to continue to leverage our scale, scope, technical
expertise and know-how to deliver to our customers higher
quality and more reliable products and services at lower cost.
Our largest manufacturing facility is in the Czech Republic,
which allows us to achieve considerable cost savings versus our
competitors. In addition, we believe China, where we are
experiencing significant growth, will be a sustainable low-cost
labor environment. We maintain a disciplined approach to capital
expenditures. We intend to make capacity investments in
energy-related markets where we expect to realize significant
and timely returns, and to also leverage our existing operating
capacity in other markets.
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Segments and Products
We operate in three segments: (i) Energy and Chemicals
(“E&C”), (ii) Distribution and Storage
(“D&S”) and (iii) BioMedical. While each
segment manufactures and markets different cryogenic equipment
and systems to distinct end-users, they share a reliance on our
heat transfer and low temperature storage know-how and
expertise. The E&C and D&S segments manufacture products
used in energy-related applications.
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Energy and Chemicals Segment
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Our principal products within the E&C segment, which
accounted for 30% of sales for the year ended December 31,
2005, are focused on process equipment, primarily heat
exchangers and LNG systems, which include cold boxes and LNG
vacuum-insulated pipe, used by major natural gas, petrochemical
processing and industrial gas companies in the production of
their products. Our products in the E&C segment include the
following:
We are a leading designer and manufacturer of cryogenic heat
exchangers. Using technology pioneered by us, heat exchangers
are incorporated into systems such as cold boxes to facilitate
the progressive cooling and liquefaction of air or hydrocarbon
mixtures for the subsequent recovery or purification of component
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gases. In hydrocarbon processing industries, heat exchangers
allow producers to obtain purified hydrocarbon by-products, such
as methane, ethane, propane and ethylene, which are commercially
marketable for various industrial or residential uses. In the
industrial gas market, heat exchangers are used to obtain high
purity atmospheric gases, such as oxygen, nitrogen and argon,
which have numerous diverse industrial applications. Heat
exchangers are customized to the customer’s requirements
and range in price from approximately $30,000 for a relatively
simple unit to as high as $10 million for a major project.
The heat exchangers market has seen significant demand
improvement over the last two years, resulting primarily from
increased activity in the LNG and natural gas segments of the
hydrocarbon processing market as well as the Asian industrial
gas market. In the future, management believes that continuing
efforts by petroleum producing countries to better utilize
stranded natural gas and previously flared gases, as well as
efforts to broaden their industrial base, present a promising
source of demand for our heat exchangers and cold box systems.
Demand for heat exchangers in developed countries is expected to
continue as firms upgrade their facilities for greater
efficiency and regulatory compliance.
Our principal competitors for heat exchangers are Linde,
Sumitomo, Kobe and Nordon. Management believes that we are the
only producer of large brazed aluminum heat exchangers in the
United States and that we are the leader in the global heat
exchanger market. Major customers for our heat exchangers in the
industrial gas market include Air Liquide, Air Products and
Praxair. In the hydrocarbon processing market, major customers
and end-users include Air Liquide, Air Products and Praxair. In
the hydrocarbon processing market, major customers include BP,
ExxonMobil, Saudi Aramco, ConocoPhillips and contractors such as
JGC, Bechtel and KBR.
We are a leading designer and fabricator of cold boxes. Cold
boxes are highly engineered systems used to significantly reduce
the temperature of gas mixtures to the point where component
gases liquefy and can be separated and purified for further use
in multiple industrial, scientific and commercial applications.
In the hydrocarbon processing market, our cold box systems are
used in natural gas processing and in the petrochemical
industry. In the industrial gas market, cold boxes are used to
separate air into its major atmospheric components, including
nitrogen, oxygen and argon, where the gases are used in a
diverse range of applications such as the quick-freezing of
food, wastewater treatment and industrial welding. The
construction of a cold box generally consists of one or more
heat exchangers and other equipment packaged in a
“box” consisting of metal framing and a complex system
of piping and valves. Cold boxes, which are designed and
fabricated to order, sell in the price range of $500,000 to
$10 million, with the majority of cold boxes priced between
$1 million and $2 million.
We have a number of competitors for fabrication of cold boxes,
including Linde, Air Products and many smaller fabrication-only
facilities around the world. Principal customers for our cold
boxes include Air Liquide, ABB Lummus, BP, Bechtel, Saudi
Aramco, Stone and Webster, and KBR.
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LNG Vacuum Insulated Pipe
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This product line consists of vacuum-insulated pipe
(“VIP”) used for LNG transportation (“LNG
VIP”) within both export and import terminals. This is a
new and growing market as new LNG infrastructure is added around
the world. LNG VIP is fabricated to order with projects varying
in size from $500,000 to $25 million. Our competitors in
the LNG VIP market include Technip and ITP. In general, our
customers are the major contractors such as Technip and Bechtel.
LNG VIP competes directly with mechanically insulated pipe which
takes longer to install and requires higher maintenance over its
life.
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Distribution and Storage Segment
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Through our D&S segment, which accounted for 52% of our
sales for the year ended December 31, 2005, we are a
leading supplier of cryogenic equipment to the global bulk and
packaged industrial gas markets. Demand for the products
supplied by this segment is driven primarily by the significant
installed base of users of cryogenic liquids as well as new
applications and distribution technologies for cryogenic
liquids. Our
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products span the entire spectrum of the industrial gas market
from small customers requiring cryogenic packaged gases to large
users requiring custom engineered cryogenic storage systems. Our
products in the D&S segment include the following:
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Cryogenic Bulk Storage Systems
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We are a leading supplier of cryogenic bulk storage systems of
various sizes ranging from 500 gallons to
150,000 gallons. Using sophisticated vacuum insulation
systems placed between inner and outer vessels, these bulk
storage systems are able to store and transport liquefied
industrial gases and hydrocarbon gases at temperatures from
-100° Fahrenheit to temperatures nearing absolute zero. End
use customers for our cryogenic storage tanks include industrial
gas producers and distributors, chemical producers,
manufacturers of electrical components, health care
organizations, food processors and businesses in the oil and
natural gas industries. Prices for our cryogenic bulk storage
systems range from $10,000 to $1,000,000. Global industrial gas
producers, including Praxair, Air Liquide, Air Products, Linde,
Messer and The BOC Group, are significant customers for our
cryogenic bulk storage systems. In addition, Airgas is a
significant customer in the North American industrial gas
market. On a worldwide basis, we compete primarily with
Taylor-Wharton, a Harsco Company in this product area. In the
European and Asian markets, we compete with several suppliers
owned by the global industrial gas producers as well as
independent regional suppliers.
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Cryogenic Packaged Gas Systems
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We are a leading supplier of cryogenic packaged gas systems of
various sizes ranging from 160 liters to 2,000 liters.
Cryogenic liquid cylinders are used extensively in the packaged
gas industry to allow smaller quantities of liquid to be easily
delivered to the customers of the industrial gas distributors on
a full-for-empty or fill on site basis. Principal customers for
our liquid cylinders are the same global industrial gas
producers as the North American industrial gas distributors who
purchase our cryogenic bulk storage systems. We compete on a
worldwide basis primarily with Harsco in this product area. We
have developed two technologies in the packaged gas product
area: ORCA Micro-Bulk systems and
Tri-fecta
®
Laser Gas assist systems. ORCA Micro-Bulk systems bring the ease
of use and distribution economics of bulk gas supply to
customers formerly supplied by high pressure or cryogenic liquid
cylinders. The ORCA Micro-Bulk system is the substantial market
leader in this growing product line. The
Tri-fecta
®
Laser Gas assist system was developed to meet the “assist
gas” performance requirements for new high powered lasers
being used in the metal fabrication industry.
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Cryogenic Systems and Components
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Our line of cryogenic components, including VIP, engineered bulk
gas installations and specialty liquid nitrogen end-use
equipment are recognized in the market for their reliability,
quality and performance. These products are sold to industrial
gas producers, as well as to a diverse group of distributors,
resellers and end users. We compete with a number of suppliers
of cryogenic systems and components, including Acme Cryogenics,
Vacuum Barrier Corporation and others.
This product line consists of LNG and liquid/compressed natural
gas refueling systems for centrally fueled fleets of vehicles
powered by natural gas, such as fleets operated by metropolitan
transportation authorities, refuse haulers and heavy-duty truck
fleets. Competition for LNG fueling and storage systems is based
primarily on product design, customer support and service,
dependability and price.
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Beverage Liquid
CO
2
Systems
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This product line consists primarily of vacuum-insulated, bulk
liquid
CO
2
containers used for beverage carbonation in restaurants,
convenience stores and cinemas, in sizes ranging from 100 pounds
to 750 pounds of liquid
CO
2
storage. We also manufacture and market non-insulated, bulk
fountain syrup containers for side-by-side installation with our
CO
2
systems. Our beverage systems are sold to national restaurant
chains, soft
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drink companies and
CO
2
distributors. Our primary competitors for our bulk liquid
CO
2
beverage delivery systems are Taylor-Wharton and other producers
of high-pressure gaseous
CO
2
cylinders.
We operate three locations in the United States providing
installation, service and maintenance of cryogenic products
including storage tanks, liquid cylinders, cryogenic trailers,
cryogenic pumps and VIP.
The BioMedical segment, which accounted for 18% of our sales for
the year ended December 31, 2005, consists of various
product lines built around our core competencies in cryogenics,
but with a focus on the medical and biological users of the
liquids and gases instead of the large producers and
distributors of cryogenic liquids. Our products in the
BioMedical segment include the following:
Our medical oxygen product line is comprised of a limited range
of medical respiratory products, including liquid oxygen systems
and ambulatory oxygen systems, both of which are used for the
in-home supplemental oxygen treatment of patients with chronic
obstructive pulmonary diseases, such as bronchitis, emphysema
and asthma.
Individuals for whom supplemental oxygen is prescribed generally
receive an oxygen system from a home healthcare provider,
medical equipment dealer, or gas supplier. The provider or
physician usually selects which type of oxygen system to
recommend to its customers: liquid oxygen systems, oxygen
concentrators or high-pressure oxygen cylinders. Of these
modalities, physicians generally believe that liquid oxygen
offers greater long-term therapeutic benefits by providing the
option of increased patient ambulation.
Our primary competitor in the medical products line is
Puritan-Bennett, a division of Tyco International, Ltd. We
believe that competition for liquid oxygen systems is based
primarily upon product quality, performance, reliability,
ease-of
-service and
price and focus our marketing strategies on these considerations.
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Biological Storage Systems
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This product line consists of vacuum-insulated containment
vessels for the storage of biological materials. The primary
markets for this product line include medical laboratories,
biotech/pharmaceutical, research facilities, blood and tissue
banks, veterinary laboratories, large-scale repositories and
artificial insemination, particularly in the beef and dairy
industry.
The significant competitors for biological storage systems
include a few large companies worldwide, such as Taylor-Wharton,
Air Liquide and IBP. These products are sold through multiple
channels of distribution specifically applicable to each market
sector. The distribution channels range from highly specialized
cryogenic storage systems providers to general supply and
catalogue distribution operations to breeding service providers.
Historically, competition in this field has been focused on
design, reliability and price. Additionally, we believe our
understanding of the end-user’s applications and concerns
enables us to sell a “total value” package.
Alternatives to vacuum insulated containment vessels include
mechanical, electrically powered refrigeration.
The basis of the MRI technique is that the magnetic properties
of certain nuclei of the human body can be detected, measured
and converted into images for analysis. MRI equipment uses
high-strength magnetic fields, applied radio waves and
high-speed computers to obtain cross-sectional images of the
body. The major components of the MRI assembly are a series of
concentric thermal shields and a supercooled electromagnet
immersed in a liquid helium vessel (a “cryostat”) that
maintains a constant, extremely low temperature (4°Kelvin;
-452° Fahrenheit) to achieve superconductivity. We
manufacture large cryostats, various cryo-
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genic interfaces, electrical feed-throughs and various other MRI
components that are used to transfer power and/or cryogenic
fluids from the exterior of the MRI unit to the various layers
of the cryostat and superconducting magnet. We currently sell
all of our MRI components to GE, a leading worldwide
manufacturer of MRI equipment.
Engineering and Product Development
Our engineering and product development activities are focused
on developing new and improved solutions and equipment for the
users of cryogenic liquids. Our engineering, technical and
marketing employees actively assist customers in specifying
their needs and in determining appropriate products to meet
those needs. Portions of our engineering expenditures typically
are charged to customers, either as separate items or as
components of product cost.
Competition
We believe we can compete effectively around the world and that
we are a leading competitor in our markets. Competition is based
primarily on performance and the ability to provide the design,
engineering and manufacturing capabilities required in a timely
and cost-efficient manner. Contracts are usually awarded on a
competitive bid basis. Quality, technical expertise and
timeliness of delivery are the principal competitive factors
within the industry. Price and terms of sale are also important
competitive factors. Because reliable market share data is not
available, it is difficult to estimate our exact position in our
markets, although we believe we rank among the leaders in each
of the markets we serve.
Marketing
We market our products and services throughout the world
primarily through direct sales personnel and through independent
sales representatives and distributors. The technical and custom
design nature of our products requires a professional, highly
trained sales force. While each salesperson and sales
representative is expected to develop a highly specialized
knowledge of one product or group of products within one of our
segments, each salesperson and certain sales representatives are
able to sell many products from different segments to a single
customer. We use independent sales representatives and
distributors to market our products and services in certain
foreign countries that we serve and in certain North American
markets. These independent sales representatives supplement our
direct sales force in dealing with language and cultural
matters. Our domestic and foreign independent sales
representatives earn commissions on sales, which vary by product
type.
Backlog
The dollar amount of our backlog at December 31, 2005 and
2004 was $233.6 million and $129.3 million,
respectively. Backlog is comprised of the portion of firm signed
purchase orders or other written contractual commitments
received from customers that we have not recognized as revenue
under the percentage of completion method or based upon
shipment. It is expected that substantially all of our
December 31, 2005 backlog will be recognized as sales
during the next twelve months. Backlog can be significantly
affected by the timing of orders for large products,
particularly in the E&C segment, and the amount of backlog
at December 31, 2005 described above is not necessarily
indicative of future backlog levels or the rate at which backlog
will be recognized as sales. For further information about our
backlog, including backlog by segment, see
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
Customers
We sell our products to gas producers, distributors and
end-users across the industrial gas, hydrocarbon and chemical
processing industries in countries throughout the world. While
no single customer exceeded 10% of consolidated sales in 2005,
2004 or 2003, sales to our top ten customers accounted for 39%,
45% and 43% of consolidated sales in 2005, 2004 and 2003,
respectively. Our sales to particular customers fluctuate from
period to period, but the global gas producer and distributor
customers tend to be a consistently large source of
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revenue for us. Our supply contracts are generally contracts for
“requirements” only. While our customers are obligated
to purchase a certain percentage of their supplies from us,
there are no minimum requirements. Also, many of our contracts
may be cancelled on as little as one month’s notice. To
minimize credit risk from trade receivables, we review the
financial condition of potential customers in relation to
established credit requirements before sales credit is extended
and monitors the financial condition of customers to help ensure
timely collections and to minimize losses. In addition, for
certain domestic and foreign customers, particularly in the
E&C segment, we require advance payments, letters of credit
and other such guarantees of payment. Certain customers also
require us to issue letters of credit or performance bonds,
particularly in instances where advance payments are involved,
as a condition of placing the order. We believe our
relationships with our customers generally have been good since
our reorganization under Chapter 11 of the
U.S. Bankruptcy Code in 2003.
Intellectual Property
Although we have a number of patents, trademarks and licenses
related to our business, no one of them or related group of them
is considered by us to be of such importance that its expiration
or termination would have a material adverse effect on our
business. In general, we depend upon technological capabilities,
manufacturing quality control and application of know-how,
rather than patents or other proprietary rights, in the conduct
of our business.
Raw Materials and Suppliers
We manufacture most of the products we sell. The raw materials
used in manufacturing include aluminum products (including
sheets, bars, plate and piping), stainless steel products
(including sheets, plates, heads and piping), palladium oxide,
carbon steel products (including sheets, plates and heads), 9%
nickel steel products (including heads and plates), valves and
gauges and fabricated metal components. Most raw materials are
available from multiple sources of supply. We believe our
relationships with our raw material suppliers and other vendors
are generally good. The commodity metals we use have experienced
significant upward fluctuations in price. We have generally been
able to recover the costs of price increases through our
contracts with customers. We foresee no acute shortages of any
raw materials that would have a material adverse effect on our
operations.
Employees
As of December 31, 2005, we had 2,271 employees, including
1,402 domestic employees and 869 international employees. These
employees consisted of 766 salaried, 283 bargaining unit hourly
and 1,222 non-bargaining unit hourly.
We are a party to one collective bargaining agreement through
one of our operating subsidiaries. The agreement with the
International Association of Machinists and Aerospace Workers
covering 283 employees at our La Crosse, Wisconsin heat
exchanger facility expires in February 2007. In 2005, through
another one of our operating subsidiaries, we were also a party
to the agreement with the United Steel Workers of America, which
covered 244 employees at our New Prague, Minnesota facility. On
November 16, 2005, pursuant to an approved stipulation
election agreement, the bargaining unit employees voted to
decertify the United Steel Workers of America as its bargaining
representative. The election results were certified on
November 23, 2005. Over the past several years, we have not
had any work stoppages or strikes and we believe our
relationships with our employees are generally good.
Environmental Matters
Our operations have historically included and currently include
the handling and use of hazardous and other regulated
substances, such as various cleaning fluids used to remove
grease from metal, that are subject to federal, state and local
environmental laws and regulations. These regulations impose
limitations on the discharge of pollutants into the soil, air
and water, and establish standards for their handling,
management, use, storage and disposal. We monitor and review our
procedures and policies for compliance with
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environmental laws and regulations. Our management is familiar
with these regulations, and supports an ongoing program to
maintain our adherence to required standards.
We are involved with environmental compliance, investigation,
monitoring and remediation activities at certain of our owned
manufacturing facilities and at one owned facility that is
leased to a third party. We believe that we are currently in
substantial compliance with all known environmental regulations.
We accrue for certain environmental remediation-related
activities for which commitments or remediation plans have been
developed and for which costs can be reasonably estimated. These
estimates are determined based upon currently available facts
regarding each facility. Actual costs incurred may vary from
these estimates due to the inherent uncertainties involved.
Future expenditures relating to these environmental remediation
efforts are expected to be made over the next 8 to 14 years
as ongoing costs of remediation programs. Although we believe we
have adequately provided for the cost of all known environmental
conditions, additional contamination or changes in regulatory
posture concerning our on-going remedial efforts could result in
more costly remediation measures than budgeted, or those we
believe are adequate or required by existing law. We believe
that any additional liability in excess of amounts accrued which
may result from the resolution of such matters will not have a
material adverse effect on our financial position, liquidity,
cash flows or results of operations.
Properties
We occupy 24 principal facilities totaling approximately
1.9 million square feet, with the majority devoted to
manufacturing, assembly and storage. Of these manufacturing
facilities, approximately 1.6 million square feet are owned
and 300,000 square feet are occupied under operating
leases. We consider our manufacturing facilities sufficient to
meet our current and planned operational needs in the D&S
and Biomedical segments. However, we have commenced the
expansion of our E&C segment facilities over the next few
years to meet significant current order backlog levels and
expected growth in business as both we and our competitors reach
capacity. We lease approximately 10,300 square feet for our
corporate office in Garfield Heights, Ohio. Our major owned
facilities in the United States are subject to mortgages
securing our senior secured credit facility.
As a result of our operational restructuring activities, we
closed our D&S manufacturing facility in Plaistow, New
Hampshire in the third quarter of 2004 and we are currently
pursuing the sale of this property. The Plaistow, New Hampshire
facility is classified as an “asset held for sale” in
our audited consolidated balance sheet as of December 31,
2005 and 2004. In the first quarter of 2005, we completed the
move of the medical respiratory product line from the
Burnsville, Minnesota facility to the Canton, Georgia
manufacturing facility. The Burnsville, Minnesota facility was
sold in the fourth quarter of 2004 and leased until the move of
the medical respiratory product line was completed. Our
operational restructuring activities are further described in
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the related notes
thereto included elsewhere in this prospectus.
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The following table sets forth certain information about
facilities occupied by us as of March 2006:
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Location
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Segment
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Square Feet
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Ownership
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Use
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LaCrosse, Wisconsin
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Energy & Chemicals
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149,000
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Owned
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Manufacturing/Office
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New Iberia, Louisiana
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Energy & Chemicals
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62,400
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Leased
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Manufacturing
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New Iberia, Louisiana
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Energy & Chemicals
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|
35,000
|
|
|
|
Leased
|
|
|
Manufacturing
|
|
The Woodlands, Texas
|
|
Energy & Chemicals
|
|
|
29,000
|
|
|
|
Leased
|
|
|
Office
|
|
Wolverhampton, United Kingdom
|
|
Energy & Chemicals
|
|
|
1,600
|
|
|
|
Leased
|
|
|
Office
|
|
Changzhou, China(1)
|
|
Distribution & Storage
|
|
|
21,500
|
|
|
|
Leased
|
|
|
Manufacturing/Office
|
|
Changzhou, China
|
|
Distribution & Storage
|
|
|
130,000
|
|
|
|
Owned
|
|
|
Manufacturing/Office
|
|
Changzhou, China
|
|
Distribution & Storage
|
|
|
60,000
|
|
|
|
Leased
|
|
|
Manufacturing/Office
|
|
Changzhou, China
|
|
Distribution & Storage
|
|
|
40,000
|
|
|
|
Leased
|
|
|
Manufacturing
|
|
Decin, Czech Republic
|
|
Distribution & Storage
|
|
|
564,000
|
|
|
|
Owned
|
|
|
Manufacturing/Office
|
|
Houston, Texas
|
|
Distribution & Storage
|
|
|
22,000
|
|
|
|
Owned
|
|
|
Service
|
|
Plaistow, New Hampshire(2)
|
|
Distribution & Storage
|
|
|
164,400
|
|
|
|
Owned
|
|
|
Manufacturing/Office
|
|
Solingen, Germany
|
|
Distribution & Storage
|
|
|
3,000
|
|
|
|
Leased
|
|
|
Office
|
|
Zhangiajang, China
|
|
Distribution & Storage
|
|
|
30,000
|
|
|
|
Leased
|
|
|
Manufacturing/Office
|
|
Canton, Georgia
|
|
Distribution & Storage/ BioMedical
|
|
|
154,000
|
|
|
|
Owned
|
|
|
Manufacturing/Office
|
|
Jasper, Georgia
|
|
Distribution & Storage/ BioMedical
|
|
|
32,500
|
|
|
|
Leased
|
|
|
Warehouse/Service
|
|
New Prague, Minnesota
|
|
Distribution & Storage/ BioMedical
|
|
|
254,000
|
|
|
|
Owned
|
|
|
Manufacturing/Service/ Office
|
|
Denver, Colorado
|
|
BioMedical
|
|
|
109,000
|
|
|
|
Owned
|
|
|
Manufacturing
|
|
Marietta, Georgia
|
|
BioMedical
|
|
|
11,100
|
|
|
|
Leased
|
|
|
Office/Lab
|
|
Brackell, United Kingdom
|
|
BioMedical
|
|
|
12,500
|
|
|
|
Leased
|
|
|
Office/Warehouse
|
|
Lidcombe, Australia
|
|
BioMedical
|
|
|
2,400
|
|
|
|
Leased
|
|
|
Office/Warehouse
|
|
New Prague, Minnesota
|
|
BioMedical
|
|
|
11,700
|
|
|
|
Leased
|
|
|
Warehouse
|
|
Burnsville, Minnesota(3)
|
|
Corporate
|
|
|
7,000
|
|
|
|
Leased
|
|
|
Office
|
|
Garfield Heights, Ohio
|
|
Corporate
|
|
|
10,300
|
|
|
|
Leased
|
|
|
Office
|
|
Clarksville, Arkansas(4)
|
|
Discontinued operation
|
|
|
110,000
|
|
|
|
Owned
|
|
|
Manufacturing/Office
|
|
|
|
|
(1)
|
This facility has been vacated and we expect to sublease until
the lease expires.
|
|
|
|
(2)
|
This facility is being held for sale.
|
|
|
|
(3)
|
This facility is in the process of being closed and we expect to
buy-out the lease or sublease until the lease expires in January
2007.
|
|
|
|
(4)
|
This facility is leased from us, with a purchase option, by the
company that purchased certain assets of the former Greenville
Tube LLC stainless steel tubing business.
|
Regulatory Environment
We are subject to federal, state and local regulations relating
to the discharge of materials into the environment, production
and handling of our hazardous and regulated materials and our
products and the conduct and condition of our production
facilities. We do not believe that these regulatory requirements
have had a material effect upon our capital expenditures,
earnings or competitive position. We are not anticipating any
material capital expenditures in 2006 that are directly related
to regulatory compliance matters. We are also not aware of any
pending or potential regulatory changes that would have a
material adverse impact on our business.
82
Legal Proceedings
In March 2003, we completed the closure of our Wolverhampton,
United Kingdom manufacturing facility, operated by CHEL, and all
current heat exchanger manufacturing is being conducted at our
LaCrosse, Wisconsin facility. On March 28, 2003, CHEL filed
for a voluntary administration under the U.K. Insolvency Act of
1986. CHEL’s application for voluntary administration was
approved on April 1, 2003 and an administrator was
appointed. Additionally, we received information that indicated
that CHEL’s net pension plan obligations had increased
significantly primarily due to a decline in plan asset values
and interest rates as well as an increase in plan liabilities,
resulting in an estimated plan deficit of approximately
$12.0 million. Based on our financial condition, in March
2003 we determined not to advance funds to CHEL in amounts
necessary to fund CHEL’s obligations. Since CHEL was unable
to fund its net pension plan deficit, pay remaining severance
due to former employees or pay other creditors, the trustees of
the CHEL pension plan requested a decision to
wind-up
the plan from a
U.K. pension regulatory board. That board approved the
wind-up
as of
March 28, 2003.
We do not believe that we are legally obligated to fund the net
pension deficit of the CHEL pension plan because CHEL, which is
no longer one of our consolidated subsidiaries, was the sponsor
of the pension plan and the entity with primary responsibility
for the plan. In addition, we considered ourselves and our
consolidated subsidiaries legally released from being the
primary obligor of any CHEL liabilities. Further, at the time
the insolvency administrator assumed control of CHEL, we no
longer had control of the assets or liabilities of CHEL. As a
result, in March 2003, we wrote-off our net investment in CHEL.
In addition, any claims of CHEL against us were discharged in
bankruptcy as part of our Reorganization Plan.
While no claims presently are pending against us related to
CHEL’s insolvency, persons impacted by the insolvency or
others could bring a claim against us asserting that we are
directly responsible for pension and benefit related liabilities
of CHEL. Although we would contest any claim of this kind, we
can provide no assurance that claims will not be asserted
against us in the future. To the extent we have a significant
liability related to CHEL’s insolvency and pension wind-up,
satisfaction of that liability could have a material adverse
impact on our liquidity, results of operations and financial
position.
On July 8, 2003, we and all of our then majority-owned
U.S. subsidiaries filed voluntary petitions for
reorganization relief under Chapter 11 of the
U.S. Bankruptcy Code with the U.S. Bankruptcy Court
for the District of Delaware to implement an agreed upon senior
debt restructuring plan through a prepackaged plan of
reorganization. None of our
non-U.S.
subsidiaries
were included in the filing in the Bankruptcy Court. On
September 15, 2003, we (as reorganized, the
“Reorganized Company”) and all of our majority-owned
U.S. subsidiaries emerged from Chapter 11 bankruptcy
proceedings pursuant to the Amended Joint Prepackaged
Reorganization Plan of Chart Industries, Inc. and Certain
Subsidiaries, dated September 3, 2003. We have resolved all
proofs of claim asserted in the bankruptcy proceedings,
including the settlement in July 2005 of a finders’ fee
claim in the amount of $1.1 million asserted by one of our
former shareholders, against which we had filed an objection in
the Bankruptcy Court. We expect to move forward to close these
proceedings in the first half of 2006.
We are a party to other legal proceedings incidental to the
normal course of our business. Based on our historical
experience in litigating these actions, as well as our current
assessment of the underlying merits of the actions and
applicable insurance, management believes that the final
resolution of these matters will not have a material adverse
effect on our financial position, liquidity, cash flows or
results of operations.
83
MANAGEMENT
The following table sets forth the name, age as of April 1,
2006 and position of each person that serves as an executive
officer or director of our company and certain other key members
of management.
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
|
54
|
|
|
Chief Executive Officer, President and Director
|
|
Michael F. Biehl
|
|
|
50
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer
|
|
Matthew J. Klaben
|
|
|
36
|
|
|
Vice President, General Counsel and Secretary
|
|
James H. Hoppel, Jr.
|
|
|
42
|
|
|
Chief Accounting Officer, Controller and Assistant Treasurer
|
|
John T. Romain
|
|
|
42
|
|
|
President—Energy & Chemicals Group
|
|
Thomas M. Carey
|
|
|
48
|
|
|
President—Distribution & Storage Group
|
|
Steven T. Shaw
|
|
|
44
|
|
|
President—BioMedical Group
|
|
Ben A. Guill
|
|
|
55
|
|
|
Chairman of the Board of Directors
|
|
Kenneth W. Moore
|
|
|
36
|
|
|
Director
|
|
Timothy H. Day
|
|
|
35
|
|
|
Director
|
Samuel F. Thomas
is our Chief Executive Officer
and President and has served as a member of our board of
directors since October 2003. Prior to joining our company,
Mr. Thomas was Executive Vice President of Global
Consumables at ESAB Holdings Ltd. In addition to his most recent
position at ESAB, Mr. Thomas was responsible for ESAB N.
America during his employment at ESAB Holdings Ltd. Prior to
joining ESAB in February 1999, Mr. Thomas was Vice
President of Friction Products for Federal Mogul, Inc. Prior to
its acquisition by Federal Mogul in 1998, Mr. Thomas was
employed by T&N plc from 1976 to 1998, where he served from
1991 as chief executive of several global operating divisions,
including industrial sealing, camshafts and friction products.
Michael F. Biehl
has been our Executive Vice
President since April 2006, served as our Chief Accounting
Officer from October 2002 until March 2006, and has been our
Chief Financial Officer and Treasurer since July 2001. Prior to
joining us, Mr. Biehl served as Vice President, Finance and
Treasurer at Oglebay Norton Company. Prior to joining Oglebay
Norton in 1992, Mr. Biehl worked in the audit practice of
Ernst & Young LLP in Cleveland, Ohio from 1978 to 1992.
Matthew J. Klaben
is our Vice President, General
Counsel and Secretary. Prior to joining us in March 2006,
Mr. Klaben was a partner at the law firm of Calfee,
Halter & Griswold LLP in Cleveland, Ohio from January
2005 until March 2006, and an associate from April 1998 until
December 2004. Before that, Mr. Klaben was an associate at
the law firm of Jones Day in Cleveland, Ohio from September 1995
until April 1998.
James H. Hoppel, Jr.
is our Chief Accounting
Officer, Controller and Assistant Treasurer and has served as
Controller since November 2004. Prior to joining us,
Mr. Hoppel served as Vice President, Finance for W.W.
Holdings, LLC, a manufacturer and distributor of doors and
hardware. Prior to joining W.W. Holdings in 2001,
Mr. Hoppel held various finance and accounting positions
with different organizations, including the Transaction Services
and Audit practices of PricewaterhouseCoopers LLP in Cleveland,
Ohio.
John T. Romain
has been the President of our
Energy & Chemicals Group since October 2002.
Mr. Romain has been with our company for twelve years, and
prior to becoming the President of the Energy &
Chemicals Group served as our Controller and Chief Accounting
Officer. Prior to joining us, Mr. Romain worked in the
audit practice of Ernst & Young LLP from 1985 to 1993,
where he gained extensive experience providing services to oil
and gas companies.
Thomas M. Carey
has been the President of our
Distribution & Storage Group since September 2004.
Mr. Carey has been with us and our predecessors since 1987
and prior to becoming the President of the
Distribution & Storage Group, Mr. Carey worked in
various engineering and business management positions.
84
Prior to joining Chart, Mr. Carey was employed by Airco as
a field engineer in support of bulk industrial gas sales.
Steven T. Shaw
has been the President of our
BioMedical Group since October 2002. Mr. Shaw has been
employed by us and our predecessors for eleven years in various
management positions. Before joining our company in 1993,
Mr. Shaw was employed for eleven years in the automotive
manufacturing and distribution business of TRW Inc. in
Cleveland, Ohio. Before that, he held positions in sales and
management with APS Incorporated in Houston, Texas.
Ben A. Guill
has been the Chairman of our board of
directors since the Acquisition in October 2005. Mr. Guill
is the President and a Managing Director of First Reserve
Corporation, which he joined in September 1998. Prior to joining
First Reserve Corporation, Mr. Guill was the Managing
Director and Co-head of Investment Banking of Simmons &
Company International, an investment banking firm specializing
in the oil service industry. Mr. Guill also serves as a
director of Dresser, Inc., T-3 Energy Services, Inc. and
National Oilwell Varco, Inc.
Kenneth W. Moore
has been a member of our board of
directors since the Acquisition in October 2005. Mr. Moore
is a Managing Director of First Reserve Corporation and joined
that firm in January 2004. Prior to joining First Reserve
Corporation, Mr. Moore was a Vice President at Morgan
Stanley, an investment bank, from 2000 until 2004. Prior to
joining Morgan Stanley, Mr. Moore was an Associate at Chase
Securities from 1998 until 2000. Mr. Moore also serves as a
director of Dresser-Rand Group, Inc.
Timothy H. Day
has been a member of our board of
directors since the Acquisition in October 2005. Mr. Day is
a Director of First Reserve Corporation, which he joined in
November 2000. Before joining First Reserve Corporation,
Mr. Day was employed at WorldOil.com where he was a Vice
President in charge of Operations. Prior to that time,
Mr. Day spent three years with SCF Partners, a private
equity investment group and three years with CS First
Boston and Salomon Brothers. Mr. Day also serves as a
director of Pacific Energy Partners, L.P.
Composition of the Board of Directors after this Offering
Our board of directors currently consists of four directors. We
expect to add an independent director prior to the effectiveness
of the registration statement of which this prospectus is a
part, another independent director within three months after the
first date the registration statement is declared effective and
one additional independent director to our board within twelve
months after the registration statement is declared effective.
Depending on the size of this offering, we will be a
“controlled company” under the New York Stock Exchange
corporate governance rules if First Reserve and its affiliates
continue to own more than 50% of our common stock after the
completion of this offering. As a result, we would be eligible
for exemptions from provisions of these rules requiring a
majority of independent directors, nominating and corporate
governance and compensation committees composed entirely of
independent directors and written charters addressing specified
matters. If available, we intend to take advantage of these
exemptions. In the event that we are not, or cease to be, a
controlled company within the meaning of these rules, we will be
required to comply with these provisions within the transition
periods specified in the New York Stock Exchange corporate
governance rules.
Board Committees
Our board of directors currently has an audit committee and a
compensation committee. In connection with this offering, we
intend to establish a nominating and corporate governance
committee.
Audit Committee
Our audit committee consists of Ben A. Guill, Kenneth W. Moore
and Timothy H. Day, who is currently the chairman. We expect
that our current audit committee will be comprised of three
independent directors within the transition periods specified in
Rule 10A-3 under the Exchange Act. Following this offering,
the
85
audit committee will be required to have at least one member who
qualifies as an audit committee “financial expert” as
such term is defined in Item 401(h) of
Regulation
S-K.
The audit committee is governed by a written charter which will
be reviewed, and amended if necessary, on an annual basis. The
audit committee’s responsibilities include
(1) appointing, retaining, evaluating and terminating our
independent auditors and approving in advance any audit or
non-audit engagement or relationship between us and such
auditor, (2) approving the overall scope of the audit,
(3) assisting the board in monitoring the integrity of our
financial statements, the independent accountant’s
qualifications and independence, the performance of the
independent accountants and our internal audit function and our
compliance with legal and regulatory requirements,
(4) annually reviewing an independent auditors’ report
describing the auditing firms’ internal quality-control
procedures and any material issues raised by the most recent
internal quality-control review, or peer review, of the auditing
firm, (5) discussing the annual audited financial and
quarterly statements with management and the independent
auditors, (6) discussing earnings press releases, as well
as financial information and earnings guidance provided to
analysts and rating agencies, (7) discussing policies with
respect to risk assessment and risk management, (8) meeting
separately, periodically, with management, internal auditors and
the independent auditor, (9) reviewing with the independent
auditor any audit problems or difficulties and managements’
response, (10) setting clear hiring policies for employees
or former employees of the independent auditors,
(11) annually reviewing the adequacy of the audit
committee’s written charter, (12) reviewing with
management any legal matters that may have a material impact on
us and our financial statements and (13) reporting
regularly to the full board of directors.
Prior to consummation of this offering, the audit committee will
approve and adopt a Code of Ethical Business Conduct for all
employees and an additional Officer Code of Ethics for all of
our executives and financial officers, copies of which will be
available at no cost upon written request by our stockholders.
Compensation Committee
Our current compensation committee consists of Ben A. Guill,
Kenneth W. Moore and Timothy H. Day. The compensation committee
is responsible for (1) reviewing key employee compensation
policies, plans and programs, (2) reviewing and approving
the compensation of our chief executive officer and other
executive officers, (3) developing and recommending to the
board of directors compensation for board members,
(4) reviewing and approving employment contracts and other
similar arrangements between us and our executive officers,
(5) reviewing and consulting with the chief executive
officer on the selection of officers and evaluation of executive
performance and other related matters, (6) administration
of stock plans and other incentive compensation plans,
(7) overseeing compliance with any applicable compensation
reporting requirements of the SEC, (8) approving the
appointment and removal of trustees and investment managers for
pension fund assets, (9) retaining consultants to advise
the committee on executive compensation practices and policies
and (10) handling such other matters that are specifically
delegated to the compensation committee by the board of
directors from time to time.
Director Compensation
None of our directors currently receives any additional
compensation for serving as a director or as a member or chair
of a committee of the board of directors. We expect to pay our
independent directors an annual retainer of $32,000, payable in
equal quarterly installments, and to grant each independent
director 2,000 stock options annually, which options will be
granted with an exercise price equal to the fair market value of
a share of our common stock on the grant date. The options will
vest at 20% per year over five years. We expect to pay also to
the chairperson of our audit committee an additional $8,000
annual retainer and to the chairpersons of our other board
committees an additional $4,000 annual retainer, in each case in
equal quarterly installments. Additionally, we expect to pay our
independent directors a fee of $2,000 for board meetings
attended in person (up to six meetings and $1,000 per meeting
thereafter) and a fee of $1,000 for board meetings attended
telephonically. In connection with meetings of the committees of
our board of directors, we expect to pay our independent
directors who attend committee meetings in person a fee of
$1,000 per meeting and a fee of $500 per meeting for committee
meetings attended telephonically. In addition, directors must
accumulate at least $50,000 in our common stock during their
first 24 months on our board.
86
Executive Compensation
|
|
|
|
|
Summary Compensation Table
|
The following summary compensation table sets forth information
concerning compensation earned during the last three fiscal
years by our chief executive officer and all other persons who
served as executive officers during the last fiscal year. As of
April 1, 2006, our executive officers included
Messrs. Thomas and Biehl, in addition to Matthew J. Klaben,
our Vice President, General Counsel and Secretary and James H.
Hoppel, our Chief Accounting Officer, Controller and Assistant
Treasurer, and Mr. Lovett was no longer an executive
officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
Annual Compensation
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Other Annual
|
|
|
Underlying
|
|
|
All Other
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Compensation(1)
|
|
|
Options
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas(2)
|
|
|
2005
|
|
|
$
|
400,000
|
|
|
$
|
600,000
|
|
|
$
|
5,766,483
|
(3)
|
|
|
67,547
|
(4)
|
|
$
|
18,726
|
(5)
|
|
|
Chief Executive Officer and
|
|
|
2004
|
|
|
$
|
400,000
|
|
|
$
|
600,000
|
|
|
$
|
435,123
|
(6)
|
|
|
203,701
|
(7)
|
|
$
|
19,595
|
(5)
|
|
|
President
|
|
|
2003
|
|
|
$
|
92,307
|
|
|
$
|
94,338
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Michael F. Biehl
|
|
|
2005
|
|
|
$
|
213,200
|
|
|
$
|
319,800
|
|
|
$
|
1,166,830
|
(3)
|
|
|
20,264
|
(4)
|
|
$
|
18,726
|
(5)
|
|
|
Executive Vice President,
|
|
|
2004
|
|
|
$
|
205,000
|
|
|
$
|
374,167
|
(8)
|
|
|
—
|
|
|
|
28,000
|
(7)
|
|
$
|
14,536
|
(5)
|
|
|
Chief Financial Officer and
|
|
|
2003
|
|
|
$
|
200,000
|
|
|
|
|
(8)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
14,077
|
(5)
|
|
|
Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Lovett
|
|
|
2005
|
|
|
$
|
173,349
|
|
|
$
|
260,024
|
|
|
$
|
916,205
|
(3)
|
|
|
6,755
|
(4)
|
|
$
|
15,471
|
(5)
|
|
|
Vice President —
|
|
|
2004
|
|
|
$
|
168,300
|
|
|
$
|
307,450
|
(8)
|
|
|
—
|
|
|
|
23,000
|
(7)
|
|
$
|
5,100
|
(5)
|
|
|
Manufacturing
|
|
|
2003
|
|
|
$
|
165,000
|
|
|
|
|
(8)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
4,950
|
(5)
|
|
|
|
|
(1)
|
No person listed in the table received personal benefits or
perquisites in excess of the lesser of $50,000 or 10% of his
aggregate salary and bonus. Messrs. Thomas and Biehl
received automobile allowances of $1,846 and $6,923 in 2005,
respectively, and Mr. Biehl received the use of a company
car in 2003, 2004 and part of 2005.
|
|
|
|
(2)
|
Mr. Thomas became Chief Executive Officer on
October 6, 2003.
|
|
|
|
(3)
|
These amounts reflect the payments made by us in connection with
the Acquisition related to the cancellation of stock options (or
portions of stock options) held by the named individuals before
the Acquisition.
|
|
|
|
(4)
|
These options were granted on November 23, 2005 pursuant to
the terms of our 2005 Stock Incentive Plan. The following
portions of these options vest annually in equal installments
over five years based on continued service: Mr. Thomas
23,840; Mr. Biehl, 7,152; and Mr. Lovett, 2,384. The
following portions of these options vest based on performance,
measured by reference to First Reserve’s net return on its
investment in us: Mr. Thomas, 43,707; Mr. Biehl,
13,112; and Mr. Lovett, 4,371.
|
|
|
|
(5)
|
Represents amounts contributed by us to the listed person’s
personal account under the Chart Industries, Inc. 401(k)
Investment and Savings Plan.
|
|
|
|
(6)
|
On February 26, 2004, Mr. Thomas purchased from us
28,797 shares of common stock at a price of $13.89 per
share. The amount listed as “Other Annual
Compensation” for Mr. Thomas for 2004 is equal to the
product of the total number of shares purchased and the
difference between the price paid to us and the closing price of
$29.00 per share of Reorganized Company common stock in the
over-the
-counter-market
on February 26, 2004.
|
|
|
|
(7)
|
These options were granted on March 19, 2004 pursuant to
the terms of our 2004 Stock Option and Incentive Plan. A portion
of these options were cancelled in the Acquisition in exchange
for the payments describe in footnote (3) above. The
balance of these options remain outstanding and were adjusted in
connection with the Acquisition to represent rollover options to
acquire our common stock after the Acquisition at an exercise
price of $16.19 per share, as follows: Mr. Thomas,
94,599; Mr. Biehl, 5,297;
|
87
|
|
|
|
|
and Mr. Lovett, 5,221. All of these rollover options held
by Messrs. Thomas, Biehl and Lovett are currently
exercisable.
|
|
|
|
|
(8)
|
Of the amounts listed for 2004, $307,500 and $252,450 represent
year-end cash bonuses paid to Mr. Biehl and
Mr. Lovett, respectively, for our 2004 fiscal year. The
balance of the amounts listed for 2004, $66,667 for
Mr. Biehl and $55,000 for Mr. Lovett, represent
retention incentives that were paid in March 2004 in lieu of any
other cash bonuses for 2003. These retention incentives were
paid under retention agreements entered into in 2003 with
Mr. Biehl and Mr. Lovett, which required these
officers to remain employed with the company through
February 29, 2004 as a condition to payment.
|
The following table sets forth information concerning the grant
of stock options to our chief executive officer and all other
executive officers during the last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
Potential Realizable Value
|
|
|
|
|
Number of
|
|
|
Total
|
|
|
|
|
at Assumed Annual Rates
|
|
|
|
|
Securities
|
|
|
Options
|
|
|
|
|
of Stock Price
|
|
|
|
|
Underlying
|
|
|
Granted to
|
|
|
Exercise
|
|
|
|
|
Appreciation for Option
|
|
|
|
|
Options
|
|
|
Employees
|
|
|
or Base
|
|
|
|
|
Term
|
|
|
|
|
Granted
|
|
|
in Fiscal
|
|
|
Price
|
|
|
Expiration
|
|
|
|
|
|
Name
|
|
(#)
|
|
|
Year
|
|
|
($/Sh)
|
|
|
Date
|
|
|
5% ($)
|
|
|
10% ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
|
67,547
|
(1)
|
|
|
31.0
|
%
|
|
$
|
64.75
|
|
|
|
11/23/15
|
(2)
|
|
$
|
2,750,514
|
(3)
|
|
$
|
6,970,175
|
(3)
|
|
|
Chief Executive Officer and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Biehl
|
|
|
20,264
|
(1)
|
|
|
9.3
|
%
|
|
$
|
64.75
|
|
|
|
11/23/15
|
(2)
|
|
$
|
825,150
|
(3)
|
|
$
|
2,091,042
|
(3)
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Lovett
|
|
|
6,755
|
(1)
|
|
|
3.1
|
%
|
|
$
|
64.75
|
|
|
|
11/23/15
|
(2)
|
|
$
|
275,064
|
(3)
|
|
$
|
697,048
|
(3)
|
|
|
Vice President — Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These options were granted on November 23, 2005 at an
exercise price of $64.75 pursuant to the terms of our 2005 Stock
Incentive Plan. The following portions of these options vest
annually in equal installments over five years based on
continued service: Mr. Thomas, 23,840; Mr. Biehl,
7,152; and Mr. Lovett, 2,384. The following portions of
these options vest based on performance, measured by reference
to First Reserve’s net return on its investment in us:
Mr. Thomas, 43,707; Mr. Biehl, 13,112; and
Mr. Lovett, 4,371. See “—2005 Stock Incentive
Plan.”
|
|
|
|
(2)
|
The portion of these options that vests based on performance, as
described in footnote (1), may terminate earlier than this date
to the extent the performance measure is not satisfied at such
time that First Reserve may cease to have any ownership interest
in us.
|
|
|
|
(3)
|
The potential realized values are net of exercise price but do
not take into account the payment of taxes associated with
exercise. The amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of
the option term based on assumed annual rates of compound share
price appreciation from the date of this prospectus of 5% and
10% based on $64.75 per share, the fair market value on the date
of grant. The 5% and 10% assumed annual rates of compounded
share price appreciation are mandated by rules of the SEC and do
not represent our estimate or projection of our future common
share prices. Actual gains, if any, on stock option exercises
are dependent on the future performance of our common shares and
overall stock market conditions and the option holders’
continued service with us.
|
88
The following table sets forth information concerning the
exercise of stock options during 2005 by each of our chief
executive officer and all other executive officers and the
2005 year-end value of unexercised options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised
|
|
|
Value of Unexercised
|
|
|
|
|
Shares
|
|
|
|
|
Options at
|
|
|
In-the-Money Options at
|
|
|
|
|
Acquired on
|
|
|
Value
|
|
|
Fiscal Year-End (#)
|
|
|
Fiscal Year-End ($)(1)
|
|
|
Name
|
|
Exercise (#)
|
|
|
Realized($)
|
|
|
Exercisable/Unexercisable
|
|
|
Exercisable/Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
|
—
|
|
|
|
—
|
|
|
|
94,599/67,547
|
|
|
|
$ /$
|
|
|
|
Chief Executive Officer and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Biehl
|
|
|
—
|
|
|
|
—
|
|
|
|
5,297/20,264
|
|
|
|
$ /$
|
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Lovett
|
|
|
—
|
|
|
|
—
|
|
|
|
4,350/7,626
|
|
|
|
$ /$
|
|
|
|
Vice President —Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
There was no public trading market for our common stock as of
December 31, 2005. The value of unexercised
in-the
-money options is
based on the assumed initial public offering price of
$ per
share.
|
Pension Plan Information
The Chart Retirement Income Plan was frozen as of
December 31, 2004. Therefore, no future service or earnings
will be considered in the calculation of the “normal
retirement benefit” (as defined therein) payable from the
plan. Mr. Lovett’s annual benefit payable at his
“normal retirement date” (as defined therein) is
$4,850.88. This amount was calculated using his final average
earnings and credited service at December 31, 2004.
2005 Stock Incentive Plan
The following description of the Chart Industries, Inc. 2005
Stock Incentive Plan, which we refer to as the Plan, is not
complete and is qualified by reference to the full text of the
Plan, which has been filed as an exhibit to the registration
statement of which this prospectus forms a part. We adopted the
stock incentive plan effective November 23, 2005 and it was
approved by our stockholders on November 23, 2005.
The Plan provides for the grant of options that are not
incentive stock options, stock appreciation rights
(“SARs”) or various other stock-based grants,
including the shares of our common stock sold to, and options
granted to, our executive officers and other key employees.
In connection with this offering, we intend to amend the Plan to
increase the number of shares of common stock reserved for
issuance under the Plan and to make other changes to the terms
of the Plan that will be effective when we complete this
offering. As of April 1, 2006, there were
245,157 shares of common stock reserved for issuance under
the Plan. The number or kind of shares issued or reserved for
issuance pursuant to the Plan or pursuant to outstanding awards,
maximum number of shares for which options or SARs may be
granted during a calendar year to any participant, the exercise
price of any award or any other affected term of an award may be
adjusted by our board of directors on account of mergers,
consolidations, reorganizations, stock splits, extraordinary
dividends or other dilutive changes in the shares of common
stock. Shares of common stock covered by awards that terminate
or lapse without the issuance of shares will again be available
for grant under the Plan.
The Plan is administered by our board of directors, which may
delegate its duties and powers in whole or in part to any
committee thereof. The board has the full power and authority to
establish the terms and conditions of any award consistent with
the provisions of the Plan and to waive any such terms and
conditions at any time. The board also has the authority to
grant awards under the Plan. The board is authorized to
interpret the Plan, to establish, amend and rescind any rules
and regulations relating to the Plan and to make any other
determinations that it deems necessary or desirable for the
administration of the Plan. The board is
89
authorized to correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the
extent the board deems necessary or desirable.
The exercise price per share for options is equal to the fair
market value on the applicable date of grant. An option holder
may exercise an option by written notice and payment of the
exercise price (i) in cash, (ii) to the extent
permitted by the board, by the surrender of a number of shares
of common stock already owned by the option holder for at least
six months (or such other period as established from time to
time by the board to avoid adverse accounting treatment applying
generally accepted accounting principles), (iii) in a
combination of cash and shares of common stock (as qualified by
clause (ii)), (iv) through the delivery of irrevocable
instructions to a broker to sell share obtained upon the
exercise of the option and deliver to us an amount equal to the
exercise price for the shares of common stock being purchased or
(v) through such cashless exercise procedures as the board
may permit. Option holders who are subject to the withholding of
federal and state income tax as a result of exercising an option
may satisfy the income tax withholding obligation through the
withholding of a portion of the shares of common stock to be
received upon exercise of the option.
As of the date of this prospectus, we have granted under the
Plan certain options as non-qualified stock options, which have
been granted as follows: approximately 35% vest and become
exercisable over the passage of time, which we refer to as
“time options,” assuming the holder thereof continues
to be employed by us, and the remaining portion vests and
becomes exercisable based upon the achievement of certain
performance targets, which we refer to as “performance
options.” Time options generally become exercisable by the
holder of the option in installments of 20% on each of the first
five anniversaries of the grant date. Performance options
generally become exercisable based upon the “Fund X
Net Return,” which is the amount received by First Reserve
in cash (and/or in kind based upon the fair market value of
securities or other property received by First Reserve) in
respect of its investment in us divided by the aggregate amount
of the investment by First Reserve in us (the “Fund X
Investment”).
Immediately prior to a change in control of us (as defined in
the Plan), the exercisability of the time options will
automatically accelerate with respect to 100% of the shares of
our common stock subject to the time options. In addition,
subject to the holder of the option’s continued employment,
in the event First Reserve sells 100% of its interest in us to a
third party prior to October 17, 2008 and, as a result of
such sale, the Fund X Net Return is less than 2.50 times
the Fund X Investment, but an internal rate of return of
greater than 30% is realized, the performance option will
accelerate with respect to 45% of the shares of our common stock
subject to the performance option.
The board may grant SARs independent of or in connection with an
option. The exercise price per share of a SAR shall be an amount
determined by the board, but in no event shall such amount be
less than the greater of (i) the fair market value of a
share on the date the SAR is granted or, in the case of a SAR
granted in conjunction with an option, or a portion thereof, the
exercise price of the related option and (ii) the minimum
amount permitted by applicable laws, rules, by-laws or policies
of regulatory authorities or stock exchanges. Each SAR granted
independent of an option shall entitle a participant upon
exercise to an amount equal to (i) the excess of
(A) the fair market value on the exercise date of one share
over (B) the exercise price per share, times (ii) the
number of shares covered by the SAR. Each SAR granted in
conjunction with an option, or a portion thereof, shall entitle
a participant to surrender to us the unexercised option, or any
portion thereof, and to receive from us in exchange therefor an
amount equal to (i) the excess of (A) the fair market
value on the exercise date of one share over (B) the
exercise price per share, times (ii) the number of shares
covered by the option, or portion thereof, which is surrendered.
Payment shall be made in shares of common stock or in cash, or
partly in shares of common stock and partly in cash, all as
shall be determined by the board.
The board may grant awards of shares of common stock, restricted
stock and awards that are valued in whole or in part by
reference to, or are otherwise based on the fair market value
of, shares. Such awards will be subject to the terms and
conditions established by the board.
Unless otherwise determined by the board, awards granted under
the Plan are not transferable other than by will or by the laws
of descent and distribution.
90
The board of directors may amend, alter or discontinue the Plan
in any respect at any time, but no amendment, alteration or
discontinuance may diminish any of the rights of a participant
under any awards previously granted, without his or her consent.
2004 Stock Option and Incentive Plan
The following description of the Chart Industries, Inc. 2004
Stock Option and Incentive Plan, which we refer to as our 2004
Plan, is not complete and is qualified by reference to the full
text of the 2004 Plan, which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. We
adopted the stock incentive plan effective February 12,
2004. We anticipate that the 2004 Plan will be approved by our
stockholders prior to the completion of this offering.
The 2004 Plan permits the grant of nonqualified stock options to
our and our affiliates’ employees. A maximum of
494,703 shares of common stock may be subject to awards
under the 2004 Plan. The number of shares of common stock issued
or reserved pursuant to the 2004 Plan, or pursuant to
outstanding awards, is subject to adjustment on account of
mergers, consolidations, reorganizations, stock splits, stock
dividends, extraordinary dividends and other dilutive changes in
the shares of common stock. Shares of common stock covered by
awards that expire, terminate or lapse will again be available
for grant under the 2004 Plan.
The stock incentive plan is administered by our board of
directors, which may delegate its duties and powers in whole or
in part to any committee thereof. The board has the sole
discretion to determine the employees to whom awards may be
granted under the 2004 Plan and the manner in which such awards
will vest. Options will be granted by the board to employees in
such numbers and at such times during the term of the 2004 Plan
as the board shall determine. The board is authorized to
interpret the 2004 Plan, to establish, amend and rescind any
rules and regulations relating to the 2004 Plan.
The board shall determine the exercise price for each option. An
option holder may exercise an option by written notice and
payment of the exercise price (1) in cash, (2) by the
surrender of a number of shares of common stock already owned by
the option holder, (3) by surrender of all or part of an
award or (4) in a combination of the foregoing methods. The
board may also prescribe any other method of paying the exercise
price that it determines is consistent with applicable law and
the purpose of the 2004 Plan. The board in its discretion may
permit option holders who are subject to the withholding of
federal and state income tax as a result of exercising an option
to satisfy the income tax withholding obligation through the
withholding of a portion of the shares of common stock to be
received upon exercise of the option.
Unless otherwise determined by the board, awards granted under
the 2004 Plan are not transferable other than by will, by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Internal Revenue Code
of 1986, as amended, which we refer to as the Code.
Prior to the consummation of this offering, we expect the
outstanding options under the 2004 Plan to be fully vested and
exercised.
Our board of directors may amend, alter or discontinue the 2004
Plan in any respect at any time, but no amendment, alteration or
discontinuance may impair any of the rights of a participant
under any awards previously granted, without his or her consent.
2006 Chart Executive Incentive Compensation Plan
The following description of the 2006 Chart Executive Incentive
Compensation Plan, which we refer to as our 2006 Bonus Plan, is
not complete and is qualified by reference to the full text of
the annual incentive plan, which has been filed as an exhibit to
the registration statement of which this prospectus forms a part.
The 2006 Bonus Plan is a bonus plan in which our executive
officers participate, which is designed to provide our executive
officers with incentive compensation based upon the achievement
of pre-established performance goals. The purpose of the annual
incentive plan is to attract, retain, motivate and reward
participants by providing them with the opportunity to earn
competitive compensation directly linked to our performance.
91
The 2006 Bonus Plan is administered by the compensation
committee of our board of directors. The 2006 Bonus Plan
provides for the payment of incentive bonuses, in the form of
cash. If our performance relative to the 2006 Bonus Plan’s
targets exceeds threshold amounts, participants may earn a bonus
of up to a pre-determined percentage of the participant’s
base salary, ranging from 90% to 165% of the participant’s
base salary at maximum performance levels.
The compensation committee of the board has established the
performance targets under the 2006 Bonus Plan. The material
targets under the 2006 Bonus Plan include working capital and
EBITDA targets. The performance period under the plan is our
fiscal year.
Following the end of the fiscal year, the compensation committee
of the board will determine (i) whether and to what extent
any of the performance objectives established have been
satisfied, and (ii) for each participant employed as of the
last day of the fiscal year, the actual bonus to which such
participant shall be entitled, taking into consideration the
extent to which the performance objectives have been met.
Employees on a leave of absence as of the last day of the fiscal
year are not eligible for payment under the plan unless and
until they return to active status.
Payment of any bonus amount will be made to participants before
March 15, 2007.
Annual Incentive Compensation Plan
Prior to the consummation of this offering, we expect to adopt
an annual cash bonus plan that will apply to fiscal year 2007
and beyond. Such plan will be designed to comply with
performance-based compensation exemption from
section 162(m) of the Code during any period which
section 162(m) of the Code is applicable.
Employment Agreements
On November 23, 2005, we entered into an employment
agreement with Samuel F. Thomas, pursuant to which
Mr. Thomas serves as our Chief Executive Officer and
President for a rolling term of three years. Under the
agreement, Mr. Thomas is entitled to an annual base salary
of $400,000 payable in regular installments in accordance with
our usual payroll practices. Mr. Thomas is also eligible to
earn an annual bonus award, for each full year during the term
of his employment agreement, of up to 150% of his annual bonus
target, which target for calendar year 2006 is $440,000 and may
be increased in the sole discretion of our board of directors,
based upon the achievement of annual performance targets
established by our board. Mr. Thomas is also generally
entitled to participate in our employee benefit plans on the
same basis as those benefits are generally made available to our
other senior executives.
If Mr. Thomas’s employment is terminated by us without
“cause” or he resigns for “good reason” (as
such terms are defined in his employment agreement),
Mr. Thomas will be entitled to receive compensation and
benefits that are earned but unpaid as of the date of
termination and, subject to the execution and delivery of a
release of claims against us, (i) base salary for three
years, payable in installments and (ii) continued coverage
under our group health plans for three years or, to the extent
such coverage is not permissible under the terms of such plans,
an amount equal to the premium subsidy we would have otherwise
paid on Mr. Thomas’ behalf for such coverage.
Mr. Thomas is also subject to a covenant not to disclose
confidential information during the employment term and at all
times thereafter and covenants not to compete and not to solicit
employees or customers during the employment term and for three
years following termination of employment for any reason.
On December 1, 2005, we entered into an employment
agreement with Michael F. Biehl, pursuant to which
Mr. Biehl serves as our Chief Financial Officer and
Treasurer for a rolling term of two years. Under the agreement,
Mr. Biehl is entitled to an annual base salary of $235,000
payable in regular installments in
92
accordance with our usual payroll practices. Mr. Biehl is
also eligible to earn an annual bonus award, for each full year
during the term of his employment agreement, of up to 150% of
his annual base salary, based upon the achievement of annual
performance targets established by our board. Mr. Biehl is
also generally entitled to participate in our employee benefit
plans on the same basis as those benefits are generally made
available to our other senior executives.
If Mr. Biehl’s employment is terminated by us without
“cause” or he resigns for “good reason” (as
such terms are defined in his employment agreement),
Mr. Biehl will be entitled to receive the compensation and
benefits that are earned but unpaid as of the date of
termination and, subject to the execution and delivery of a
release of claims against us, (i) base salary for two
years, payable in installments and (ii) continued coverage
under our group health plans for two years and, to the extent
such coverage is not permissible under the terms of such plans,
an amount equal to the premium subsidy we would have otherwise
paid on Mr. Biehl’s behalf for such coverage.
Mr. Biehl is also subject to a covenant not to disclose
confidential information during the employment term and at all
times thereafter and covenants not to compete and not to solicit
employees or customers during the term of his employment and for
two years following termination of employment for any reason.
On March 29, 2006, we entered into an employment agreement
with Matthew J. Klaben, pursuant to which Mr. Klaben serves
as our Vice President and General Counsel for a rolling term of
one year. Under the agreement, Mr. Klaben is entitled to an
annual base salary of $193,000, payable in regular installments
in accordance with our usual payroll practices. Mr. Klaben
is also entitled to receive a one-time $25,000 signing bonus,
which will be forfeited and repaid to the company if
Mr. Klaben resigns without “good reason” (as such
term is defined in his employment agreement) before
March 29, 2007. In addition, Mr. Klaben is also
eligible to earn an annual bonus award, for each full year
during the term of his employment agreement, of up to 105% of
his annual base salary, based upon the achievement of annual
performance targets established by our board. Mr. Klaben is
also generally entitled to participate in our employee benefit
plans on the same basis as those benefits are generally made
available to our other senior executives.
If Mr. Klaben’s employment is terminated by us without
“cause” or he resigns for “good reason” (as
such terms are defined in his employment agreement), he will be
entitled to receive the compensation and benefits that are
earned but unpaid as of the date of termination and, subject to
the execution and delivery of a release of claims against us,
(i) base salary for one year, payable in installments and
(ii) continued coverage under our group health plans for
one year and, to the extent such coverage is not permissible
under the terms of such plans, an amount equal to the premium
subsidy we would have otherwise paid on Mr. Klaben’s
behalf for such coverage.
Mr. Klaben is also subject to a covenant not to disclose
confidential information during his term of employment and at
all times thereafter and covenants not to compete and not to
solicit employees or customers during the term of his employment
and for one year following termination of employment for any
reason.
On December 1, 2005, we entered into an employment
agreement with Charles R. Lovett pursuant to which
Mr. Lovett serves as our Vice President— Manufacturing
for a rolling term of one year. Under the agreement,
Mr. Lovett is entitled to an annual base salary of
$179,416, payable in regular installments in accordance with our
usual payroll practices. Mr. Lovett is also eligible to
earn an annual bonus award, for each full year during the term
of his employment agreement, of up to 150% of his annual base
salary, based upon the achievement of annual performance targets
established by our board. Mr. Lovett is also generally
entitled to participate in our employee benefit plans on the
same basis as those benefits are generally made available to our
other senior executives.
93
If Mr. Lovett’s employment is terminated by us without
“cause” or he resigns for “good reason” (as
such terms are defined in the employment agreement), he will be
entitled to receive the compensation and benefits that are
earned but unpaid as of the date of termination and, subject to
the execution and delivery of a release of claims against us,
(i) base salary for one year, payable in installments and
(ii) continued coverage under our group health plans for
one year and, to the extent such coverage is not permissible
under the terms of such plans, an amount equal to the premium
subsidy we would have otherwise paid on Mr. Lovett’s
behalf for such coverage.
Mr. Lovett is also subject to a covenant not to disclose
confidential information during his term of employment and at
all times thereafter and covenants not to compete and not to
solicit employees or customers during the term of his employment
and for one year following termination of employment for any
reason.
Management Equity
In connection with the Acquisition, the compensation committee
elected to adjust, in accordance with the terms of our 2004
Stock Option and Incentive Plan and the merger agreement, a
portion of certain then-outstanding stock options held by
certain executive officers or members of senior management to
represent options to acquire shares of our common stock after
the Acquisition. All other then-outstanding stock options were
cashed out pursuant to the merger agreement. All such rollover
options are subject to the same terms and conditions as set
forth in our 2004 Stock Option and Incentive Plan and related
option agreements (including post-termination exercise periods)
and are fully vested, unless otherwise agreed in writing prior
to the closing of the Acquisition. In addition, any rollover
option that was granted with an exercise price per share less
than the per share fair market value of the shares underlying
the option on the grant date thereof was modified by increasing
the aggregate exercise price of such option by an amount equal
to the excess of (i) the aggregate fair market value of the
shares underlying such option on the grant date thereof over
(ii) the aggregate exercise price of such options on the
grant date thereof (the “Aggregate Option Spread”). At
the closing of the Acquisition, the holders of the rollover
options received an amount in cash equal to the Aggregate Option
Spread (less any required withholding). All shares of common
stock acquired upon exercise of a rollover option are subject to
the terms of the management stockholder’s agreements. See
“Certain Related Party Transactions.”
94
PRINCIPAL STOCKHOLDERS
The following table and accompanying footnotes show information
regarding the beneficial ownership of our common stock before
and after this offering by:
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each person who is known by us to own beneficially more than 5%
of our common stock;
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each member of our board of directors and each of our named
executive officers; and
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all members of our board of directors and our executive officers
as a group.
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The number of shares and percentages of beneficial ownership
before the offering set forth below are based on
1,718,896 shares of our common stock issued and outstanding
as of March 31, 2006 and after giving effect to
the -for-one
stock split we expect to effect immediately prior to the
consummation of this offering. The number of shares and
percentages of beneficial ownership after the offering are based
on shares
of our common stock that will be issued and outstanding
immediately after this offering,
including shares,
adjusted for the elimination of any fractional shares, that will
be dividended to our existing stockholders assuming no exercise
of the underwriters’ over-allotment option.
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Shares Beneficially Owned Immediately
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After this Offering
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Shares Beneficially
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Assuming the
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Assuming the
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Owned Immediately
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Underwriters’ Option
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Underwriters’ Option
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Prior to this Offering
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is Not Exercised(1)
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is Exercised in Full
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Percent of
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Percent of
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Percent of
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Name of Beneficial Holder
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Number
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Common
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Number
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Common
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Number
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Common
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First Reserve Fund X, L.P(2)
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2,291,923
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100%
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Samuel F. Thomas(3)
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94,599
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5.2%
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Michael F. Biehl(4)
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5,297
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*
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Matthew J. Klaben
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0
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*
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James H. Hoppel, Jr.
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0
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*
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Charles R. Lovett(5)
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5,221
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*
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Ben A. Guill(6)
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0
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*
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Kenneth W. Moore(6)
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0
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*
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Timothy H. Day(6)
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0
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*
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All directors and officers as a group (8 persons)(7)
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105,117
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5.8%
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(1)
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We will grant the underwriters an option to purchase up to an
additional shares in this offering. Immediately prior to the
consummation of this offering, we will declare a stock dividend,
the terms of which will require that shortly after the
expiration of the underwriters’ over-allotment option
(assuming the option is not exercised in full) we issue to our
existing stockholders the number of shares equal to (x) the
number of additional shares the underwriters have an option to
purchase minus (y) the actual number of shares the
underwriters purchase from us pursuant to that option.
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(2)
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100% of our common stock is owned by FR X Chart Holdings
LLC, which in turn is 100% owned and managed by First Reserve
Fund X, L.P. (“Fund X”). First Reserve
GP X, L.P. (“GP X”) is the general partner
of Fund X. First Reserve GP X, Inc. (“GP X,
Inc.”) is the general partner of GP X. First Reserve
Corporation is the advisor to Fund X. The address of
FR X Chart Holdings LLC, Fund X, GP X, GP X,
Inc. and First Reserve Corporation is c/o First Reserve
Corporation, One Lafayette Place, Greenwich, Connecticut 06830.
First Reserve’s beneficial ownership consists of
1,718,896 shares of our common stock and a warrant
exercisable to acquire 573,027 shares of our common stock.
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(3)
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Mr. Thomas’ beneficial ownership consists of
94,599 shares subject to exercisable stock options.
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(4)
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Mr. Biehl’s beneficial ownership consists of
5,297 shares subject to exercisable stock options.
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(5)
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Mr. Lovett’s beneficial ownership consists of
5,221 shares subject to exercisable stock options.
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(6)
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Mr. Guill is the President, a Managing Director and a
member of the board of directors of First Reserve Corporation
and GP X, Inc. Mr. Moore is a Managing Director of
First Reserve Corporation and GP X, Inc. Mr. Day is a
Director of First Reserve Corporation and GP X, Inc.
Mr. Guill, Mr. Moore and Mr. Day all disclaim
beneficial ownership of any shares of the issuer’s equity
securities owned by such entities or their affiliates (including
First Reserve Fund X, L.P.).
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(7)
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Consists of 105,117 shares subject to exercisable stock options.
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Less than 1%.
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96
CERTAIN RELATED PARTY TRANSACTIONS
Management Stockholder’s Agreements
We have entered into management stockholder’s agreements,
dated as of November 23, 2005 and March 29, 2006, with
certain members of our management, including
Messrs. Thomas, Biehl, Klaben, Hoppel and Lovett (the
“management stockholders”) and FR X Chart Holdings LLC.
Restrictions on Transfers.
The management
stockholder’s agreements impose significant restrictions on
transfers of shares of common stock. Except for transfers in
accordance with the management stockholder’s agreements,
transfers approved in advance by our board, transfers to Chart,
FR X Chart Holdings LLC or any affiliate of FR X Chart Holdings
LLC, transfers by a management stockholder to a family member or
family trust for bona fide estate planning purposes with the
consent of our board (which will not be unreasonably withheld),
transfers by a management stockholder by will or by intestate
succession, or any transfer made pursuant to the registration
rights granted by the management stockholder’s agreements
(“Permitted Transfers”), no management stockholder
will be permitted to transfer any shares of our common stock
without the consent of our board until the earliest to occur of
(i) an initial public offering of at least 25% of the
outstanding shares of our common stock or that results in gross
proceeds to us equal to $55,649,258.75, (ii) the occurrence
of a “change of control” (as defined in the management
stockholder’s agreements) of the company and
(iii) October 17, 2008 (the earliest of such dates
being the “Lapse Date”). The consummation of this
offering is expected to result in the occurrence of the Lapse
Date.
Right of First Offer.
If at any time after the Lapse Date
but prior to the consummation of an initial public offering of
our common stock, the management stockholder proposes to
transfer his or her shares of common stock, other than in a
Permitted Transfer, or as a result of the exercise of tag-along
or drag-along rights (as described below), the management
stockholder will notify us of such proposed sale and allow us
the opportunity to, or to arrange for a third party to, purchase
such shares at the same price and on substantially the same
terms of the proposed transfer. If we do not elect to, or
arrange for a third party to, purchase such shares at such price
and on such terms, the management stockholder may then sell such
shares at such price and on such terms to a third party. This
right of first offer is expected to expire upon the consummation
of this offering.
Tag-Along Rights.
If FR X Chart Holdings LLC wishes to
transfer shares of common stock other than pursuant to a
registered offering, a transfer pursuant to Rule 144 of the
Securities Act, a transfer with the approval of the members of
the board not affiliated with FR X Chart Holdings LLC, a
transfer by FR X Chart Holdings LLC to any of its affiliates or
partners or our employees or a transfer resulting in an exercise
by FR X Chart Holdings LLC of its drag-along rights, each
management stockholder shall have the right to tag-along and
participate, on a pro rata basis, in such transfer of common
stock.
Chart’s Right to Repurchase Shares of Common Stock of a
Management Stockholder.
If, prior to the Lapse Date, a
management stockholder’s employment is terminated by us for
“cause” (as defined in the management
stockholder’s agreements), then we shall have the right to
repurchase all or part of the shares of common stock held by
such management stockholder at a per share price equal to the
lower of the purchase price per share paid by such management
stockholder and the “fair market value” (as defined in
the management stockholder’s agreements) per share on the
date of exercise of our repurchase right. If, prior to the Lapse
Date, a management stockholder’s employment is terminated
due to death or “disability”, by us without
“cause”, by such management stockholder for “good
reason” or upon retirement (as such terms are defined in
the management stockholder’s agreements), then we shall
have the right to repurchase all or part of the shares of common
stock held by such management stockholder at a per share price
equal to the “fair market value” per share on the date
of exercise of our repurchase right. If, prior to the Lapse
Date, a management stockholder’s employment is terminated
by such management stockholder without “good reason”,
then we shall have the right to repurchase all or part of the
shares of common stock held by such management stockholder at a
per share price equal to (i) the “fair market
value” per share on the date of exercise of our repurchase
right with respect to “purchased shares” and
“rollover shares” (as such terms are defined in the
management stockholder’s agreements) held by such
management stockholder and (ii) the
97
lower of the purchase price per share paid by such management
stockholder and the “fair market value” per share on
the date of exercise of our repurchase right with respect to all
other shares held by such management stockholder. Our right to
repurchase shares as described in this paragraph is expected to
expire upon consummation of this offering.
Obligation to Repurchase Shares of Common Stock of a
Management Stockholder.
If a management stockholder’s
employment is terminated as a result of death or
“disability,” by us without “cause” or by
the management stockholder for “good reason” or upon
“retirement,” such management stockholder shall, for a
period of 90 days following the later of (x) the date
of such termination and (y) the date that is six months and
one day after the date on which such management stockholder
purchased the shares under stock options that were rolled over
in connection with the Acquisition from us, have the right to
sell to us, and we shall be required to purchase all of such
shares at a per share price equal to the “fair market
value” per share on the date of exercise of such right.
“Piggyback” Registration Rights.
Pursuant to
and subject to the terms of the management stockholder’s
agreements, each management stockholder will have the
opportunity to include in registered sales of our common stock
(other than an initial public offering or relating to any
employee benefit plan or corporate merger, acquisition or
reorganization), all or any part of the “registrable
securities” (as such term is defined in the management
stockholder’s agreements) then held by such management
stockholder.
Voting Agreement.
Until the occurrence of the Lapse Date,
each management stockholder shall vote his or her shares of
common stock with respect to all matters in the same proportion
as the shares of common stock held by FR X Chart Holdings LLC
and its affiliates are voted. This provision is expected to
expire upon the consummation of this offering.
Preemptive Rights.
In the event we issue shares of our
common stock (other than upon or in connection with (i) any
exercise or conversion of options, warrants or convertible
securities outstanding as of the date of the management
stockholder’s agreements, or the issuance or exercise of
any options or warrants issued after the date of the management
stockholder’s agreements pursuant to any stock option plan
or stock option agreement approved by the board, (ii) any
issuance of common stock in exchange for consideration other
than cash or (iii) any acquisition (by sale, merger in
which we are the surviving corporation, or otherwise) by us of
equity in, or assets of, a business), each management
stockholder shall have the right to purchase, on a pro-rata
basis, shares of the common stock proposed to be issued. This
right terminates upon an initial public offering of our common
stock.
Stockholders Agreement
In connection with this offering, we and First Reserve or one of
its affiliates intend to enter into a stockholders agreement
pursuant to which First Reserve or its affiliates has the right
to request us to register the sale of shares held by First
Reserve, including shares issuable upon exercise of the warrant
held by FR X Chart Holdings LLC, on their behalf and may
require us to make available shelf registration statements
permitting sales of shares into the market from time to time
over an extended period. In addition, First Reserve has the
ability to exercise certain piggyback registration rights in
connection with registered offerings initiated by us. After the
consummation of this offering, First Reserve will own shares
entitled to these registration rights. There are also
573,027 shares under FR X Chart Holdings LLC’s
warrant which are entitled to these registration rights. See
“—Warrant to Purchase our Shares.”
In addition, pursuant to the terms of the stockholders
agreement, after this offering, for so long as First Reserve
continues to hold (1) less than 50% but at least 25% of our
outstanding common stock, it shall have the right to designate
three director nominees, (2) less than 25% but more than
10% of our outstanding common stock, it will have the right to
designate two director nominees; and (3) 10% of our
outstanding common stock, it will have the right to designate
one director nominee. Once First Reserve holds less than 10% of
our outstanding common stock, it will have no right to designate
directors pursuant to the stockholders agreement.
98
Warrant to Purchase our Shares
On November 23, 2005, we issued a warrant to FR X Chart
Holdings LLC to purchase up to 573,027 shares of our common
stock at a per share purchase price of $64.75 (subject to
adjustment per the terms of the warrant). FR X Chart Holdings
LLC may exercise the warrant at any time prior to March 19,
2014, including through cashless exercise. The warrant may not
be transferred except to a successor of FR X Chart Holdings LLC
without the prior consent of a majority of our board of
directors who are not affiliated with FR X Chart Holdings LLC,
such consent not to be unreasonably withheld or delayed. The
terms, conditions and securities subject to the warrant shall be
adjusted in a manner commensurate with and proportionate to
changes applying generally to the outstanding management
rollover options. See “Management— Management
Equity.”
Legal Fees
On April 1, 2006, Matthew J. Klaben became our Vice
President, General Counsel and Secretary. Prior to joining us in
March 2006, Mr. Klaben was a partner with the law firm of
Calfee, Halter & Griswold LLP. During 2005 and
year-to
-date in 2006,
we paid $959,264 and $41,765, respectively, in legal fees and
expenses to the law firm of Calfee, Halter & Griswold
LLP for legal services rendered.
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DESCRIPTION OF INDEBTEDNESS
Senior Secured Credit Facility
In connection with the Acquisition, we entered into a senior
secured credit facility with Citicorp North America, Inc., as
administrative agent, Citigroup Global Markets Inc., as joint
lead arranger and joint book manager, Morgan Stanley Senior
Funding, Inc., as joint lead arranger, joint book manager and
syndication agent and each lender party thereto.
The senior secured credit facility provides senior secured
financing of $240.0 million, consisting of:
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a $180.0 million term loan facility; and
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a $60.0 million revolving credit facility.
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The term loan portion of our senior secured credit facility was
fully funded on October 17, 2005 and had approximately
$37.6 million of borrowing capacity under the revolving
portion of our senior secured credit facility at
December 31, 2005, after giving effect to approximately
$22.4 million of letters of credit and bank guarantees
outstanding at that date.
Upon the occurrence of certain events, we may request an
increase to the existing term loan facility and/or the existing
revolving credit facility in an amount not to exceed
$50.0 million, subject to receipt of commitments by
existing lenders or other financial institutions reasonably
acceptable to the administrative agent.
We are the borrower for the term loan facility and the revolving
credit facility. The revolving credit facility includes
borrowing capacity available for letters of credit and for
borrowings on same-day notice, referred to as swingline loans.
Borrowings under the senior secured credit facility bear
interest at a rate equal to an applicable margin plus, at our
option, either (a) a base rate determined by reference to
the highest of (1) the rate that the administrative agent
announces from time to time as its base commercial lending rate,
(2) the three month certificate of deposit rate plus 0.5%
and (3) the federal funds rate plus 0.5% or (b) a
LIBOR rate determined by the applicable screen rate or by
reference to the costs of funds for deposits in
U.S. dollars for the interest period relevant to such
borrowing adjusted for certain additional costs.
The initial applicable margin for borrowings under the revolving
credit facility is 1.50% with respect to base rate borrowings
and 2.50% with respect to LIBOR borrowings. After we deliver our
financial statements for the first fiscal quarter ending at
least six months after the closing date, such applicable margin
will be reduced to 1.25% and 2.25%, respectively if our leverage
ratio is less than 5.0 to 1.0 but greater than or equal to 4.0
to 1.0, and to 1.00% and 2.00%, respectively if our leverage
ratio is less than 4.0 to 1.0. The applicable margin for
borrowings under the term loan facility is 1.00% with respect to
base rate borrowings and 2.00% with respect to LIBOR borrowings.
In addition to paying interest on outstanding principal under
the senior secured credit facility, we are required to pay a
commitment fee to the lenders under the revolving credit
facility in respect of the unutilized commitments thereunder.
The initial commitment fee rate is 0.50% per annum (which
fee will be reduced to 0.375% per annum if our leverage
ratio is less than 4.0 to 1.0). We also have to pay letter of
credit fees equal to the applicable margin then in effect with
respect to LIBOR loans under the revolving credit facility on
the aggregate undrawn amount of all letters of credit
outstanding. We also have to pay to each bank issuing a letter
of credit fees equal to 0.25% on the face amount of each letter
of credit and other customary documentary and processing charges.
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The senior secured credit facility requires us to prepay
outstanding term loans, subject to certain exceptions, with:
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beginning in the year ending December 31, 2006, 75% (which
percentage will be reduced to 50% if our leverage ratio is equal
to or less than 4.75 and greater than 3.75 to 1.00, and to 25%
if our leverage ratio is equal to or less than 3.75 to 1.00 and
greater than 2.75 to 1.00, and to 0% if our leverage ratio is
equal to or less than 2.75 to 1.00) of our annual excess cash
flow;
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100% of the net cash proceeds in excess of an amount to be
determined from non-ordinary course asset sales and casualty and
condemnation events, if we do not reinvest or contract to
reinvest those proceeds within 12 months and use such
proceeds within 18 months of receipt, subject to certain
limitations;
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100% of the net cash proceeds of any incurrence of debt, other
than certain debt permitted under the senior secured credit
facility; and
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100% of amounts in excess of an aggregate amount of
$5.0 million in respect of certain claims arising out of
the Acquisition, subject to certain exceptions.
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The foregoing mandatory prepayments other than from excess cash
flow will be applied first, to the next eight installments of
the term loan facility and second, to the remaining installments
of the term loan facility on a pro rata basis. Mandatory
prepayments from excess cash flow and optional prepayments will
be applied to the remaining installments of the term loan
facility at our direction. Each lender has the right to decline
any mandatory prepayment of its term loans in which case the
amount of such prepayment will be retained by us.
We may voluntarily prepay outstanding loans under the senior
secured credit facility at any time without premium or penalty,
other than customary “breakage” costs with respect to
LIBOR loans.
We are required to repay installments on the loans under the
term loan facility in quarterly principal amounts equal to 0.25%
of their funded total principal amount for the first six years
and nine months, with the remaining amount payable on the date
that is seven years from the date of the closing of the senior
secured credit facility.
Principal amounts outstanding under the revolving credit
facility will be due and payable in full at maturity, five years
from the date of the closing of the senior secured credit
facility.
All our obligations under the senior secured credit facility are
unconditionally guaranteed by each of our existing and future
domestic wholly-owned subsidiaries (subject to exceptions with
respect to immaterial subsidiaries and with respect to any
guaranty that could create materially adverse tax consequences),
and our direct parent, FR X Chart Holdings LLC, referred to,
collectively, as “Domestic Guarantors.”
All our obligations under the senior secured credit facility and
the guarantees of our obligations under the senior secured
credit facility by the Domestic Guarantors are secured by
substantially all our assets and the assets of each Domestic
Guarantor, including, but not limited to, the following:
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subject to certain exceptions, a pledge of 100% of our capital
stock and the capital stock of each direct and indirect domestic
subsidiary owned by us or a Domestic Guarantor (other than
subsidiaries substantially all of whose assets consist of stock
in controlled foreign corporations) and 65% of the capital stock
of each first tier foreign subsidiary owned by us or a Domestic
Guarantor and of each first tier domestic subsidiary owned by us
or a Domestic Guarantor substantially all of whose assets
consist of stock in controlled foreign corporations; and
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subject to certain exceptions, a security interest in
substantially all of the tangible and intangible assets owned by
us and each Domestic Guarantor.
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101
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Certain Covenants and Events of Default
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The senior secured credit facility contains a number of
covenants that, among other things, restrict, subject to certain
exceptions, our ability and the ability of each of our
subsidiaries to:
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sell assets;
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incur additional indebtedness;
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prepay, redeem or repurchase other indebtedness (including the
notes);
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pay dividends and distributions or repurchase capital stock;
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create liens on assets;
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make investments, loans or advances;
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make capital expenditures;
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make certain acquisitions;
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engage in mergers or consolidations;
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engage in certain transactions with affiliates;
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amend certain material agreements governing indebtedness
(including the notes);
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change the business conducted by us and our subsidiaries;
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enter into agreements that restrict dividends from subsidiaries;
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enter into sale and lease-back transactions; and
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enter into swap agreements.
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In addition, the senior secured credit facility requires us to
maintain the following financial covenants:
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a maximum consolidated net leverage ratio; and
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a minimum interest coverage ratio.
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The senior secured credit facility also contains certain
customary affirmative covenants and events of default.
As of February 28, 2006 we were in compliance in all
material respects with all covenants and provisions contained
under our senior secured credit facility.
In connection with this offering, we intend to enter into an
amendment to our senior secured facility to remove certain
restrictions on our ability to consummate the offering and the
use of proceeds as described in “Use of Proceeds” as
well as to make certain other amendments.
Senior Subordinated Notes
In October 2005, we issued
9
1
/
8
% senior subordinated notes that mature on
October 15, 2015 in an aggregate principal amount of
$170.0 million in a private transaction not subject to the
registration requirements under the Securities Act. The net
proceeds from that financing were used to finance the
Acquisition and pay related fees and expenses.
The notes are guaranteed, on a senior subordinated, unsecured
basis, by each of our direct and indirect wholly-owned
subsidiaries that were domestic subsidiaries on the issue date.
102
The notes are our general unsecured senior subordinated
obligations that rank junior to our existing and future senior
indebtedness, including obligations under the senior secured
credit facility, equally in right of payment with all of our
future senior subordinated debt and senior in right of payment
to all of our future subordinated debt. They are effectively
subordinated in right of payment to all of our existing and
future secured debt to the extent of the value of the assets
securing such debt, and are structurally subordinated to all
obligations of our subsidiaries that are not guarantors.
At any time prior to October 15, 2008, we may on any one or
more occasions redeem up to 35% of the aggregate principal
amount of notes issued under the indenture (including any
additional notes issued after the issue date) at a redemption
price of 109.125% of the principal amount, plus accrued and
unpaid interest and additional interest, if any, to, but not
including, the redemption date, with the net cash proceeds of
one or more equity offerings (such as this offering); provided
that:
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(1) at least 65% of the aggregate principal amount of notes
issued under the indenture (excluding notes held by us and our
subsidiaries) remains outstanding immediately after the
occurrence of such redemption; and
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(2) the redemption occurs within 180 days of the date
of the closing of such equity offering.
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Except pursuant to the preceding paragraph or as otherwise set
forth below, the notes will not be redeemable at our option
prior to October 15, 2010. We are not, however, prohibited
from acquiring the notes by means other than a redemption,
whether pursuant to a tender offer, open market purchase or
otherwise, so long as the acquisition does not violate the terms
of the indenture.
On or after October 15, 2010, we may redeem all or a part
of the notes at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid
interest and additional interest, if any, on the notes to be
redeemed, to, but not including, the applicable redemption date,
if redeemed during the twelve month period beginning on October
15 of the years indicated below, subject to the rights of
holders on the relevant record date to receive interest on the
relevant interest payment date.
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Year
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Percentage
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2010
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104.563%
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2011
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103.042%
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2012
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101.521%
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2013 and thereafter
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100.000%
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In addition, at any time prior to October 15, 2010, we may
also redeem all or a part of the notes at a redemption price
equal to 100% of the principal amount of notes to be redeemed,
plus the applicable premium (an amount intended to approximate a
“make-whole” price based on the price of a
U.S. treasury security plus 50 basis points) as of,
and accrued and unpaid interest and additional interest, if any,
to, but not including, the redemption date, subject to the
rights of holders on the relevant record date to receive
interest due on the relevant interest payment date. Though the
notes may be redeemed prior to October 15, 2010 in this
way, because any “make-whole” premium would be
prohibitively expensive, we do not expect to make a redemption
pursuant to this provision of the indenture.
In the event of a change of control, which is defined in the
indenture governing the notes, each holder of the notes will
have the right to require us to repurchase all or any part of
such holder’s notes at a purchase price in cash equal to
101% of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase.
103
The indenture governing the notes contains certain covenants
that, among other things, limit our ability and the ability of
some of our subsidiaries to:
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incur additional debt or issue certain preferred shares;
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pay dividends on or make distributions in respect of our or any
of our restricted subsidiaries’ capital stock or make other
restricted payments;
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make certain investments;
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sell certain assets;
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create liens on certain debt without securing the notes;
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consolidate, merge, sell or otherwise dispose of all or
substantially all of our assets;
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enter into certain transactions with our affiliates; and
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designate our subsidiaries as unrestricted subsidiaries.
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The indenture governing the notes also provides for events of
default which, if any of them occurs, would permit or require
the principal of and accrued interest on such notes to become or
to be declared to be due and payable.
As of February 28, 2006 we were in compliance in all
material respects with all covenants and provisions contained
under the indenture governing the notes.
We are obligated to use commercially reasonable efforts to
register the notes under the Securities Act and consummate an
exchange offer no later than August 14, 2006. If this
requirement is not met, then the annual interest on the notes
will increase by (1) 0.25 percentage points for the
first 90 days following the end of such period and
(2) 0.25 percentage points at the beginning of each
subsequent 90 day period, up to a maximum of
1.0 percentage point until all such registration defaults
are cured.
Chart Ferox Credit Facility
Chart Ferox, a.s., our majority-owned subsidiary located in the
Czech Republic, currently maintains a secured revolving credit
facility with borrowing capacity of up to $9.6 million, of
which $4.4 million is available only for letters of credit
and bank guarantees. At December 31, 2005, there was
$0.8 million outstanding under the Ferox revolving credit
facility. Ferox is the only borrower for this revolving credit
facility.
Under the revolving credit facility, Ferox may make borrowings
in Czech Koruna, Euros and U.S. dollars. Borrowings in
Koruna are at PRIBOR, borrowings in Euros are at EURIBOR and
borrowings in U.S. dollars are at LIBOR, each with a fixed
margin of 0.6%. Ferox is not required to pay a commitment fee to
the lenders under the revolving credit facility in respect of
the unutilized commitments thereunder. Ferox must pay letter of
credit and guarantee fees equal to 0.75% on the face amount of
each guarantee.
Ferox’s land and buildings secure $4.6 million, and
Ferox’s account receivables secure $2.5 million of
this revolving credit facility.
104
DESCRIPTION OF CAPITAL STOCK
The following is a description of the material terms of our
amended and restated certificate of incorporation and amended
and restated bylaws that will be in effect immediately prior to
this offering. We refer you to the form of our amended and
restated certificate of incorporation and amended and restated
bylaws, copies of which have been filed as exhibits to the
registration statement of which this prospectus forms a part.
Authorized Capitalization
Our authorized capital stock consists
of shares
of common stock, par value $0.01 per share, of
which shares
were issued and outstanding immediately prior to this offering,
and shares
of preferred stock, par value $0.01 per share, of which no
shares are currently issued and outstanding. Immediately
following the completion of this offering, we will
have shares
of common stock outstanding. Immediately following completion of
the offering, there will be no shares of preferred stock
outstanding.
Voting Rights.
Holders of common stock are entitled to
one vote per share on all matters to be voted upon by the
stockholders. The holders of common stock do not have cumulative
voting rights in the election of directors.
Dividend Rights.
Subject to the rights of the holders of
any preferred stock that may be outstanding, holders of our
common stock are entitled to receive dividends as may be
declared by our board of directors out of funds legally
available to pay dividends. Dividends upon our common stock may
be declared by the board of directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of
capital stock. Before payment of any dividend, there may be set
aside out of any of our funds available for dividends, such sums
as the board of directors deems proper as reserves to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any of our property, or for any proper purpose, and
the board of directors may modify or abolish any such reserve.
The senior secured credit facility and the indenture governing
the notes impose restrictions on our ability to declare
dividends with respect to our common stock.
Liquidation Rights.
Upon liquidation, dissolution or
winding up, any business combination or a sale or disposition of
all or substantially all of the assets, the holders of common
stock are entitled to receive ratably the assets available for
distribution to the stockholders after payment of liabilities
and the liquidation preference of any of our outstanding
preferred stock.
Other Matters.
The common stock has no preemptive or
conversion rights and is not subject to further calls or
assessment by us. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding
shares of our common stock, including the common stock offered
in this offering, are fully paid and non-assessable.
Our amended and restated certificate of incorporation authorizes
our board of directors to establish one or more series of
preferred stock and to determine, with respect to any series of
preferred stock, the terms and rights of that series, including:
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the designation of the series;
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the number of shares of the series, which our board may, except
where otherwise provided in the preferred stock designation,
increase or decrease, but not below the number of shares then
outstanding;
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whether dividends, if any, will be cumulative or non-cumulative
and the dividend rate of the series;
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the dates at which dividends, if any, will be payable;
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the redemption rights and price or prices, if any, for shares of
the series;
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105
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the terms and amounts of any sinking fund provided for the
purchase or redemption of shares of the series;
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the amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or
winding-up
of the
affairs of our company, or upon any distribution of assets of
our company;
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whether the shares of the series will be convertible into shares
of any other class or series, or any other security, of our
company or any other corporation, and, if so, the specification
of the other class or series or other security, the conversion
price or prices or rate or rates, any rate adjustments, the date
or dates as of which the shares will be convertible and all
other terms and conditions upon which the conversion may be made;
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restrictions on the issuance of shares of the same series or of
any other class or series;
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the voting rights, if any, of the holders of the series; and
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such other rights, powers and preferences with respect to the
series as our board of directors may deem advisable.
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Anti-Takeover Effects of Certain Provisions of Delaware Law
and our Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws
Certain provisions of our amended and restated certificate of
incorporation and amended and restated bylaws, which are
summarized in the following paragraphs, may have an
anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in
its best interest, including those attempts that might result in
a premium over the market price for the shares held by
stockholders.
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Removal of Directors; Vacancies
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Our amended and restated certificate of incorporation and
amended and restated bylaws provide that unless otherwise stated
in the stockholders agreement as more fully described in
“Certain Related Party Transactions—Stockholders
Agreement”, (i) prior to the date on which First
Reserve ceases to own at least 40% of all outstanding shares of
stock, directors may be removed for any reason upon the
affirmative vote of holders of at least a majority of the voting
power of all then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class and (ii) on and after the date on which First
Reserve ceases to own at least 40% of all the then outstanding
shares of common stock, directors may be removed with or without
cause, at any time by the affirmative vote of holders of at
least 75% of the voting power of all the then outstanding shares
of stock entitled to vote generally in the election of
directors, voting together as a single class. In addition, our
amended and restated certificate of incorporation and amended
and restated bylaws also provide that any vacancies on our board
of directors will be filled by the affirmative vote of a
majority of the remaining directors, although less than a quorum
or by the sole remaining director.
The Delaware General Corporation Law (“DGCL”) provides
that stockholders are not entitled to the right to cumulate
votes in the election of directors unless our amended and
restated certificate of incorporation provides otherwise. Our
amended and restated certificate of incorporation does not
expressly provide for cumulative voting.
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Calling of Special Meetings of Stockholders
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Our amended and restated bylaws provide that special meetings of
our stockholders may be called at any time by the board of
directors or a committee of the board which has been designated
by the board of directors.
106
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Stockholder Action by Written Consent
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The DGCL permits stockholder action by written consent unless
otherwise provided by our amended and restated certificate of
incorporation. Our amended and restated certificate of
incorporation precludes stockholder action by written consent
after the date on which First Reserve ceases to hold at least
40% of the then outstanding stock.
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Advance Notice Requirements for Stockholder Proposals and
Director Nominations
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Our amended and restated bylaws provide that stockholders
seeking to nominate candidates for election as directors or to
bring business before an annual meeting of stockholders must
provide timely notice of their proposal in writing to the
corporate secretary.
Generally, to be timely, a stockholder’s notice must be
received at our principal executive offices not less than 90
calendar days nor more than 120 calendar days prior to the first
anniversary of the date on which we first mailed our proxy
materials for the preceding year’s annual meeting or at
such other time as specified in our amended and restated bylaws.
Our amended and restated bylaws also specify requirements as to
the form and content of a stockholder’s notice. These
provisions may impede stockholders’ ability to bring
matters before an annual meeting of stockholders or make
nominations for directors at an annual meeting of stockholders.
The DGCL provides generally that the affirmative vote of a
majority of the outstanding shares entitled to vote is required
to amend a corporation’s certificate of incorporation or
bylaws, unless the certificate of incorporation requires a
greater percentage. Our amended and restated certificate of
incorporation provides that the following provisions in our
amended and restated certificate of incorporation and amended
and restated bylaws may only be amended, altered, repealed or
rescinded by a vote of at least 75% of the voting power of all
of the outstanding shares of our stock entitled to vote:
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the removal of directors;
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the limitation of stockholder action by written consent;
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the ability to call a special meeting of stockholders being
vested solely in our board of directors and any committee of the
board of directors which has been designated by our board of
directors;
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the advance notice requirements for stockholder proposals and
director nominations; and
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the amendment provision requiring that the above provisions be
amended only with a 75% supermajority vote.
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In addition, our amended and restated certificate of
incorporation grants our board of directors the authority to
amend or repeal our amended and restated bylaws without a
stockholder vote in any manner not inconsistent with the laws of
the State of Delaware or our amended and restated certificate of
incorporation.
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Limitations on Liability and Indemnification of Officers
and Directors
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The DGCL authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their
stockholders for monetary damages for breaches of
directors’ fiduciary duties. Our amended and restated
certificate of incorporation includes a provision that
eliminates the personal liability of directors for monetary
damages for breach of fiduciary duty as a director, except:
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for breach of duty of loyalty;
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for acts or omissions not in good faith or involving intentional
misconduct or knowing violation of law;
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under Section 174 of the DGCL (unlawful dividends); or
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for transactions from which the director derived improper
personal benefit.
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107
Our amended and restated certificate of incorporation and
amended and restated bylaws provide that we must indemnify our
directors and officers to the fullest extent authorized by the
DGCL. We are also expressly authorized to, and do, carry
directors’ and officers’ insurance providing coverage
for our directors, officers and certain employees for some
liabilities. We believe that these indemnification provisions
and insurance are useful to attract and retain qualified
directors and executive officers.
The limitation of liability and indemnification provisions in
our amended and restated certificate of incorporation and
amended and restated bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions.
We have entered into indemnification agreements with each of our
directors and officers providing for additional indemnification
protection beyond that provided by the directors’ and
officers’ liability insurance policy. In the
indemnification agreements, we have agreed, subject to certain
exceptions, to indemnify and hold harmless the director or
officer to the maximum extent then authorized or permitted by
the provisions of the amended and restated certificate of
incorporation, the DGCL, or by any amendment(s) thereto.
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
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Delaware Anti-takeover Statute
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We have opted out of Section 203 of the DGCL. Subject to
specified exceptions, Section 203 prohibits a publicly held
Delaware corporation from engaging in a “business
combination” with an “interested stockholder” for
a period of three years after the date of the transaction in
which the person became an interested stockholder.
“Business combinations” include mergers, asset sales
and other transactions resulting in a financial benefit to the
“interested stockholder.” Subject to various
exceptions, an “interested stockholder” is a person
who together with his or her affiliates and associates, owns, or
within three years did own, 15% or more of the
corporation’s outstanding voting stock. These restrictions
generally prohibit or delay the accomplishment of mergers or
other takeover or
change-in
-control
attempts.
Transfer Agent and Registrar
National City Bank is the transfer agent and registrar for our
common stock.
Listing
We intend to apply to list our common stock on the New York
Stock Exchange under the symbol “GTL.”
Authorized but Unissued Capital Stock
The DGCL does not require stockholder approval for any issuance
of authorized shares. However, the listing requirements of the
New York Stock Exchange, which would apply so long as our common
stock is listed on the New York Stock Exchange, require
stockholder approval of certain issuances equal to or exceeding
20% of the then outstanding voting power or then outstanding
number of shares of common stock, as well as for certain
issuances of stock in compensatory transactions. These
additional shares may be used for a variety of corporate
purposes, including future public offerings, to raise additional
capital or to facilitate acquisitions. One of the effects of the
existence of unissued and unreserved common stock may be to
enable our board of directors to issue shares to persons
friendly to current management, which issuance could render more
difficult or discourage an attempt to obtain control of our
company by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of our management
and possibly deprive the stockholders of opportunities to sell
their shares of common stock at prices higher than prevailing
market prices.
108
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for
our common stock, and we cannot predict what effect, if any,
market sales of shares of common stock or the availability of
shares of common stock for sale will have on the market price of
our common stock. Nevertheless, sales of substantial amounts of
common stock in the public market, or the perception that such
sales could occur, could materially and adversely affect the
market price of our common stock and could impair our future
ability to raise capital through the sale of our equity or
equity-related securities at a time and price that we deem
appropriate.
Upon the closing of this offering, we will have outstanding an
aggregate of
approximately million
shares of common stock, including an
additional shares,
adjusted for the elimination of any fractional shares, that will
be issued upon the exercise of the underwriters’
over-allotment option or otherwise dividended to our existing
stockholders. Of the outstanding shares, the shares sold in this
offering will be freely tradable without restriction or further
registration under the Securities Act, except that any shares
held by our “affiliates,” as that term is defined
under Rule 144 of the Securities Act, may be sold only in
compliance with the limitations described below. The remaining
outstanding shares of common stock will be deemed
“restricted securities” as that term is defined under
Rule 144. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption
from registration under Rule 144 or 144(k) under the
Securities Act, which are summarized below.
Under our stockholders agreement and management
stockholder’s agreements, we may be required to register
the sale of our shares held by First Reserve and certain
management stockholders. First Reserve and certain management
stockholders will have the ability to exercise certain
registration rights in connection with registered offerings
initiated by us or requested by First Reserve. Immediately after
this offering, First Reserve and management will
own shares
and shares,
respectively, entitled to these registration rights. See
“Certain Related Party Transactions.”
Rule 144
Subject to the
lock-up
agreements described below and the volume limitations and other
conditions under Rule 144, additional shares of our common
stock will be available for sale in the public market pursuant
to exemptions from registration requirements as follows:
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Number of Shares
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Date
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After days from the date of this
prospectus (subject to volume limitations and other conditions
under Rule 144 and to the lock-up agreements described
below)
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In general, under Rule 144 as currently in effect, a person
(or persons whose shares are required to be aggregated),
including an affiliate, who has beneficially owned shares of our
common stock for at least one year is entitled to sell in any
three-month period a number of shares that does not exceed the
greater of:
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1% of the then-outstanding shares of common stock; and
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the average weekly reported volume of trading in the common
stock on the New York Stock Exchange during the four calendar
weeks preceding the date on which notice of sale is filed,
subject to restrictions.
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Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of
current public information about us.
Rule 144(k)
In addition, a person who is not deemed to have been an
affiliate of ours at any time during the 90 days preceding
a sale and who has beneficially owned the shares proposed to be
sold for at least two years, would be entitled to sell those
shares under Rule 144(k) without regard to the manner of
sale, public information, volume limitation or notice
requirements of Rule 144. To the extent that our affiliates
sell their shares, other
109
than pursuant to Rule 144 or a registration statement, the
purchaser’s holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from
the affiliate.
Lock-Up Agreements
In connection with this offering, we, our executive offices,
directors and existing stockholders have agreed with the
underwriters, subject to certain exceptions, not to sell,
dispose of or hedge any of our common stock or securities
convertible into or exchangeable for shares of common stock,
during the period ending 180 days after the date of this
prospectus, except with the prior written consent of Morgan
Stanley & Co. Incorporated, Lehman Brothers Inc. and UBS
Securities LLC. See “Underwriting.”
110
CERTAIN UNITED STATES FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES TO
NON-U.S.
HOLDERS
The following is a summary of certain United States federal
income and estate tax consequences of the purchase, ownership
and disposition of our common stock as of the date hereof.
Except where noted, this summary deals only with common stock
that is held as a capital asset by a
non-U.S.
holder.
A
“non-U.S.
holder”
means a beneficial owner of our common stock (other than an
entity that is treated as a partnership for United States
federal income tax purposes) that is not for United States
federal income tax purposes any of the following:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for
United States federal income tax purposes) created or organized
in or under the laws of the United States, any state thereof or
the District of Columbia;
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an estate the income of which is subject to United States
federal income taxation regardless of its source; or
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a trust if it (1) is subject to the primary supervision of
a court within the United States and one or more United States
persons have the authority to control all substantial decisions
of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a
United States person.
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This summary is based upon provisions of the Internal Revenue
Code of 1986, as amended (the “Code”), and
regulations, rulings and judicial decisions as of the date
hereof. Those authorities may be changed, perhaps retroactively,
so as to result in United States federal income and estate tax
consequences different from those summarized below. This summary
does not address all aspects of United States federal income and
estate taxes and does not deal with foreign, state, local or
other tax considerations that may be relevant to
non-U.S.
holders
in light of their personal circumstances. In addition, it does
not represent a detailed description of the United States
federal income and estate tax consequences applicable to you if
you are subject to special treatment under the United States
federal income tax laws (including if you are a United States
expatriate, “controlled foreign corporation,”
“passive foreign investment company” or a partnership
or other pass-through entity for United States federal income
tax purposes). We cannot assure you that a change in law will
not alter significantly the tax considerations that we describe
in this summary.
If a partnership holds our common stock, the tax treatment of a
partner will generally depend upon the status of the partner and
the activities of the partnership. If you are a partner of a
partnership holding our common stock, you should consult your
tax advisors.
If you are considering the purchase of our common stock, you
should consult your own tax advisors concerning the particular
United States federal income and estate tax consequences to you
of the ownership of the common stock, as well as the
consequences to you arising under the laws of any other taxing
jurisdiction.
Dividends
Dividends paid to a
non-U.S.
holder of
our common stock generally will be subject to withholding of
United States federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty.
However, dividends that are effectively connected with the
conduct of a trade or business by the
non-U.S.
holder
within the United States (and, where a tax treaty applies, are
attributable to a United States permanent establishment (or, for
an individual, a fixed base) of the non-U.S. holder) are
not subject to the withholding tax, provided certain
certification and disclosure requirements are satisfied.
Instead, such dividends are generally subject to United States
federal income tax on a net income basis in the same manner as
if the
non-U.S.
holder
were a United States person as defined under the Code, unless an
applicable income tax treaty provides otherwise. Any such
effectively connected dividends received by a foreign
corporation may be subject to an additional “branch profits
tax” at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty.
111
A
non-U.S.
holder
of our common stock who wishes to claim the benefit of an
applicable treaty rate and avoid backup withholding, as
discussed below, for dividends will be required (a) to
complete Internal Revenue Service Form W-8BEN (or other
applicable form) and certify under penalty of perjury that such
holder is not a United States person as defined under the Code
and is eligible for treaty benefits or (b) if our common
stock is held through certain foreign intermediaries, to satisfy
the relevant certification requirements of applicable United
States Treasury regulations. Special certification and other
requirements apply to certain
non-U.S.
holders
that are pass-through entities rather than corporations or
individuals.
A
non-U.S.
holder
of our common stock eligible for a reduced rate of United States
withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate
claim for refund with the Internal Revenue Service.
Gain on Disposition of Common Stock
Any gain realized on the disposition of our common stock
generally will not be subject to United States federal income or
withholding tax unless:
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the gain is effectively connected with a trade or business of
the
non-U.S.
holder in the United States (and, if required by an applicable
income tax treaty, is attributable to a United States permanent
establishment (or, for an individual, a fixed base) of the
non-U.S.
holder);
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the
non-U.S.
holder is
an individual who is present in the United States for
183 days or more in the taxable year of the disposition,
and certain other conditions are met; or
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we are or have been a “United States real property holding
corporation” for United States federal income tax purposes
at any time during the shorter of the five-year period ending on
the date of disposition and the
non-U.S.
holder’s
holding period for our common stock.
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An individual
non-U.S.
holder
described in the first bullet point immediately above will be
subject to tax on the net gain derived from the sale under
regular graduated United States federal income tax rates. An
individual
non-U.S.
holder
described in the second bullet point immediately above will be
subject to a flat 30% tax on the gain derived from the sale,
which may be offset by United States source capital losses, even
though the individual is not considered a resident of the United
States. If a
non-U.S.
holder
that is a foreign corporation falls under the first bullet point
immediately above, it will be subject to tax on its net gain in
the same manner as if it were a United States person as defined
under the Code and, in addition, may be subject to the branch
profits tax equal to 30% of its effectively connected earnings
and profits or at such lower rate as may be specified by an
applicable income tax treaty.
We believe we are not and do not anticipate becoming a
“United States real property holding corporation” for
United States federal income tax purposes.
Federal Estate Tax
Common stock held by an individual
non-U.S.
holder at
the time of death will be included in such holder’s gross
estate for United States federal estate tax purposes, unless an
applicable estate tax or other treaty provides otherwise.
Information Reporting and Backup Withholding
We must report annually to the Internal Revenue Service and to
each
non-U.S.
holder
the amount of dividends paid to such holder and the tax withheld
with respect to such dividends, regardless of whether
withholding was required. Copies of the information returns
reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the
non-U.S.
holder
resides under the provisions of an applicable income tax treaty.
A
non-U.S.
holder
will be subject to backup withholding for dividends paid to such
holder unless such holder certifies under penalty of perjury
that it is a
non-U.S.
holder
(and the payor does not have actual
112
knowledge or reason to know that such holder is a United States
person as defined under the Code), or such holder otherwise
establishes an exemption.
Information reporting and, depending on the circumstances,
backup withholding will apply to the proceeds of a sale of our
common stock within the United States or conducted through
certain United States-related financial intermediaries, unless
the beneficial owner certifies under penalty of perjury that it
is a
non-U.S.
holder
(and the payor does not have actual knowledge or reason to know
that the beneficial owner is a United States person as defined
under the Code), or such owner otherwise establishes an
exemption.
113
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated the date of this prospectus, each
of the underwriters named below have severally agreed to
purchase, and we have agreed to sell to them, severally, the
number of shares indicated in the table below. Morgan
Stanley & Co. Incorporated, Lehman Brothers Inc. and
UBS Securities LLC are acting as book-running managers and as
representatives of the underwriters named below.
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Underwriters
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Number of Shares
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Morgan Stanley & Co. Incorporated
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Lehman Brothers Inc.
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UBS Securities LLC
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Total
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The underwriters are offering the common stock subject to their
acceptance of the shares from us and subject to prior sale. The
underwriting agreement provides that the obligations of the
several underwriters to pay for and accept delivery of the
common stock offered by this prospectus are subject to the
approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take
and pay for all of the common stock offered by this prospectus
if any such shares are taken. However, the underwriters are not
required to take or pay for the shares covered by the
underwriters’ over-allotment option described below.
The underwriters initially propose to offer part of the shares
of common stock directly to the public at the public offering
price listed on the cover page of this prospectus and part to
certain dealers at a price that represents a concession not in
excess of
$ a
share under the public offering price. Any underwriter may
allow, and such dealer may reallow, a concession not in excess
of
$ a
share to other underwriters or to certain dealers. After the
initial offering of the shares of common stock, the offering
price and other selling terms may from time to time be varied by
the representatives.
We have granted to the underwriters an option, exercisable for
30 days from the date of this prospectus, to purchase up to
an aggregate
of additional
shares of common stock at the public offering price listed on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
specified conditions, to purchase approximately the same
percentage of additional shares of common stock as the number
listed next to the underwriter’s name in the preceding
table bears to the total number of shares of common stock listed
next to the names of all underwriters in the preceding table. If
the underwriters’ option is exercised in full, the total
price to the public would be
$ ,
the total underwriters’ discounts and commissions would be
$ ,
and total proceeds to us would be
$ .
The following table shows the per share and total underwriting
discounts and commissions to be paid to the underwriters by us.
Such amounts are shown assuming both no exercise and full
exercise by the underwriters of their over-allotment option.
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Paid by Chart Industries, Inc.
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No Exercise
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Full Exercise
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Per Share
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Total
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The expenses of this offering payable by us, not including the
underwriting discounts and commissions, are estimated at
$ million.
The underwriters have informed us that they do not intend sales
to accounts over which any such underwriter exercises
discretionary authority to exceed five percent of the total
number of shares of common stock offered by them.
We intend to apply to list our common stock on the New York
Stock Exchange under the symbol “GTL.”
114
We, our executive officers, directors and existing stockholders
have agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated, Lehman Brothers Inc. and
UBS Securities LLC on behalf of the underwriters, none of us
will, during the period ending 180 days after the date of
this prospectus:
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offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any
shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock or file any
registration statement under the Securities Act of 1933 (other
than a registration statement on
Form
S-8)
with
respect to the foregoing; or
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enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the common stock;
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whether any transaction described above is to be settled by
delivery of common stock or such other securities, in cash or
otherwise.
The restrictions described in the previous paragraph do not
apply to:
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the sale of shares to the underwriters pursuant to the
underwriting agreement;
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the issuance by us of shares of common stock upon the exercise
of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus of which the
underwriters have been advised in writing;
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grants, issuances, or exercises under our existing employee
benefits plans;
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the issuance of common stock in connection with the acquisition
of, or joint venture with, another company, provided that the
recipient agrees to be bound by the restrictions described in
the previous paragraph;
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transactions by any person other than us relating to shares of
common stock or other securities acquired in open market
transactions after the completion of the offering of the shares;
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transfers by any person other than us of shares of common stock
or any security convertible, exchangeable for or exercisable
into common stock as a bona fide gift or gifts as a result of
operation of law or testate or in testate succession, provided
that such transferee agrees to be bound by the restrictions
described in the previous paragraph;
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transfers by any person other than us to a trust, partnership,
limited liability company or other entity, all of the beneficial
interests of which are held, directly, or indirectly by such
person, provided that such transferee agrees to be bound by the
restrictions described in the previous paragraph; or
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distributions by any person other than us of shares of common
stock or any security convertible, exchangeable for or
exercisable into common stock to limited partners or
stockholders of such person, provided that such distributee
agrees to be bound by the restrictions described in the previous
paragraph.
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At our request, the underwriters will reserve for sale, at the
initial public offering price, up
to shares
offered in this prospectus for our directors, officers,
employees, business associates and related persons. The number
of shares of common stock available for sale to the general
public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so purchased
will be offered by the underwriters to the general public on the
same basis as the other shares offered in this prospectus.
Prior to this offering, there has been no public market for the
common stock. The initial public offering price was negotiated
between us and the representatives of the underwriters. The
factors considered in determining the initial public offering
price of the shares, in addition to prevailing market
conditions, will be our historical performance, our business
prospects, an assessment of our management and the consideration
of the above factors in relation to market valuation of
companies in related businesses, and the price-earnings ratios,
market prices of securities and other quantitative and
qualitative data relating to such businesses. The
115
estimated initial public offering price range set forth on the
cover page of this prospectus is subject to change as a result
of market conditions and other factors.
In order to facilitate the offering of the common stock, the
underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of the common stock. Specifically,
the underwriters may sell more shares than they are obligated to
purchase under the underwriting agreement, creating a short
position. A short sale is “covered” if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the
open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other
things, the open market price of shares compared to the price
available under the over-allotment option. The underwriters may
also sell shares in excess of the over-allotment option,
creating a “naked” short position. The underwriters
must close out any naked short position by purchasing shares in
the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open
market after pricing that could adversely affect investors who
purchase in the offering. As an additional means of facilitating
the offering, the underwriters may bid for, and purchase, common
stock in the open market to stabilize the price of the common
stock. The underwriting syndicate may also reclaim selling
concessions allowed to an underwriter or a dealer for
distributing common stock in the offering, if the syndicate
repurchases previously distributed common stock to cover
syndicate short positions, or to stabilize the price of the
common stock. These activities may raise or maintain the market
price of the common stock above independent market levels or
prevent or retard a decline in the market price of our common
stock. The underwriters are not required to engage in these
activities and may end any of these activities at any time.
The underwriters may also impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares of common stock sold by
or for the account of such underwriter in stabilizing or short
covering transactions.
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or retarding a decline in the
market price of our stock, and together with the imposition of
the penalty bid, may stabilize, maintain or otherwise affect the
market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced,
they may be discontinued at any time. These transactions may be
effected on the New York Stock Exchange, in the
over-the
-counter market
or otherwise.
A prospectus in electronic format may be made available by one
or more of the underwriters. The representatives may agree to
allocate a number of shares to underwriters for sale to their
online brokerage account holders. The representatives will
allocate shares to underwriters that may make Internet
distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities
dealers who resell shares to online brokerage account holders.
From time to time, some of the underwriters and their affiliates
have provided, and may continue to provide, investment banking,
commercial banking and capital raising services to us and our
affiliates for fees and commissions that we believe are
customary. Morgan Stanley Senior Funding, Inc. acts as joint
lead arranger, joint book manager and syndication agent and is a
lender under our senior secured credit facility. UBS Securities
LLC acted as our financial advisor in connection with the
Acquisition.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
116
VALIDITY OF THE SHARES
The validity of the issuance of the shares of common stock to be
sold in this offering will be passed upon for us by Simpson
Thacher & Bartlett LLP, New York, New York.
Shearman & Sterling LLP, New York, New York will act as
counsel to the underwriters. Shearman &
Sterling LLP represents First Reserve on other matters.
EXPERTS
The accompanying consolidated balance sheets of Chart
Industries, Inc. and subsidiaries as of December 31, 2005
and 2004, and the related consolidated statements of operations,
shareholders’ equity and cash flows for the period from
October 17, 2005 through December 31, 2005, the period
from January 1, 2005 through October 16, 2005, the
year ended December 31, 2004, the three months ended
December 31, 2003, and the nine months ended
September 30, 2003, appearing in this prospectus have been
audited by Ernst & Young LLP, independent registered
public accounting firm, as set forth in their report thereon,
appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the
“SEC”) a registration statement on
Form
S-1
under the
Securities Act with respect to the issuance of shares of our
common stock being offered hereby. This prospectus, which forms
a part of the registration statement, does not contain all of
the information set forth in the registration statement and
exhibits and schedules. For further information with respect to
us and the shares of our common stock, reference is made to the
registration statement. Statements contained in this prospectus
as to the contents of any contract or other document are not
necessarily complete. We are not currently subject to the
informational requirements of the Exchange Act. After the
offering of the shares of our common stock, we will be subject
to the informational requirements of the Exchange Act, and, in
accordance therewith, will file reports and other information
with the SEC. The registration statement and the exhibits and
schedules to the registration statement, such reports and other
information can be inspected and copied at the Public Reference
Room of the SEC located at 100 F Street, N.E., Washington D.C.
20549. Copies of such materials, including copies of all or any
portion of the registration statement, can be obtained from the
Public Reference Room of the SEC at prescribed rates. You can
call the SEC at
1-800-SEC-0330
to
obtain information on the operation of the Public Reference
Room. Such materials may also be accessed electronically by
means of the SEC’s home page on the Internet
(http://www.sec.gov).
117
INDEX TO FINANCIAL STATEMENTS
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Report of Independent Registered Public Accounting Firm
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F-2
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Consolidated Balance Sheets at December 31, 2005 and 2004
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F-3
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Consolidated Statements of Operations for the Period from
October 17, 2005 to December 31, 2005, the Period from
January 1, 2005 to October 16, 2005, the Year Ended
December 31, 2004, the Three Months Ended December 31,
2003 and the Nine Months Ended September 30, 2003
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F-4
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Consolidated Statements of Shareholders’ Equity (Deficit)
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F-5
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Consolidated Statements of Cash Flows for the Period from
October 17, 2005 to December 31, 2005, the Period from
January 1, 2005 to October 16, 2005, the Year Ended
December 31, 2004, the Three Months Ended December 31,
2003 and the Nine Months Ended September 30, 2003
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F-8
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Notes to Consolidated Financial Statements
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F-9
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F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholder and Board of Directors of Chart Industries,
Inc.
We have audited the accompanying consolidated balance sheets of
Chart Industries, Inc. and subsidiaries as of December 31,
2005 and 2004, and the related consolidated statements of
operations, shareholders’ equity and cash flows for the
period from October 17, 2005 through December 31,
2005, the period from January 1, 2005 through
October 16, 2005, the year ended December 31, 2004,
the three months ended December 31, 2003, and the nine
months ended September 30, 2003. These financial statements
are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Company’s internal control over financial
reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Chart Industries, Inc. and
subsidiaries at December 31, 2005 and 2004, and the
consolidated results of their operations and their cash flows
for the period from October 17, 2005 through
December 31, 2005, the period from January 1, 2005
through October 16, 2005, the year ended December 31,
2004, the three months ended December 31, 2003, and the
nine months ended September 30, 2003, in conformity with
U.S. generally accepted accounting principles.
As more fully described in Note A to the consolidated
financial statements, effective September 15, 2003, the
Company emerged from Chapter 11 Bankruptcy. In accordance
with American Institute of Certified Public Accountants’
Statement of Position No. 90-7,
Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code
, the
Company has adopted “Fresh Start” reporting whereby
its assets, liabilities and new capital structure have been
adjusted to reflect estimated fair values as of
September 30, 2003. As a result, the consolidated financial
statements for periods from September 30, 2003 through
October 16, 2005 reflect this basis of reporting and are
not comparable to the Company’s pre-reorganization
consolidated financial statements.
As more fully described in Note J to the consolidated
financial statements, on October 17, 2005, the Company
changed its method of accounting for stock based compensation by
adopting the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123(R),
“Share
Based Payments”.
Cleveland, Ohio
April 11, 2006
F-2
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
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Successor
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Reorganized
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Company
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Company
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December 31,
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December 31,
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2005
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2004
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ASSETS
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Current Assets
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Cash and cash equivalents
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$
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15,433
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$
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14,814
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Accounts receivable, net
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62,463
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45,744
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Inventories, net
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53,132
|
|
|
|
47,777
|
|
|
|
Unbilled contract revenue
|
|
|
23,813
|
|
|
|
10,528
|
|
|
|
Prepaid expenses
|
|
|
3,037
|
|
|
|
2,119
|
|
|
|
Other current assets
|
|
|
12,102
|
|
|
|
14,840
|
|
|
|
Assets held for sale
|
|
|
3,084
|
|
|
|
3,567
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
173,064
|
|
|
|
139,389
|
|
|
Property, plant and equipment, net
|
|
|
64,265
|
|
|
|
41,993
|
|
|
Goodwill
|
|
|
236,742
|
|
|
|
75,110
|
|
|
Identifiable intangible assets, net
|
|
|
154,063
|
|
|
|
48,472
|
|
|
Other assets, net
|
|
|
13,672
|
|
|
|
2,116
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
641,806
|
|
|
$
|
307,080
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
34,435
|
|
|
$
|
26,789
|
|
|
|
Customer advances and billings in excess of contract revenue
|
|
|
26,741
|
|
|
|
15,181
|
|
|
|
Accrued salaries, wages and benefits
|
|
|
19,797
|
|
|
|
16,148
|
|
|
|
Warranty reserve
|
|
|
3,598
|
|
|
|
2,812
|
|
|
|
Other current liabilities
|
|
|
17,606
|
|
|
|
12,353
|
|
|
|
Short-term debt
|
|
|
2,304
|
|
|
|
3,005
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
104,481
|
|
|
|
76,288
|
|
|
Long-term debt
|
|
|
345,000
|
|
|
|
76,406
|
|
|
Long-term deferred tax liability, net
|
|
|
56,038
|
|
|
|
12,939
|
|
|
Other long-term liabilities
|
|
|
19,957
|
|
|
|
25,807
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
Common stock of Successor and Reorganized Company, par value
$.01 per share — 9,500,000 shares
authorized, 1,718,896 and 5,358,183 shares issued and
outstanding at December 31, 2005 and 2004, respectively
|
|
|
17
|
|
|
|
54
|
|
|
|
|
Additional paid-in capital
|
|
|
117,367
|
|
|
|
90,652
|
|
|
|
|
Retained (deficit) earnings
|
|
|
(506
|
)
|
|
|
22,631
|
|
|
|
|
Accumulated other comprehensive (loss) income
|
|
|
(548
|
)
|
|
|
2,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,330
|
|
|
|
115,640
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
641,806
|
|
|
$
|
307,080
|
|
|
|
|
|
|
|
|
|
* See accompanying notes to these consolidated financial
statements, including Note A — Nature of
Operations and Summary of Significant Accounting Policies,
describing the Successor Company, Reorganized Company and
Predecessor Company. The accompanying notes are an integral part
of these consolidated financial statements.
F-3
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
|
Reorganized Company
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 17,
|
|
|
|
January 1,
|
|
|
Year
|
|
|
Three Months
|
|
|
|
Nine Months
|
|
|
|
|
2005 to
|
|
|
|
2005 to
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
97,652
|
|
|
|
$
|
305,497
|
|
|
$
|
305,576
|
|
|
$
|
68,570
|
|
|
|
$
|
197,017
|
|
|
Cost of sales
|
|
|
75,733
|
|
|
|
|
217,284
|
|
|
|
211,770
|
|
|
|
52,509
|
|
|
|
|
141,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
21,919
|
|
|
|
|
88,213
|
|
|
|
93,806
|
|
|
|
16,061
|
|
|
|
|
55,777
|
|
|
Selling, general and administrative expense
|
|
|
16,632
|
|
|
|
|
59,826
|
|
|
|
53,374
|
|
|
|
14,147
|
|
|
|
|
44,211
|
|
|
Transaction expense
|
|
|
—
|
|
|
|
|
6,602
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Employee separation and plant closure costs
|
|
|
139
|
|
|
|
|
1,057
|
|
|
|
3,169
|
|
|
|
1,010
|
|
|
|
|
882
|
|
|
Loss on insolvent subsidiary
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
13,682
|
|
|
Equity expense in joint venture
|
|
|
—
|
|
|
|
|
—
|
|
|
|
51
|
|
|
|
41
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,771
|
|
|
|
|
67,485
|
|
|
|
56,594
|
|
|
|
15,198
|
|
|
|
|
58,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
5,148
|
|
|
|
|
20,728
|
|
|
|
37,212
|
|
|
|
863
|
|
|
|
|
(2,998
|
)
|
|
Other income (expense)
(Loss) gain on sale of assets
|
|
|
(78
|
)
|
|
|
|
131
|
|
|
|
(133
|
)
|
|
|
57
|
|
|
|
|
4,753
|
|
|
|
Interest expense, net
|
|
|
(5,565
|
)
|
|
|
|
(4,192
|
)
|
|
|
(4,760
|
)
|
|
|
(1,390
|
)
|
|
|
|
(9,911
|
)
|
|
|
Financing costs amortization
|
|
|
(308
|
)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(1,653
|
)
|
|
|
Derivative contracts valuation income (expense)
|
|
|
9
|
|
|
|
|
28
|
|
|
|
48
|
|
|
|
46
|
|
|
|
|
(389
|
)
|
|
|
Foreign currency gain (loss)
|
|
|
(101
|
)
|
|
|
|
(659
|
)
|
|
|
465
|
|
|
|
350
|
|
|
|
|
(287
|
)
|
|
|
Reorganization items, net
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
5,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,043
|
)
|
|
|
|
(4,692
|
)
|
|
|
(4,380
|
)
|
|
|
(937
|
)
|
|
|
|
(1,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes and
minority interest
|
|
|
(895
|
)
|
|
|
|
16,036
|
|
|
|
32,832
|
|
|
|
(74
|
)
|
|
|
|
(4,808
|
)
|
|
Income tax (benefit) expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
1,902
|
|
|
|
|
9,420
|
|
|
|
8,031
|
|
|
|
(751
|
)
|
|
|
|
(1,953
|
)
|
|
|
Deferred
|
|
|
(2,343
|
)
|
|
|
|
(2,261
|
)
|
|
|
2,103
|
|
|
|
626
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(441
|
)
|
|
|
|
7,159
|
|
|
|
10,134
|
|
|
|
(125
|
)
|
|
|
|
3,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before minority interest
|
|
|
(454
|
)
|
|
|
|
8,877
|
|
|
|
22,698
|
|
|
|
51
|
|
|
|
|
(7,855
|
)
|
|
Minority interest, net of taxes
|
|
|
(52
|
)
|
|
|
|
(19
|
)
|
|
|
(98
|
)
|
|
|
(20
|
)
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
|
(506
|
)
|
|
|
|
8,858
|
|
|
|
22,600
|
|
|
|
31
|
|
|
|
|
(7,918
|
)
|
|
Income from discontinued operation, net of tax
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(506
|
)
|
|
|
$
|
8,858
|
|
|
$
|
22,600
|
|
|
$
|
31
|
|
|
|
$
|
(7,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* See accompanying notes to these consolidated financial
statements, including Note A — Nature of
Operations and Summary of Significant Accounting Policies,
describing the Successor Company, Reorganized Company and
Predecessor Company. The accompanying notes are an integral part
of these consolidated financial statements.
F-4
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(DEFICIT)
(Dollars and shares in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
Total
|
|
|
|
|
|
|
Additional
|
|
|
Retained
|
|
|
Other
|
|
|
|
|
Shareholder’s
|
|
|
|
|
Shares
|
|
|
|
|
Paid-In
|
|
|
Earnings
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Equity
|
|
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Capital
|
|
|
(Deficit)
|
|
|
(Loss) Income
|
|
|
Stock
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2003, Predecessor Company
|
|
|
25,554
|
|
|
$
|
257
|
|
|
$
|
45,792
|
|
|
$
|
(116,086
|
)
|
|
$
|
(10,799
|
)
|
|
$
|
(781
|
)
|
|
$
|
(81,617
|
)
|
|
|
Net (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,085
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,085
|
)
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,532
|
|
|
|
—
|
|
|
|
7,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
447
|
|
|
|
Contribution of stock to employee benefit plans
|
|
|
944
|
|
|
|
9
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
343
|
|
|
|
Issuance of warrants to lenders
|
|
|
—
|
|
|
|
—
|
|
|
|
430
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
430
|
|
|
|
Treasury stock acquisitions
|
|
|
(232
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(111
|
)
|
|
|
(111
|
)
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2003, Predecessor Company
|
|
|
26,266
|
|
|
$
|
266
|
|
|
$
|
46,550
|
|
|
$
|
(123,180
|
)
|
|
$
|
(3,267
|
)
|
|
$
|
(886
|
)
|
|
$
|
(80,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* See accompanying notes to these consolidated financial
statements, including Note A — Nature of
Operations and Summary of Significant Accounting Policies,
describing the Successor Company, Reorganized Company and
Predecessor Company. The accompanying notes are an integral part
of these consolidated financial statements.
F-5
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(DEFICIT)
(Dollars and shares in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
Total
|
|
|
|
|
|
|
Additional
|
|
|
Retained
|
|
|
Other
|
|
|
|
|
Shareholder’s
|
|
|
|
|
Shares
|
|
|
|
|
Paid-In
|
|
|
Earnings
|
|
|
Comprehensive
|
|
|
Treasury
|
|
Equity
|
|
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Capital
|
|
|
(Deficit)
|
|
|
(Loss) Income
|
|
|
Stock
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2003, (Date of
Reorganization)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Issuance of new common shares
|
|
|
5,325
|
|
|
|
53
|
|
|
|
89,812
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
89,865
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
914
|
|
|
|
—
|
|
|
|
914
|
|
|
|
|
Minimum pension liability adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003, Reorganized Company
|
|
|
5,325
|
|
|
|
53
|
|
|
|
89,812
|
|
|
|
31
|
|
|
|
911
|
|
|
|
—
|
|
|
|
90,807
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,600
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,635
|
|
|
|
—
|
|
|
|
2,635
|
|
|
|
|
Minimum pension liability adjustment, net of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,243
|
)
|
|
|
—
|
|
|
|
(1,243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,992
|
|
|
Issuance of common shares
|
|
|
33
|
|
|
|
1
|
|
|
|
840
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004, Reorganized Company
|
|
|
5,358
|
|
|
|
54
|
|
|
|
90,652
|
|
|
|
22,631
|
|
|
|
2,303
|
|
|
|
—
|
|
|
|
115,640
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,858
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,858
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,240
|
)
|
|
|
—
|
|
|
|
(2,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,618
|
|
|
Stock option pay-out adjustment, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,628
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,628
|
)
|
|
Issuance of common shares
|
|
|
51
|
|
|
|
—
|
|
|
|
1,691
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 16, 2005, Reorganized Company
|
|
|
5,409
|
|
|
$
|
54
|
|
|
$
|
89,715
|
|
|
$
|
31,489
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
121,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* See accompanying notes to these consolidated financial
statements, including Note A — Nature of
Operations and Summary of Significant Accounting Policies,
describing the Successor Company, Reorganized Company and
Predecessor Company. The accompanying notes are an integral part
of these consolidated financial statements.
F-6
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER EQUITY
(Dollars and shares in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Shareholder
|
|
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Capital
|
|
|
(Deficit)
|
|
|
(Loss)
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 17, 2005 (Date of Acquisition)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Equity contributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash investment
|
|
|
1,719
|
|
|
|
17
|
|
|
|
111,281
|
|
|
|
—
|
|
|
|
—
|
|
|
|
111,298
|
|
|
|
|
Rollover of Reorganized Company vested stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
5,947
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,947
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(506
|
)
|
|
|
—
|
|
|
|
(506
|
)
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(286
|
)
|
|
|
(286
|
)
|
|
|
|
Minimum pension liability adjustment, net of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(262
|
)
|
|
|
(262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,054
|
)
|
|
|
Compensation expense recognized for employee stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
139
|
|
|
|
—
|
|
|
|
—
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005, Successor Company
|
|
|
1,719
|
|
|
$
|
17
|
|
|
$
|
117,367
|
|
|
$
|
(506
|
)
|
|
$
|
(548
|
)
|
|
$
|
116,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* See accompanying notes to these consolidated financial
statements, including Note A — Nature of
Operations and Summary of Significant Accounting Policies,
describing the Successor Company, Reorganized Company and
Predecessor Company. The accompanying notes are an integral part
of these consolidated financial statements.
F-7
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
|
Reorganized Company
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
|
October 17,
|
|
|
|
January 1,
|
|
|
Year
|
|
|
Months
|
|
|
|
Nine Months
|
|
|
|
|
2005 to
|
|
|
|
2005 to
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(506
|
)
|
|
|
$
|
8,858
|
|
|
$
|
22,600
|
|
|
$
|
31
|
|
|
|
$
|
(7,085
|
)
|
|
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of taxes
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(833
|
)
|
|
|
Inventory purchase accounting charge
|
|
|
8,903
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,368
|
|
|
|
|
—
|
|
|
|
Reorganization items, net
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(5,677
|
)
|
|
|
Reorganization value in excess of amounts allocable to
identifiable assets
|
|
|
—
|
|
|
|
|
—
|
|
|
|
1,430
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Loss on insolvent subsidiary
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
13,682
|
|
|
|
Financing costs amortization
|
|
|
308
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,653
|
|
|
|
Employee stock and stock option related compensation expense
|
|
|
437
|
|
|
|
|
9,509
|
|
|
|
2,433
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt restructuring-related fees expensed
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
6,046
|
|
|
|
Employee separation and plant closure costs
|
|
|
—
|
|
|
|
|
—
|
|
|
|
177
|
|
|
|
—
|
|
|
|
|
456
|
|
|
|
Loss (gain) on sale of assets
|
|
|
78
|
|
|
|
|
(131
|
)
|
|
|
133
|
|
|
|
(57
|
)
|
|
|
|
(4,753
|
)
|
|
|
Purchased in-process research and development charge
|
|
|
—
|
|
|
|
|
2,768
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Depreciation and amortization
|
|
|
4,088
|
|
|
|
|
6,808
|
|
|
|
8,490
|
|
|
|
2,225
|
|
|
|
|
7,607
|
|
|
|
Equity loss (income) from joint venture
|
|
|
—
|
|
|
|
|
—
|
|
|
|
51
|
|
|
|
41
|
|
|
|
|
|
|
|
|
Foreign currency transaction (gain) loss
|
|
|
101
|
|
|
|
|
659
|
|
|
|
(465
|
)
|
|
|
(350
|
)
|
|
|
|
287
|
|
|
|
Minority interest
|
|
|
95
|
|
|
|
|
29
|
|
|
|
198
|
|
|
|
34
|
|
|
|
|
105
|
|
|
|
Deferred income tax expense (benefit)
|
|
|
(2,343
|
)
|
|
|
|
(2,261
|
)
|
|
|
2,103
|
|
|
|
626
|
|
|
|
|
5,000
|
|
|
|
Contribution of stock to employee benefit plans
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
343
|
|
|
Changes in assets and liabilities, net of effects from
Acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(8,267
|
)
|
|
|
|
(8,611
|
)
|
|
|
(4,661
|
)
|
|
|
(3,027
|
)
|
|
|
|
2,486
|
|
|
|
Inventory
|
|
|
2,812
|
|
|
|
|
(6,463
|
)
|
|
|
(11,566
|
)
|
|
|
2,603
|
|
|
|
|
6,574
|
|
|
|
Unbilled contract revenues and other current assets
|
|
|
2,687
|
|
|
|
|
(11,039
|
)
|
|
|
2,903
|
|
|
|
(853
|
)
|
|
|
|
(1,304
|
)
|
|
|
Accounts payable and other current liabilities
|
|
|
6,424
|
|
|
|
|
6,634
|
|
|
|
4,602
|
|
|
|
(1,838
|
)
|
|
|
|
(1,527
|
)
|
|
|
Deferred income taxes
|
|
|
779
|
|
|
|
|
731
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Customer advances and billings in excess of contract revenue
|
|
|
3,146
|
|
|
|
|
8,150
|
|
|
|
6,631
|
|
|
|
185
|
|
|
|
|
(3,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By Operating Activities
|
|
|
18,742
|
|
|
|
|
15,641
|
|
|
|
35,059
|
|
|
|
4,988
|
|
|
|
|
19,466
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(5,601
|
)
|
|
|
|
(11,038
|
)
|
|
|
(9,379
|
)
|
|
|
(518
|
)
|
|
|
|
(1,907
|
)
|
|
|
Dividends received from joint venture
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
790
|
|
|
|
Proceeds from sale of assets
|
|
|
—
|
|
|
|
|
2,220
|
|
|
|
6,057
|
|
|
|
—
|
|
|
|
|
16,075
|
|
|
|
Acquisition of business
|
|
|
—
|
|
|
|
|
(12,147
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Payments to Reorganized Company shareholders for Transaction
|
|
|
(356,649
|
)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Other investing activities
|
|
|
—
|
|
|
|
|
166
|
|
|
|
5
|
|
|
|
672
|
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used In) Provided By Investing Activities
|
|
|
(362,250
|
)
|
|
|
|
(20,799
|
)
|
|
|
(3,317
|
)
|
|
|
154
|
|
|
|
|
15,101
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
350,000
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Borrowings on revolving credit facilities
|
|
|
2,605
|
|
|
|
|
18,901
|
|
|
|
1,742
|
|
|
|
4,151
|
|
|
|
|
20,359
|
|
|
|
Payments on revolving credit facilities
|
|
|
(4,790
|
)
|
|
|
|
(15,916
|
)
|
|
|
(1,742
|
)
|
|
|
(6,775
|
)
|
|
|
|
(21,614
|
)
|
|
|
Principal payments on long-term debt
|
|
|
(81,457
|
)
|
|
|
|
(2,968
|
)
|
|
|
(33,148
|
)
|
|
|
(10,840
|
)
|
|
|
|
(1,199
|
)
|
|
|
Proceeds from equity contribution
|
|
|
111,298
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Payment of financing costs
|
|
|
(11,558
|
)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Payment of exercised stock options
|
|
|
(15,756
|
)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Payment of Acquisition costs
|
|
|
(1,853
|
)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Debt restructuring-related fees paid
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(1,882
|
)
|
|
|
—
|
|
|
|
|
(12,583
|
)
|
|
|
Payments on interest rate collars
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(805
|
)
|
|
|
(512
|
)
|
|
|
|
(759
|
)
|
|
|
Proceeds from sale of stock
|
|
|
—
|
|
|
|
|
1,691
|
|
|
|
400
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Purchases of treasury stock
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(111
|
)
|
|
|
Other financing activities
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(309
|
)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By (Used In) Financing Activities
|
|
|
348,489
|
|
|
|
|
1,708
|
|
|
|
(35,744
|
)
|
|
|
(13,976
|
)
|
|
|
|
(15,907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow provided by (used in) continuing operations
|
|
|
4,981
|
|
|
|
|
(3,450
|
)
|
|
|
(4,002
|
)
|
|
|
(8,834
|
)
|
|
|
|
18,660
|
|
|
Cash flow provided by discontinued operation
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
4,981
|
|
|
|
|
(3,450
|
)
|
|
|
(4,002
|
)
|
|
|
(8,834
|
)
|
|
|
|
20,252
|
|
|
Effect of exchange rate changes on cash
|
|
|
(1,018
|
)
|
|
|
|
106
|
|
|
|
216
|
|
|
|
(381
|
)
|
|
|
|
338
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
11,470
|
|
|
|
|
14,814
|
|
|
|
18,600
|
|
|
|
27,815
|
|
|
|
|
7,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
15,433
|
|
|
|
$
|
11,470
|
|
|
$
|
14,814
|
|
|
$
|
18,600
|
|
|
|
$
|
27,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* See accompanying notes to these consolidated financial
statements, including Note A — Nature of
Operations and Summary of Significant Accounting Policies,
describing the Successor Company, Reorganized Company and
Predecessor Company. The accompanying notes are an integral part
of these consolidated financial statements.
F-8
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
NOTE A — Nature of Operations and Summary of
Significant Accounting Policies
Nature of Operations:
Chart Industries, Inc. (the
“Company”), a wholly-owned indirect subsidiary of
First Reserve Fund X, L.P. (“First Reserve”), is
a leading global supplier of standard and custom-engineered
products and systems serving a wide variety of low-temperature
and cryogenic applications. The Company has developed an
expertise in cryogenic systems and equipment, which operate at
low temperatures sometimes approaching absolute zero. The
majority of the Company’s products, including
vacuum-insulated containment vessels, heat exchangers, cold
boxes and other cryogenic components, are used throughout the
liquid-gas supply chain for the purification, liquefaction,
distribution, storage and use of industrial gases and
hydrocarbons. The Company has domestic operations located in
seven states, including the Corporate Office in Garfield
Heights, Ohio, and an international presence in Australia,
China, the Czech Republic, Germany and the United Kingdom.
Principles of Consolidation:
The consolidated financial
statements include the accounts of the Company and its
subsidiaries. Intercompany accounts and transactions are
eliminated in consolidation. Investments in affiliates where the
Company’s ownership is between 20 percent and
50 percent, or where the Company does not have control but
has the ability to exercise significant influence over
operations or financial policy, are accounted for under the
equity method. The Company’s Chart Heat Exchangers Limited
(“CHEL”) subsidiary, the equity of which was
100 percent owned by the Company, filed for a voluntary
administration under the U.K. Insolvency Act of 1986 on
March 28, 2003, as more fully described in Note F to
the consolidated financial statements. Since CHEL is not under
the control of the Company subsequent to March 28, 2003,
the consolidated financial statements do not include the
accounts or results of CHEL subsequent to this date.
Basis of Presentation:
On August 2, 2005, the
Company, certain stockholders of the Company (the
“Principal Stockholders”), First Reserve Fund X,
L.P. (“Buyer”) and CI Acquisition, Inc., a wholly
owned subsidiary of Buyer (“CI Acquisition”), entered
into an agreement and plan of merger (“Merger
Agreement”). The Merger Agreement provided for the sale of
shares of common stock of the Company owned by the Principal
Stockholders (“Principal Stockholders Shares”) to CI
Acquisition, which is referred to as the “Stock
Purchase”, and the merger of CI Acquisition with and into
the Company, with the Company surviving the merger as a
wholly-owned indirect subsidiary of Buyer, which is referred to
as the “Merger”. The Stock Purchase and Merger are
collectively referred to as the “Acquisition”.
Upon satisfaction of the conditions to the Stock Purchase, CI
Acquisition agreed to purchase the Principal Stockholders Shares
for a purchase price (the “Per Share Purchase Price”)
equal to $65.74 per share in cash, minus the result of
(i) the expenses of the Company related to the Acquisition
(as provided in the Merger Agreement) divided by (ii) the
number of fully-diluted shares of Company common stock
outstanding immediately before the closing (assuming full
exercise of all Company stock options and warrants). The Merger
Agreement provided for the occurrence of the Merger after the
closing of the Stock Purchase, and provided that at the
effective time of the Merger each share of Company common stock
outstanding (other than treasury stock, shares held by Buyer or
CI Acquisition, and shares with respect to which appraisal
rights have been exercised under Delaware law) will be converted
into the right to receive the Per Share Purchase Price (or the
price paid in the Stock Purchase, if greater) in cash, without
interest (the “Merger Consideration”). Furthermore,
the Merger Agreement provided that the holders of outstanding
warrants and stock options to acquire shares of common stock of
the Company (other than any stock options adjusted to represent
options to acquire stock of the surviving corporation in the
Merger) will be entitled to receive an amount in cash equal to
the product of (i) the number of shares of common stock of
the Company issuable upon the exercise of the surrendered
warrant or option, as applicable, as of immediately prior to the
effective time of the Merger multiplied by (ii) the excess
of the Merger consideration over the per share exercise price of
the warrant or option, subject to applicable withholding taxes.
The Merger Agreement further
F-9
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
provided that after the Merger, no holders of common stock,
warrants or options (other than any stock options adjusted to
represent options to acquire stock of the surviving corporation
in the Merger) outstanding before the Merger will have any
rights in respect of such common stock, warrants or options,
other than the right to receive the cash referred to above. A
more complete description of the Acquisition and the terms of
the Merger Agreement are set forth above in this Prospectus
under the caption “Transaction”.
On October 17, 2005, the closing of the Acquisition (the
“Closing Date”) took place under the terms of the
Merger Agreement as described above in this Prospectus under the
caption “Transaction”. The Stock Purchase was made by
CI Acquisition for a Per Share Purchase Price of $64.75 per
share of common stock ($65.74 per share, less the
Company’s transaction expenses of $0.99 per share) and
immediately following the Stock Purchase, the Merger occurred.
At the effective time of the Merger, each outstanding share of
the Company’s common stock (other than treasury stock,
shares held by Buyer or CI Acquisition, and shares as to which
appraisal rights were exercised under Delaware law) was
converted into the right to receive $64.75 per share and CI
Acquisition merged with and into Chart Industries, Inc. (which
is referred to after the merger as the “Successor
Company”). In the Merger, outstanding warrants and stock
options to acquire common stock of the Company (other than any
stock options adjusted to represent options to acquire the stock
of the surviving corporation in the Merger) were likewise
cancelled and treated in accordance with the terms of the Merger
Agreement. Certain stock options outstanding immediately before
the Merger were not cancelled and were adjusted under the terms
of the Merger Agreement to represent options to acquire the
Company’s common stock after the Merger. The purchase price
related to the Acquisition was $456,662 and included $356,649 of
cash paid for common stock and warrants outstanding, $15,756 of
cash paid for Reorganized Company stock options, repayment of
$76,458 of existing pre-Transaction credit facility and certain
other debt, $1,852 of First Reserve’s acquisition expenses
and vested Rollover Reorganized Company stock options valued at
$5,947 to acquire stock of the Successor Company.
The table below summarizes the preliminary fair value assigned
to the Successor Company’s assets and liabilities within
the balance sheet as of October 17, 2005 as a result of the
Acquisition, in accordance with Statement of Financial
Accounting Standard (“SFAS”) No. 141,
“Business Combinations”:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,861
|
|
|
Accounts receivable, net
|
|
|
54,594
|
|
|
Inventories, net
|
|
|
65,005
|
|
|
Unbilled contract revenue
|
|
|
22,667
|
|
|
Prepaid expenses
|
|
|
3,544
|
|
|
Other current assets
|
|
|
5,396
|
|
|
Assets held for sale
|
|
|
3,084
|
|
|
Deferred income taxes, net
|
|
|
4,900
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
180,051
|
|
|
Property, plant and equipment
|
|
|
61,189
|
|
|
Goodwill
|
|
|
236,823
|
|
|
Identifiable intangible assets
|
|
|
157,162
|
|
|
Other assets
|
|
|
13,357
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
648,582
|
|
|
|
|
|
|
F-10
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
31,469
|
|
|
Customer advances and billings in excess of contract revenue
|
|
|
23,546
|
|
|
Accrued salaries, wages and benefits
|
|
|
16,069
|
|
|
Warranty reserve
|
|
|
3,439
|
|
|
Other current liabilities
|
|
|
25,620
|
|
|
Short-term debt
|
|
|
4,486
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
104,629
|
|
|
Long-term debt
|
|
|
350,000
|
|
|
Long-term deferred tax liability, net
|
|
|
56,978
|
|
|
Other non-current liabilities
|
|
|
18,392
|
|
|
Minority interest
|
|
|
1,337
|
|
|
Shareholder equity
|
|
$
|
117,246
|
|
|
|
|
|
|
|
Total Liabilities and Shareholder Equity
|
|
$
|
648,582
|
|
|
|
|
|
|
The consolidated financial statements and the accompanying notes
for the period from January 1 to October 16, 2005 for the
Reorganized Company are presented as the “2005 Reorganized
Period” and for the period from October 17 to
December 31, 2005 for the Successor Company are presented
as the “2005 Successor Period”.
On July 8, 2003, the Company and all of its then
majority-owned U.S. subsidiaries (the “Predecessor
Company”) filed voluntary petitions for reorganization
relief under Chapter 11 of the U.S. Bankruptcy Code to
implement an agreed upon senior debt restructuring plan through
a pre-packaged plan of reorganization. On September 15,
2003, the Company (as reorganized, the “Reorganized
Company”) and all of its then majority-owned
U.S. subsidiaries emerged from Chapter 11 proceedings
pursuant to the Amended Joint Prepackaged Reorganization Plan of
Chart Industries, Inc. and Certain Subsidiaries, dated
September 3, 2003 (the “Reorganization Plan”).
The Company’s emergence from Chapter 11 bankruptcy
proceedings resulted in a new reporting entity and the adoption
of fresh-start accounting in accordance with the American
Institute of Certified Public Accountants (“AICPA”)
Statement of
Position
90-7,
“Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code”
(“SOP
90-7”)
(“Fresh-Start accounting”). The Company used
September 30, 2003 as the date for adopting Fresh-Start
accounting in order to coincide with the Company’s normal
financial closing for the month of September 2003. Upon adoption
of Fresh-Start accounting, a new reporting entity was deemed to
be created and the recorded amounts of assets and liabilities
were adjusted to reflect their estimated fair values.
Accordingly, the reported historical financial statements of the
Company prior to the adoption of Fresh-Start accounting for
periods ended prior to September 30, 2003 are not
necessarily comparable to those of the Reorganized Company.
In this prospectus, references to the Company’s nine month
period ended September 30, 2003 and all periods ended prior
to September 30, 2003 refer to the Predecessor Company.
SOP
90-7
requires
that financial statements for the period following the
Chapter 11 filing through the bankruptcy confirmation date
distinguish transactions and events that are directly associated
with the reorganization from the ongoing operations of the
business. Accordingly, revenues, expenses, realized gains and
losses and provisions for losses directly associated with the
reorganization and restructuring of the business, including
adjustments to fair value assets and liabilities and the gain on
the discharge of pre-petition debt, are reported separately as
reorganization items, net, in the other income (expense) section
of the Predecessor Company’s consolidated statement of
operations. In accordance with Fresh-Start accounting, all
assets and liabilities were recorded at their respective fair
values as of September 30, 2003. Such fair values
F-11
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
represented the Company’s best estimates based on
independent appraisals and valuations. In applying Fresh-Start
accounting, adjustments to reflect the fair value of assets and
liabilities, on a net basis, and the restructuring of the
Company’s capital structure and resulting discharge of the
senior lenders’ pre-petition debt, resulted in net other
income of $5,677 in the nine months ended September 30,
2003. The reorganization value exceeded the fair value of the
Reorganized Company’s assets and liabilities, and this
excess is reported as goodwill in the Reorganized Company’s
consolidated balance sheet.
Changes to Significant Accounting Policies:
As part of
the provisions of
SOP
90-7,
the
Reorganized Company was required to adopt on September 30,
2003 all accounting guidance that was going to be effective
within the twelve-month period following September 30,
2003. Additionally, Fresh-Start accounting required the
selection of appropriate accounting policies for the Reorganized
Company. The significant accounting policies previously used by
the Predecessor Company were generally continued to be used by
the Reorganized Company. As of September 30, 2003, the
Company changed its method of accounting for inventories at
sites of the Company’s former Chart Heat Exchangers Limited
Partnership legal entity and former Process Systems, Inc. legal
entity from the
last-in,
first-out
(“LIFO”) method to the
first-in,
first-out
(“FIFO”) method since the value of inventory on the
LIFO method was approximately equal to the value on a FIFO basis.
All accounting policies of the Successor Company have generally
remained the same as the Reorganized Company, except for the
early adoption of SFAS No. 123(R) “Share-Based
Payment” on October 17, 2005 in conjunction with the
Acquisition. SFAS No. 123(R) is a revision of SFAS
No. 123, “Accounting for Stock-Based
Compensation” and supersedes Accounting Principles Board
(“APB”) Opinion No. 25, “Accounting for
Stock Issued to Employees,” and amends SFAS No. 95,
“Statement of Cash Flows.” SFAS 123(R) requires
all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial
statements based on their fair values and eliminates the pro
forma disclosure option allowed under SFAS 123.
Cash and Cash Equivalents:
The Company considers all
investments with an initial maturity of three months or less
when purchased to be cash equivalents. The December 31,
2005 and 2004 balances include money market investments and cash.
Concentrations of Credit Risks:
The Company sells its
products to gas producers, distributors and end-users across the
industrial gas, hydrocarbon and chemical processing industries
in countries all over the world. Approximately 51 percent,
52 percent and 49 percent of sales were to foreign
countries in 2005, 2004 and 2003, respectively. While no single
customer exceeded ten percent of consolidated sales in 2005,
2004 or 2003, sales to the Company’s top ten customers
accounted for 39 percent, 45 percent and
43 percent of consolidated sales in 2005, 2004 and 2003,
respectively. The Company’s sales to particular customers
fluctuate from period to period, but the gas producer and
distributor customers of the Company tend to be a consistently
large source of revenue for the Company. To minimize credit risk
from trade receivables, the Company reviews the financial
condition of potential customers in relation to established
credit requirements before sales credit is extended and monitors
the financial condition of customers to help ensure timely
collections and to minimize losses. Additionally, for certain
domestic and foreign customers, particularly in the Energy and
Chemicals segment, the Company requires advance payments,
letters of credit and other such guarantees of payment. Certain
customers also require the Company to issue letters of credit or
performance bonds, particularly in instances where advance
payments are involved, as a condition of placing the order.
The Company is also subject to concentrations of credit risk
with respect to its cash and cash equivalents, marketable
securities, interest rate collar agreements and forward foreign
currency exchange contracts. To minimize credit risk from these
financial instruments, the Company enters into these
arrangements with major banks and other high credit quality
financial institutions and invests only in high-quality
instruments. The Company does not expect any counterparties to
fail to meet their obligations in this area.
F-12
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
Allowance for Doubtful Accounts:
The Company evaluates
the collectibility of accounts receivable based on a combination
of factors. In circumstances where the Company is aware of a
specific customer’s inability to meet its financial
obligations (e.g., bankruptcy filings, or substantial
downgrading of credit scores), a specific reserve is recorded to
reduce the receivable to the amount the Company believes will be
collected. The Company also records allowances for doubtful
accounts based on the length of time the receivables are past
due and historical experience. The allowance for doubtful
accounts balance at December 31, 2005 and 2004 was $1,304
and $1,520, respectfully.
Inventories:
Inventories are stated at the lower of cost
or market with cost being determined by the
first-in,
first-out
(“FIFO”) method at December 31, 2005 and 2004.
The components of inventory are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Raw materials and supplies
|
|
$
|
26,385
|
|
|
$
|
22,896
|
|
|
Work in process
|
|
|
13,003
|
|
|
|
16,918
|
|
|
Finished goods
|
|
|
13,744
|
|
|
|
7,963
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
53,132
|
|
|
$
|
47,777
|
|
|
|
|
|
|
|
|
|
Inventory Valuation Reserves:
The Company determines
inventory valuation reserves based on a combination of factors.
In circumstances where the Company is aware of a specific
problem in the valuation of a certain item, a specific reserve
is recorded to reduce the item to its net realizable value. The
Company also recognizes reserves based on the actual usage in
recent history and projected usage in the near-term. If
circumstances change (e.g., lower-than-expected or
higher-than-expected usage), estimates of the net realizable
value could be changed by a material amount.
Property, Plant and Equipment:
At October 17, 2005,
property, plant and equipment was recorded at fair value under
SFAS 141 “Business Combinations”. The depreciable
lives were adjusted to reflect the estimated remaining useful
life of each asset and all existing accumulated depreciation of
the Reorganized Company was eliminated. Subsequent to
October 17, 2005, all capital expenditures for property,
plant and equipment are stated on the basis of cost.
Expenditures for maintenance, repairs and renewals are charged
to expense as incurred, whereas major improvements are
capitalized. The cost of applicable assets is depreciated over
their estimated useful lives. Depreciation is computed using the
straight-line method for financial reporting purposes and
accelerated methods for income tax purposes. Depreciation
expense was $1,115 for the 2005 Successor Period, $4,122 for the
2005 Reorganized Period, $5,681 for the year ended
December 31,
F-13
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
2004, $1,523 for the three-months ended December 31, 2003,
and $6,441 for the nine months ended September 30, 2003.
The following table summarizes the components of property, plant
and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Classification
|
|
Estimated Useful Life
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
20-35 years (buildings)
|
|
$
|
34,450
|
|
|
$
|
24,264
|
|
|
Machinery and equipment
|
|
3-12 years
|
|
|
19,750
|
|
|
|
21,917
|
|
|
Computer equipment, furniture and fixtures
|
|
3-7 years
|
|
|
2,383
|
|
|
|
2,823
|
|
|
Construction in process
|
|
|
|
|
8,244
|
|
|
|
2,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,827
|
|
|
|
51,480
|
|
|
Less accumulated depreciation
|
|
|
|
|
(562
|
)
|
|
|
(9,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net
|
|
|
|
$
|
64,265
|
|
|
$
|
41,993
|
|
|
|
|
|
|
|
|
|
|
|
The Company monitors its property, plant and equipment, and
finite-lived intangible assets for impairment indicators on an
ongoing basis in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived
Assets.” If impairment indicators exist, the Company
performs the required analysis and records impairment charges in
accordance with SFAS No. 144. In conducting its analysis,
the Company compares the undiscounted cash flows expected to be
generated from the long-lived assets to the related net book
values. If the undiscounted cash flows exceed the net book
value, the long-lived assets are considered not to be impaired.
If the net book value exceeds the undiscounted cash flows, an
impairment loss is measured and recognized. An impairment loss
is measured as the difference between the net book value and the
fair value of the long-lived assets. Fair value is estimated
based upon either discounted cash flow analyses or estimated
salvage values. Cash flows are estimated using internal
forecasts as well as assumptions related to discount rates.
Changes in economic or operating conditions impacting these
estimates and assumptions could result in the impairment of
long-lived assets.
Goodwill and Other Intangible Assets:
In conjunction with
the Acquisition as previously explained above, the Company
recorded $236,742 of goodwill. In accordance with SFAS
No. 142, “Goodwill and Other Intangible Assets”,
the Company does not amortize goodwill or other indefinite-lived
intangible assets, but reviews them at least annually for
impairment using a measurement date of October 1st. The
Company amortizes intangible assets that have finite useful
lives over their useful lives.
SFAS No. 142 requires that indefinite-lived intangible
assets be tested for impairment and that goodwill be tested for
impairment at the reporting unit level on an annual basis. Under
SFAS No. 142, a company determines the fair value of any
indefinite-lived intangible assets, compares the fair value to
its carrying value and records an impairment loss if the
carrying value exceeds its fair value. Goodwill is tested
utilizing a two-step approach. After recording any impairment
losses for indefinite-lived intangible assets, a company is
required to determine the fair value of each reporting unit and
compare the fair value to its carrying value, including
goodwill, of such reporting unit (step one). If the fair value
exceeds the carrying value, no impairment loss would be
recognized. If the carrying value of the reporting unit exceeds
its fair value, the Goodwill of the reporting unit may be
impaired. The amount of the impairment, if any, would then be
measured in step two, which compares the implied fair value of
the reporting unit’s Goodwill with the carrying
F-14
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
amount of that Goodwill. The following table displays the gross
carrying amount and accumulated amortization for finite-lived
intangible assets and indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
|
|
Reorganized Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
December 31, 2004
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
|
|
|
|
Estimated
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Estimated
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
Useful Life
|
|
|
Amount
|
|
|
Amortization
|
|
|
Useful Life
|
|
|
Amount
|
|
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finite-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpatented technology
|
|
|
9 years
|
|
|
$
|
9,400
|
|
|
$
|
(235
|
)
|
|
|
9 years
|
|
|
$
|
3,305
|
|
|
$
|
(450
|
)
|
|
|
Patents
|
|
|
10 years
|
|
|
|
8,138
|
|
|
|
(298
|
)
|
|
|
11 years
|
|
|
|
4,269
|
|
|
|
(566
|
)
|
|
|
Product names
|
|
|
20 years
|
|
|
|
940
|
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Backlog
|
|
|
14 months
|
|
|
|
5,440
|
|
|
|
(1,110
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Non-compete agreements
|
|
|
3 years
|
|
|
|
1,344
|
|
|
|
(280
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Licenses and certificates
|
|
|
18 months
|
|
|
|
48
|
|
|
|
(20
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Customer relations
|
|
|
13 years
|
|
|
|
96,906
|
|
|
|
(1,480
|
)
|
|
|
13 years
|
|
|
|
23,960
|
|
|
|
(2,495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
122,216
|
|
|
$
|
(3,433
|
)
|
|
|
|
|
|
$
|
31,534
|
|
|
$
|
(3,511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
$
|
236,742
|
|
|
|
|
|
|
|
|
|
|
$
|
75,110
|
|
|
|
|
|
|
|
Trademarks and trade names
|
|
|
|
|
|
|
35,280
|
|
|
|
|
|
|
|
|
|
|
|
20,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
272,022
|
|
|
|
|
|
|
|
|
|
|
$
|
95,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for intangible assets subject to
amortization was $2,973, for the 2005 Successor Period, $2,686
for the 2005 Reorganized Period, $2,809 for the year ended
December 31, 2004, $702 for the three months ended
December 31, 2003, and $1,166 for the nine months ended
September 30, 2003, and is estimated to range from
approximately $15,500 to $10,300 annually for fiscal years 2006
through 2010, respectively.
Financial Instruments:
The fair values of cash
equivalents, accounts receivable and short-term bank debt
approximate their carrying amount because of the short maturity
of these instruments. The fair value of long-term debt is
estimated based on the present value of the underlying cash
flows discounted at the Company’s estimated borrowing rate.
Under such method the Company’s long-term debt approximated
its carrying value at December 31, 2005 and 2004.
Derivative Instruments:
The Company utilizes certain
derivative financial instruments to enhance its ability to
manage risk, including interest rate risk and foreign currency
risk that exists as part of ongoing business operations.
Derivative instruments are entered into for periods consistent
with related underlying exposures and do not constitute
positions independent of those exposures. The Company does not
enter into contracts for speculative purposes, nor is it a party
to any leveraged derivative instrument.
The Company’s primary interest rate risk exposure results
from various floating rate pricing mechanisms in the
consolidated term loan and revolving credit facility. This
interest rate risk has been partially managed by the use of an
interest rate derivative contract relating to a portion of the
term debt. The interest rate derivative contract is generally
described as a collar and results in putting a cap on the base
LIBOR interest rate at approximately 7.0 percent and a
floor at approximately 5.0 percent on certain portions of
the Company’s floating rate term debt. The Predecessor
Company entered into an interest rate collar in March 1999 to
manage interest rate risk exposure relative to its term debt.
This collar, in the amount of $4,430 at December 31, 2005,
expired in March 2006. The Company’s interest rate collar
does not qualify as a hedge
F-15
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
under the provisions of SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities”, which
requires such a collar to be recorded in the consolidated
balance sheet at fair value. Changes in their fair value must be
recorded in the consolidated statement of operations. The fair
value of the contract related to the collar outstanding at
December 31, 2005 and 2004 is a liability of $5 and $312,
respectively and is recorded in accrued interest.
The change in fair value for the 2005 Successor Period, 2005
Reorganized Period, year ended December 31, 2004, three
months ended December 31, 2003, and the nine months ended
September 30, 2003 of $9, $28, $48, $46, and ($389)
respectively, is recorded in derivative contracts valuation
income (expense).
The Company is exposed to foreign currency exchange risk as a
result of transactions in currencies other than the functional
currency of certain subsidiaries. The Company utilizes foreign
currency forward purchase and sale contracts to manage the
volatility associated with foreign currency purchases and
certain intercompany transactions in the normal course of
business. Contracts typically have maturities of less than one
year. Principal currencies include the Euro, British Pound and
Czech Koruna. The Company’s foreign currency forward
contracts do not qualify as hedges under the provisions of
SFAS No. 133. Gains and losses recorded by the Company
related to foreign currency forward contracts during 2005, 2004
and 2003 were not material.
The Company held foreign exchange forward sale contracts for
notional amounts as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
USD
|
|
$
|
—
|
|
|
$
|
400
|
|
|
Euros
|
|
|
2,400
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,400
|
|
|
$
|
400
|
|
|
|
|
|
|
|
|
|
Product Warranties:
The Company provides product
warranties with varying terms and durations for the majority of
its products. The Company records warranty expense in cost of
sales. The changes in the Company’s consolidated warranty
reserve are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Three
|
|
|
Nine
|
|
|
|
|
2005
|
|
|
2005
|
|
|
Year
|
|
|
Months
|
|
|
Months
|
|
|
|
|
to
|
|
|
to
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
3,439
|
|
|
$
|
2,812
|
|
|
$
|
3,208
|
|
|
$
|
3,803
|
|
|
$
|
4,032
|
|
|
|
Warranty expense
|
|
|
515
|
|
|
|
2,206
|
|
|
|
1,522
|
|
|
|
89
|
|
|
|
1,214
|
|
|
|
Warranty usage
|
|
|
(356
|
)
|
|
|
(1,579
|
)
|
|
|
(1,918
|
)
|
|
|
(684
|
)
|
|
|
(1,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
3,598
|
|
|
$
|
3,439
|
|
|
$
|
2,812
|
|
|
$
|
3,208
|
|
|
$
|
3,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity:
As a result of the
Acquisition, the Company had 1,718,896 shares of common
stock issued and outstanding at December 31, 2005. Also, in
connection with Acquisition, 573,027 warrants were granted
in November 2005 to FRX Chart Holdings LLC, then sole
shareholder and affiliate of First Reserve, at an exercise price
of $64.75 per share and expire in March 2014. The warrants
may be exercised at
F-16
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
anytime. The Company reports comprehensive income in its
consolidated statement of shareholders’ equity. The
components of accumulated other comprehensive (loss) income are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
$
|
(286
|
)
|
|
$
|
3,549
|
|
|
Minimum pension liability adjustments net of taxes of $162 and
$671 at December 31, 2005 and 2004, respectively
|
|
|
(262
|
)
|
|
|
(1,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(548
|
)
|
|
$
|
2,303
|
|
|
|
|
|
|
|
|
|
In 2004, the Company finalized the liquidation of the Biomedical
operation in Solingen, Germany and recognized $403 of foreign
currency gain, $258 net of tax, related to the elimination
of the foreign currency translation adjustments previously
recorded as part of this entity.
Revenue Recognition:
For the majority of the
Company’s products, revenue is recognized when products are
shipped, title has transferred and collection is reasonably
assured. For these products, there is also persuasive evidence
of an arrangement and the selling price to the buyer is fixed or
determinable. For heat exchangers, cold boxes, liquefied natural
gas fueling stations and engineered tanks, the Company uses the
percentage of completion method of accounting. Earned revenue is
based on the percentage that incurred costs to date bear to
total estimated costs at completion after giving effect to the
most current estimates. Earned revenue on contracts in process
at December 31, 2005, 2004 and 2003, totaled $126,122,
$47,978 and $73,360, respectively. Timing of amounts billed on
contracts varies from contract to contract and could cause
significant variation in working capital needs. Amounts billed
on percentage of completion contracts in process at
December 31 totaled $125,971, $43,343 and $65,309, in 2005,
2004, and 2003, respectively. The cumulative impact of revisions
in total cost estimates during the progress of work is reflected
in the period in which these changes become known. Earned
revenue reflects the original contract price adjusted for agreed
upon claims and change orders, if any. Losses expected to be
incurred on contracts in process, after consideration of
estimated minimum recoveries from claims and change orders, are
charged to operations as soon as such losses are known.
Distribution Costs:
The Company records distribution
costs, including warehousing and freight related to product
shipping, in cost of sales.
Advertising Costs:
The Company incurred advertising costs
of $556 for the 2005 Successor Period, $2,151 for the 2005
Reorganized Period, $2,833 for the year ended December 31,
2004, $465 for the three months ended December 2003, $1,538 for
the nine months ended September 30, 2003. Such costs are
expensed as incurred.
Research and Development Costs:
The Company incurred
research and development costs of $805 for the 2005 Successor
Period, $2,198 for the 2005 Reorganized Period, $3,279 for the
year ended December 31, 2004, $1,280 for the three months
ended December 31, 2003, and $2,551 for the nine months
ended September 30, 2003. Such costs are expensed as
incurred.
Foreign Currency Translation:
The functional currency for
the majority of the Company’s foreign operations is the
applicable local currency. The translation from the applicable
foreign currencies to U.S. dollars is performed for balance
sheet accounts using exchange rates in effect at the balance
sheet date and for revenue and expense accounts using a weighted
average exchange rate during the period. The resulting
translation adjustments are recorded as a component of
shareholders’ equity. Gains or losses resulting from
foreign currency transactions are charged to operations as
incurred.
F-17
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
Deferred Income Taxes:
The Company and its
U.S. subsidiaries file a consolidated federal income tax
return. Deferred income taxes are provided for temporary
differences between financial reporting and the consolidated tax
return in accordance with the liability method. A valuation
allowance is provided against net deferred tax assets when
conditions indicate that it is more likely than not that the
benefit related to such assets will not be realized.
Employee Stock Options:
In November 2005, the Successor
Company granted stock options (“New Options”), under
the 2005 Stock Incentive Plan (“Stock Incentive Plan”)
to certain management employees. In addition, under the
Company’s 2004 Stock Option and Incentive Plan (“2004
Plan”) certain management employees rolled over stock
options (“Rollover Options”). The Company adopted
SFAS 123(R) “Share-Based Payments”, on
October 17, 2005 using the modified prospective method, to
account for these New Options. The New Options are exercisable
for a period of ten years and have two different vesting
schedules. The time-based (“Time-based Options”) vest
equally over a five-year period and the performance-based
(“Performance-based Options”) vest based upon
specified actual returns on First Reserve’s investment in
the Company. Furthermore, certain of the Rollover Options were
vested on the Closing Date of the Acquisition and the remaining
unvested Rollover Options vest upon the performance criteria as
outlined in the 2004 Plan and related option agreements. The New
Options and Rollover Options generally may not be transferred,
and any shares of stock that are required upon exercise of the
New Options or Rollover Options generally may not be sold,
transferred, assigned or disposed of except under certain
predefined liquidity events or in the event of a change in
control. The Company’s policy is to issue authorized shares
upon the exercise of any stock options. In addition, all of the
2004 stock options (“2004 Options”) of the Reorganized
Company, except for the Rollover Options described above, were
deemed to be exercised in conjunction with the Transaction on
October 17, 2005. These 2004 Options were accounted for
under the intrinsic value method of APB Opinion No. 25
“Accounting for Stock Issued to Employees” and related
interpretations in accounting for employee stock options. See
Note J for further discussions regarding the stock options.
Reclassifications:
Certain prior year amounts have been
reclassified to conform to current year presentation.
Use of Estimates:
The preparation of financial statements
in conformity with accounting principles generally accepted in
the United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
Recently Adopted Accounting Standards:
The Financial
Accounting Standards Board (“FASB”) has recently
issued the following Statements of Financial Accounting
Standards that the Company has adopted as of December 31,
2005:
In December 2004, the FASB issued SFAS No. 123
(revised 2004), “Share-Based Payment.”
SFAS No. 123(R) is a revision of
SFAS No. 123, “Accounting for Stock-Based
Compensation” and supersedes Accounting Principles Board
(“APB) Opinion No. 25, “Accounting for Stock
Issued to Employees,” and amends SFAS No. 95,
“Statement of Cash Flows.” SFAS 123(R) requires
all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial
statements based on their fair values and eliminates the pro
forma disclosure option allowed under SFAS 123.
SFAS 123(R) is effective for nonpublic entities for fiscal
years beginning after December 15, 2005. The Company
adopted SFAS 123(R) early on October 17, 2005 in
conjunction with the Acquisition.
In December 2004, the FASB issued FASB Staff Position
(FSP”) FSP
No.
109-1,
“Application for FASB Statement No 109, Accounting for
Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of
2004.”
FSP
109-1
is
intended to clarify that the domestic manufacturing deduction
should be accounted for as a special deduction (rather than a
rate
F-18
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
reduction) under SFAS No. 109, “Accounting for
Income Taxes.” A special deduction is recognized under
SFAS 109 as it is earned. The adoption of this statement
did not have a material impact on the Company’s financial
position or results of operations.
In December 2004, the FASB issued FSP
No.
109-2,
“Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs
Creation Act of 2004.”
FSP
109-2
provides
guidance under SFAS No. 109, “Accounting for
Income Taxes,” with respect to recording the potential
impact of the repatriation provisions of the American Jobs
Creation Act of 2004 (the “Jobs Act”) on
enterprises’ income tax expense and deferred tax liability.
The Jobs Act was enacted on October 22, 2004.
FSP
109-2
states
that an enterprise is allowed time beyond the financial
reporting period of enactment to evaluate the effect of the Jobs
Act on its plan for reinvestment or repatriation of foreign
earnings for purposes of applying SFAS No. 109. The
Company completed evaluating the impact of the repatriation
provisions. The adjustment as provided for in
FSP
109-2
did not
have a material impact on the Company’s tax expense or
deferred tax liability.
In March 2005, the FASB issued FASB Interpretation No. 47
“Accounting for Conditional Asset Retirement
Obligations”. This interpretation requires companies to
recognize a liability for the fair value of a legal obligation
to perform asset retirement activities that are conditional on a
future event if the amount can be reasonably estimated. This
statement is effective for the year ending December 31,
2005. The adoption of this statement did not have a material
affect on the Company’s financial position, results of
operations, liquidity or cash flows.
Recently Issued Accounting Standards:
The Financial
Accounting Standards Board (“FASB”) has recently
issued the following Statements of Financial Accounting
Standards that the Company has not adopted as of
December 31, 2005:
In December 2004, the FASB issued SFAS No. 151,
“Inventory Costs.” SFAS No. 151 requires
abnormal amounts of inventory costs related to idle facility,
freight handling and wasted material expenses to be recognized
as current period charges. Additionally SFAS No. 151
requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the
production facilities. The standard is effective for fiscal
years beginning after June 15, 2005. The Company is
currently evaluating the effect the adoption of
SFAS No. 151 will have on the Company’s financial
position or results of operations.
In June 2005, the FASB issued SFAS No. 154,
“Accounting Changes and Error Corrections”.
SFAS 154 replaces APB Opinion No. 20, “Accounting
Changes” and SFAS 3, “Reporting Accounting
Changes in Interim Financial Statements”. SFAS 154
requires that a voluntary change in accounting principle be
applied retrospectively with all prior period financial
statements presented on the new accounting principle.
SFAS 154 also requires that a change in method of
depreciating and amortizing a long-lived asset be accounted for
prospectively as a change in estimate, and the correction of
errors in previously issued financial statements should be
termed a restatement. SFAS 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning
after December 15, 2005. SFAS 154 will only affect the
Company’s consolidated financial statements to the extent
there are future accounting changes or errors.
F-19
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
NOTE B — Balance Sheet Components
The following table summarizes the components of other current
assets, other assets, net, other current liabilities and other
long-term liabilities on the Company’s consolidated balance
sheet as of December 31, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Other current assets:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
306
|
|
|
$
|
425
|
|
|
|
Investment in leases
|
|
|
133
|
|
|
|
133
|
|
|
|
Deferred income taxes
|
|
|
6,429
|
|
|
|
7,125
|
|
|
|
Other receivables
|
|
|
5,234
|
|
|
|
7,157
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,102
|
|
|
$
|
14,840
|
|
|
|
|
|
|
|
|
|
|
Other assets net:
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
|
$
|
11,749
|
|
|
$
|
—
|
|
|
|
Investment in leases
|
|
|
64
|
|
|
|
185
|
|
|
|
Cash value life insurance
|
|
|
1,265
|
|
|
|
1,719
|
|
|
|
Unearned compensation
|
|
|
159
|
|
|
|
—
|
|
|
|
Other
|
|
|
435
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,672
|
|
|
$
|
2,116
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
$
|
4,599
|
|
|
$
|
324
|
|
|
|
Accrued income taxes
|
|
|
—
|
|
|
|
2,636
|
|
|
|
Accrued other taxes
|
|
|
1,948
|
|
|
|
936
|
|
|
|
Accrued rebates
|
|
|
3,152
|
|
|
|
2,734
|
|
|
|
Accrued employee separation and plant closure costs
|
|
|
2,007
|
|
|
|
2,763
|
|
|
|
Accrued other
|
|
|
5,900
|
|
|
|
2,960
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,606
|
|
|
$
|
12,353
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accrued environmental
|
|
$
|
6,608
|
|
|
$
|
6,460
|
|
|
|
Accrued pension cost
|
|
|
7,233
|
|
|
|
11,106
|
|
|
|
Minority interest
|
|
|
1,103
|
|
|
|
1,213
|
|
|
|
Accrued contingencies and other
|
|
|
5,013
|
|
|
|
7,028
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,957
|
|
|
$
|
25,807
|
|
|
|
|
|
|
|
|
|
F-20
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
NOTE C — Debt and Credit Arrangements
The following table shows the components of the Company’s
borrowings at December 31, 2005 and 2004, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Senior term loan, due October 2012 and September 2009,
respectively, average interest rate of 6.62% and 5.62% at
December 31, 2005 and 2004, respectively
|
|
$
|
175,000
|
|
|
$
|
78,395
|
|
|
Subordinated notes, due 2015, interest accrued at 9.125%
|
|
|
170,000
|
|
|
|
—
|
|
|
Industrial Development Revenue bonds, due August 2006, average
interest rate of 6.33% at December 31, 2004
|
|
|
—
|
|
|
|
1,016
|
|
|
Revolving foreign credit facility and other short-term debt
|
|
|
2,304
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
347,304
|
|
|
|
79,411
|
|
|
Less: current maturities
|
|
|
2,304
|
|
|
|
3,005
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
345,000
|
|
|
$
|
76,406
|
|
|
|
|
|
|
|
|
|
In connection with the Acquisition, the Company entered into a
$240,000 senior secured credit facility (“the Senior Credit
Facility”) and completed a $170,000 offering of
9
1
/
8
percent senior subordinated notes (“the Subordinated
Notes”). The Company repaid the then existing credit
facility of the Reorganized Company, as described further below,
and certain other debt on or before October 17, 2005, the
Closing Date of the Acquisition. The Senior Credit Facility
consists of a $180,000 term loan facility (the “Term
Loan”) and a $60,000 revolving credit facility (the
“Revolver”), of which $35,000 may be used for the
issuance of letters of credit. The Term Loan and Subordinated
Notes were fully funded on the Closing Date. The Term Loan
matures on October 17, 2012 and the Revolver matures on
October 17, 2010. As a result of a $5,000 voluntary
principal prepayment in December 2005, the Term Loan requires
quarterly principal payments that equal 0.8 percent per
annum of the funded balance commencing in September 2008 and a
remaining balloon payment on the maturity date. Future principal
payments will be adjusted for any voluntary prepayments. The
interest rate under the Senior Credit Facility is, at the
Company’s option, the Alternative Base Rate
(“ABR”) plus 1.0 percent or LIBOR plus
2.0 percent on the Term loan and ABR plus 1.5 percent
or LIBOR plus 2.5 percent on the Revolver. In addition, the
Company is required to pay an annual administrative fee of $100,
a commitment fee of 0.5 percent on the unused Revolver
balance, a letter of credit participation fee of
2.5 percent per annum on the letter of credit exposure and
a letter of credit issuance fee of 0.25 percent. The
obligations under the Secured Credit Facility are secured by
substantially all of the assets of the Company’s
U.S. Subsidiaries and 65 percent of the capital stock
of the Company’s
non-U.S.
Subsidiaries.
The Subordinated Notes are due in 2015 with interest payable
semi-annually on
April 15
th
and
October 15
th
.
Any of the Subordinated Notes may be redeemed solely at the
Company’s option beginning on October 15, 2010. The
initial redemption price is 104.563 percent of the
principal amount, plus accrued interest. Also, any of the notes
may be redeemed solely at the Company’s option at any time
prior to October 15, 2010, plus accrued interest and a
“make-whole” premium. In addition, before
October 15, 2008, up to 35 percent of the Subordinated
Notes may be redeemed solely at the Company’s option at a
price of 109.125 percent of the principal amount, plus
accrued interest, using the proceeds from sales of certain kinds
of capital stock. The Subordinated Notes are general unsecured
obligations of the Company and are subordinated in right of
payment to all existing and future senior debt of the Company,
including the Senior Credit Facility, pari passu in right of
payment with all future senior subordinated indebtedness of the
F-21
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
Company, senior in right of payment with any future indebtedness
of the Company that expressly provided for its subordination to
the Subordinated Notes, and unconditionally guaranteed jointly
and severally by substantially all of the Company’s
U.S. Subsidiaries.
The Senior Credit Facility agreement and provisions of the
indenture governing the Subordinated Notes contain a number of
customary covenants, including, but not limited to, restrictions
on the Company’s ability to incur additional indebtedness,
create liens or other encumbrances, sell assets, enter into sale
and lease-back transactions, make certain payments, investments,
loans, advances or guarantees, make acquisitions and engage in
mergers or consolidations, pay dividends and distributions, and
make capital expenditures. The Senior Credit Facility also
includes covenants relating to leverage and interest coverage.
At December 31, 2005, there was $175,000 and $170,000
outstanding under the Term Loan and Subordinated Notes,
respectively, and letters of credit and bank guarantees totaling
$22,442 supported by the Revolver.
Chart Ferox, a.s. (“Ferox”), a majority-owned
subsidiary of the Company, maintains secured revolving credit
facilities with borrowing capacity, including overdraft
protection, of up to $9,600, of which $4,400 is available only
for letters of credit and bank guarantees. Under the revolving
credit facilities, Ferox may make borrowings in Czech Koruna,
Euros and U.S. dollars. Borrowings in Koruna are at PRIBOR,
borrowings in Euros are at EUROBOR and borrowings in
U.S. dollars are at LIBOR, each with a fixed margin of
0.6%. Ferox is not required to pay a commitment fee to the
lenders under the revolving credit facilities in respect to the
unutilized commitments thereunder. Ferox must pay letter of
credit and guarantee fees equal to 0.75% on the face amount of
each guarantee. Ferox’s land and buildings, and accounts
receivable secure $4,600 and $2,500, respectively, of the
revolving credit facilities. At December 31, 2005, there
was $800 of borrowings outstanding under, and $1,506 of bank
guarantees supported by the Ferox revolving credit facilities.
The scheduled annual maturities of long-term debt and credit
arrangements at December 31, 2005, are as follows:
|
|
|
|
|
|
|
Year
|
|
Amount
|
|
|
|
|
|
|
|
2006
|
|
$
|
—
|
|
|
2007
|
|
|
—
|
|
|
2008
|
|
|
720
|
|
|
2009
|
|
|
1,440
|
|
|
2010 and thereafter
|
|
|
342,840
|
|
|
|
|
|
|
|
|
|
$
|
345,000
|
|
|
|
|
|
|
Effective September 15, 2003, upon emergence from its
Chapter 11 bankruptcy reorganization, the Reorganized
Company entered into a term loan agreement and revolving credit
facility (collectively, the “2003 Credit Facility”).
The 2003 Credit Facility provided a term loan of $120,000 with
final maturity in 2009 and revolving credit line of $55,000, of
which $15,000 would have expired on January 31, 2006 and
$40,000 on September 15, 2008, and of which $40,000 was
available for the issuance of letters of credit and bank
guarantees. Under the terms of the credit facility, the term
loan bore interest at rates, at the Company’s option, equal
to the prime rate plus 2.50 percent or LIBOR plus
3.50 percent and the revolving credit line bore interest,
at the Company’s option, at rates equal to the prime rate
plus 1.50 percent or LIBOR plus 2.50 percent.
The 2003 Credit Facility contained certain covenants and
conditions, which imposed limitations on the Company and its
operating units, including restriction on the payment of cash
dividends and a requirement to meet certain financial tests and
to maintain on a quarterly basis certain consolidated financial
ratios, including leverage, interest coverage, minimum fixed
coverage, minimum operating cash flow and capital expenditures.
F-22
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
The 2003 Credit Facility also contained a feature whereby if the
Company generated cash from operations above a pre-defined
calculated amount, the Company was required to use a portion of
that cash to make principal prepayments on the term loan portion
of the 2003 Credit Facility.
In 2004, the Company made prepayments on the term loan portion
of the Credit Facility totaling $30 million, which was in
addition to a $10 million prepayment made in December 2003.
The prepayments reduced all future scheduled term loan payments
on a pro-rata basis. As a result, the Company had borrowings
outstanding of $78,395 under the term loan portion of the 2003
Credit facility and letters of credit outstanding and bank
guarantees totaling $19,040 supported by the revolving credit
line portion of the 2003 Credit Facility.
The Company paid interest of $1,085 for the 2005 Successor
Period, $4,397 in the 2005 Reorganized Period, $5,615 in the
year ended December 31, 2004, $2,268 in the three months
ended December 31, 2003, and $10,021 in the nine months
ended September 30, 2003.
NOTE D — Employee Separation and Plant Closure
Costs
In 2004, the Company continued its manufacturing facility
reduction plan which commenced in 2002. These actions resulted
in the closure of the Company’s Energy and Chemicals
segment manufacturing facility in Wolverhampton, U.K. in March
2003, the closure in September 2003 of the Company’s Energy
and Chemicals segment sales and engineering office in
Westborough, MA and the announcements in December 2003 and
January 2004 of the closure of the Company’s Distribution
and Storage segment manufacturing facility in Plaistow, NH and
the Biomedical segment manufacturing and office facility in
Burnsville, MN, respectively. In 2004, the Company completed the
shutdown of the Plaistow, NH manufacturing facility and
continued the shutdown of the Burnsville, MN manufacturing
facility, which was completed in the first quarter of 2005. In
each of these facility closures, the Company did not exit the
product lines manufactured at those sites, but moved the
manufacturing to other facilities with available capacity, most
notably New Prague, MN for engineered tank production and
Canton, GA for medical respiratory production. During 2005 and
2004, the Company recorded employee separation and plant closure
costs related to the closures of these various facilities and
also recorded non-cash inventory valuation charges included in
cost of sales at certain of these sites.
The following tables summarize the Company’s employee
separation and plant closure costs activity for 2005, 2004 and
2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 17, 2005 to December 31, 2005 — Successor Company
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Energy &
|
|
|
|
|
|
|
Biomedical
|
|
|
& Storage
|
|
|
Chemicals
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-time employee termination costs
|
|
$
|
17
|
|
|
$
|
(120
|
)
|
|
$
|
78
|
|
|
$
|
86
|
|
|
$
|
61
|
|
|
Other associated costs
|
|
|
2
|
|
|
|
102
|
|
|
|
(26
|
)
|
|
|
—
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee separation and plant closure costs
|
|
|
19
|
|
|
|
(18
|
)
|
|
|
52
|
|
|
|
86
|
|
|
|
139
|
|
|
Inventory valuation in cost of sales
|
|
|
149
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(34
|
)
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168
|
|
|
|
(18
|
)
|
|
|
52
|
|
|
|
52
|
|
|
|
254
|
|
|
Reserve usage
|
|
|
(33
|
)
|
|
|
(97
|
)
|
|
|
(48
|
)
|
|
|
(57
|
)
|
|
|
(235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in reserve
|
|
|
135
|
|
|
|
(115
|
)
|
|
|
4
|
|
|
|
(5
|
)
|
|
|
19
|
|
|
Reserves as of October 16, 2005
|
|
|
104
|
|
|
|
305
|
|
|
|
1,553
|
|
|
|
5
|
|
|
|
1,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2005
|
|
$
|
239
|
|
|
$
|
190
|
|
|
$
|
1,557
|
|
|
$
|
—
|
|
|
$
|
1,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2005 to October 16, 2005— Reorganized Company
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Energy &
|
|
|
|
|
|
|
Biomedical
|
|
|
& Storage
|
|
|
Chemicals
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-time employee termination costs
|
|
$
|
—
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
(159
|
)
|
|
$
|
(118
|
)
|
|
Other associated costs
|
|
|
540
|
|
|
|
465
|
|
|
|
129
|
|
|
|
41
|
|
|
|
1,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee separation and plant closure costs
|
|
|
540
|
|
|
|
506
|
|
|
|
129
|
|
|
|
(118
|
)
|
|
|
1,057
|
|
|
Inventory valuation in cost of sales
|
|
|
643
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,183
|
|
|
|
506
|
|
|
|
129
|
|
|
|
(118
|
)
|
|
|
1,700
|
|
|
Reserve usage
|
|
|
(1,451
|
)
|
|
|
(542
|
)
|
|
|
(133
|
)
|
|
|
(370
|
)
|
|
|
(2,496
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in reserve
|
|
|
(268
|
)
|
|
|
(36
|
)
|
|
|
(4
|
)
|
|
|
(488
|
)
|
|
|
(796
|
)
|
|
Reserves as of January 1, 2005
|
|
|
372
|
|
|
|
341
|
|
|
|
1,557
|
|
|
|
493
|
|
|
|
2,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of October 16, 2005
|
|
$
|
104
|
|
|
$
|
305
|
|
|
$
|
1,553
|
|
|
$
|
5
|
|
|
$
|
1,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004— Reorganized Company
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Energy &
|
|
|
|
|
|
|
Biomedical
|
|
|
& Storage
|
|
|
Chemical
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-time employee termination costs
|
|
$
|
381
|
|
|
$
|
215
|
|
|
$
|
303
|
|
|
$
|
398
|
|
|
$
|
1,297
|
|
|
Contract termination costs
|
|
|
—
|
|
|
|
317
|
|
|
|
29
|
|
|
|
—
|
|
|
|
346
|
|
|
Other associated costs
|
|
|
406
|
|
|
|
726
|
|
|
|
412
|
|
|
|
(18
|
)
|
|
|
1,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee separation and plant closure costs
|
|
|
787
|
|
|
|
1,258
|
|
|
|
744
|
|
|
|
380
|
|
|
|
3,169
|
|
|
Inventory valuation in costs of sales
|
|
|
97
|
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
884
|
|
|
|
1,338
|
|
|
|
744
|
|
|
|
380
|
|
|
|
3,346
|
|
|
Reserve usage
|
|
|
(512
|
)
|
|
|
(1,530
|
)
|
|
|
(1,369
|
)
|
|
|
(562
|
)
|
|
|
(3,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in reserve
|
|
|
372
|
|
|
|
(192
|
)
|
|
|
(625
|
)
|
|
|
(182
|
)
|
|
|
(627
|
)
|
|
Reserves as of January 1, 2004
|
|
|
—
|
|
|
|
533
|
|
|
|
2,182
|
|
|
|
675
|
|
|
|
3,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2004
|
|
$
|
372
|
|
|
$
|
341
|
|
|
$
|
1,557
|
|
|
$
|
493
|
|
|
$
|
2,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2003— Reorganized Company
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Energy &
|
|
|
|
|
|
|
Biomedical
|
|
|
& Storage
|
|
|
Chemical
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-time employee termination costs
|
|
$
|
139
|
|
|
$
|
633
|
|
|
$
|
28
|
|
|
$
|
19
|
|
|
$
|
819
|
|
|
Other associated costs
|
|
|
9
|
|
|
|
—
|
|
|
|
113
|
|
|
|
69
|
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee separation and plant closure costs
|
|
|
148
|
|
|
|
633
|
|
|
|
141
|
|
|
|
88
|
|
|
|
1,010
|
|
|
Reserve usage
|
|
|
(165
|
)
|
|
|
(721
|
)
|
|
|
(307
|
)
|
|
|
48
|
|
|
|
(1,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in reserve
|
|
|
(17
|
)
|
|
|
(88
|
)
|
|
|
(166
|
)
|
|
|
136
|
|
|
|
(135
|
)
|
|
Reserves as of October 1, 2003
|
|
|
17
|
|
|
|
621
|
|
|
|
2,348
|
|
|
|
539
|
|
|
|
3,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of December 31, 2003
|
|
$
|
—
|
|
|
$
|
533
|
|
|
$
|
2,182
|
|
|
$
|
675
|
|
|
$
|
3,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2003 — Predecessor Company
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Energy &
|
|
|
|
|
|
|
Biomedical
|
|
|
& Storage
|
|
|
Chemicals
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-time employee termination costs
|
|
$
|
42
|
|
|
$
|
350
|
|
|
$
|
754
|
|
|
$
|
384
|
|
|
$
|
1,530
|
|
|
Contract termination costs
|
|
|
47
|
|
|
|
(1,604
|
)
|
|
|
756
|
|
|
|
97
|
|
|
|
(704
|
)
|
|
Other associated costs
|
|
|
10
|
|
|
|
8
|
|
|
|
30
|
|
|
|
8
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee separation and plant closure costs
|
|
|
99
|
|
|
|
(1,246
|
)
|
|
|
1,540
|
|
|
|
489
|
|
|
|
882
|
|
|
Inventory valuation in cost of sales
|
|
|
16
|
|
|
|
440
|
|
|
|
—
|
|
|
|
—
|
|
|
|
456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
(806
|
)
|
|
|
1,540
|
|
|
|
489
|
|
|
|
1,338
|
|
|
Write-off due to CHEL insolvency
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,976
|
)
|
|
|
—
|
|
|
|
(2,976
|
)
|
|
Reserve usage
|
|
|
(328
|
)
|
|
|
(1,665
|
)
|
|
|
(1,182
|
)
|
|
|
(477
|
)
|
|
|
(3,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in reserve
|
|
|
(213
|
)
|
|
|
(2,471
|
)
|
|
|
(2,618
|
)
|
|
|
12
|
|
|
|
(5,290
|
)
|
|
Reserves as of January 1, 2003
|
|
|
230
|
|
|
|
3,092
|
|
|
|
4,966
|
|
|
|
527
|
|
|
|
8,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve as of September 30, 2003
|
|
$
|
17
|
|
|
$
|
621
|
|
|
$
|
2,348
|
|
|
$
|
539
|
|
|
$
|
3,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE E — Acquisitions
On May 16, 2005, the Company acquired 100 percent of
the equity interest in Changzhou CEM Cryo Equipment Co., Ltd.
(“CEM”), a foreign owned enterprise established under
the laws of the People’s Republic of China. The purchase
price was $13,664, consisting of cash of $12,198 and the
issuance of a promissory note of $1,466 payable to the seller.
The estimated fair value of the net assets acquired and goodwill
at the date of acquisition was $8,894 and $4,770, respectively.
For the 2005 Reorganized Period, the Company recorded a charge
of $2,768 for the write-off of purchased in-process research and
development that was included in the fair value of net assets
acquired. CEM has been included in the Company’s
Distribution and Storage operating segment and includes
approximately $4,100 of revenue since the Acquisition.
On February 27, 2004, the Company’s Coastal
Fabrication joint venture (“Coastal Fabrication”)
executed an agreement to redeem the joint venture partner’s
50 percent equity interest of $289 for cash consideration
of $250 and the possibility of additional consideration being
paid based upon the number of direct labor manufacturing hours
performed at the Company’s New Iberia, LA facility during
2004 and 2005. The $39 difference between the cash consideration
paid and the value of the 50 percent equity interest was
recorded by Coastal Fabrication as a reduction of certain fixed
assets. As a result of the elimination of the joint venture
partner and the assumption of 100 percent of control by the
Company, the assets, liabilities and operating results of
Coastal Fabrication are included in these consolidated financial
statements subsequent to February 27, 2004.
NOTE F — Loss on Insolvent Subsidiary
In March 2003, the Company completed the closure of its
Wolverhampton, United Kingdom manufacturing facility, operated
by CHEL, and all current heat exchanger manufacturing is now
being conducted at its LaCrosse, WI facility.
On March 28, 2003, CHEL filed for a voluntary
administration under the U.K. Insolvency Act of 1986.
CHEL’s application for voluntary administration was
approved on April 1, 2003 and an administrator was
appointed. In accordance with SFAS No. 94,
“Consolidation of All Majority-Owned Subsidiaries,”
the Company is not consolidating the accounts or financial
results of CHEL subsequent to March 28, 2003 due to the
assumption of control of CHEL by the insolvency administrator.
F-25
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
Effective March 28, 2003, the Company recorded a non-cash
impairment charge of $13,682 to write off its net investment in
CHEL. The components of this impairment charge includes:
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
2,413
|
|
|
Intercompany receivables
|
|
|
3,904
|
|
|
Property, plant and equipment, net
|
|
|
2,939
|
|
|
Other current assets
|
|
|
1,168
|
|
|
Accounts payable
|
|
|
(1,323
|
)
|
|
Accrued and other current liabilities
|
|
|
(1,302
|
)
|
|
Cumulative translation adjustment
|
|
|
3,268
|
|
|
Minimum pension liability
|
|
|
2,615
|
|
|
|
|
|
|
|
|
|
$
|
13,682
|
|
|
|
|
|
|
NOTE G — Income Taxes
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company’s deferred tax assets and liabilities are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
Accruals and reserves
|
|
$
|
7,665
|
|
|
$
|
7,872
|
|
|
|
Pensions
|
|
|
2,699
|
|
|
|
3,787
|
|
|
|
Inventory
|
|
|
1,288
|
|
|
|
1,499
|
|
|
|
Other — net
|
|
|
3,370
|
|
|
|
5,163
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
15,022
|
|
|
$
|
18,321
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
$
|
5,795
|
|
|
$
|
6,218
|
|
|
|
Intangibles
|
|
|
58,836
|
|
|
|
16,185
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
$
|
64,631
|
|
|
$
|
22,403
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax (liabilities) asset
|
|
$
|
(49,609
|
)
|
|
$
|
(5,814
|
)
|
|
|
|
|
|
|
|
|
The Company has not provided for income taxes on approximately
$15,226 of foreign subsidiaries’ undistributed earnings as
of December 31, 2005, since the earnings retained have been
reinvested indefinitely by the subsidiaries. It is not
practicable to estimate the additional income taxes and
applicable foreign withholding taxes that would be payable on
the remittance of such undistributed earnings.
Congress passed the American Jobs Creation Act in October 2004.
The Act provided for a special one-time tax deduction of 85% of
certain foreign earnings that are repatriated (as defined in the
Act) in 2005. During the 2005 Reorganized Period, the Company
recorded income tax expense of $156 for the repatriation of
$2,970 of foreign earnings under the Act.
F-26
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
(Loss) income from continuing operations before income taxes and
minority interest consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized Company
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Months
|
|
|
Nine Months
|
|
|
|
|
2005 to
|
|
|
2005 to
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
(1,425
|
)
|
|
$
|
10,718
|
|
|
$
|
25,566
|
|
|
$
|
1,749
|
|
|
$
|
(9,997
|
)
|
|
Foreign
|
|
|
530
|
|
|
|
5,319
|
|
|
|
7,266
|
|
|
|
(1,823
|
)
|
|
|
5,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(895
|
)
|
|
$
|
16,037
|
|
|
$
|
32,832
|
|
|
$
|
(74
|
)
|
|
$
|
(4,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant components of the provision for income taxes are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized Company
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Months
|
|
|
Nine Months
|
|
|
|
|
2005 to
|
|
|
2005 to
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,476
|
|
|
$
|
6,601
|
|
|
$
|
5,224
|
|
|
$
|
—
|
|
|
$
|
(4,016
|
)
|
|
|
State
|
|
|
199
|
|
|
|
1,013
|
|
|
|
928
|
|
|
|
181
|
|
|
|
158
|
|
|
|
Foreign
|
|
|
227
|
|
|
|
1,806
|
|
|
|
1,879
|
|
|
|
(932
|
)
|
|
|
1,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,902
|
|
|
|
9,420
|
|
|
|
8,031
|
|
|
|
(751
|
)
|
|
|
(1,953
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(2,055
|
)
|
|
|
(1,793
|
)
|
|
|
1,692
|
|
|
|
537
|
|
|
|
6,639
|
|
|
|
State
|
|
|
(185
|
)
|
|
|
(161
|
)
|
|
|
166
|
|
|
|
—
|
|
|
|
664
|
|
|
|
Foreign
|
|
|
(103
|
)
|
|
|
(307
|
)
|
|
|
245
|
|
|
|
89
|
|
|
|
(2,303
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,343
|
)
|
|
|
(2,261
|
)
|
|
|
2,103
|
|
|
|
626
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(441
|
)
|
|
$
|
7,159
|
|
|
$
|
10,134
|
|
|
$
|
(125
|
)
|
|
$
|
3,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-27
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
The reconciliation of income taxes computed at the
U.S. federal statutory tax rates to income tax expense is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized Company
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Months
|
|
|
Nine Months
|
|
|
|
|
2005 to
|
|
|
2005 to
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense at U.S. statutory rates
|
|
$
|
(313
|
)
|
|
$
|
5,691
|
|
|
$
|
11,491
|
|
|
$
|
(26
|
)
|
|
$
|
(1,391
|
)
|
|
State income taxes, net of federal tax benefit
|
|
|
129
|
|
|
|
659
|
|
|
|
612
|
|
|
|
118
|
|
|
|
102
|
|
|
Debt forgiveness income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(18,283
|
)
|
|
Credit on foreign taxes paid
|
|
|
(127
|
)
|
|
|
(408
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Effective tax rate differential of earnings outside of U.S.
|
|
|
(71
|
)
|
|
|
(463
|
)
|
|
|
(488
|
)
|
|
|
(205
|
)
|
|
|
89
|
|
|
Federal tax benefit of foreign sales
|
|
|
(130
|
)
|
|
|
(648
|
)
|
|
|
(456
|
)
|
|
|
(88
|
)
|
|
|
(263
|
)
|
|
Non-deductible (taxable) items — goodwill and other
items
|
|
|
71
|
|
|
|
1,203
|
|
|
|
(525
|
)
|
|
|
76
|
|
|
|
4,535
|
|
|
In-process research and development
|
|
|
—
|
|
|
|
969
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Fresh-Start accounting adjustments and valuation allowance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,274
|
|
|
Repatriation of foreign earnings
|
|
|
|
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resolved tax contingency
|
|
|
—
|
|
|
|
—
|
|
|
|
(500
|
)
|
|
|
—
|
|
|
|
(4,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(441
|
)
|
|
$
|
7,159
|
|
|
$
|
10,134
|
|
|
$
|
(125
|
)
|
|
$
|
3,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 2005 Reorganized Period, the Company received a tax
benefit of $5,818 from the exercise of stock options as a result
of the Acquisition. The Company had net income tax payments
(refunds) of $3,113 in the 2005 Successor Period, $11,160
in the 2005 Reorganized Period, $8,035 in 2004, $362 in the
three months ended December 31, 2003, and $(1,262) in the
nine months ended September 30, 2003.
NOTE H — Discontinued Operation and Assets Held for
Sale
On July 3, 2003, the Company sold certain assets and
liabilities of its former Greenville Tube, LLC stainless steel
tubing business, which the Company previously reported as a
component of its Energy and Chemicals operating segment. The
Company received gross proceeds of $15,500, consisting of
$13,550 in cash and $1,950 in a long-term subordinated note,
which resulted in a gain of $3,692 recorded in the nine months
ended September 30, 2003. In accordance with
SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets,” the Company classified the
operating results of this business as a discontinued operation
on its consolidated statements of operations for the nine months
ended September 30, 2003. The amount of revenue reported in
discontinued operations was $8,807 for the nine months ended
September 30, 2003. The amount of pre-tax profit reported
in discontinued operations is equal to the income from
discontinued operation, net of income taxes, since the Company
did not allocate income tax expense to this business.
In September 2003, the Company decided to sell a vacant building
and a parcel of land at its New Prague, MN Distribution and
Storage manufacturing facility. These assets were sold in April
2004 for $550 and the Company recorded a loss of $11 due to
selling expenses. The net proceeds from this sale were used for
working capital purposes.
F-28
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
In January 2004, the Company decided to sell a building and
parcel of land at its Burnsville, MN Biomedical manufacturing
and office facility. In June 2004, the Company executed an
agreement to sell the Burnsville facility for $4,500. Because
the net sales price, estimated to be $4,175 after selling costs,
was lower than the carrying value, the assets were written down
to the net sales price by recording a $404 loss on sale of
assets in 2004. The net proceeds from this sale were used to pay
down $880 of debt outstanding under an industrial revenue bond
and the remainder was used for working capital purposes.
In June 2004, the Company decided to sell a building, parcel of
land and manufacturing equipment at its Plaistow, NH
Distribution and Storage manufacturing and office facility. The
manufacturing equipment was sold in August 2004 for $1,082
resulting in a gain on sale of assets of $549. In September
2004, the Company entered into an agreement, which expired in
July 2005, to sell the Plaistow land and building for $3,567,
net of selling costs. It was determined the net sales price per
the agreement was lower than the carrying value and the Company
recorded a fair value impairment loss of $386 in 2004. During
the 2005 Reorganization Period, an additional $483 fair value
impairment loss was recognized by the Reorganized Company. At
December 31, 2005 the carrying value of this property
equaled $3,084. The Plaistow facility is classified as held for
sale on its consolidated balance sheet as of December 31,
2005 and 2004. The Company continues to pursue the completion of
the sale and the net proceeds from such sale are expected to be
available for working capital purposes.
NOTE I — Employee Benefit Plans
The Company has four defined benefit pension plans (“the
Plans”) covering certain U.S. hourly and salary
employees. As of December 31, 2005 and 2004, three of the
Plans were frozen. Effective February 28, 2006, the fourth
Plan was frozen. The Plans provided benefits primarily based on
the participants’ years of service and compensation.
The following table sets forth the components of net periodic
pension (benefit) cost for the 2005 Successor Period, the 2005
Reorganized Period, the year ended December 31, 2004, the
three months ended December 31, 2003 and the nine months
ended September 30, 2003 based on a December 31
measurement date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized Company
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Months
|
|
|
Nine Months
|
|
|
|
|
2005 to
|
|
|
2005 to
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
53
|
|
|
$
|
205
|
|
|
$
|
887
|
|
|
$
|
269
|
|
|
$
|
851
|
|
|
Interest cost
|
|
|
410
|
|
|
|
1,559
|
|
|
|
2,056
|
|
|
|
534
|
|
|
|
1,515
|
|
|
Expected return on plan assets
|
|
|
(474
|
)
|
|
|
(1,807
|
)
|
|
|
(2,135
|
)
|
|
|
(472
|
)
|
|
|
(1,197
|
)
|
|
Amortization of net (gain) loss
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
(48
|
)
|
|
|
—
|
|
|
|
431
|
|
|
Amortization of prior service cost
|
|
|
—
|
|
|
|
(141
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pension (benefit) cost
|
|
$
|
(11
|
)
|
|
$
|
(190
|
)
|
|
$
|
760
|
|
|
$
|
331
|
|
|
$
|
1,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
The following table sets forth changes in the projected benefit
obligation and plan assets, the funded status of the plans and
the amounts recognized in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
January 1 projected benefit obligation
|
|
$
|
36,104
|
|
|
$
|
35,354
|
|
|
|
Service cost
|
|
|
258
|
|
|
|
887
|
|
|
|
Interest coat
|
|
|
1,969
|
|
|
|
2,056
|
|
|
|
Benefits paid
|
|
|
(990
|
)
|
|
|
(943
|
)
|
|
|
Plan Amendments
|
|
|
—
|
|
|
|
(2,015
|
)
|
|
|
Actuarial losses and plan changes
|
|
|
63
|
|
|
|
765
|
|
|
|
|
|
|
|
|
|
|
December 31 projected benefit obligation
|
|
$
|
37,404
|
|
|
$
|
36,104
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
Fair value at January 1
|
|
$
|
27,789
|
|
|
$
|
25,244
|
|
|
|
Actual return
|
|
|
2,359
|
|
|
|
1,777
|
|
|
|
Employer contributions
|
|
|
946
|
|
|
|
1,711
|
|
|
|
Benefits paid
|
|
|
(990
|
)
|
|
|
(943
|
)
|
|
|
|
|
|
|
|
|
|
Fair value at December 31
|
|
$
|
30,104
|
|
|
$
|
27,789
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized:
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plans
|
|
$
|
(7,300
|
)
|
|
$
|
(8,315
|
)
|
|
|
Unrecognized actuarial loss (gain)
|
|
|
424
|
|
|
|
(874
|
)
|
|
|
|
|
|
|
|
|
|
Net pension liability recognized
|
|
$
|
(6,876
|
)
|
|
$
|
(9,189
|
)
|
|
|
|
|
|
|
|
|
|
Accrued benefit liability
|
|
$
|
(7,300
|
)
|
|
$
|
(11,106
|
)
|
|
Accumulated other comprehensive loss
|
|
|
424
|
|
|
|
1,917
|
|
|
|
|
|
|
|
|
|
|
Net pension liability recognized
|
|
$
|
(6,876
|
)
|
|
$
|
(9,189
|
)
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation is equal to the projected
benefit obligation at December 31, 2005 and 2004 because
three of the Plans were frozen at these dates and the remaining
plan was service related. A minimum pension liability adjustment
was required as of December 31, 2005 and 2004 as the
actuarial present value of a projected benefit obligations
exceeded plan assets and accrued pension liabilities.
At December 31, 2005, the Company’s consolidated net
pension liability recognized was $6.9 million, a decrease
of $2.3 million from December 31, 2004. The decrease
is primarily due to an increase in the fair value of plan assets
during 2005 and the recognition of the net unamortized gain at
the Closing Date of the Acquisition in accordance with
SFAS 141 “Business Combinations”.
F-30
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
The actuarial assumptions used in determining the funded status
information and subsequent net periodic pension cost are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
Nine
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Months
|
|
|
Months
|
|
|
|
|
2005 to
|
|
|
2005 to
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
|
|
6.25
|
%
|
|
|
6.50
|
%
|
|
|
Weighted average rate of increase in compensation
|
|
|
*
|
|
|
|
3.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
Expected long-term weighted average rate of return on plan assets
|
|
|
8.25
|
%
|
|
|
8.25
|
%
|
|
|
8.25
|
%
|
|
|
8.25
|
%
|
|
|
8.25
|
%
|
|
|
|
|
*
|
No longer applicable as Plans were frozen and participants are
no longer accruing benefits.
|
The expected long-term weighted average rate of return on plan
assets was established using the Company’s target asset
allocation for equity and debt securities and the historical
average rates of return for equity and debt securities. The
Company employs a total return investment approach whereby a mix
of equities and fixed income investments are used to maximize
the long-term return of plan assets for a prudent level of risk.
Risk tolerance is established through careful consideration of
short- and long-term plan liabilities, plan funded status and
corporate financial condition. The investment portfolio contains
a diversified blend of equity and fixed-income investments.
Furthermore, equity investments are diversified across U.S. and
non-U.S.
stocks,
as well as growth, value, and small and large capitalizations.
Additionally, the Plans held 2,540 shares of the
Reorganized Company’s common stock with fair values of $124
and $67 at December 31, 2004 and 2003, respectively, and
did not receive any dividends on these shares during 2004 or
2003. Investment risk is measured and monitored on an ongoing
basis through quarterly investment portfolio reviews, annual
liability measurements and periodic asset/liability studies. The
Company’s pension plan weighted-average actual and target
asset allocations by asset category at December 31 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Reorganized
|
|
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
Target
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
|
64
|
%
|
|
|
57
|
%
|
|
|
57
|
%
|
|
Fixed income funds
|
|
|
34
|
%
|
|
|
41
|
%
|
|
|
41
|
%
|
|
Cash and cash equivalents
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
F-31
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
The Company’s funding policy is to contribute at least the
minimum funding amounts required by law. Based upon current
actuarial estimates, the Company expects to contribute $1,263 to
its defined benefit pension plans in 2006 and expects the
following benefit payments to be paid by the plans:
|
|
|
|
|
|
|
2006
|
|
$
|
1,176
|
|
|
2007
|
|
|
1,263
|
|
|
2008
|
|
|
1,327
|
|
|
2009
|
|
|
1,432
|
|
|
2010
|
|
|
1,578
|
|
|
|
|
|
|
|
|
|
$
|
6,776
|
|
|
|
|
|
|
The Company presently makes contributions to one bargaining unit
supported multi-employer pension plans resulting in expense of
$78 for the 2005 Successor Period, $282 for the 2005 Reorganized
Period, $313 for the year ended December 31, 2004, $110 for
the three months ended December 31, 2003 and $199 for the
nine months ended September 30, 2003. As part of the
closure of Plaistow, NH facility in 2004, the Company withdrew
from the multi-employer plan upon final termination of all
employees at such facility. The Company has recorded a related
estimated withdrawal liability of $170 at December 31, 2005
and 2004. Any additional liability over this accrued amount is
not expected to have a material adverse impact on the
Company’s financial position, liquidity, cash flows or
results of operations.
The Company has a defined contribution savings plan that covers
most of its U.S. employees. Company contributions to the
plan are based on employee contributions, and a Company match
and discretionary contributions. Expenses under the plan totaled
$517 for the 2005 Successor Period, $2,188 for the 2005
Reorganized Period, $1,483 for the year ended December 31,
2004, $313 for the three months ended December 31, 2003 and
$1,118 for the nine months ended September 30, 2003.
NOTE J — Stock Option Plans
In November 2005, 218,408 New Options were granted to certain
management employees of the Company, under the 2005 Stock
Incentive Plan, to purchase shares of the Successor
Company’s common stock at an exercise price of
$64.75 per share. In addition, certain members of
management rolled over 131,823 options from the Reorganized
Company’s 2004 Plan at an exercise price of $16.19 per
share.
The New Options are exercisable for a period of ten years and
have two different vesting schedules. 77,094 of the New Options
are time-based (“Time-based Options”) and vest equally
over a five year period, and 141,314 of the New Options are
performance-based (“Performance-based Options”) and
vest based upon specified actual returns on First Reserve’s
investment in the Company. In addition, 122,470 of the Rollover
Options were vested on the Closing Date of the Acquisition and
9,353 unvested Rollover Options vest upon the performance
criteria of the Company’s 2004 Plan. As of March 22,
2006, 128,543 of the Rollover Options were vested. The New
Options generally may not be transferred, and any shares of
stock that are acquired upon exercise of the New Options
generally may not be sold, transferred, assigned or disposed of
except under certain predefined liquidity events or in the event
of a change in control. As of December 31, 2005, there were
350,231 vested and unvested options outstanding. For the 2005
Successor Period, $437 of stock-based compensation expense was
recognized for the New Options and the Rollover Options. At
December 31, 2005, the unrecognized total share-based
compensation expense to be recorded over the next five years
related to non-vested awards is $2,716.
The fair value of the New Options was estimated at the date of
grant using a Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free interest rate
of 4.8%; dividend yields of 0.0%; volatility factors of the
expected market price of the Company’s common shares of
47.0%; and a
F-32
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
weighted-average expected life of 7.5 years for the
options. Volatility was calculated using an average of the
Reorganized Company’s historical closing stock price on the
OTCBB from October 2, 2003 to October 14, 2005.
Stock-based compensation expense for the Time-based Options is
recorded on a straight-line basis over the vesting period.
On October 17, 2005, in conjunction with the Acquisition,
all of the unvested 2004 Options under the Reorganized
Company’s 2004 Plan were vested upon the change of control,
except for 9,353 Rollover Options. The Reorganized
Company’s 2004 Options are described further below. As a
result of normal vesting and the change in control, $9,508 of
share-based compensation expense was recognized for the 2005
Reorganized Period.
On March 19, 2004, the Reorganized Company granted 435,701
of 2004 Options to purchase shares of the Company’s common
stock with an exercise price of $13.89 per share when the
closing market price of the Company’s common stock was
$28.00 per share. These 2004 Options were accounted for
under the intrinsic value method of APB Opinion No. 25,
“Accounting for Stock Issued to Employees”
(“APB 25”). These non-qualified stock options
were exercisable for a period of 10 years and have two
different vesting schedules: 319,701 options were scheduled to
vest in equal annual installments over a four-year period and
116,000 options were scheduled to vest over a
45-month
period, which
commenced April 1, 2004, based upon the achievement of
specific operating performance goals during that
45-month
period as
determined by the Compensation Committee of the Board of
Directors. The 319,701 2004 Options on the time-based vesting
schedule were accounted for as a fixed compensatory plan under
APB 25. For these options, the Company expected to record
$4,313 as compensation expense over the vesting period based on
the $14.11 difference between the closing market price and the
exercise price on the date of grant. The 116,000 2004 Options on
the performance-based vesting schedule were accounted for as a
variable compensatory plan under APB 25. For these options,
the Company recorded compensation expense over the vesting
period based upon the difference between the closing market
price of the Company’s stock and the exercise price at each
balance sheet measurement date, and the Company’s estimate
of the number of options that will ultimately vest based upon
actual and estimated performance in comparison to the
performance targets.
During 2004, 14,000 options on the time-based vesting schedule
and 14,000 options on the performance-based vesting schedule
were cancelled due to the resignation of eligible employees, and
42,000 additional 2004 Options on the time-based vesting
schedule and 30,000 additional 2004 Options on the
performance-based vesting schedule were issued at the closing
market price on the date of grant to then new eligible employees
and non-employee members of the Company’s Board of
Directors. The 42,000 2004 Options with the time-based vesting
schedule were accounted for as a fixed plan under APB 25.
For these options, the Company recorded no compensation expense,
since the exercise price was equal to the market price at the
date of grant. The 30,000 Options with the performance-based
vesting schedule were accounted for as a variable compensatory
plan under APB 25 and the Company recorded compensation
expense using the same method as the initial 116,000
performance-based options. As of December 31, 2004, there
were 479,701 options outstanding. For the year ended
December 31, 2004, the Company recognized $1,998 of
stock-based compensation expense.
F-33
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
Certain information for the 2005 Successor Company and the year
ended December 31, 2004, relative to the Successor
Company’s and Reorganized Company’s stock option plans
is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
Reorganized Company
|
|
|
|
|
December 31, 2005
|
|
|
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
Average
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at beginning of period
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Rollover
|
|
|
131,823
|
|
|
|
16.19
|
|
|
|
—
|
|
|
|
—
|
|
|
Granted
|
|
|
218,408
|
|
|
|
64.75
|
|
|
|
507,701
|
|
|
|
18.04
|
|
|
Expired or canceled
|
|
|
—
|
|
|
|
—
|
|
|
|
(28,000
|
)
|
|
|
13.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
350,231
|
|
|
$
|
46.47
|
|
|
|
479,701
|
|
|
$
|
18.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year *
|
|
|
128,543
|
|
|
$
|
16.19
|
|
|
|
104,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of options granted during the year
|
|
$
|
37.03
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Participants at end of year
|
|
|
32
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for future grant at end of year
|
|
|
6,749
|
|
|
|
|
|
|
|
75,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Remaining contractual term of 8 years and 3 months.
|
NOTE K — Lease Commitments
The Company incurred $717, $2,665, $3,478, $974 and $3,756 of
rental expense under operating leases for the 2005 Successor
Period, the 2005 Reorganized Period, the year ended
December 31, 2004, the three months ended December 31,
2003 and the nine months ended September 30, 2003. At
December 31, 2005, future minimum lease payments for
non-cancelable operating leases for the next five years total
$8,547 and are payable as follows: 2006 — $2,040;
2007 — $1,855; 2008 — $1,713;
2009 — $1,600; and 2010 — $1,339.
NOTE L — Contingencies
The Company is subject to federal, state and local environmental
laws and regulations concerning, among other matters, waste
water effluents, air emissions and handling and disposal of
hazardous materials such as cleaning fluids. The Company is
involved with environmental compliance, investigation,
monitoring and remediation activities at certain of its owned
manufacturing facilities and at one owned facility that is
leased to a third party, and, except for these continuing
remediation efforts, believes it is currently in substantial
compliance with all known environmental regulations. At
December 31, 2005 and 2004, the Company had undiscounted
accrued environmental reserves of $6,608 and $6,460,
respectively, recorded in other long-term liabilities. The
Company accrues for certain environmental remediation-related
activities for which commitments or remediation plans have been
developed and for which costs can be reasonably estimated. These
estimates are determined based upon currently available facts
and circumstances regarding each facility. Actual costs incurred
may vary from these estimates due to the inherent uncertainties
involved. Future expenditures relating to these environmental
remediation efforts are expected to be made over the next 8 to
14 years as ongoing costs of remediation programs.
F-34
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
Although the Company believes it has adequately provided for the
cost of all known environmental conditions, the applicable
regulatory agencies could insist upon different and more costly
remediation than those the Company believes are adequate or
required by existing law. The Company believes that any
additional liability in excess of amounts accrued which may
result from the resolution of such matters will not have a
material adverse effect on the Company’s financial
position, liquidity, cash flows or results of operations.
In conjunction with the Acquisition and the Notice of Merger
dated October 25, 2005, certain of the former shareholders
of the Reorganized Company representing 244,180 shares of
common stock, gave notice of their right under Delaware General
Corporation Law to exercise appraisal rights. In February 2006,
before the former shareholders filed suit in court under
Delaware General Corporation Law, the Company settled this
appraisal rights matter by paying additional proceeds to these
former shareholders of $0.5 million. This settlement amount
was accrued at December 31, 2005.
In March 2003, the Company completed the closure of its
Wolverhampton, United Kingdom manufacturing facility, operated
by CHEL, and all current heat exchanger manufacturing is being
conducted at the Company’s La Crosse, WI facility. On
March 28, 2003, CHEL filed for a voluntary administration
under the United Kingdom (“U.K.”) Insolvency Act of
1986. CHEL’s application for voluntary administration was
approved on April 1, 2003 and an administrator was
appointed. Additionally, the Company received information that
indicated that CHEL’s net pension plan obligations had
increased significantly primarily due to a decline in plan asset
values and interest rates as well as increased plan liabilities,
resulting in an estimated plan deficit of approximately
$12.0 million as of March 2003. Based on the Company’s
financial condition in March 2003, it determined not to advance
funds to CHEL in amounts necessary to fund CHEL’s
obligations. Since CHEL was unable to fund its net pension
deficit, pay remaining severance due to former employees, or pay
other creditors, the trustees of the CHEL pension plan requested
a decision to
wind-up
the plan from a U.K. pension regulatory board. That board
approved the
wind-up
as
of March 28, 2003.
The Company does not believe that it is legally obligated to
fund the net pension deficit of the CHEL pension plan because
CHEL, which is no longer one of the Company’s consolidated
subsidiaries, was the sponsor of the pension plan and the entity
with primary responsibility for the plan. In addition, the
Company considered itself and its consolidated subsidiaries
legally released from being the primary obligor of any CHEL
liabilities. Further, at the time the insolvency administrator
assumed control of CHEL, the Company no longer had control of
the assets or liabilities of CHEL. As a result, in March 2003,
the Company wrote-off its net investment in CHEL. In addition,
any claims of CHEL against the Company were discharged in
bankruptcy as part of the Company’s Reorganization Plan.
While no claims presently are pending against the Company
related to CHEL’s insolvency, persons impacted by the
insolvency or others could bring a claim against the Company
asserting that the Company is directly responsible for pension
and benefit related liabilities of CHEL. Although the Company
would contest any claim of this kind, it can provide no
assurance that claims will not be asserted against it in the
future. To the extent the Company has a significant liability
related to CHEL’s insolvency and pension wind-up,
satisfaction of that liability could have a material adverse
impact on the Company’s liquidity, results of operations
and financial position.
F-35
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
Chapter 11 Reorganization
|
On July 8, 2003, the Company and all of its then
majority-owned U.S. subsidiaries filed voluntary petitions
for reorganization relief under Chapter 11 of the
U.S. Bankruptcy Code with the United States Bankruptcy
Court for the District of Delaware to implement an agreed upon
senior debt restructuring plan through a pre-packaged plan of
reorganization. None of the Company’s
non-U.S.
subsidiaries
were included in the filing in the Bankruptcy Court. On
September 15, 2003, the Reorganized Company and all of its
majority-owned U.S. subsidiaries emerged from
Chapter 11 proceedings pursuant to the Amended Joint
Prepackaged Reorganization Plan of Chart Industries, Inc. and
Certain Subsidiaries, dated September 3, 2003. The Company
has resolved all proofs of claim asserted in the bankruptcy
proceedings, including the settlement in July 2005 of a
finders’ fee claim in the amount of $1.1 million
asserted by a former shareholder of the Company, against which
the Company had filed an objection in the Bankruptcy Court. The
Company expects to move forward to close these proceedings in
2006.
|
|
|
|
|
Performance Under Contracts
|
The Company is occasionally subject to various other legal
actions related to performance under contracts, product
liability and other matters, several of which actions claim
substantial damages, in the ordinary course of its business.
Based on the Company’s historical experience in litigating
these actions, as well as the Company’s current assessment
of the underlying merits of the actions and applicable
insurance, the Company believes the resolution of these other
legal actions will not have a material adverse effect on the
Company’s financial position, liquidity, cash flows or
results of operations.
The Company is a party to other legal proceedings incidental to
the normal course of its business. Based on the Company’s
historical experience in litigating these actions, as well as
the Company’s current assessment of the underlying merits
of the actions and applicable insurance, management believes
that the final resolution of these matters will not have a
material adverse affect on the Company’s financial
position, liquidity, cash flows or results of operations.
NOTE M — Operating Segments
The Company’s structure of its internal organization is
divided into the following three reportable segments: Energy and
Chemicals, Distribution and Storage, and Biomedical. The
Company’s reportable segments are business units that offer
different products. The reportable segments are each managed
separately because they manufacture and distribute distinct
products with different production processes and sales and
marketing approaches. The Biomedical segment sells medical
respiratory products, biological storage systems and magnetic
resonance imaging (“MRI”) cryostat components. The
Distribution and Storage segment sells cryogenic bulk storage
systems, cryogenic packaged gas systems, cryogenic systems and
components, beverage liquid
CO
2
systems and cryogenic services to various companies for the
storage and transportation of both industrial and natural gases.
The Energy and Chemicals segment sells heat exchangers, cold
boxes and liquefied natural gas (“LNG”) vacuum
insulated pipe (“VIP”) to natural gas, petrochemical
processing and industrial gas companies who use them for the
liquefaction and separation of natural and industrial gases. Due
to the nature of the products that each operating segment sells,
there are no inter-segment sales. The Company moved the
management and reporting of the LNG alternative fuel systems
product line from the Energy and Chemicals segment to the
Distribution and Storage segment effective December 31,
2004. All segment information for all periods presented has been
restated to conform to this presentation.
F-36
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
The Company evaluates performance and allocates resources based
on operating income or loss from continuing operations before
gain on sale of assets, net interest expense, financing costs
amortization expense, derivative contracts valuation expense,
foreign currency loss, income taxes, minority interest and
cumulative effect of change in accounting principle. The
accounting policies of the reportable segments are the same as
those described in the summary of significant accounting
policies.
Information for the Company’s three reportable segments and
its corporate headquarters, and product revenue and geographic
information for the Company, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
|
|
|
|
|
|
|
October 17, 2005 to December 31, 2005
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy and
|
|
|
Distribution
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
and Storage
|
|
|
Biomedical
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
34,135
|
|
|
$
|
47,832
|
|
|
$
|
15,685
|
|
|
$
|
—
|
|
|
$
|
97,652
|
|
|
Employee separation and plant closure costs (benefit)
|
|
|
52
|
|
|
|
(18
|
)
|
|
|
19
|
|
|
|
86
|
|
|
|
139
|
|
|
Depreciation and amortization expense
|
|
|
1,424
|
|
|
|
2,152
|
|
|
|
458
|
|
|
|
54
|
|
|
|
4,098
|
|
|
Operating income (loss)
|
|
|
5,092
|
|
|
|
4,025
|
|
|
|
714
|
|
|
|
(4,683
|
)
|
|
|
5,148
|
|
|
Total assets(B)(C)
|
|
|
177,915
|
|
|
|
341,644
|
|
|
|
93,929
|
|
|
|
28,318
|
|
|
|
641,806
|
|
|
Capital expenditures
|
|
|
877
|
|
|
|
3,338
|
|
|
|
1,255
|
|
|
|
131
|
|
|
|
5,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
|
|
|
|
|
|
|
January 1, 2005 to October 16, 2005
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy and
|
|
|
Distribution
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
and Storage
|
|
|
Biomedical
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
86,920
|
|
|
$
|
161,329
|
|
|
$
|
57,248
|
|
|
$
|
—
|
|
|
$
|
305,497
|
|
|
Employee separation and plant closure costs (benefit)
|
|
|
129
|
|
|
|
506
|
|
|
|
540
|
|
|
|
(118
|
)
|
|
|
1,057
|
|
|
Depreciation and amortization expense
|
|
|
931
|
|
|
|
3,694
|
|
|
|
1,901
|
|
|
|
282
|
|
|
|
6,808
|
|
|
Operating income (loss)
|
|
|
13,818
|
|
|
|
27,020
|
|
|
|
9,093
|
|
|
|
(29,203
|
)
|
|
|
20,728
|
|
|
Total assets(B)(D)
|
|
|
85,203
|
|
|
|
151,404
|
|
|
|
99,001
|
|
|
|
7,499
|
|
|
|
343,107
|
|
|
Capital expenditures
|
|
|
2,817
|
|
|
|
5,878
|
|
|
|
1,490
|
|
|
|
853
|
|
|
|
11,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy and
|
|
|
Distribution
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
and Storage
|
|
|
Biomedical
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
69,609
|
|
|
$
|
162,508
|
|
|
$
|
73,459
|
|
|
$
|
—
|
|
|
$
|
305,576
|
|
|
Employee separation and plant closure costs
|
|
|
744
|
|
|
|
1,258
|
|
|
|
787
|
|
|
|
380
|
|
|
|
3,169
|
|
|
Depreciation and amortization expense
|
|
|
1,180
|
|
|
|
2,614
|
|
|
|
1,386
|
|
|
|
3,310
|
|
|
|
8,490
|
|
|
Equity expense in joint venture
|
|
|
(51
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(51
|
)
|
|
Operating income (loss)
|
|
|
11,545
|
|
|
|
27,799
|
|
|
|
14,493
|
|
|
|
(16,625
|
)
|
|
|
37,212
|
|
|
Total assets(B)(D)
|
|
|
65,212
|
|
|
|
118,555
|
|
|
|
100,768
|
|
|
|
22,545
|
|
|
|
307,080
|
|
|
Capital expenditures
|
|
|
1,681
|
|
|
|
4,643
|
|
|
|
2,357
|
|
|
|
698
|
|
|
|
9,379
|
|
F-37
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy and
|
|
|
Distribution
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
and Storage
|
|
|
Biomedical
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
15,699
|
|
|
$
|
37,863
|
|
|
$
|
15,008
|
|
|
$
|
—
|
|
|
$
|
68,570
|
|
|
Employee separation and plant closure costs
|
|
|
141
|
|
|
|
633
|
|
|
|
148
|
|
|
|
88
|
|
|
|
1,010
|
|
|
Depreciation and amortization expense
|
|
|
356
|
|
|
|
991
|
|
|
|
791
|
|
|
|
87
|
|
|
|
2,225
|
|
|
Equity expense in joint venture
|
|
|
(41
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(41
|
)
|
|
Operating income (loss)(A)
|
|
|
3,298
|
|
|
|
3,797
|
|
|
|
2,694
|
|
|
|
(8,926
|
)
|
|
|
863
|
|
|
Total assets(B)(D)
|
|
|
62,558
|
|
|
|
105,508
|
|
|
|
105,127
|
|
|
|
26,444
|
|
|
|
299,637
|
|
|
Equity investment in joint venture
|
|
|
340
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
340
|
|
|
Capital expenditures
|
|
|
42
|
|
|
|
476
|
|
|
|
—
|
|
|
|
—
|
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor Company
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2003
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy and
|
|
|
Distribution
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
and Storage
|
|
|
Biomedical
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
42,910
|
|
|
$
|
102,469
|
|
|
$
|
51,638
|
|
|
$
|
—
|
|
|
$
|
197,017
|
|
|
Employee separation and plant closure costs (benefit)
|
|
|
1,540
|
|
|
|
(1,246
|
)
|
|
|
99
|
|
|
|
489
|
|
|
|
882
|
|
|
Depreciation and amortization expense
|
|
|
934
|
|
|
|
4,639
|
|
|
|
1,505
|
|
|
|
529
|
|
|
|
7,607
|
|
|
Loss on insolvent subsidiary
|
|
|
13,682
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,682
|
|
|
Operating income (loss)(A)
|
|
|
(8,694
|
)
|
|
|
8,005
|
|
|
|
12,381
|
|
|
|
(14,690
|
)
|
|
|
(2,998
|
)
|
|
Total assets(B)(D)
|
|
|
59,307
|
|
|
|
105,147
|
|
|
|
109,196
|
|
|
|
39,272
|
|
|
|
312,922
|
|
|
Equity investment in joint venture
|
|
|
381
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
381
|
|
|
Capital expenditures
|
|
|
138
|
|
|
|
1,573
|
|
|
|
196
|
|
|
|
—
|
|
|
|
1,907
|
|
|
|
|
|
|
(A)
|
|
Corporate operating loss for the nine months ended
September 30, 2003 includes $6,046 of professional fees
incurred by the Company related to its debt restructuring
activities.
|
|
|
|
(B)
|
|
Corporate assets at December 31, 2005, October 16,
2005, December 31, 2004, December 31, 2003 and
September 30, 2003 consist primarily of cash and cash
equivalents and deferred income taxes.
|
|
|
|
(C)
|
|
Total assets at December 31, 2005 includes goodwill of
$72,833, $128,653 and $35,256 for the Energy and Chemicals,
Distribution and Storage, and Biomedical segments, respectively.
|
|
|
|
(D)
|
|
Total assets at October 16, 2005, December 31, 2004,
December 31, 2003 and September 30, 2003 includes
goodwill of $31,648, $2,787 and $40,675 for the Energy and
Chemicals, Distribution and Storage, and Biomedical segments,
respectively.
|
F-38
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
A reconciliation of the total of the reportable segments’
operating income (loss) from continuing operations to
consolidated (loss) income from continuing operations before
income taxes, minority interest and cumulative effect of change
in accounting principle is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Three
|
|
|
Nine
|
|
|
|
|
2005
|
|
|
2005
|
|
|
Year
|
|
|
Months
|
|
|
Months
|
|
|
|
|
to
|
|
|
to
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) from continuing operations
|
|
$
|
5,148
|
|
|
$
|
20,728
|
|
|
$
|
37,212
|
|
|
$
|
863
|
|
|
$
|
(2,998
|
)
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale of assets
|
|
|
(78
|
)
|
|
|
131
|
|
|
|
(133
|
)
|
|
|
57
|
|
|
|
4,753
|
|
|
|
Interest expense, net
|
|
|
(5,565
|
)
|
|
|
(4,192
|
)
|
|
|
(4,760
|
)
|
|
|
(1,390
|
)
|
|
|
(9,911
|
)
|
|
|
Financing costs amortization
|
|
|
(308
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,653
|
)
|
|
|
Derivative contracts valuation income (expense)
|
|
|
9
|
|
|
|
28
|
|
|
|
48
|
|
|
|
46
|
|
|
|
(389
|
)
|
|
Foreign currency gain (loss)
|
|
|
(101
|
)
|
|
|
(659
|
)
|
|
|
465
|
|
|
|
350
|
|
|
|
(287
|
)
|
|
Reorganization items, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes and
minority interest
|
|
$
|
(895
|
)
|
|
$
|
16,036
|
|
|
$
|
32,832
|
|
|
$
|
(74
|
)
|
|
$
|
(4,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-39
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
Predecessor
|
|
|
|
|
Company
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Three
|
|
|
Nine
|
|
|
|
|
2005
|
|
|
2005
|
|
|
Year
|
|
|
Months
|
|
|
Months
|
|
|
|
|
to
|
|
|
to
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product Revenue Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy and Chemicals Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heat exchangers
|
|
$
|
22,218
|
|
|
$
|
52,702
|
|
|
$
|
48,091
|
|
|
$
|
10,975
|
|
|
$
|
31,430
|
|
|
|
Cold boxes and LNG VIP
|
|
|
11,917
|
|
|
|
34,218
|
|
|
|
21,518
|
|
|
|
4,724
|
|
|
|
11,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,135
|
|
|
|
86,920
|
|
|
|
69,609
|
|
|
|
15,699
|
|
|
|
42,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution and Storage Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryogenic bulk storage systems
|
|
|
22,626
|
|
|
|
70,180
|
|
|
|
73,118
|
|
|
|
17,950
|
|
|
|
43,248
|
|
|
|
Cryogenic packaged gas systems and beverage liquid CO
2
systems
|
|
|
18,150
|
|
|
|
65,713
|
|
|
|
59,706
|
|
|
|
13,447
|
|
|
|
41,677
|
|
|
|
Cryogenic systems and components
|
|
|
2,862
|
|
|
|
11,571
|
|
|
|
14,767
|
|
|
|
3,798
|
|
|
|
8,424
|
|
|
|
Cryogenic services
|
|
|
4,194
|
|
|
|
13,865
|
|
|
|
14,917
|
|
|
|
2,668
|
|
|
|
9,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,832
|
|
|
|
161,329
|
|
|
|
162,508
|
|
|
|
37,863
|
|
|
|
102,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biomedical Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical products and biological storage systems
|
|
|
13,355
|
|
|
|
48,488
|
|
|
|
62,873
|
|
|
|
12,337
|
|
|
|
41,355
|
|
|
|
MRI components and other
|
|
|
2,330
|
|
|
$
|
8,760
|
|
|
|
10,586
|
|
|
|
2,671
|
|
|
|
10,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,685
|
|
|
|
57,248
|
|
|
|
73,459
|
|
|
|
15,008
|
|
|
|
51,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$
|
97,652
|
|
|
$
|
305,497
|
|
|
$
|
305,576
|
|
|
$
|
68,570
|
|
|
$
|
197,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
|
|
Reorganized
|
|
|
|
|
|
|
|
Predecessor Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 17,
|
|
|
January 1,
|
|
|
|
|
Three
|
|
|
Nine
|
|
|
|
|
2005
|
|
|
2005
|
|
|
Year
|
|
|
Months
|
|
|
Months
|
|
|
|
|
to
|
|
|
to
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
October 16,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived
|
|
|
|
|
|
|
Long-Lived
|
|
|
|
|
|
|
Geographic Information:
|
|
Revenues
|
|
|
Assets
|
|
|
Revenues
|
|
|
Revenues
|
|
|
Assets
|
|
|
Revenues
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
75,692
|
|
|
$
|
398,576
|
|
|
$
|
233,669
|
|
|
$
|
233,466
|
|
|
$
|
156,181
|
|
|
$
|
52,828
|
|
|
$
|
155,451
|
|
|
Czech Republic
|
|
|
12,829
|
|
|
|
27,944
|
|
|
|
42,645
|
|
|
|
43,163
|
|
|
|
5,494
|
|
|
|
10,205
|
|
|
|
20,406
|
|
|
Other Non-U.S. Countries
|
|
|
9,131
|
|
|
|
42,222
|
|
|
|
29,183
|
|
|
|
28,947
|
|
|
|
6,016
|
|
|
|
5,537
|
|
|
|
21,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
97,652
|
|
|
$
|
468,742
|
|
|
$
|
305,497
|
|
|
$
|
305,576
|
|
|
$
|
167,691
|
|
|
$
|
68,570
|
|
|
$
|
197,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands, except per share amounts)
Note N — Quarterly Data (Unaudited)
Selected quarterly data for the years ended December 31,
2005 and 2004 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
Reorganized Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Fourth
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter(a)
|
|
|
Quarter(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
85,170
|
|
|
$
|
99,721
|
|
|
$
|
105,787
|
|
|
$
|
14,819
|
|
|
$
|
97,652
|
|
|
Gross Profit
|
|
|
24,898
|
|
|
|
29,932
|
|
|
|
30,101
|
|
|
|
3,282
|
|
|
|
21,919
|
|
|
Employee separation and plant closure costs
|
|
|
604
|
|
|
|
201
|
|
|
|
200
|
|
|
|
52
|
|
|
|
139
|
|
|
Operating Income
|
|
|
9,893
|
|
|
|
14,092
|
|
|
|
12,398
|
|
|
|
(15,654
|
)
|
|
|
5,148
|
|
|
Net Income
|
|
|
5,795
|
|
|
|
8,658
|
|
|
|
7,228
|
|
|
|
(12,823
|
)
|
|
|
(506
|
)
|
|
|
|
|
|
(a)
|
|
The fourth quarter for the Reorganized Company is the period
October 1, 2005 to October 16, 2005 and the fourth
quarter for the Successor Company is the period October 17,
2005 to December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
68,782
|
|
|
$
|
74,665
|
|
|
$
|
76,380
|
|
|
$
|
85,749
|
|
|
$
|
305,576
|
|
|
Gross Profit
|
|
|
21,831
|
|
|
|
22,136
|
|
|
|
23,687
|
|
|
|
26,152
|
|
|
|
93,806
|
|
|
Employee separation and plant closure costs
|
|
|
(964
|
)
|
|
|
(776
|
)
|
|
|
(618
|
)
|
|
|
(811
|
)
|
|
|
(3,169
|
)
|
|
Operating Income
|
|
|
7,804
|
|
|
|
8,273
|
|
|
|
9,493
|
|
|
|
11,642
|
|
|
|
37,212
|
|
|
Net Income
|
|
|
4,034
|
|
|
|
4,223
|
|
|
|
6,924
|
|
|
|
7,419
|
|
|
|
22,600
|
|
NOTE O — Subsequent Events
In February 2006, the Company paid $1,498, including fees to
acquire the remaining 4.3% of minority interest in Chart Ferox,
a.s. The Company expects to own a 100% interest in Chart Ferox,
a.s. during 2006 upon customary Czech Republic regulatory
approval.
F-41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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Item 13.
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Other Expenses of Issuance and Distribution.
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The following table sets forth the costs and expenses payable in
connection with the distribution of the securities being
registered. All amounts are estimated except the Securities and
Exchange Commission registration fee.
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Securities and Exchange Commission Registration Fee
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$
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26,750
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NYSE Listing Fees
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$
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Blue Sky Fees and Expenses
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$
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Printing and Engraving Expenses
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$
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Legal Fees
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$
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Accounting Fees
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$
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Registrar and Transfer Agent Fees
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$
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Agent and Trustee Fees and Expenses
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$
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NASD Filing Fee
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$
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25,500
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Total
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$
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Item 14.
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Indemnification of Directors and Officers.
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Section 145 of the Delaware General Corporation Law (the
“DGCL”) grants each corporation organized thereunder
the power to indemnify any person who is or was a director,
officer, employee or agent of a corporation or enterprise,
against expenses, including attorneys’ fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in
the right of the corporation, by reason of being or having been
in any such capacity, if he acted in good faith in a manner
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action, or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 102(b)(7) of the DGCL enables a corporation in its
certificate of incorporation or an amendment thereto or
eliminate or limit the personal liability of a director to the
corporation or its stockholders of monetary damages for
violations of the directors’ fiduciary duty of care, except
(i) for any breach of the director’s duty of loyalty
to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from
which a director derived an improper personal benefit. The
Amended and Restated Certificate of Incorporation and Amended
and Restated By-Laws for Chart Industries, Inc. provide for such
limitations on liability.
We have entered into indemnification agreements with each of our
directors and officers providing for additional indemnification
protection beyond that provided by the Directors and Officers
Liability Insurance Policy. In the indemnification agreements,
we have agreed, subject to certain exceptions, to indemnify and
hold harmless the director or officer to the maximum extent then
authorized or permitted by the provisions of the Amended and
Restated Certificate of Incorporation, the DGCL, or by any
amendment(s) thereto.
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Item 15.
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Recent Sales of Unregistered Securities.
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We have issued unregistered securities in the transactions
described below. These securities were offered and sold in
reliance upon the exemptions provided for in
Section 1145(a) of the U.S. Bankruptcy Code, relating
to issuance of securities pursuant to our bankruptcy
reorganization plan, Section 4(2) of the Securities Act,
relating to sales not involving any public offering,
Rule 506 of the Securities Act relating to sales to
accredited investors and Rule 701 of the Securities Act
relating to a compensatory benefit plan. The
II-1
sales were made without the use of an underwriter and any
certificates representing the securities sold (other than
securities issued pursuant to the exemption provided by
Section 1145(a) of the U.S. Bankruptcy Code) contain a
restrictive legend that prohibits transfer without registration
or an applicable exemption.
Pursuant to the terms of our bankruptcy reorganization plan, on
September 15, 2003 we issued an aggregate of
5,325,331 shares of common stock to our then senior lenders
and our pre-bankruptcy stockholders and we issued warrants to
acquire an aggregate of 280,281 shares of our common stock
to our pre-bankruptcy stockholders. These shares of common stock
and warrants were issued in accordance with the terms of our
reorganization plan, which was confirmed by the U.S. Bankruptcy
Court for the District of Delaware by an order entered on
September 4, 2003, in reliance on the exemption from the
registration requirements of the Securities Act provided by
Section 1145(a) of the U.S. Bankruptcy Code. The common
Stock issued to our then senior lenders was issued in exchange
for claims under our pre-bankruptcy senior credit facilities,
and the common stock and warrants issued to our pre-bankruptcy
stockholders was issued in exchange for their cancelled
pre-bankruptcy stock.
The following table shows the shares of our common stock that we
have issued upon the exercise of warrants for the prices
indicated therein for the past three years.
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Share of Common
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Date of Exercise
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Warrants Exercised
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Exercise Price
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Stock Issued
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July 15, 2004
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2
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$32.97 per share
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2
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August 12, 2004
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26,390
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$32.97 per share; cashless
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5,323
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September 29, 2004
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53
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$32.97 per share
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53
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October 19, 2004
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5
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$32.97 per share
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5
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October 22, 2004
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19
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$32.97 per share
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19
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November 11, 2004
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1
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$32.97 per share
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1
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November 19, 2004
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53
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$32.97 per share
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53
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December 8, 2004
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6
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$32.97 per share
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6
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December 10, 2004
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24
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$32.97 per share
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24
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January 4, 2005
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9
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$32.97 per share
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9
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February 11, 2005
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1
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$32.97 per share
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1
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February 25, 2005
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1
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$32.97 per share
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1
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March 9, 2005
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819
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$32.97 per share
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819
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April 12, 2005
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987
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$32.97 per share
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987
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April 12, 2005
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107
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$32.97 per share
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107
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April 27, 2005
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1
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$32.97 per share
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1
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May 10, 2005
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77
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$32.97 per share
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77
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May 16, 2005
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53
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$32.97 per share
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53
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May 23, 2005
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9
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$32.97 per share
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9
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June 3, 2005
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124
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$32.97 per share
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124
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June 20, 2005
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2
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$32.97 per share
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2
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June 30, 2005
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2
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$32.97 per share
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2
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July 7, 2005
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14
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$32.97 per share
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14
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July 12, 2005
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20
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$32.97 per share
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20
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July 25, 2005
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6
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$32.97 per share
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6
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July 27, 2005
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1,157
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$32.97 per share
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1,157
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August 5, 2005
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7
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$32.97 per share
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7
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August 5, 1005
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1,043
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$32.97 per share
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1,043
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August 10, 2005
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2,000
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$32.97 per share
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2,000
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II-2
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Share of Common
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Date of Exercise
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Warrants Exercised
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Exercise Price
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Stock Issued
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August 11, 2005
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1,780
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$32.97 per share
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1,780
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August 11, 2005
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1,458
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$32.97 per share
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1,458
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August 12, 2005
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820
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$32.97 per share
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820
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August 15, 2005
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1
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$32.97 per share
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1
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August 15, 2005
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5,148
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$32.97 per share
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5,148
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August 18, 2005
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32
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$32.97 per share
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32
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August 24, 2005
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4,279
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$32.97 per share
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4,279
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August 31, 2005
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1
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$32.97 per share
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1
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September 6, 2005
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7,116
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$32.97 per share
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7,116
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September 13, 2005
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2
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$32.97 per share
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2
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September 14, 2005
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2,100
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$32.97 per share
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2,100
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September 16, 2005
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7
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$32.97 per share
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7
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September 19, 2005
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53
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$32.97 per share
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53
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September 21, 2005
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551
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$32.97 per share
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551
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September 28, 2005
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15,000
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$32.97 per share
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15,000
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September 29, 2005
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300
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$32.97 per share
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300
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October 3, 2005
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3,200
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$32.97 per share
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3,200
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October 4, 2005
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1,900
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$32.97 per share
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1,900
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October 5, 2005
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434
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$32.97 per share
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434
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October 6, 2005
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200
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$32.97 per share
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200
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October 7, 2005
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357
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$32.97 per share
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357
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October 12, 2005
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134
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$32.97 per share
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134
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TOTAL
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77,865
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$32.97 per share
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56,798
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With respect to each of the issuances above, the issuance of the
shares of our common stock upon the exercise of the warrants was
made in reliance on the exemption from the registration
requirements of the Securities Act of 1933, as amended, provided
by Section 1145(a) of the U.S. Bankruptcy Code, on the
basis that the common stock was offered and sold upon the
exercise of warrants that were offered and sold under a plan of
a debtor in exchange for an interest in the debtor. The warrants
were governed by a Warrant Agreement, dated September 15,
2003, between the Company and National City Bank, as warrant
agent. The Warrant Agreement terminated upon consummation of the
Acquisition.
On February 26, 2004, we issued an aggregate of
28,797 shares to Samuel F. Thomas, our Chief Executive
Officer, for an aggregate purchase price of $399,990 in reliance
on the exemption from the registration requirements of the
Securities Act provided by Section 4(2) and Rule 506
thereunder on the basis that the transaction did not involve a
public offering.
On October 17, 2005, in connection with the Acquisition, we
issued an aggregate of 1,718,896 shares of our common stock
to FR X Chart Holdings LLC pursuant to the terms of
the agreement and plan of merger, dated August 2, 2005, by
and among certain of our then-existing stockholders, First
Reserve Fund X, L.P. and CI Acquisition, a wholly-owned
subsidiary of First Reserve Fund X, L.P. in reliance on the
exemption from the registration requirements of the Securities
Act provided by Section 4(2) thereunder.
On November 23, 2005, we issued 218,408 options under the
2005 Stock Option Plan in reliance on the exemption from the
registration requirements of the Securities Act provided by
Rule 701 promulgated thereunder.
On March 29, 2006, we issued 10,000 options under the 2005
Stock Option Plan to one of our executive officers in reliance
upon the exemption under Section 701 of the Securities Act.
II-3
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Item 16.
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Exhibits and Financial Statement Schedules.
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(a) Exhibits
Reference is made to the information contained in the
Exhibit Index filed as part of this Registration Statement,
which information is incorporated herein by reference pursuant
to Rule 411 of the Securities and Exchange
Commission’s Rules and Regulations under the Securities Act.
(b) Financial Statement Schedules
All applicable financial statement schedule disclosure
requirements are included in the prospectus which forms a part
of this registration statement, which information is
incorporated herein by reference pursuant to Rule 411 of
the Securities and Exchange Commission’s Rules and
Regulations under the Securities Act.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that
in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
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(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
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(2) For purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreements, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused the registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Garfield Heights, State of Ohio, on
April 13, 2006.
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Name: Samuel F. Thomas
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Title: President and Chief
Executive Officer
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SIGNATURES AND POWERS OF ATTORNEY
Each person whose signature appears below authorizes Michael F.
Biehl and Matthew J. Klaben and each of them, as his
attorney-in
-fact and
agent, with full power of substitution and resubstitution, to
execute, in his name and on his behalf, in any and all
capacities, this Registration Statement on
Form
S-1
and any
and all amendments thereto (and any additional registration
statement related thereto permitted by Rule 462(b)
promulgated under the Securities Act of 1933 (and all further
amendments including post-effective amendments thereto))
necessary or advisable to enable the registrant to comply with
the Securities Act of 1933, and any rules, regulations and
requirements of the Securities and Exchange Commission, in
respect thereof, in connection with the registration of the
securities which are the subject of such registration statement,
which amendments may make such changes in such registration
statement as such
attorney-in
-fact may
deem appropriate, and with full power and authority to perform
and do any and all acts and things, whatsoever which any such
attorney-in
-fact or
substitute may deem necessary or advisable to be performed or
done in connection with any or all of the above-described
matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving
all acts of any such
attorney-in
-fact or
substitute.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities indicated on April 13, 2006.
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Signature
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Title
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/s/
Samuel F. Thomas
Samuel F. Thomas
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Chief Executive Officer, President and Director
(Principal Executive Officer)
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/s/
Michael F. Biehl
Michael F. Biehl
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Chief Financial Officer and Treasurer
(Principal Financial Officer)
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/s/
Ben A. Guill
Ben A. Guill
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Chairman of the Board of Directors
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/s/
Kenneth W. Moore
Kenneth W. Moore
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Director
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/s/
Timothy H. Day
Timothy H. Day
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Director
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/s/
James H. Hoppel,
Jr.
James H. Hoppel, Jr.
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Controller and Chief Accounting Officer
(Principal Accounting Officer)
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II-5
EXHIBIT INDEX
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Exhibit
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No.
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Description of Exhibit
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1
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.1*
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Form of Underwriting Agreement
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2
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.1
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Agreement and Plan of Merger, dated as of August 2, 2005 by
and among Chart Industries, Inc., certain of its stockholders,
First Reserve Fund X, L.P. and CI Acquisition, Inc.
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2
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.2
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Asset Purchase Agreement among GT Acquisition Company and
Greenville Tube, LLC, dated July 1, 2003
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3
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.1*
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Form of Amended and Restated Certificate of Incorporation
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3
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.2*
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Form of Amended and Restated By-Laws
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4
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.1*
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Form of certificate of Chart Industries, Inc. common stock
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4
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.2
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Indenture, dated as of October 17, 2005, between Chart
Industries, Inc. and The Bank of New York as trustee
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4
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.3
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Registration Rights Agreement, dated October 17, 2005 among
Chart Industries, Inc., the subsidiary guarantors party thereto
and Morgan Stanley & Co., as representative of the
initial purchasers
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4
|
.4
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Form of Senior Subordinated Note (included in Exhibit 4.2)
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5
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.1*
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Opinion of Simpson Thacher & Bartlett LLP
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10
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.1
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Credit Agreement, dated as of October 17, 2005 among FR X
Chart Holdings LLC, CI Acquisition, Inc., as Borrower, the
lenders party thereto, Citicorp North America, Inc., as
administrative agent, Morgan Stanley Senior Funding, Inc., as
syndication agent, Citigroup Global Markets Inc. and Morgan
Stanley Senior Funding, Inc., as joint lead arrangers and joint
book managers and Natexis Banques Populaires and Sovereign Bank,
as co-documentation agents
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10
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.2
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Guarantee and Collateral Agreement, dated as of October 17,
2005 among FR X Chart Holdings LLC, as guarantor and pledgor, CI
Acquisition, Inc., as borrower, each subsidiary loan party named
therein and Citicorp North America, Inc., as collateral agent
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10
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.3
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Employment Agreement, dated November 23, 2005 between Chart
Industries, Inc. and Samuel F. Thomas
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10
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.4
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Employment Agreement, dated December 1, 2005 between Chart
Industries, Inc. and Michael F. Biehl
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10
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.5
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Employment Agreement, dated December 1, 2005 between Chart
Industries, Inc. and Charles R. Lovett
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10
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.6
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Employment Agreement, dated March 29, 2006 between Chart
Industries, Inc. and Matthew J. Klaben
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10
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.7
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IAM Agreement 2004-2007, effective February 8, 2004, by and
between Chart Heat Exchangers, L.P. and Local Lodge 2191 of
District Lodge 66 of the International Association of
Machinists and Aerospace Workers, AFL-CIO
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10
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.8*
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Trust Agreement by and between Chart Industries, Inc. and
Security Trust Company relating to the Amended and Restated
Chart Industries, Inc. Voluntary Deferred Income Plan
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10
|
.9*
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Form of Management Stockholders Agreement
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10
|
.10*
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Form of Stockholders Agreement
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10
|
.11
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Chart Industries, Inc. 2004 Stock Option and Incentive Plan
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10
|
.12*
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Amendment No. 1 to the 2004 Stock Option and Incentive Plan
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10
|
.13
|
|
Form of Stock Option Agreement under the 2004 Stock Option and
Incentive Plan (for Samuel F. Thomas)
|
|
|
10
|
.14
|
|
Form of Stock Option Agreement under the 2004 Stock Option and
Incentive Plan (for those other than Samuel F. Thomas)
|
|
|
10
|
.15
|
|
Chart Industries, Inc. 2005 Stock Incentive Plan
|
|
|
10
|
.16
|
|
Amendment No. 1 to the Chart Industries, Inc. 2005 Stock
Incentive Plan
|
|
|
10
|
.17
|
|
Form of Stock Option Agreement under the 2005 Stock Incentive
Plan
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
No.
|
|
Description of Exhibit
|
|
|
|
|
|
|
10
|
.18*
|
|
2006 Chart Executive Incentive Compensation Plan
|
|
|
10
|
.19*
|
|
Annual Incentive Compensation Plan
|
|
|
10
|
.20
|
|
Form of Indemnification Agreement
|
|
|
10
|
.21*
|
|
Amendment No. 1 to the Credit Agreement
|
|
|
21
|
.1
|
|
List of Subsidiaries
|
|
|
23
|
.1*
|
|
Consent of Simpson Thacher & Bartlett LLP (included as
part of its opinion filed as Exhibit 5.1 hereto)
|
|
|
23
|
.2
|
|
Consent of Ernst & Young LLP
|
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|
24
|
.1
|
|
Powers of Attorney (included on signature page of this
Registration Statement)
|
|
|
|
|
*
|
To be filed by amendment.
|
Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
dated as of
August 2, 2005
by and among
CHART INDUSTRIES, INC.,
CERTAIN OF ITS STOCKHOLDERS,
FIRST RESERVE FUND X, L.P.
And
CI ACQUISITION, INC.
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE TRANSACTIONS
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|
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SECTION 1.01 The Purchase and Sale
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1
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SECTION 1.02 The Stock Purchase Closing
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2
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|
SECTION 1.03 Representations and Warranties of Principal Stockholders
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2
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SECTION 1.04 Covenants of Principal Stockholders
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3
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|
ARTICLE II
THE MERGER
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SECTION 2.01 The Merger
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3
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SECTION 2.02 Conversion of Shares
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5
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SECTION 2.03 Exchange of Shares
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5
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SECTION 2.04 Dissenting Shares
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6
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SECTION 2.05 Company Stock Options
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|
7
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SECTION 2.06 Warrants
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8
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ARTICLE III
THE SURVIVING CORPORATION
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SECTION 3.01 Certificate of Incorporation
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10
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SECTION 3.02 Bylaws
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10
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SECTION 3.03 Directors and Officers
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10
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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SECTION 4.01 Organization and Qualification; Subsidiaries
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10
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SECTION 4.02 Certificate of Incorporation and Bylaws
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11
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i
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SECTION 4.03 Capitalization
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11
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SECTION 4.04 Authority Relative to this Agreement
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12
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SECTION 4.05 No Conflict; Required Filings and Consents
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13
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SECTION 4.06 Compliance
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13
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SECTION 4.07 SEC Filings; Financial Statements
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14
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SECTION 4.08 Brokers
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15
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SECTION 4.09 Events Subsequent to Most Recent Fiscal Quarter End
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15
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SECTION 4.10 Tax Matters
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15
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SECTION 4.11 Opinion of Financial Advisor
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17
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SECTION 4.12 Litigation
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17
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SECTION 4.13 Anti-takeover Statutes
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17
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SECTION 4.14 Real Property
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17
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SECTION 4.15 Tangible Assets
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19
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SECTION 4.16 Material Contracts
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19
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SECTION 4.17 Employee Matters
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21
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SECTION 4.18 Environmental Matters
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25
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SECTION 4.19 Intellectual Property Matters
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27
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
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SECTION 5.01 Organization and Qualification; Subsidiaries
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28
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SECTION 5.02 Certificate of Incorporation and Bylaws
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28
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|
SECTION 5.03 Authority Relative to this Agreement
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29
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SECTION 5.04 No Conflict; Required Filings and Consents
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29
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SECTION 5.05 Compliance
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30
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SECTION 5.06 Securities Act
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30
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SECTION 5.07 Financing
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30
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SECTION 5.08 Brokers
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31
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SECTION 5.09 Vote Required
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31
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SECTION 5.10 Ownership of Shares
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31
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ARTICLE VI
COVENANTS OF THE COMPANY
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SECTION 6.01 Conduct of the Company
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31
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SECTION 6.02 Access to Information
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34
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SECTION 6.03 No Solicitation
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35
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SECTION 6.04 Notices of Certain Events
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36
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SECTION 6.05 Takeover Statutes
|
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|
36
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|
ii
|
|
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SECTION 6.06 Section 16 Matters
|
|
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36
|
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SECTION 6.07 Financing
|
|
|
36
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|
|
SECTION 6.08 Houston Facility Permits
|
|
|
37
|
|
ARTICLE VII
COVENANTS OF BUYER
|
|
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SECTION 7.01 Confidentiality
|
|
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38
|
|
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SECTION 7.02 Obligations of Merger Subsidiary and the Surviving Corporation
|
|
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38
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|
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SECTION 7.03 Director and Officer Liability
|
|
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38
|
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SECTION 7.04 Employee Benefits
|
|
|
39
|
|
|
SECTION 7.05 Notices of Certain Events
|
|
|
40
|
|
ARTICLE VIII
COVENANTS OF BUYER AND THE COMPANY
|
|
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|
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|
|
SECTION 8.01 Reasonable Best Efforts
|
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41
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SECTION 8.02 Certain Filings
|
|
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41
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|
|
SECTION 8.03 Public Announcements
|
|
|
41
|
|
ARTICLE IX
CONDITIONS TO THE TRANSACTION
|
|
|
|
|
|
|
SECTION 9.01 Conditions to the Obligations of Each Party to Consummate the Stock Purchase
|
|
|
41
|
|
|
SECTION 9.02 Conditions to the Obligations of Each Party to Consummate the Merger
|
|
|
43
|
|
ARTICLE X
TERMINATION; EXPENSES
|
|
|
|
|
|
|
SECTION 10.01 Termination
|
|
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46
|
|
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SECTION 10.02 Effect of Termination
|
|
|
47
|
|
|
SECTION 10.03 Fees, Expenses and Other Payments
|
|
|
47
|
|
iii
ARTICLE XI
MISCELLANEOUS
|
|
|
|
|
|
|
SECTION 11.01 Notices
|
|
|
48
|
|
|
SECTION 11.02 Survival of Representations, Warranties and Covenants
|
|
|
50
|
|
|
SECTION 11.03 Acknowledgment by Buyer and Merger Subsidiary
|
|
|
50
|
|
|
SECTION 11.04 Amendments; No Waivers
|
|
|
51
|
|
|
SECTION 11.05 Successors and Assigns
|
|
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51
|
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SECTION 11.06 Governing Law
|
|
|
52
|
|
|
SECTION 11.07 Counterparts; Effectiveness
|
|
|
53
|
|
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SECTION 11.08 Headings
|
|
|
53
|
|
|
SECTION 11.09 No Third Party Beneficiaries
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|
|
53
|
|
|
SECTION 11.10 Entire Agreement
|
|
|
53
|
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SECTION 11.11 Severability
|
|
|
53
|
|
|
SECTION 11.12 Specific Enforcement
|
|
|
53
|
|
iv
GLOSSARY OF DEFINED TERMS
|
|
|
|
|
|
|
|
|
Location of
|
|
Defined Term
|
|
Definition
|
|
Acquisition Proposal
|
|
SECTION 6.03(a)
|
|
Actions
|
|
SECTION 4.12
|
|
Aggregate Original Option Spread
|
|
SECTION 2.05(b)
|
|
Agreement
|
|
Preamble
|
|
Assumed CTE Amount
|
|
SECTION 4.11
|
|
Base Amount
|
|
SECTION 10.03(b)
|
|
Blue Sky Laws
|
|
SECTION 4.05(b)
|
|
Board
|
|
SECTION 6.03(b)
|
|
Buyer
|
|
Preamble
|
|
Buyer Disclosure Schedule
|
|
Article V
|
|
Buyer Material Adverse Effect
|
|
SECTION 5.01
|
|
Certificate of Merger
|
|
SECTION 2.01(b)
|
|
CERCLA
|
|
SECTION 4.18(h)
|
|
Claim
|
|
SECTION 7.03(b)
|
|
Code
|
|
SECTION 4.10
|
|
Commitment Letter
|
|
SECTION 5.07
|
|
Committee
|
|
SECTION 2.05(b)
|
|
Company
|
|
Preamble
|
|
Company Disclosure Schedule
|
|
Article IV
|
|
Company Intellectual Property
|
|
SECTION 4.19(a)
|
|
Company Material Adverse Effect
|
|
SECTION 4.01(a)
|
|
Company SEC Reports
|
|
SECTION 4.07(a)
|
|
Company Stock Options
|
|
SECTION 2.05(a)
|
|
Company Subsidiary
|
|
SECTION 4.01(b)
|
|
Company Transaction Expenses
|
|
SECTION 1.01
|
|
Confidentiality Agreement
|
|
SECTION 6.02
|
|
Contract
|
|
SECTION 4.16(a)
|
|
Determination Date
|
|
SECTION 1.01
|
|
DGCL
|
|
SECTION 2.01(a)
|
|
Discount Option
|
|
SECTION 2.05(b)
|
|
Dissenting Shares
|
|
SECTION 2.04
|
|
Effective Time
|
|
SECTION 2.01(b)
|
|
Eligible Optionee
|
|
SECTION 2.05(b)
|
|
Employee
|
|
SECTION 4.17(a)
|
|
Encumbrances
|
|
SECTION 4.03
|
|
Environment
|
|
SECTION 4.18(h)
|
|
Environmental Laws
|
|
SECTION 4.18(h)
|
|
Environmental Permits
|
|
SECTION 4.18(h)
|
|
ERISA
|
|
SECTION 4.17(a)
|
|
ERISA Plans
|
|
SECTION 4.17(a)
|
|
Exchange Act
|
|
SECTION 4.05(b)
|
v
|
|
|
|
|
|
|
|
|
Location of
|
|
Defined Term
|
|
Definition
|
|
Exchange Agent
|
|
SECTION 2.03(a)
|
|
Expenses
|
|
SECTION 10.03(a)
|
|
Fairness Opinion
|
|
SECTION 4.11
|
|
Financing
|
|
SECTION 5.07
|
|
Foreign Plan
|
|
SECTION 4.17(a)
|
|
GAAP
|
|
SECTION 4.07(b)
|
|
Governmental Entity
|
|
SECTION 4.05(b)
|
|
Hazardous Material
|
|
SECTION 4.18(h)
|
|
HSR Act
|
|
SECTION 4.05(b)
|
|
Indemnified Parties
|
|
SECTION 7.03(b)
|
|
Infringe
|
|
SECTION 4.19(b)
|
|
Intellectual Property
|
|
SECTION 4.19(a)
|
|
IP Licenses
|
|
SECTION 4.19(a)
|
|
Labor Laws
|
|
SECTION 4.17(e)
|
|
Leased Real Property
|
|
SECTION 4.14(b)
|
|
Leases
|
|
SECTION 4.14(b)
|
|
Material Contract
|
|
SECTION 4.16(b)
|
|
Material Subsidiary
|
|
SECTION 4.01(b)
|
|
Merger
|
|
SECTION 2.01(a)
|
|
Merger Closing
|
|
SECTION 2.01(d)
|
|
Merger Closing Date
|
|
SECTION 2.01(d)
|
|
Merger Consideration
|
|
SECTION 2.02(c)
|
|
Merger Subsidiary
|
|
Preamble
|
|
Owned Real Property
|
|
SECTION 4.14(a)
|
|
PBGC
|
|
SECTION 4.17(c)
|
|
Permits
|
|
SECTION 4.06(b)
|
|
Permitted Encumbrances
|
|
SECTION 4.14(a)
|
|
Per Share Purchase Price
|
|
SECTION 1.01
|
|
Plan
|
|
SECTION 4.17(a)
|
|
Preferred Stock
|
|
SECTION 4.03
|
|
Principal Stockholders
|
|
Preamble
|
|
Principal Stockholder Shares
|
|
Recitals
|
|
Real Property
|
|
SECTION 4.14(b)
|
|
Release
|
|
SECTION 4.18(h)
|
|
Replacement Option
|
|
SECTION 2.05(b)
|
|
Required Holder(s)
|
|
SECTION 11.04(a)
|
|
Rollover Election
|
|
SECTION 2.05(b)
|
|
Rollover Option
|
|
SECTION 2.05(b)
|
|
Sarbanes-Oxley Act
|
|
SECTION 4.07(d)
|
|
SEC
|
|
SECTION 4.01(b)
|
|
Securities Act
|
|
SECTION 4.05(b)
|
|
Shares
|
|
Recitals
|
|
Stock Purchase
|
|
SECTION 1.01
|
|
Stock Purchase Closing
|
|
SECTION 1.02(a)
|
|
Stock Purchase Closing Date
|
|
SECTION 1.02(a)
|
|
Superior Proposal
|
|
SECTION 6.03(b)
|
vi
|
|
|
|
|
|
|
|
|
Location of
|
|
Defined Term
|
|
Definition
|
|
Surviving Corporation
|
|
SECTION 2.01(a)
|
|
Tax
|
|
SECTION 4.10
|
|
Tax Authority
|
|
SECTION 4.10
|
|
Tax Returns
|
|
SECTION 4.10
|
|
Termination Date
|
|
SECTION 10.01(c)
|
|
Top-Up Shares
|
|
SECTION 2.01(e)
|
|
Transaction
|
|
SECTION 2.01(a)
|
|
UBS
|
|
SECTION 4.08
|
|
WARN
|
|
SECTION 4.17(e)
|
|
Warrant Agreement
|
|
SECTION 2.06(a)
|
|
Warrant Consideration
|
|
SECTION 2.06(b)
|
|
Warrants
|
|
SECTION 2.06(a)
|
vii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of August 2, 2005 (this “
Agreement
”), is
made by and among Chart Industries, Inc., a Delaware corporation (the “
Company
”), the
shareholders of the Company set forth on the
Principal Stockholders Schedule
attached
hereto (each a “
Principal Stockholder
” and, collectively, the “
Principal
Stockholders
”), First Reserve Fund X, L.P., a Delaware limited partnership (“
Buyer
”),
and CI Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Buyer
(“
Merger Subsidiary
”).
WHEREAS, the Board of Directors of each of Buyer, Merger Subsidiary and the Company has
approved, and deems it advisable and in the best interests of its respective stockholders to
consummate, the acquisition of the Company by Buyer upon the terms and subject to the conditions
set forth herein; and
WHEREAS, as of the date hereof, each Principal Stockholder is the record and/or beneficial
owner of the number of shares of common stock, par value $0.01 per share, of the Company
(“
Shares
”) set forth opposite such Principal Stockholder’s name on the
Principal
Stockholders Schedule
attached hereto (together with all other Shares acquired by such
Principal Stockholder after the date hereof, the “
Principal Stockholder Shares
” of such
Principal Stockholder).
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties,
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE TRANSACTIONS
SECTION 1.01
The Purchase and Sale
. On and subject to the terms and conditions set
forth in this Agreement, at the Stock Purchase Closing, each Principal Stockholder shall sell and
transfer to Merger Subsidiary, and Merger Subsidiary shall, and Buyer shall take all actions
necessary or advisable to enable and cause Merger Subsidiary to, purchase from each Principal
Stockholder, all of the Principal Stockholder Shares then held by such Principal Stockholder (the
“
Stock Purchase
”), for a purchase price per Share (the “
Per Share Purchase Price
”)
equal to (a) $65.74, minus (b) the result (rounded to the nearest cent) of (x) the aggregate amount
of Company Transaction Expenses, divided by (y) the sum of the number of Shares issued and
outstanding immediately prior to the earlier of the Stock Purchase Closing and the Effective Time
plus the number of Shares issuable upon the exercise of Company Stock Options and Warrants
outstanding immediately prior to the earlier of the Stock Purchase Closing and the Effective Time.
For purposes hereof, “
Company Transaction Expenses
” means all out-of-pocket costs and
expenses, including, without limitation, fees and disbursements of counsel, financial advisors
(including any fees payable to UBS) and accountants, incurred by the Company on or prior to the
Merger Closing Date in respect of the transactions contemplated hereby (excluding (i) all costs and
expenses incurred by the Company in connection with the Financing and (ii) all costs and expenses
incurred by the Company in connection with the preparation of any information and/or materials to
be distributed after the Effective Time to the former holders of Shares in accordance with Section
253 of the DGCL), as estimated in good faith by the chief financial officer of the Company on the
third day immediately preceding the earlier of the Stock Purchase Closing Date and the Merger
Closing Date (the “
Determination Date
”) based on the latest information then available,
which estimate of Company Transaction Expenses (together with a copy of the information used to
formulate such estimate) shall be provided to Buyer on the Determination Date.
SECTION 1.02
The Stock Purchase Closing
.
(a)
Stock Purchase Closing
. The closing of the Stock Purchase (the “
Stock
Purchase Closing
”) shall take place at the offices of Kirkland & Ellis LLP, 200 E. Randolph
Drive, Chicago, Illinois, commencing at 10:00 a.m. on the second business day immediately following
the satisfaction or waiver of all of the conditions set forth in SECTION 9.01 hereof (other than
those that by their nature are to be satisfied at the Stock Purchase Closing, but subject to the
satisfaction or waiver thereof), or at such other place and/or on such other date as the Company
and Buyer agree to in writing. The date on which the Stock Purchase Closing is consummated is
referred to herein as the “
Stock Purchase Closing Date
.”
(b)
Stock Purchase Closing Deliveries
. At the Stock Purchase Closing, (i) each
Principal Stockholder shall deliver to Merger Subsidiary one or more certificate(s) representing
the Principal Stockholder Shares to be sold by such Principal Stockholder pursuant to SECTION 1.01
hereof, duly endorsed for transfer or accompanied by duly executed stock powers, and (ii) Merger
Subsidiary shall, and Buyer shall take all actions necessary or advisable to enable and cause
Merger Subsidiary to, deliver to each Principal Stockholder, by wire transfer of immediately
available funds to an account designated in writing by such Principal Stockholder, an aggregate
amount in cash equal to the product of (x) the Per Share Purchase Price, multiplied by (y) the
number of Principal Stockholder Shares to be sold by such Principal Stockholder pursuant to SECTION
1.01 hereof.
SECTION 1.03
Representations and Warranties of Principal Stockholders
. Each Principal
Stockholder, acting solely in its capacity as a holder of Shares and not as a director or officer
of the Company or in any other capacity, hereby, severally and not jointly with any other Principal
Stockholder, represents and warrants as of the date hereof to Buyer and Merger Subsidiary as
follows:
(a)
Title to the Shares
. Such Principal Stockholder owns the number of Shares set
forth opposite such Principal Stockholder’s name on the
Principal Stockholders Schedule
attached hereto, free and clear of all security interests, liens, claims and pledges. Such
Principal Stockholder has exclusive power to vote all of such Shares on all matters submitted
to holders of Shares.
2
(b)
Authority Relative to this Agreement
. Such Principal Stockholder has all
necessary power and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by such Principal Stockholder and the consummation by such Principal Stockholder of
the transactions contemplated hereby have been duly and validly authorized by all necessary action
on the part of such Principal Stockholder. This Agreement has been duly and validly executed and
delivered by such Principal Stockholder and, assuming the due authorization, execution and delivery
by Buyer and Merger Subsidiary, constitutes a legal, valid and binding obligation of such Principal
Stockholder, enforceable against such Principal Stockholder in accordance with its terms (i) except
as such enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors’ rights generally and (ii) subject to general
principles of equity.
(c)
No Conflict
. The execution and delivery of this Agreement by such Principal
Stockholder does not, and the performance of this Agreement by such Principal Stockholder will not,
(i) require any consent, approval, authorization or permit of, or filing with or notification to,
any governmental or regulatory authority (other than the SEC), domestic or foreign, by such
Principal Stockholder or (ii) conflict with or violate any law, rule, regulation, order, judgment
or decree applicable to such Principal Stockholder.
SECTION 1.04
Covenants of Principal Stockholders
.
(a) Each Principal Stockholder, acting solely in its capacity as a holder of Shares and not as
a director or officer of the Company or in any other capacity, hereby, severally and not jointly
with any other Principal Stockholder, covenants and agrees during the time this Agreement is in
effect that, except as otherwise contemplated herein, such Principal Stockholder shall not, and
shall not offer or agree to, sell, transfer, tender, assign, hypothecate or otherwise dispose of,
or create any security interest, lien, claim or pledge with respect to, all or any portion of its
Principal Stockholder Shares, unless in each case (i) the transferee agrees in writing to be bound
by the terms and conditions of this Agreement to the same extent as the transferor and (ii) the
transferee is an affiliate of such Principal Stockholder, is an “accredited investor” (as defined
in the Securities Act and the rules and regulations promulgated thereunder) or acquires all of the
Principal Stockholder Shares of such Principal Stockholder.
(b) Subject to the terms and conditions of this Agreement, each Principal Stockholder will use
commercially reasonable efforts to promptly take, or cause to be taken, all action and to promptly
do, or cause to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
ARTICLE II
THE MERGER
SECTION 2.01
The Merger
.
3
(a) At the Effective Time, Merger Subsidiary shall be merged (the “
Merger
”) with and
into the Company in accordance with the General Corporation Law of the State of Delaware (the
“
DGCL
”), whereupon the separate existence of Merger Subsidiary shall cease, and the Company
shall be the surviving corporation (the “
Surviving Corporation
”). The Stock Purchase and
the Merger are sometimes hereinafter referred to as the “
Transaction
.”
(b) Unless another date is agreed to in writing by the Company and Buyer, as soon as
practicable, but in no event later than five business days, after satisfaction and/or, to the
extent permitted hereunder, waiver of all conditions set forth in SECTION 9.02 hereof (other than
those that by their nature are to be satisfied at the Merger Closing, but subject to the
satisfaction or waiver thereof), the Company and Merger Subsidiary will, and Buyer shall cause the
Company and Merger Subsidiary to, file (i) a certificate of merger or (ii) in the event Merger
Subsidiary shall own 90% or more of the outstanding Shares, a certificate of ownership and merger
(in either such case, the “
Certificate of Merger
”), with the Secretary of State of the
State of Delaware and make all other filings or recordings required by the DGCL in connection with
the Merger. The Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware (the “
Effective Time
”).
(c) From and after the Effective Time, the Surviving Corporation shall succeed to all the
assets, rights, privileges, powers and franchises and be subject to all of the liabilities,
restrictions, disabilities and duties of the Company and Merger Subsidiary, all as provided under
the DGCL.
(d) The closing of the Merger (the “
Merger Closing
”) shall take place on the date on
which the Effective Time occurs (the “
Merger Closing Date
”), at the offices of Kirkland &
Ellis LLP, 200 East Randolph Drive, Chicago, IL, 60601, unless another place is agreed to in
writing by the Company and Buyer. At the Merger Closing, the Company shall, and Buyer shall take
all actions necessary or advisable to enable and cause the Company to, pay all unpaid out-of-pocket
costs and expenses, including, without limitation, fees and disbursements of counsel, financial
advisors (including any fees payable to UBS) and accountants, incurred on or prior to the Merger
Closing Date by the Company.
(e) Notwithstanding any implication herein to the contrary, if, on the Merger Closing Date,
the Stock Purchase Closing has previously occurred but the Principal Stockholder Shares owned by
Merger Subsidiary represent less than 90% of the Shares then outstanding, then, immediately prior
to the Effective Time, the Company shall issue to Merger Subsidiary, and Merger Subsidiary shall,
and Buyer shall take all actions necessary or advisable to enable and cause Merger Subsidiary to,
purchase from the Company, the lowest number of Shares (the “
Top-Up Shares
”) that, when added to the number of Shares then owned by Merger
Subsidiary, shall represent one Share more than 90% of the Shares then outstanding (after giving
effect to the issuance of such Top-Up Shares), for a purchase price per Top-Up Share equal to the
Per Share Purchase Price. Concurrently with the issuance and purchase of the Top-Up Shares, (i)
the Company shall deliver to Merger Subsidiary a certificate representing the Top-Up Shares, and
(ii) Merger Subsidiary shall, and Buyer shall take all actions necessary or advisable to enable and
cause Merger Subsidiary to, deliver to the Company, by wire transfer of immediately available funds
to an account designated in writing by the Company, an aggregate amount in cash equal to
4
the
product of (x) the Per Share Purchase Price, multiplied by (y) the number of Top-Up Shares to be
purchased by Merger Subsidiary pursuant to this SECTION 2.01(e).
SECTION 2.02
Conversion of Shares
. At the Effective Time and by virtue of the Merger
and without any action on the part of the holders of Shares or shares of the capital stock of
Merger Subsidiary:
(a) Each share of capital stock of the Company held by the Company as treasury stock or owned
by Buyer, Merger Subsidiary or any subsidiary of either of them immediately prior to the Effective
Time, including without limitation all Shares acquired in the Stock Purchase and all Top-Up Shares
acquired pursuant to SECTION 2.01(e), shall be canceled, and no payment shall be made with respect
thereto;
(b) Each share of capital stock of Merger Subsidiary outstanding immediately prior to the
Effective Time shall be converted into and become one share of capital stock of the Surviving
Corporation with the same rights and privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving Corporation; and
(c) Each Share outstanding immediately prior to the Effective Time shall, except as otherwise
provided in clause (a) above or as provided in SECTION 2.04 with respect to Shares as to which
appraisal rights have been exercised, be converted into the right to receive the Per Share Purchase
Price or, if greater, the price per Share paid in the Stock Purchase, in cash without interest (the
“
Merger Consideration
”). As of the Effective Time, all such Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive upon the surrender of such certificates, the Merger
Consideration.
SECTION 2.03
Exchange of Shares.
(a) Prior to the Effective Time, Buyer shall appoint an agent (the “
Exchange Agent
”)
reasonably acceptable to the Company for the purposes of exchanging certificates representing
Shares for the Merger Consideration in accordance with this SECTION 2.03 and exchanging
certificates representing certain Warrants for Warrant Consideration in accordance with SECTION
2.06. Buyer will, at the Effective Time, deposit with the Exchange Agent, the full amount of the
Merger Consideration to be paid in respect of Shares. For purposes of determining the Merger
Consideration to be so deposited, Buyer shall assume that no stockholder of the Company will
perfect his right to appraisal of his, her or its Shares. Promptly after the
Effective Time, Buyer will send, or will cause the Exchange Agent to send, to each holder of
Shares at the Effective Time a letter of transmittal and related instructions for use in such
exchange.
(b) Each holder of Shares that have been converted into a right to receive the Merger
Consideration, upon surrender to the Exchange Agent of a certificate or certificates representing
such Shares (or evidence of loss in lieu thereof), together with a properly completed letter of
transmittal covering such Shares, will be entitled to receive the Merger Consideration payable in
respect of such Shares and the certificate or certificates so surrendered shall forthwith
5
be
cancelled;
provided
that in no event will a holder of a certificate or certificates be entitled to
receive the Merger Consideration if the Merger Consideration was already paid with respect to the
Shares underlying such certificate or certificates in connection with an affidavit of loss. Until
so surrendered, each such certificate shall, after the Effective Time, represent for all purposes
only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration payable in respect of any Share is to be paid
to a person other than the registered holder of the Shares represented by the certificate or
certificates surrendered, it shall be a condition to such payment that the certificate or
certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer
and that the person requesting such payment shall pay to the Exchange Agent any transfer or other
taxes required as a result of such payment to a person other than the registered holder of such
Shares or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no further registration of transfers of Shares
outstanding immediately prior to the Effective Time.
(e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to
SECTION 2.03(a) that remains unclaimed by the holders of Shares entitled thereto six months after
the Effective Time shall be returned to Buyer, upon demand, and any stockholder of the Company who
has not exchanged his Shares for the Merger Consideration in accordance with this SECTION 2.03
prior to that time shall thereafter look only to Buyer for payment of the Merger Consideration in
respect of his Shares. None of Buyer, Merger Subsidiary or the Company shall be liable to any
holder of the Shares for any Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to
SECTION 2.03(a) to pay for Shares for which appraisal rights shall have been perfected shall be
returned to Buyer, upon demand.
(g) In the event that any certificate representing Shares shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and, if required by Buyer, the posting by such person of a bond in
such reasonable amount as Buyer may direct as indemnity against any claim that may be made against
it with respect to such certificate (provided that, if such person is a financial institution or
other institutional investor, its own agreement shall be satisfactory), the Exchange
Agent will issue in exchange for such lost, stolen or destroyed certificate the Merger
Consideration with respect to such certificate, to which such person is entitled pursuant hereto.
SECTION 2.04
Dissenting Shares
. Notwithstanding SECTION 2.02, Shares outstanding
immediately prior to the Effective Time and held by a holder who has not voted in favor of the
Merger or consented thereto in writing, if any such vote or consent is required, and who has
demanded appraisal for such Shares in accordance with the DGCL (“
Dissenting Shares
”) shall
not be converted into a right to receive the Merger Consideration, unless such holder fails to
perfect or withdraws or otherwise loses his right to appraisal. At the
6
Effective Time, all
Dissenting Shares shall no longer be outstanding and shall automatically be cancelled and shall
cease to exist, and each holder of Dissenting Shares shall cease to have any rights with respect
thereto, except the right to receive, subject to and net of any applicable withholding of Taxes,
payment of the appraised value of such Dissenting Shares held by them in accordance with the
provisions of Section 262 of the DGCL. If, after the Effective Time, such holder fails to perfect
or withdraws or loses his right to appraisal, such Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Merger Consideration payable in
respect of such Shares pursuant to SECTION 2.02, without any interest thereon. The Company shall
give Buyer prompt notice of any demands received by the Company for appraisal of Shares, and Buyer
shall have the right to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Buyer, make any payment
with respect to any demands for appraisal or offer to settle or settle any such demands.
SECTION 2.05
Company Stock Options
.
(a) At the Effective Time, each stock option, stock equivalent right or other right to acquire
Shares granted under the Chart Industries, Inc. 2004 Stock Option and Incentive Plan or the Chart
Industries, Inc. 2004 Stock Option Plan for Outside Directors (each a “
Company Stock
Option
”) that is outstanding immediately prior to the Effective Time (regardless of whether
then vested or exercisable, but excluding any Company Stock Options, or portions thereof, for which
a Rollover Election has been delivered in accordance with SECTION 2.05(b)) shall be canceled in the
Merger. Thereafter, no holder of any such Company Stock Option shall have any rights in respect
thereof, other than the right to receive therefor an amount in cash from the Company at the Merger
Closing, and the Company shall, and Buyer shall take all actions necessary or advisable to enable
and cause the Company to, pay an amount in cash at the Merger Closing to such holder in respect of
such Company Stock Option, equal to the product of (i) the number of Shares issuable upon the
exercise of such Company Stock Option as of immediately prior to the Effective Time (assuming, for
this purpose, that such Company Stock Option is fully vested and exercised for cash) and (ii) the
excess, if any, of the Merger Consideration over the exercise price per Share under such Company
Stock Option, less any required withholding taxes. Prior to the Effective Time, the Company shall
take all action necessary to effect the foregoing.
(b) Notwithstanding anything in SECTION 2.05(a) to the contrary, the Compensation Committee of
the Board (the “
Committee
”) may elect, by delivering written notice to Buyer and one or
more employees of the Company or any Company Subsidiary holding any Company Stock Option (each an
“
Eligible Optionee
”) at least 10 days prior to the Merger Closing (a “
Rollover
Election
”), to have all or any portion of the Company Stock Options held by such Eligible
Optionee(s) and which remain outstanding as of the Effective Time adjusted in accordance with the
terms of the Plans and SECTION 2.05(c) below to represent stock options to acquire shares of common
stock of the Surviving Corporation (each a “
Rollover Option
”), on the same terms and
conditions applicable to such Company Stock Option(s) (or portions thereof) immediately prior to
the Effective Time;
provided
that: (i) unless otherwise agreed to in writing by such
Eligible Optionee prior to the Effective Time, each such Rollover Option shall vest in the manner
that was due to occur under the terms of such corresponding Company Stock Option(s) before or at
the Effective Time; and (ii) to the extent the Committee elects to have any
7
Company Stock Option
that was granted with an exercise price per share less than the per share fair market value of the
Shares underlying such Company Stock Option on the grant date thereof (each a “
Discount
Option
”), and which remains outstanding as of immediately prior to the Effective Time, adjusted
into a Rollover Option in accordance with the terms of the Plans and SECTION 2.05(c) below, then
immediately prior to the Effective Time, such Discount Option shall be modified in accordance with
Internal Revenue Service Notice 2005-1, Q&A 18(d) (any Discount Option so modified is referred to
herein as a “
Replacement Option
”) by increasing the aggregate exercise price of such
Discount Option by an amount equal to the excess of (A) the aggregate fair market value of the
Shares underlying such Discount Option on the grant date thereof over (B) the aggregate exercise
price of such Discount Options on the grant date thereof (such excess, the “
Aggregate Original
Option Spread
”). Prior to the Effective Time, the Company shall take all action necessary to
effect the foregoing.
(c) The adjustment of any Company Stock Option(s) (or portions thereof) (including any
Replacement Option(s)) into a Rollover Option shall be effected in a manner such that: (i) the
excess of the aggregate fair market value of the shares of common stock of the Surviving
Corporation subject to such Rollover Option immediately following such adjustment over the
aggregate exercise price of such Rollover Option immediately following such adjustment shall be
equal to the aggregate amount of cash to which the holder of such corresponding Company Stock
Option(s) (or portions thereof) would have been entitled pursuant to SECTION 2.05(a) (before any
reduction for withholding taxes) in respect of such Company Stock Option(s) (or portions thereof)
had such Company Stock Option(s) (or portions thereof) been cancelled in accordance with such
section (for the avoidance of doubt, with respect to any Replacement Option(s), the “aggregate
amount of cash to which the holder of such corresponding Company Stock Option(s) (or portions
thereof) would have been entitled pursuant to SECTION 2.05(a)” shall be determined after giving
effect to the increase in the exercise price of such Replacement Option(s) pursuant to the proviso
in SECTION 2.05(b) above); and (ii) all of the other requirements of Internal Revenue Service
Notice 2005-1, and Treasury Regulation Section 1.424-1, as modified by Internal Revenue Service
Notice 2005-1, Q&A 4(d), are intended to be satisfied.
(d) Each Eligible Optionee who holds a Discount Option that the Committee has elected to
adjust into a Rollover Option in accordance with SECTION 2.05(b) shall be entitled to receive an
amount in cash from the Company at the Merger Closing, and the
Company shall, and Buyer shall take all actions necessary or advisable to enable and cause the
Company to, pay an amount in cash at the Merger Closing to such Eligible Optionee, equal to the
Aggregate Original Option Spread for such Discount Option, less any required withholding taxes.
Prior to the Effective Time, the Company shall take all action necessary to effect the foregoing.
SECTION 2.06
Warrants
.
(a) At the Effective Time, each warrant issued pursuant to that certain Warrant Agreement (the
“
Warrant Agreement
”), dated September 15, 2003, between the Company and National City Bank,
as Warrant Agent (the “
Warrants
”), that is outstanding immediately prior to the Effective
Time shall be canceled in the Merger. Thereafter, no holder of any such Warrant shall have any
rights in respect thereof, other than the right to receive
8
therefor in accordance with this SECTION
2.06 an amount in cash equal to the product of (i) the number of Shares issuable upon the exercise
of such Warrant as of immediately prior to the Effective Time (assuming, for this purpose, that
such Warrant is exercised for cash) and (ii) the excess, if any, of the Merger Consideration over
the exercise price per Share under such Warrant (the “
Warrant Consideration
”). Prior to
the Effective Time, the Company shall take all actions necessary to effect the foregoing.
(b) Buyer will, at the Effective Time, deposit with the Exchange Agent, the full amount of the
Warrant Consideration to be paid in respect of the Warrants. Promptly after the Effective Time,
Buyer will send, or will cause the Exchange Agent to send, to each holder of Warrants at the
Effective Time a letter of transmittal and related instructions for the exchange of certificates
representing Warrants for the Warrant Consideration payable in respect thereof. Each holder of
Warrants, upon surrender to the Exchange Agent of a certificate or certificates representing such
Warrants (or evidence of loss in lieu thereof), together with a properly completed letter of
transmittal covering such Warrants, will be entitled to receive the Warrant Consideration payable
in respect of such Warrants, and the certificate or certificates so surrendered shall forthwith be
cancelled;
provided
that in no event will a holder of a certificate or certificates representing
Warrants be entitled to receive the Warrant Consideration if the Warrant Consideration was already
paid with respect to the Warrants underlying such certificate or certificates in connection with an
affidavit of loss. Until so surrendered, each such certificate shall, after the Effective Time,
represent for all purposes only the right to receive such Warrant Consideration.
(c) If any portion of the Warrant Consideration payable in respect of any Warrant is to be
paid to a person other than the registered holder of the Warrant represented by the certificate or
certificates surrendered, it shall be a condition to such payment that the certificate or
certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer
and that the person requesting such payment shall pay to the Exchange Agent any transfer or other
taxes required as a result of such payment to a person other than the registered holder of such
Warrants or establish to the satisfaction of the Exchange Agent that such tax has been paid or is
not payable.
(d) After the Effective Time, there shall be no further registration of transfers of Warrants
outstanding immediately prior to the Effective Time.
(e) Any portion of the Warrant Consideration made available to the Exchange Agent pursuant to
SECTION 2.06(b) that remains unclaimed by the holders of Warrants entitled thereto six months after
the Effective Time shall be returned to Buyer, upon demand, and any warrantholder of the Company
who has not exchanged his Warrants for the Warrant Consideration in accordance with this SECTION
2.06 prior to that time shall thereafter look only to Buyer for payment of the Warrant
Consideration in respect of his Warrants. None of Buyer, Merger Subsidiary or the Company shall be
liable to any holder of the Warrants for any Warrant Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) In the event that any certificate representing Warrants shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming such
9
certificate to
be lost, stolen or destroyed and, if required by Buyer, the posting by such person of a bond in
such reasonable amount as Buyer may direct as indemnity against any claim that may be made against
it with respect to such certificate (provided that, if such person is a financial institution or
other institutional investor, its own agreement shall be satisfactory), the Exchange Agent will
issue in exchange for such lost, stolen or destroyed certificate the Warrant Consideration with
respect to such certificate, to which such person is entitled pursuant hereto.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.01
Certificate of Incorporation
. The Certificate of Incorporation of the
Company in effect at the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 3.02
Bylaws
. The Bylaws of the Company in effect at the Effective Time shall
be the Bylaws of the Surviving Corporation until amended in accordance with applicable law.
SECTION 3.03
Directors and Officers
. From and after the Effective Time, until
successors are duly elected or appointed in accordance with applicable law, (i) the directors of
Merger Subsidiary at the Effective Time shall constitute the directors of the Surviving
Corporation, until the earlier of their resignation or removal, and (ii) the officers of the
Company at the Effective Time shall be the officers of the Surviving Corporation until the earlier
of their resignation or removal.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule delivered by the Company to Buyer at or
prior to the execution of this Agreement (the “
Company Disclosure Schedule
”) or as
expressly disclosed in the Company SEC Reports filed with SEC prior to the date hereof, the Company
represents and warrants to Buyer and Merger Subsidiary that:
SECTION 4.01
Organization and Qualification; Subsidiaries.
(a) Each of the Company and each Material Subsidiary is a corporation, limited liability
company, partnership or other legal entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has the requisite power
and authority and all necessary governmental approvals to own, lease and operate its properties and
to carry on its business as it is now being conducted, except where the
10
failure to be so organized,
existing or in good standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Company Material Adverse Effect. The Company and each
Material Subsidiary are duly qualified or licensed as foreign corporations to do business, and are
in good standing, in each jurisdiction where the character of the properties owned, leased or
operated by them or the nature of their business makes such qualification or licensing necessary,
except for such failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Company Material Adverse Effect. The term “
Company
Material Adverse Effect
” means any change, condition, circumstance or effect that is, or is
reasonably likely to be, materially adverse to the assets and liabilities (taken together),
business, financial condition or results of operations of the Company and the Company Subsidiaries,
taken as a whole (other than changes, conditions, circumstances or effects that are the result of
(i) economic factors affecting the economy or financial markets as a whole or generally affecting
any of the industries and markets in which the Company or any of the Company Subsidiaries operates,
(ii) natural disasters, acts of war, sabotage or terrorism, military actions or the escalation
thereof, (iii) any change in applicable laws, rules or regulations or accounting rules or (iv)
actions contemplated by the parties in connection with this Agreement or the announcement or
performance of this Agreement, except that the exclusions set forth in clauses (i), (ii) and (iii)
shall only be effective if the Company and the Company Subsidiaries, taken as a whole, are not
substantially, disproportionately impacted in financial terms by such events when compared to other
companies in the industries in which the Company and the Company Subsidiaries operate).
(b) For purposes hereof, “
Material Subsidiary
” means a subsidiary (as defined in Rule
1-02 of Regulation S-X of the United States Securities and Exchange Commission (the “
SEC
”))
of the Company (a “
Company Subsidiary
”) that constitutes a “significant subsidiary” of the
Company within the meaning of Rule 1-02 of Regulation S-X of the SEC.
SECTION 4.02
Certificate of Incorporation and Bylaws
. The Company has heretofore made available to Buyer a complete and correct copy of the
Certificate of Incorporation and the Bylaws or equivalent organizational documents, each as amended
to date, of the Company and each Company Subsidiary. Such Certificates of Incorporation, Bylaws
and equivalent organizational documents are in full force and effect.
SECTION 4.03
Capitalization
. The authorized capital stock of the Company consists of
9,500,000 Shares and 500,000 shares of preferred stock, par value $0.01 per share (the
“
Preferred Stock
”). As of July 18, 2005, (a) 5,360,409 Shares were outstanding and (b) no
shares of Preferred Stock were outstanding. All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and nonassessable. As of July 18,
2005, Warrants to purchase 249,983 Shares were outstanding at an exercise price of $32.97 per Share
(subject to adjustment). SECTION 4.03 of the Company Disclosure Schedule contains a true and
complete list of all outstanding Company Stock Options as of the date hereof, the exercise price
for each such Company Stock Option as of the date hereof and the holders of each such Company Stock
Option as of the date hereof. As of March 31, 2005, 729,080 Shares were reserved for issuance upon
the exercise of outstanding Company Stock Options and Warrants, which consisted of (i) Company
Stock Options to purchase 477,701 Shares at a weighted average exercise price of $18.18 per Share
(subject to
11
adjustment) and (ii) Warrants to purchase 251,379 Shares at an exercise price of $32.97
per Share (subject to adjustment) pursuant to the Warrant Agreement, and, except for such Company
Stock Options and Warrants, no preemptive rights, conversion rights, stock appreciation rights,
redemption rights, repurchase rights options, warrants or other rights, agreements, arrangements or
commitments of any character obligating the Company or any Company Subsidiary to issue or sell, or
to cause to be issued or sold, any shares of capital stock of, other equity interests in, or rights
to acquire equity interests in, the Company or any Material Subsidiary were outstanding. Other
than with respect to the Company Subsidiaries listed on SECTION 4.03 of the Company Disclosure
Schedule, the Company does not directly or indirectly own any securities or other beneficial
ownership interests in any other entity (including through joint ventures or partnership
arrangements) representing more than 5% of the beneficial ownership interests of such entity, or
have any similar equity investment in any other person. There are no material outstanding
contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise
acquire any Shares or any capital stock of any Material Subsidiary, or to make any investment (in
the form of a loan, capital contribution or otherwise) in any Company Subsidiary. Each outstanding
share of capital stock or other equity interest of each Company Subsidiary is validly issued and,
with respect to each outstanding share of capital stock of any Company Subsidiary that is a
domestic corporation, fully paid, and each such share owned by the Company or another Company
Subsidiary is free and clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements imposing restrictions on assets, limitations on the Company’s or such
other Company Subsidiary’s voting rights, charges and other encumbrances of any nature whatsoever
(“
Encumbrances
”) other than any such encumbrances imposed by applicable law (including
securities laws). Except as otherwise expressly contemplated by SECTION 2.05 hereof, following the
consummation of the Merger, there will not be outstanding any rights, warrants, options or other
securities entitling the holder thereof to purchase, acquire or otherwise receive any shares of the
capital stock of the Company or any of the Company Subsidiaries (or any other securities
exercisable for or convertible into such shares). Neither the Company nor any of the
Company Subsidiaries has outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or are convertible into or exercisable for securities
having the right to vote) with the stockholders of the Company or any Company Subsidiary on any
matter or any agreements with respect to which Company stockholders, as such, have the right to
vote.
SECTION 4.04
Authority Relative to this Agreement
. The Company has all necessary
power and authority to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement or to consummate
the transactions contemplated herein (other than, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the then outstanding Shares and the
filing and recordation of appropriate merger documents as required by the DGCL). This Agreement
has been duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Buyer, constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms, subject to the effect
of any applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors rights generally and to
12
the effect of general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
SECTION 4.05
No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do not, and the performance of
the transactions contemplated herein by the Company will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws or equivalent organizational documents of the Company or any
Company Subsidiary, (ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both would become a
default) under, result in the loss of a material benefit under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance on any property or asset of the Company or Company Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or such Company Subsidiary is a party or by which the
Company or such Company Subsidiary or any property or asset of the Company or such Company
Subsidiary is bound or affected, except, in the case of clauses (ii) and (iii) above, for any such
conflicts, violations, breaches, defaults or other occurrences which would not prevent or delay
consummation of the Merger in any material respect, or otherwise prevent the Company from
performing its obligations under this Agreement in any material respect, or would not, individually
or in the aggregate, have a Company Material Adverse Effect (provided that, for purposes of this
SECTION 4.05(a), the definition of Company Material Adverse Effect shall not include the exclusion
in clause (iv) thereof).
(b) The execution and delivery of this Agreement by the Company do not, and the performance of
this Agreement by the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority, domestic or foreign
(each a “
Governmental Entity
”), except (i) for (A) applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder
(the “
Exchange Act
”), the Securities Act of 1933, as amended (the “
Securities
Act
”), state securities or “blue sky” laws (“
Blue Sky Laws
”) and state takeover laws,
(B) the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the “
HSR Act
”), (C) filing and
recordation of appropriate merger documents as required by the DGCL and (D) applicable
requirements, if any, of any non-United States competition, antitrust and investment laws and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Merger in any material
respect, or otherwise prevent the Company from performing its obligations under this Agreement in
any material respect, or would not, individually or in the aggregate, have a Company Material
Adverse Effect (provided that, for purposes of this SECTION 4.05(b), the definition of Company
Material Adverse Effect shall not include the exclusion in clause (iv) thereof).
SECTION 4.06
Compliance
.
13
(a) Neither the Company nor any Company Subsidiary is in conflict with, or in default or
violation of, (i) any material law, statute, ordinance, writ, injunction, settlement agreement,
rule, regulation, order, judgment or decree (including, without limitation, material laws, rules
and regulations relating to franchises) applicable to the Company or any Company Subsidiary or by
which any property or asset of the Company or any Company Subsidiary is bound or affected, or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any Company Subsidiary is a party or by
which the Company or any Company Subsidiary or any property or asset of the Company or any Company
Subsidiary is bound or affected, except for any such conflicts, defaults or violations that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
(b) Except for such deficiencies that would not individually or in the aggregate have a
Company Material Adverse Effect, the Company and each Company Subsidiary has duly obtained all
material permits, consents, concessions, grants, franchises, licenses and other governmental
authorizations, agreements and approvals (collectively, “
Permits
”) required under any
applicable law, statute, ordinance, writ, injunction, settlement agreement, rule, regulation,
order, judgment or decree in order to conduct the business of the Company and the Company
Subsidiaries as conducted on the date hereof, each Permit is in full force and effect, and there
are no proceedings pending or to the knowledge of the Company threatened which could result in the
revocation, cancellation, suspension or modification of any Permit. For purposes of this
Agreement, “knowledge” of the Company means the actual knowledge of Samuel F. Thomas, Michael F.
Biehl and Mark Ludwig and the knowledge that such individuals would reasonably be expected to have
upon reasonable inquiry.
(c) This SECTION 4.06 does not address compliance with, or Permits required under,
Environmental Laws, which are addressed solely in SECTION 4.18.
SECTION 4.07
SEC Filings; Financial Statements
.
(a) The Company has filed all forms, reports and documents required to be filed by it with the
SEC since September 15, 2003 (the “
Company SEC Reports
”) and has heretofore made available
to Buyer, in the form filed with the SEC (excluding any exhibits thereto), the Company SEC Reports.
The Company SEC Reports and any forms, reports and other documents filed by the Company with the
SEC after the date of this Agreement (x) were or will be prepared in all material respects in
accordance with the requirements of the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations thereunder and (y) did not at the time they were filed, or will not
at the time they are filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the statements made
therein, in the light of circumstances under which they were made, not misleading (provided that no
representation is made under this clause (y) with respect to agreements filed as exhibits to any
such forms or reports). No Company Subsidiary is required to file any form, report or other
document with the SEC.
(b) Except as set forth in SECTION 4.07(b) of the Company Disclosure Schedule, each of the
consolidated financial statements (including, in each case, any notes thereto) contained in the
Company SEC Reports (other than any such financial statements
14
furnished to the SEC and not deemed
to be “filed” for purposes of Section 18 of the Exchange Act) was prepared in accordance with U.S.
generally accepted accounting principles applied on a consistent basis throughout the periods
indicated (“
GAAP
”) (except as may be indicated in the notes thereto) and each fairly
presented the financial position, results of operations and cash flows of the Company and the
consolidated Company Subsidiaries, as the case may be, at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited statements, to year-end
adjustments which were not and are not expected, individually or in the aggregate, to be material
in amount and the absence in such unaudited statements of certain footnote disclosures).
(c) Except for (i) liabilities recorded or disclosed in the consolidated financial statements
or the notes thereto contained in the Company SEC Reports, (ii) liabilities that were not required
to be disclosed in such consolidated financial statements or the notes thereto pursuant to GAAP,
(iii) liabilities or obligations incurred in the ordinary course of business consistent with past
practices since March 31, 2005, (iv) liabilities or obligations incurred pursuant to the
transactions contemplated by this Agreement and/or (v) liabilities or obligations that have been
discharged or paid in full prior to the date of this Agreement, there are no material liabilities
or obligations of the Company or any of the Company Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined or otherwise.
(d) Since the enactment of the Sarbanes-Oxley Act of 2002 (the “
Sarbanes-Oxley Act
”),
the Company has been and is in compliance in all material respects with the
applicable provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated
thereunder applicable to the Company.
SECTION 4.08
Brokers
. Except for UBS Securities LLC (“
UBS
”) whose fees will
be paid by the Company, there is no investment banker, broker or finder which has been retained by
or is authorized to act on behalf of the Company or any Company Subsidiary who might be entitled to
any fee or commission from the Company, any Company Subsidiary, Merger Subsidiary or Buyer or any
of their affiliates upon consummation of the transactions contemplated by this Agreement.
SECTION 4.09
Events Subsequent to Most Recent Fiscal Quarter End.
Since March 31,
2005, there has not been any adverse change in the financial condition of the Company and the
Material Subsidiaries taken as a whole which would constitute a Company Material Adverse Effect or
any action by the Company or a Company Subsidiary that would have required Buyer’s consent pursuant
to SECTION 6.01 had such action been taken after the date hereof.
SECTION 4.10
Tax Matters
. (i) The Company and its Material Subsidiaries have duly and
timely filed (taking into account any extension of time within which to file) all material Tax
Returns required to be filed by any of them and all such filed Tax Returns are complete and
accurate in all material respects; (ii) the Company and its Material Subsidiaries have paid all
Taxes due and payable or that the Company or any Material Subsidiary is obligated to withhold from
amounts owing to any employee, creditor or third party, except with respect to matters contested in
good faith and for which adequate reserves have been provided in accordance with GAAP or for such
amounts that, individually or in the aggregate,
15
could not reasonably be expected to have a Company
Material Adverse Effect; (iii) as of the date of this Agreement, there are no pending or, to the
knowledge of the Company, threatened in writing audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters relating to the Company or any Material Subsidiary
which, if determined adversely to the Company or such Material Subsidiary, could reasonably be
expected to have a Company Material Adverse Effect; (iv) there are no deficiencies or claims for
any Taxes that have been proposed, asserted or assessed against the Company or any Material
Subsidiary, which if such deficiencies or claims were finally resolved against the Company or such
Material Subsidiary, could reasonably be expected to have a Company Material Adverse Effect; (v)
there are no material liens or claims for Taxes upon the assets of the Company or any Material
Subsidiary, other than liens or claims for current Taxes not yet due and payable and liens or
claims for Taxes that are being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP; (vi) the Company has made available
to the Buyer (1) all material Tax Returns filed by or on behalf of the Company or any Material
Subsidiary for all completed Tax years that remain open for audit or review by the relevant Tax
Authority and (2) all material ruling requests, private letter rulings, notices of proposed
deficiencies, closing agreements and settlement agreements, and any similar documents or
communications sent or received by the Company or
any Material Subsidiary relating to Taxes, to the extent still pending or in effect; (vii) the
Company and the Company Subsidiaries have not incurred any material liability for Taxes from and
after September 15, 2003 other than Taxes incurred in the ordinary course of business consistent
with past practices; (viii) neither the Company nor any Material Subsidiary has made an election
under Section 341(f) of the Internal Revenue Code of 1986, as amended (the “
Code
”); (ix)
neither the execution and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in the Company and the Company Subsidiaries incurring any material
liability to make or possibly make any payments, either alone or in conjunction with any other
payments, that (A) are non-deductible under, or would otherwise constitute a “parachute payment”
within the meaning of, Section 280G of the Code or (B) are or may be subject to the imposition of
an excise Tax under Section 4999 of the Code; (x) as of the date hereof the Company and the Company
Subsidiaries have not agreed to, and are not required to, make any adjustments or changes to their
accounting methods pursuant to Section 481 of the Code (or similar provisions of state, local or
foreign law), and neither the Internal Revenue Service nor any other Tax Authority has proposed in
writing any such adjustments or changes in the accounting methods of the Company and the Material
Subsidiaries; (xi) to the Company’s knowledge, no unresolved material claim has ever been made in
writing by any Tax Authority in a jurisdiction in which the Company or the Company Subsidiaries do
not file Tax Returns that any such person is or may be subject to taxation by that jurisdiction;
(xii) the Company is not, and has not been during the five-year period ending on the date hereof, a
“United States real property holding corporation” within the meaning of Section 897(c)(2) of the
Code; (xiii) neither the Company nor any of its Subsidiaries (1) is a party to any Tax sharing or
similar agreement or any arrangement pursuant to which it or any of its Subsidiaries has an
obligation to indemnify any party (other than the Company or any Company Subsidiary) with respect
to Taxes or
(2) is or has been since September 15, 2003 a member of an affiliated group filing a
consolidated return (other than a group the common parent of which is the Company); (xiv) neither
the Company nor any Company Subsidiary has engaged in any “reportable transactions” within the
meaning of Treasury Regulation §1.6011-4(b) during the period for which such regulation is
effective; and, (xv) during the five-year period ending on the
16
date hereof, neither the Company nor
any Company Subsidiary was a “distributing corporation” or a “controlled corporation” (as such
terms are defined in Treas. Reg. Section 1.355-1(b)) in a transaction intended to be governed by
Section 355 of the Code. “
Tax
” means all federal, state, local and foreign income,
profits, franchise, gross receipts, environmental, customs duty, capital stock, severance, stamp,
payroll, sales, employment, unemployment disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever,
together with all interest, penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to tax whether disputed or not
and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of
any other person. “
Tax Return
” means all returns and reports (including elections, claims,
declarations, disclosures, schedules, estimates, computations and information returns) required to
be supplied to a Tax authority in any jurisdiction relating to Taxes. “
Tax Authority
”
shall mean any Governmental Entity or any quasi-governmental or private body having jurisdiction
over the assessment, determination, collection or imposition of any Tax.
SECTION 4.11
Opinion of Financial Advisor
. The Company has received the opinion of UBS, dated the date of this Agreement (the
“
Fairness Opinion
”), to the effect that, as of such date, the Merger Consideration to be
paid to the stockholders of the Company (other than the Principal Stockholders) is fair, from a
financial point of view, to such stockholders, assuming that aggregate Company Transaction Expenses
do not exceed the assumed amount of such expenses expressly set forth in the Fairness Opinion (the
“
Assumed CTE Amount
”).
SECTION 4.12
Litigation.
There is no litigation, arbitration, claim, suit, action,
investigation or proceeding pending or, to the knowledge of the Company, threatened, against or
affecting the Company or any Material Subsidiary (collectively, the “
Actions
”) which,
individually or in the aggregate of all such Actions arising out of similar facts or circumstances,
could reasonably be expected to have a Company Material Adverse Effect, nor is there any judgment,
award, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any Material Subsidiary which could reasonably be expected to have a Company
Material Adverse Effect.
SECTION 4.13
Anti-takeover Statutes
. The Company has taken all action necessary to
exempt the Stock Purchase, the Merger, this Agreement and the transactions contemplated hereby from
Section 203 of the DGCL, and, to the Company’s knowledge, no other state takeover statute, other
than those arising solely under state “blue sky” laws, is applicable to the Merger, this Agreement
and the transactions contemplated hereby or thereby.
SECTION 4.14
Real Property
.
(a) The Company or one of the Company Subsidiaries has good and marketable title to real
property listed as owned by the Company or one of the Company Subsidiaries on SECTION 4.14(a) of
the Company Disclosure Schedule (collectively, the “
Owned Real Property
”), free and clear
of all Encumbrances, other than Permitted Encumbrances. For purposes of this Agreement,
“
Permitted Encumbrances
” means (i) mechanics’, carriers’, workmen’s, repairmen’s or other
like Encumbrances arising or incurred in the ordinary course of business, (ii) Encumbrances arising
under original purchase price
17
conditional sales contracts and equipment leases with third parties
entered into in the ordinary course of business and under which the Company or the Company
Subsidiaries are not in default, (iii) Encumbrances for current Taxes and utilities not yet due and
payable or which may hereafter be paid without penalty, which have been set aside in accordance
with GAAP or which are being contested by appropriate proceedings, (iv) imperfections of title or
Encumbrances, if any, that do not, individually or in the aggregate, materially impair the
continued use and operation of any asset to which they relate in the conduct of the business of the
Company or any of the Company Subsidiaries as presently conducted, (v) leases, subleases and
similar agreements set forth on the Company Disclosure Schedules, (vi) easements, covenants,
rights-of-way and other similar restrictions or conditions of record or which would be shown by a
current
accurate survey of any of the Real Property that do not materially interfere with the
continued use and operation of the Real Property as currently used and operated, (vii) zoning,
building and other restrictions imposed by any applicable law (including securities laws) that do
not, individually or in the aggregate, materially impair the continued use and operation of any
asset to which they relate in the conduct of the business of the Company or any of the Company
Subsidiaries as presently conducted, (viii) Encumbrances that have been placed by any developer,
landlord or other third party on property over which the Company or any of the Company Subsidiaries
have easement rights or under any lease or subordination or similar agreements relating thereto
that do not, individually or in the aggregate, materially impair the continued use and operation of
any asset to which they relate in the conduct of the business of the Company or any of the Company
Subsidiaries as presently conducted, (ix) unrecorded easements, covenants, rights-of-way and other
similar restrictions on the Real Property none of which, individually or in the aggregate,
materially impairs the continued use and operation of such Real Property as currently used and
operated, (x) pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or regulations, (xi)
cash deposits to secure the performance of bids, trade contracts, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in
the ordinary course of business consistent with past practice, and (xii) bankers’ liens and similar
liens, including rights of offset or set-off in respect of deposit accounts and liens in favor of
securities intermediaries in respect of securities accounts securing fees and costs owing to such
securities intermediaries arising or incurred in the ordinary course of business. Neither the
Company nor any Company Subsidiary is a party to nor is any of the Owned Real Property subject to
any unrecorded instrument granting a right or option to any other person to purchase or lease or
otherwise obtain title to, or an interest in, such Owned Real Property. Neither the Company nor
any Company Subsidiary has received written notice of any pending violation of a condition or
agreement contained in any easement, restrictive covenant or any similar instrument or agreement
affecting any of the Owned Real Property, which in any event could reasonably be expected to have a
Company Material Adverse Effect.
(b) SECTION 4.14(b) of the Company Disclosure Schedule lists all leases and subleases
(collectively, the “
Leases
”) pursuant to which any real estate is leased or subleased by
the Company or one of the Company Subsidiaries and used in the business and operations of the
Company and the Company Subsidiaries as conducted in the ordinary course of business (collectively,
the “
Leased Real Property
” and, together with the Owned Real Property, the “
Real
Property
”). Each such Lease is in full force and effect as against the Company or the
applicable Company Subsidiary that is a party thereto and constitutes a legal, valid and binding
obligation
18
of, and is legally enforceable against, the Company or the applicable Company Subsidiary
that is a party thereto. The Company has delivered to Buyer complete and correct copies of all
Leases including all amendments thereto effective as of the date hereof. Neither the Company nor
any Company Subsidiary has received written notice of any pending default under any Lease, and
there has not occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a default, which in either such
event would reasonably be expected to have a Company Material Adverse Effect.
(c) The Real Property listed on SECTION 4.14(a) of the Company Disclosure Schedule is all of
the real property interests used in the business of the Company and the
Company Subsidiaries as conducted in the ordinary course of business. The Company does not
own or lease Real Property except as set forth on SECTION 4.14(a) and (b) of the Company Disclosure
Schedule. Neither the Company nor any Company Subsidiary has received written notice of any
pending or threatened condemnation proceedings or other similar action to take by eminent domain
any of the Real Property. Neither the Company nor any Company Subsidiary is obligated under or
bound by any option, right of first refusal, purchase contract or other contractual right to sell,
lease or purchase any Real Property or any portion thereof which Real Property, individually or in
the aggregate, is material to the Company or any Company Subsidiary. To the knowledge of the
Company, each Real Property complies in all material respects with all applicable Laws.
SECTION 4.15
Tangible Assets
. The Company and each of the Company Subsidiaries has
good and marketable title to all of its material tangible assets free and clear of all
Encumbrances, other than any such Encumbrances imposed by applicable law, any defect in title or
Encumbrance to the extent it would not have a Company Material Adverse Effect, or any other
Permitted Encumbrance. The Company and each of the Company Subsidiaries holds valid leaseholds in
all of the material tangible assets leased by it, in each case under valid and enforceable leases.
SECTION 4.16
Material Contracts
.
(a) Except as listed and set forth in SECTION 4.16(a) of the Company Disclosure Schedule, the
Company is not a party to any legally binding contract, agreement, arrangement, bond, commitment,
note, loan, mortgage, lease, subcontract, indenture, instrument, license, purchase order, sale
order, proposal or undertaking, whether written or oral, or other agreement legally binding on the
parties thereto (“
Contract
”) that is:
(i) an agreement limiting or restraining the freedom of Buyer or the Surviving Corporation or
their affiliates following the Merger Closing to compete in any material respect in any line of
business with any person;
(ii) an agreement granting an Encumbrance on assets of the Company or any Company Subsidiary,
other than any such encumbrances imposed by applicable law on any asset of the Company or a Company
Subsidiary or that otherwise constitute a Permitted Encumbrance, or an agreement guaranteeing the
payment of liabilities or performance of obligations of any other person (other than the Company or
a Company Subsidiary) in an
19
amount in each case, or in the aggregate with any such related
agreements, in excess of $1,000,000 by the Company or a Company Subsidiary;
(iii) an agreement, other than purchase orders, with any of the ten (10) largest customers
(based on 2004 sales) and the ten (10) largest suppliers (based on 2004 purchases) of the Company;
(iv) an agreement for the lease, sublease, stand-alone co-location, purchase or sale of any
material asset or property in an amount in each case, or in
the aggregate with any such related agreements, in excess of $1,000,000, or purchase or sale
of capital stock in an amount in each case, or in the aggregate with any such related agreements,
in excess of $1,000,000 or grant of any preferential rights to purchase any such material asset or
capital stock, in each case outside the ordinary course of business;
(v) an obligation of the Company or a Material Subsidiary or any predecessor entity of the
Company (A) for borrowed money in excess of $1,000,000 evidenced by bonds, debentures, notes or
similar instruments, (B) to provide indemnification to any other Person not entered into in the
ordinary course of business and involving in excess of $1,000,000 of reasonably anticipated
liability, (C) to maintain deposits or advances of any kind not entered into in the ordinary course
of business, or (D) under capital leases;
(vi) a joint venture, consortium, asset sharing, partnership or similar agreement to which the
Company or any of the Company Subsidiaries are parties, except any such agreements to which any of
the Company and the Company Subsidiaries are the only parties;
(vii) a collective bargaining agreement (none of which are currently being negotiated as of
the date hereof), or an agreement relating to employment, change in control, termination, retention
or severance that requires, or in the future would reasonably be expected to require, payments in
any twelve-month period in excess of $100,000; or
(viii) an agreement or other contractual obligation, other than as set forth above and other
than purchase orders, with respect to which the aggregate amount reasonably expected to be received
or paid thereunder will exceed $2,000,000 individually (or in the aggregate, in the case of any
related series of Contracts) in 2005 or any single calendar year thereafter.
(b) Each of the Contracts listed in SECTION 4.16(a) of the Company Disclosure Schedule in
response to the foregoing (collectively, the “
Material Contracts
”) is legal, valid, binding
and in full force and effect in all material respects and is enforceable by the Company or a
Company Subsidiary against any other party thereto in accordance with its terms, except to the
extent that such enforcement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and remedies of creditors
(other than such as relate to fraudulent conveyance), and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity or at law), and
except for any failure to be legal, valid, binding and in full force and effect
20
or enforceable as
would not have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary
is in any material respect and, to the knowledge of the Company, no other party thereto is in
default in any material respect in the performance, observance or fulfillment of any material
obligation, covenant or condition contained in the Material Contracts, and no event has occurred
which with or without the giving of notice or lapse of time, or both, would constitute a default by
the Company or a Company Subsidiary thereunder, except as would not reasonably be expected to have
a Company Material Adverse Effect. As of the date hereof, neither the Company nor any Company
Subsidiary has received any written notice of the intention of any party to terminate such Material
Contract except as would not reasonably be
expected to have a Company Material Adverse Effect. Complete and correct copies (or accurate
descriptions) of all Material Contracts, together with all modifications and amendments thereto to
the date of this Agreement, have been made available to Buyer or its representatives.
SECTION 4.17
Employee Matters
.
(a) SECTION 4.17(a) of the Company Disclosure Schedule lists each ERISA Plan (as defined
below) and each material Plan as of the date hereof. “
Plan
” shall mean each “employee
pension benefit plan,” as that term is defined in section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended (“
ERISA
”); each “employee welfare benefit plan,” as that
term is defined in section 3(1) of ERISA (such plans being hereinafter referred to collectively as
the “
ERISA Plans
”); and each other retirement, pension, profit-sharing, money purchase,
deferred compensation, excess benefits, incentive compensation, bonus, stock option or other equity
related program, severance pay, change of control benefits or payments, fringe benefit, employment
or other employee benefit plan, policy, program, agreement, or arrangement maintained or
contributed to by the Company or the Company Subsidiaries in the six years preceding the date of
this Agreement, and with respect to which the Company or the Company Subsidiaries have liability,
or could have liability due to any applicable statute of limitations not having expired, as of the
date hereof, in respect of or for the benefit of (i) any current employee, consultant or
independent contractor of the Company or the Company Subsidiaries who provides substantially all of
his or her services to or for the business of the Company or the Company Subsidiaries (any such
individual referred to hereinafter as an “
Employee
”) or director or (ii) any former
Employee or director, but excluding any such plan, program, agreement, or arrangement maintained or
contributed to solely in respect of or for the benefit of Employees or former Employees employed or
formerly employed outside of the United States, as of the date hereof. SECTION 4.17(a) of the
Company Disclosure Schedule also lists any Foreign Plan (as defined below) that is a defined
benefit type retirement Plan and each other material Foreign Plan. “
Foreign Plan
” shall
mean each plan, program, policy agreement, or arrangement maintained or contributed to in the six
years preceding the date of this Agreement, and with respect to which the Company or the Company
Subsidiaries have liability, or could have liability due to any applicable statute of limitations
not having expired, as of the date hereof, solely in respect of or for the benefit of current or
former Employees or directors employed or formerly employed outside of the United States, as of the
date hereof (collectively referred to hereinafter as the “
Foreign Plans
”). With respect to
any Foreign Plans, (i) all Foreign Plans have been established, maintained and administered in
material compliance with their terms and all applicable statutes, laws, ordinances, rules, orders,
decrees, judgments, writs and regulations of any controlling governmental authority or
instrumentality; (ii) all Foreign Plans that are required to be funded are fully funded, and with
respect to all other Foreign Plans,
21
adequate reserves therefore have been established on the
accounting statements of the Company or any Company Subsidiary; and (iii) no material liability or
obligation of the Company or any Company Subsidiary exists with respect to such Foreign Plans that
has not been disclosed in SECTION 4.17(a) of the Company Disclosure Schedule. With respect to each
Plan and each Foreign Plan listed on SECTION 4.17(a) of the Company Disclosure Schedule, the
Company has delivered or made available to Buyer a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and to the extent applicable and
available to the
Company after reasonable inquiry: (i) any related trust agreement or other funding instrument;
(ii) the most recent determination letter, if applicable; (iii) any summary plan description (to
the extent required by applicable law) and summaries of material modifications; and (iv) for the
two (2) most recent years (A) the Form 5500 and attached schedules, if applicable, (B) audited
financial statements, if applicable, and (C) actuarial valuation reports, if applicable.
(b) Except as otherwise set forth in SECTION 4.17(b) of the Company Disclosure Schedule, the
execution and delivery of this Agreement by the Company and the performance of this Agreement by
the Company will not directly result now or at any time in the future in (i) the payment to, or the
acceleration of any payment to, any Employee of any severance, termination, change of control or
similar payments or benefits, whether or not such payments would constitute parachute payments
within the meaning of Section 280G of the Code or (ii) the acceleration, vesting or increase in
benefits to any Employee or director.
(c) Except as set forth on SECTION 4.17(c) of the Company Disclosure Schedule, with respect to
the ERISA Plans, other than those ERISA Plans identified on SECTION 4.17(d) of the Company
Disclosure Schedule as “multiemployer plans”:
(i) The PBGC has not instituted proceedings to terminate any such ERISA Plan that is subject
to Title IV of ERISA, no material liability under Title IV of ERISA has been incurred or is
reasonably expected to be incurred by the Company, any of the Company Subsidiaries (other than
liability for premiums due to the Pension Benefit Guaranty Corporation (the “
PBGC
”) and
contributions required to be made in the ordinary course), unless such liability has been, or prior
to the Merger Closing Date will be, satisfied in full;
(ii) Neither the Company nor any Company Subsidiary has engaged in, or is a successor or
parent corporation to an entity that has engaged in, a transaction described in Section 4069 or
4212(c) of ERISA. No (A) “reportable event” (as such term is defined in Section 4043 of ERISA)
that could reasonably be expected to result in material liability, (B) non-exempt “prohibited
transaction” (as such term is defined in Section 406 of ERISA and Section 4975 of the Code) that
could reasonably be expected to result in a material liability, or (C) “accumulated funding
deficiency” (as such term is defined in Section 302 of ERISA and Section 412 of the Code (whether
or not waived)) has occurred with respect to any such ERISA Plan;
(iii) Each such ERISA Plan has been operated and administered in all material respects in
accordance with its provisions and all applicable laws and the Company and the Company Subsidiaries
have performed in all material respects all obligations required to be performed by them thereunder
and are not in any material respect in default under or in violation of any of the ERISA Plans;
22
(iv) Each such ERISA Plan that is intended to be “qualified” within the meaning of Section
401(a) of the Code and, to the extent applicable, Section 401(k) of the Code, has received a
favorable determination letter by the IRS, each trust created under any such plan has heretofore
been determined by the IRS to be exempt from tax under the provisions of Section 501(a) of the
Code, and nothing has occurred since the date of the most recent such letter (other than the
effective date of certain amendments to the Code, the remedial amendment
period for which has not yet expired) that would reasonably be expected to result in loss of
the qualified status of any of such ERISA Plans;
(v) There are no pending or, to the knowledge of the Company, threatened claims, lawsuits,
arbitrations or other actions or proceedings against any such ERISA Plan by any Employee, former
Employee, or beneficiary covered under any such ERISA Plan, or otherwise involving any such ERISA
Plan (other than routine claims for benefits and routine expenses) and, to the knowledge of the
Company, no facts or circumstances exist that could reasonably be expected to give rise to any such
claims, lawsuits, arbitrations or other actions or proceedings;
(vi) To the knowledge of the Company, no event has occurred and no condition exists with
respect to any ERISA Plan that would subject the Company or any Company Subsidiary to any material
tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other applicable laws,
rules and regulations;
(vii) No ERISA Plan, and none of the Company or any of the Company Subsidiaries with respect
to any ERISA Plan is under audit or investigation or action by the IRS, Department of Labor, or any
other Governmental Entity; and
(viii) No ERISA Plan provides retiree welfare benefits and neither the Company nor any Company
Subsidiary has any obligation to provide any retiree welfare benefits other than as required by
Section 4980B of the Code and similar state laws.
(d) Except as set forth on SECTION 4.17(d) of the Company Disclosure Schedule, none of the
ERISA Plans is a “multiemployer plan,” as that term is defined in Section 3(37) of ERISA, and with
respect to any such multiemployer plans (as so defined) listed in SECTION 4.17(d) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has made or incurred, and the
transactions contemplated by this Agreement will not result in the Company or any Company
Subsidiary making or incurring, a “complete withdrawal” or a “partial withdrawal,” as such terms
are respectively defined in Sections 4203 and 4205 of ERISA that would result in the incurrence of
a material liability by the Company or any Company Subsidiary.
(e) Except as set forth on SECTION 4.17(e) of the Company Disclosure Schedule (or in the case
of subsection (iv) below, as disclosed in SECTION 4.16(a) or SECTION 4.17(a) of the Company
Disclosure Schedule):
(i) neither the Company nor any of the Company Subsidiaries is a party to any Contract or
agreement with any labor organization or other body representing or purporting to represent
Employees of either the Company or any of the Company Subsidiaries
23
and (A) there are no existing
or, to the knowledge of Company, threatened labor strikes, work stoppages, slow downs or material
interruptions of work against the Company or any Company Subsidiary, nor have there been during the
five-year period ending on the date hereof, (B) there are no labor arbitrations or material
grievances involving the Company or any Company Subsidiary which if decided adversely to the
Company or any Company Subsidiary, individually or in the aggregate with all related matters, may
reasonably be expected to create a liability in
excess of $1 million or cause the Company or any Company Subsidiary to incur expenses in
excess of $1 million, or (C) there is no (x) unfair labor practice charge or complaint pending or,
to the knowledge of the Company, threatened or (y) court or agency order, or consent decree with,
or citation by, any Government Entity relating to employees or employment practices, and to the
knowledge of the Company, there is no pending or threatened, union organizing or decertification
activity respecting the Employees of the Company or any Company Subsidiary;
(ii) to the knowledge of the Company, each of the Company and the Company Subsidiaries has
complied during the three-year period ending on the date hereof in all material respects with all
requirements of applicable law relating to the employment of labor, employment practices,
compensation, benefits hours and other terms and conditions of employment, including but not
limited to payment and termination of employees, including the provisions thereof relative to
wages, hours, severance, vacation, collective bargaining, immigration, unfair labor practices,
contributions, unemployment, withholding taxes, occupational health and safety, affirmative action,
equal employment opportunity and non-discrimination (including the Americans with Disabilities Act,
the Fair Labor Standards Act and similar state and local laws and the Worker Adjustment and
Retraining Notification Act and the regulations promulgated thereunder (“
WARN
”))
(hereinafter together referred to as “
Labor Laws
”); with respect to the Company and any
Company Subsidiary, (A) during the three-year period ending on the date hereof, no notice has been
received of, and, to the knowledge of the Company, there are no pending or threatened unfair labor
practice charges or material complaints, investigations, discrimination complaints relating to
race, color, national origin, gender, religion, age, marital status, disability, handicap, sexual
harassment, overtime or minimum wage matters or any other material employment-related matter
against the Company or any Company Subsidiary before any Governmental Entity nor, to the knowledge
of the Company, does any reasonable basis therefor exist; (B) during the three-year period ending
on the date hereof, no Governmental Entity has charged the Company or any Company Subsidiary with,
or, to the knowledge of the Company, threatened a charge or investigation of, violation of any
Labor Laws; and (C) there have been no claims, inquiries, citations, nor penalties assessed or
other proceedings of the Equal Employment Opportunity Commission (or similar state or local
agencies), the Office of Federal Contract Compliance Programs or any other Governmental Entity in
respect of the Company or any Company Subsidiary during the three-year period ending on the date
hereof which relate to any alleged or potential violation of any Labor Laws;
(iii) Neither the Company nor any Company Subsidiary is liable for any severance pay or other
payments to any Employee or former Employee arising from termination of employment, nor will the
Company have any liability under any benefit or severance policy, plan, practice, agreement or
program which exists or arises, or may be deemed to exist or arise, under any applicable law, as a
result of or in connection with the transactions contemplated hereunder or the termination of any
of the Employees of the Company or any Company Subsidiary on or prior to the Merger Closing Date;
and
24
(iv) During the three-year period ending on the date hereof, neither the Company nor any
Company Subsidiary has implemented any “plant closing” or “mass layoff” of employees at any plant,
facility or operating unit, as those terms are defined under the WARN Act, nor has the Company or
any Company Subsidiary announced any such future action.
SECTION 4.18
Environmental Matters
.
(a) All Environmental Permits necessary to conduct the business of the Company and the Company
Subsidiaries as currently conducted (i) have been obtained by the Company or one of the Company
Subsidiaries and (ii) are currently in full force and effect except for any such Environmental
Permits as to which the failure to obtain or maintain in full force and effect would not reasonably
be expected to have a Company Material Adverse Effect. A list of such Environmental Permits is
attached at SECTION 4.18(a) of the Company Disclosure Schedule. The Company and the Company
Subsidiaries are and have been in material compliance with all such Environmental Permits except
for any such noncompliance that would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect. No action or proceeding which would be reasonably
expected to result in the revocation, suspension or a materially adverse modification of any such
Environmental Permits is pending or, to the knowledge of the Company, threatened.
(b) The Company and the Company Subsidiaries are and have been in compliance in all material
respects with all Environmental Laws and to the knowledge of the Company, there are no events,
conditions, circumstances, activities, practices or incidents related to the business of the
Company and the Company Subsidiaries which would reasonably be expected to give rise to any
liability under or relating to any Environmental Law, except for such noncompliance or liability
that would not individually or in the aggregate reasonably be expected to have a Company Material
Adverse Effect.
(c) There is no material civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation, investigation or proceeding pending or, to
the knowledge of the Company, threatened in writing against the Company or any Company Subsidiary
arising from any violation of or liability under any applicable Environmental Law. There have been
no written claims, written inquiries, written citations, penalties assessed in writing or other
enforcement proceedings by any Governmental Entity in respect of the business of the Company and
the Company Subsidiaries during the past three years which relate to any actual or alleged material
violation of, or material liability under, any Environmental Laws which have not been resolved and
which would reasonably be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
(d) To the knowledge of the Company, neither the Company nor any Company Subsidiary has
generated, stored, used, emitted, discharged or disposed of any Hazardous Material(s) except in
material compliance with applicable Environmental Laws.
(e) Neither the Company nor any Company Subsidiary has caused or permitted a, and to the
knowledge of the Company, there has been no, Release or threatened Release of any Hazardous
Material(s) into, on, under or about any of the Real Property (or any
25
real property formerly owned
or operated in connection with the business of the Company and the Company Subsidiaries), except,
in each case, as would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
(f) The Company has made available to Buyer true, complete and correct copies of (i) all
material reports and documents relating to compliance with Environmental Laws by the Company and
the Company Subsidiaries within the past five (5) years, including all material correspondence to
and from any Governmental Entity related thereto, all material environmental filings with any
Governmental Entity, and all material nonprivileged internal or external environmental and
compliance audits, in each case that are in the possession or under the reasonable control of the
Company; and (ii) all material documents, reports or analyses prepared by or on behalf of the
Company or the Company Subsidiaries within the past five (5) years or otherwise in their
possession, relating to the presence of any Hazardous Material(s) in an amount or concentration
that would be reasonably expected to result in material liability to the Company under any
Environmental Law on, at, under or migrating from or onto any of the Real Property listed on
SECTION 4.14(a) or SECTION 4.14(b) of the Company Disclosure Schedule (or any real property
formerly owned or operated by any of the Company or the Company Subsidiaries) in each case that are
in the possession or under the reasonable control of the Company.
(g) To the knowledge of the Company, no building or structure currently owned, operated or
leased by, or any product sold by, the Company or a Company Subsidiary contains or contained any
asbestos or asbestos-containing material or polychlorinated biphenyls (PCBs) in concentrations
exceeding 50 ppm, in each case, that individually or in the aggregate would reasonably be expected
to have a Company Material Adverse Effect.
(h) As used herein:
“
Environment
” means soil, land surface or subsurface strata; surface waters (including
navigable water, ocean waters, streams, ponds, drainage basins and wetlands); ground waters;
drinking water supply; stream sediments; ambient air; (including indoor air); plant and animal
life; and any other environmental medium or natural resources.
“
Environmental Laws
” means all applicable laws, including common law, statutes,
ordinances, codes, rules, regulations, treaties or other legally-binding requirements, adopted by
any federal, state, provincial, local, foreign or other Governmental Entity relating to pollution
or protection of the Environment, Hazardous Material(s), and/or worker health and safety in effect
as of the date hereof.
“
Environmental Permits
” means all permits, licenses, approvals, authorizations,
consents, registrations and certificates required by any Governmental Entity under any applicable
Environmental Law.
“
Hazardous Material
” means any pollutant, contaminant, hazardous or toxic substance,
or any other material or waste (a) which is subject to regulation under, or could reasonably be
expected result in liability under, any Environmental Law, including, without limitation, any
material or substance that is: (i) defined as a “hazardous
26
substance” under applicable state law; (ii) designated as a “hazardous substance” pursuant to Section 311 of the Federal Water Pollution
Control Act, as amended, 33 U.S.C. § 1251 et seq. (33 U.S.C. § 1321); (iii) defined as a “hazardous
waste” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, as amended,
42 U.S.C. § 6901 et seq. (42 U.S.C. § 6903); (iv) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601 et seq.
(“
CERCLA
”); (v) defined as a “regulated substance” pursuant to Section 9001 of the Federal
Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et seq. (42 U.S.C. § 6991); or
(vi) otherwise regulated under the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the
Clean Air Act, as amended, 42 U.S.C. § 7401, et seq., the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. § 5101, et seq., or the Federal Insecticide, Fungicide and Rodenticide Act,
as amended, 7 U.S.C. § 136, et seq.; and (b) including asbestos, materials containing asbestos,
petroleum and petroleum products, waste oil, flammable explosives and radioactive materials.
“
Release
” means any past or present spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of Hazardous
Material(s) into the Environment whether intentional or unintentional.
SECTION 4.19
Intellectual Property Matters
.
(a) SECTION 4.19 of the Company Disclosure Schedule sets forth, with respect to all
Intellectual Property owned, held, or used by the Company and/or Company Subsidiaries (“
Company
Intellectual Property
”) all registered (or applied for) Intellectual Property and all material
license, consent, royalty or other agreements concerning Intellectual Property to which the Company
or one of the Company Subsidiaries is a party (“
IP Licenses
”). For purposes of this
Agreement, “
Intellectual Property
” means all U.S. and foreign intellectual property owned,
held or used by the Company or Company Subsidiaries, including without limitation, (i) (A) patents,
inventions, discoveries, processes, designs, techniques, developments, technology and know-how; (B)
copyrights and works of authorship in any media, including computer programs, software, hardware,
databases, documentation and related works; (C) trademarks, service marks, trade names, brand
names, corporate names, domain names, logos, trade dress and other source indicators, and the
goodwill of any business symbolized thereby; and (D) trade secrets, confidential, proprietary, or
non-public information, documents, analyses, research and lists (including current and potential
customer lists); and (ii) all registrations and applications to register thereto. The Company and
the Company Subsidiaries own or have the right to use all Intellectual Property necessary for the
Company and the Company Subsidiaries to conduct their business as currently conducted, free and
clear of all Encumbrances other than any such encumbrances imposed by applicable law or other
Permitted Encumbrances.
(b) Except as would not reasonably be expected to have a Company Material Adverse Effect: (i)
all of the Company Intellectual Property (to the extent applicable) is valid, enforceable and
unexpired, to the knowledge of the Company, does not infringe, impair, misappropriate, dilute or
otherwise violate (“
Infringe
”) the intellectual property rights of others and, to the
knowledge of the Company, is not being Infringed by others; (ii) no judgment, decree, injunction,
rule or order has been rendered, or, to the knowledge of the Company, is threatened or imminent,
that seeks to cancel, limit or challenge the validity, enforceability, ownership or use
27
of any
Company Intellectual Property, and the Company knows of no valid basis for same; and (iii) the
transactions contemplated by this Agreement shall not impair the rights of the Company
under, or cause any party to breach or default under any IP License, or cause material
additional fees to be due thereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Buyer Disclosure Schedule delivered by Buyer to the Company at or
prior to the execution of this Agreement (the “
Buyer Disclosure Schedule
”), Buyer and
Merger Subsidiary, jointly and severally, represent and warrant to the Company and each Principal
Stockholder as follows:
SECTION 5.01
Organization and Qualification; Subsidiaries
. Each of Buyer and Merger
Subsidiary is a limited partnership or corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization and has the
requisite power and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except where the failure
to be so organized, existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Buyer Material Adverse Effect (as
defined below). Each of Buyer and Merger Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a Buyer Material Adverse
Effect. The term “
Buyer Material Adverse Effect
” means any change, condition, circumstance
or effect that is, or is reasonably likely to be, materially adverse to the assets and liabilities
(taken together), business, financial condition or results of operations of the Buyer, Merger
Subsidiary and each of Buyer’s other subsidiaries, taken as a whole (other than changes,
conditions, circumstances or effects that are the result of (i) economic factors affecting the
economy or financial markets as a whole or generally affecting any of the industries and markets in
which Buyer, Merger Subsidiary or any of Buyer’s other subsidiaries operates, (ii) natural
disasters, acts of war, sabotage or terrorism, military actions or the escalation thereof, (iii)
any change in applicable laws, rules or regulations or accounting rules or (iv) actions
contemplated by the parties in connection with this Agreement or the announcement or performance of
this Agreement, except that the exclusions set forth in clauses (i), (ii) and (iii) shall only be
effective if the Buyer, Merger Subsidiary or Buyer’s other subsidiaries are not substantially,
disproportionately impacted in financial terms by such events when compared to other companies in
the industries in which the Buyer, Merger Subsidiary or Buyer’s other subsidiaries operate).
SECTION 5.02
Certificate of Incorporation and Bylaws
. Buyer has heretofore made available to the Company a complete and correct copy of the
Certificate of
28
Incorporation and the Bylaws, each as amended to date, of Merger Subsidiary. Such
Certificate of Incorporation and Bylaws are in full force and effect.
SECTION 5.03
Authority Relative to this Agreement
. Each of Buyer and Merger
Subsidiary has all necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated herein. The execution
and delivery of this Agreement by Buyer and Merger Subsidiary and the consummation by Buyer and
Merger Subsidiary of the transactions contemplated herein have been duly and validly authorized by
all necessary corporate or organizational action and no other corporate or organizational
proceedings on the part of Buyer or Merger Subsidiary are necessary to authorize this Agreement or
to consummate the transactions contemplated herein (other than, with respect to the Merger, the
filing and recordation of the appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by Buyer and Merger Subsidiary and,
assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Buyer and Merger Subsidiary, enforceable against Buyer and Merger
Subsidiary in accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and to
the effect of general principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
SECTION 5.04
No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Buyer and Merger Subsidiary do not, and
the performance of the transactions contemplated herein by Buyer and Merger Subsidiary will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws or equivalent
organizational documents of Buyer or Merger Subsidiary, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Buyer or any Merger Subsidiary or by
which any property or asset of Buyer or any Merger Subsidiary is bound or affected, or (iii) result
in any breach of or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under or give to others any
right of termination, amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance on any property or asset of Buyer or any Merger Subsidiary pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Buyer or such Merger Subsidiary is a party or by which Buyer or such Merger
Subsidiary or any property or asset of Buyer or such Merger Subsidiary is bound or affected, except
in the case of clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults
or other occurrences which would not prevent or delay consummation of the Merger in any material
respect, or otherwise prevent Buyer from performing its obligations under this Agreement in any
material respect, or would not, individually or in the aggregate, have a Buyer Material Adverse
Effect (provided that, for purposes of this SECTION 5.04(a), the definition of Buyer Material
Adverse Effect shall not include the exclusion in clause (iv) thereof).
(b) Except as set forth in SECTION 5.04(b) of the
Buyer Disclosure Schedule
, the
execution and delivery of this Agreement by Buyer and Merger Subsidiary do not, and the performance
of this Agreement by Buyer and Merger Subsidiary will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
29
Entity, except (i)
for (A) applicable requirements, if any, of the Exchange Act, Securities Act, state securities or
Blue Sky Laws and state takeover laws, (B) the pre-merger notification requirements of the HSR Act,
(C) filing and recordation of appropriate merger documents as required by the DGCL and (D)
applicable requirements, if any, of any non-United States competition, antitrust and investment
laws and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or other notifications, would not prevent or delay consummation of the Merger in
any material respect, or otherwise prevent Buyer or Merger Subsidiary from performing its
obligations under this Agreement in any material respect, or would not, individually or in the
aggregate, have a Buyer Material Adverse Effect (provided that, for purposes of this SECTION
5.04(b), the definition of Buyer Material Adverse Effect shall not include the exclusion in clause
(iv) thereof).
SECTION 5.05
Compliance
. Neither Buyer nor Merger Subsidiary is in conflict with, or
in default or violation of, (a) any material law, statute, ordinance, writ, injunction, settlement
agreement, rule, regulation, order, judgment or decree applicable to Buyer or Merger Subsidiary or
by which any property or asset of Buyer or Merger Subsidiary is bound or affected, or (b) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Buyer or Merger Subsidiary is a party or by which Buyer or Merger
Subsidiary or any property or asset of Buyer or Merger Subsidiary is bound or affected, except for
any such conflicts, defaults or violations that would not, individually or in the aggregate, have a
Buyer Material Adverse Effect.
SECTION 5.06
Securities Act
. Each of Buyer and Merger Subsidiary is an “accredited
investor” (as defined under the Securities Act and the rules and regulations promulgated
thereunder). Each of Buyer and Merger Subsidiary is acquiring the Shares purchased hereunder or
otherwise acquired pursuant hereto for its own account with the intention of holding such
securities for purposes of investment. Each of Buyer and Merger Subsidiary will acquire the Shares
purchased hereunder or otherwise acquired pursuant hereto in compliance with, and will not offer to
sell or otherwise dispose of any Shares so acquired by it in violation of, the registration
requirements of the Securities Act.
SECTION 5.07
Financing
. Buyer has delivered to the Company true and complete copies
of a commitment letter, which is attached hereto as Exhibit 5.07 (the “
Commitment Letter
”),
providing for the financing of the transactions contemplated by this Agreement (the
“
Financing
”). The Commitment Letter has not been amended or modified prior to the date of
this Agreement, and the commitment contained in the Commitment Letter has not been withdrawn or
rescinded in any respect. The Commitment Letter is in full force and effect. There are no
conditions precedent or
other contingencies related to the funding of the full amount of the Financing, other than as
set forth in the Commitment Letter. The aggregate proceeds contemplated by the Commitment Letter,
together with available cash of the Buyer, will be sufficient for Merger Subsidiary and the
Surviving Corporation to pay the aggregate Merger Consideration, all amounts which may become due
under SECTIONS 1.02(b), 2.05 or 2.06, and the repayment or refinancing of debt contemplated in this
Agreement or the Commitment Letter and to pay all related fees and expenses and to satisfy Buyer’s
and Merger Subsidiary’s other obligations hereunder.
30
SECTION 5.08
Brokers
. There is no investment banker, broker or finder which has been
retained by or is authorized to act on behalf of Buyer, Merger Subsidiary or any other subsidiary
of Buyer who might be entitled to any fee or commission from the Company, any Company Subsidiary,
Merger Subsidiary or Buyer or any of their affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 5.09
Vote Required
. No further vote of the holders of the outstanding shares
of common stock of Merger Subsidiary, par value $0.01 per share, is necessary to approve this
Agreement and the transactions contemplated hereby.
SECTION 5.10
Ownership of Shares
. As of the date of this Agreement, neither Buyer,
nor any of its respective subsidiaries nor, to the best of its knowledge, any of its respective
affiliates or associates (as such terms are defined under the Exchange Act) (i) beneficially owns
(such term having the meaning in this Agreement as is ascribed under Regulation 13D under the
Exchange Act), directly or indirectly or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in case of either
clause (i) or (ii), any Shares.
ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01
Conduct of the Company
. The Company covenants and agrees that, between
the date of this Agreement and the Effective Time, unless the Buyer shall have consented in writing
(such consent not to be unreasonably withheld) or this Agreement expressly contemplates or permits,
the businesses of the Company and the Company Subsidiaries shall, in all material respects, be
conducted, and the Company and the Company Subsidiaries shall not take any material action except,
in the ordinary course of business, and the Company shall use commercially reasonable efforts to
preserve substantially intact its business organization, to keep available the services of its and
the Company Subsidiaries’ current officers, employees and consultants and to preserve its and the
Company Subsidiaries’ relationships with customers, suppliers, distributors, creditors,
lessors, licensors, licensees, agents, employees, business associates and other persons with which
it or any of its subsidiaries has significant business relations. The Company and the Company
Subsidiaries shall use commercially reasonable efforts to maintain and keep their properties and
assets in such condition as is required for use in the business and maintain in effect all material
governmental permits pursuant to which the Company or any of the Company Subsidiaries currently
operates. By way of amplification and not limitation, except (i) as contemplated or permitted by
this Agreement or (ii) as set forth in SECTION 6.01 of the Company Disclosure Schedule, neither the
Company nor any of the Company Subsidiaries shall, between the date of this Agreement and the
Effective Time, directly or indirectly do, or propose or agree to do, any of the following without
the prior written consent of the Buyer (such consent not to be unreasonably withheld):
31
(a) except to the extent required to comply with its obligations hereunder or required by law,
amend or otherwise change the Certificate of Incorporation or Bylaws of the Company;
(b) repurchase, redeem or otherwise acquire any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its capital stock or make any
other change in its capital structure;
(c) directly or indirectly (i) issue or sell, or authorize the issuance or sale of, any shares
of capital stock of any class of the Company or any of the Company Subsidiaries, or any options
(other than the grant of options to Buyer and/or Merger Subsidiary or in the ordinary course of
business to employees or the grant of options previously disclosed by the Company to Buyer prior to
the date of this Agreement including, without limitation, the Company Stock Options and Warrants),
warrants or rights to acquire capital stock of the Company, or other convertible or exchangeable
securities of the Company or any of the Company Subsidiaries (other than the issuance and sale of
shares of capital stock or convertible securities (A) in connection with the exercise of options or
other rights to purchase Shares outstanding as of the date of this Agreement (including, without
limitation, the Company Stock Options and Warrants) or granted hereafter in accordance with the
foregoing and in accordance with the terms of such options or rights or (B) otherwise permitted to
be issued pursuant to this Agreement); or (ii) sell, lease, pledge, mortgage, encumber or otherwise
dispose of any assets of it or any of the Company Subsidiaries, except for sales in the ordinary
course of business of inventory (including, without limitation, work in process and finished goods)
or other sales which, individually, do not exceed $10 million or which, in the aggregate, do not
exceed $20 million;
(d) declare, set aside or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock (other than any dividend or
distribution payable solely to the Company or a Company Subsidiary or minority owners of a Company
Subsidiary that collectively own less than 5% of the stock of such Company Subsidiary in the
aggregate);
(e) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly
or indirectly, any of its capital stock other than as permitted under certain Company Stock Option
agreements and the Warrant Agreement to effect cashless exercises;
(f) (i) acquire (for cash or shares of stock) (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership, other business
organization or any division thereof or any assets (other than raw materials and supplies), except
for such acquisitions which, individually, do not exceed $10 million or which, in the aggregate, do
not exceed $20 million; or (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person (other than the Company or a Company Subsidiary), or make any
loans or advances, except borrowings, guarantees, extensions of letters of credit and bank
guarantees, and other incurrence of indebtedness under existing credit facilities of the Company or
any Company Subsidiary in the ordinary course of business and except for the refinancing of
existing indebtedness;
32
(g) except as required by applicable law, announce, agree to provide, enter into, become
subject to, amend or terminate any employment, labor, union, or professional service contract, or
any bonus, severance, change of control, pension, insurance, profit sharing, incentive, deferred
compensation, severance pay, retirement, hospitalization, employee benefit, or other similar plan,
program, policy, arrangement or agreement (except such amendments thereto or terminations thereof
as are necessary or advisable to avoid adverse tax consequences, but only to the extent such
amendments or terminations do not cause the Company to incur any additional obligations in excess
of $1,000,000 in the aggregate), or increase the compensation or benefits payable or to become
payable to its senior managers, except for offers of employment or compensation or benefits
increases in the ordinary course of business in accordance with past practice (provided that prompt
notice of such offer of employment or increase in compensation or benefits shall be provided to
Buyer) or under commitments existing prior to or as of the date hereof;
(h) establish, amend or terminate any Plan or Foreign Plan or any plan, program or agreement
that would be a Plan or Foreign Plan if it were in existence as of the date of this Agreement,
except in each case as required by law or the terms of any Plan or Foreign Plan or as necessary or
advisable to avoid adverse tax consequences (but only to the extent such amendments or terminations
to avoid adverse tax consequences do not cause the Company to incur any additional obligations in
excess of $1,000,000 in the aggregate);
(i) sell, transfer or lease any properties or assets to, or enter into any agreement,
arrangement or transaction (other than as a result of performance under agreements or commitments
existing as of the date hereof and set forth in the Company Disclosure Schedule or expressly
disclosed in the Company SEC Reports) with, any affiliate other than transactions among the Company
and the Company Subsidiaries;
(j) materially modify, amend in any material respect or terminate any Material Contract,
except as necessary for compliance with applicable law or to avoid adverse tax consequences (but
only to the extent such modifications, amendments or terminations to avoid adverse tax consequences
do not cause the Company to incur any additional obligations in excess of $1,000,000 in the
aggregate), or enter into any agreement that would be a Material Contract of the type described in
SECTION 4.16, in each case other than in the ordinary course of business;
(k) make any loans, advances or capital contributions to, or investments in, any other person
in the aggregate, in excess of $2,000,000, other than to or in the Company or a Company Subsidiary;
(l) fail to keep in full force and effect the insurance policies held by the Company and the
Company Subsidiaries and covering the Company and the Company Subsidiaries and their businesses as
of the date hereof (or fail to obtain replacement policies providing substantially the same
coverage);
(m) (i) make or change any material Tax election or change any method or significant policy or
practice of accounting; (ii) enter into any settlement or compromise of any material Tax liability
(including any audits, examinations or litigations with respect to Taxes);
33
(iii) file any amended
Tax Return with respect to any material Tax; (iv) change any annual Tax accounting period; (v)
enter into any closing agreement relating to any material Tax; or (vi) surrender any right to claim
a material Tax refund;
(n) materially change the procedures for the collection of accounts receivable or the payment
of accounts payable or change the accounting procedures relating to the receivables and payables
other than in the ordinary course of business;
(o) take any other action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice and other than as required by law or changes in GAAP,
with respect to accounting policies or procedures;
(p) cancel any debts to, or waive any claims or rights of, the Company (other than ordinary
course customer accommodations consistent with past practice) in excess of $2,000,000 in the
aggregate, or waive, settle or compromise, or permit any settlement or compromise of, any
litigation, arbitration, claim, suit, action, investigation or proceeding pending or threatened
against the Company or any Company Subsidiary, or of which the Company or any Company Subsidiary or
their assets are subject, in excess of $2,000,000 in the aggregate or in any manner that materially
impacts the ability of the Company and the Company Subsidiaries to conduct their business;
(q) incur Company Transaction Expenses in an aggregate amount in excess of the Assumed CTE
Amount, unless the Company obtains a new or amended opinion from UBS (or another nationally
recognized investment bank) to the effect that the Merger Consideration to be paid to the
stockholders of the Company (other than the Principal Stockholders) is fair, from a financial point
of view, to such stockholders after giving effect to the actual amount of Company Transaction
Expenses; or
(r) enter into or amend any contract, agreement, commitment or arrangement to effectuate any
prohibited matter set forth in this SECTION 6.01.
SECTION 6.02
Access to Information
. During the term of this Agreement, the Company
will give Buyer, its officers, directors, employees, counsel, financial advisors, auditors and
other authorized representatives reasonable access to the offices, properties, books and records of
the Company and the Company
Subsidiaries, will furnish to Buyer, its counsel, financial advisors, auditors and authorized
representatives such financial and operating data and other information as such persons may
reasonably request and will instruct the Company’s employees, counsel and financial advisors to
cooperate with Buyer in its reasonable investigation of the business of the Company and the Company
Subsidiaries, in each case subject to any restrictions on such access imposed by law and subject to
the terms of the Confidentiality Agreement, dated March 8, 2005, between the Company and First
Reserve Corporation (the “
Confidentiality Agreement
”). During such period, the Company
shall (and shall cause the Company Subsidiaries to) furnish promptly to Buyer all information
concerning its business, properties and personnel as Buyer may reasonably request, including but
not limited to financial reports generated in the ordinary course of business, subject to the terms
of the Confidentiality Agreement. The Company shall furnish promptly to Buyer a copy of each
report, schedule,
34
registration statement and other document filed by it or the Company Subsidiaries
during such period pursuant to the requirements of federal or state securities laws.
SECTION 6.03
No Solicitation
.
(a) Subject to SECTION 6.03(b) below, the Company shall not, and shall cause its subsidiaries
and each officer, director or employee of the Company, and any investment banker, attorney or other
representative of the Company not to, take or cause, directly or indirectly, any of the following
actions after the date hereof with any party other than Buyer, Merger Subsidiary or any of their
respective designees or representatives: (i) solicit, knowingly encourage, initiate or participate
in any negotiations, inquiries or discussions with respect to any offer, indication or proposal to
acquire more than 20% of its business, assets or capital stock whether by merger, consolidation,
other business combination, purchase of assets, tender or exchange offer or otherwise (each of the
foregoing, an “
Acquisition Proposal
”) or (ii) disclose, in connection with an Acquisition
Proposal, any information or provide access to its properties, books or records, except as required
by law or pursuant to a governmental request for information.
(b) Notwithstanding anything to the contrary contained in SECTION 6.03(a) or elsewhere in this
Agreement, prior to the earlier of the Stock Purchase Closing and the Effective Time, the Company
may, to the extent the Company’s Board of Directors (the “
Board
”), after consultation with
outside counsel, determines in good faith that it would be required to do so in the proper exercise
of its fiduciary duties, participate in discussions or negotiations with, and furnish non-public
information and afford access to the properties, books, records, officers, employees and
representatives of the Company to any person, entity or group after such person, entity or group
has delivered to the Company, in writing, a bona fide unsolicited Acquisition Proposal for a
majority of the Company’s business assets or capital stock which the Board, after consultation with
and taking into account the advice of UBS or another independent, nationally recognized financial
advisor, determines in good faith that, if consummated, would be more favorable to the Company’s
stockholders from a financial point of view than the transactions contemplated by this Agreement (a
“
Superior Proposal
”). In the event the Company receives a Superior Proposal prior to the
earlier of the Stock Purchase Closing and the Effective Time, nothing contained in this Agreement
(but subject to the terms of this
paragraph (b)) will prevent the Company or any of its stockholders (including, without
limitation, any of the Principal Stockholders) from executing or entering into an agreement
relating to such Superior Proposal or prevent the Board from recommending such Superior Proposal to
its stockholders, if the Board, after consultation with outside counsel, determines in good faith
that it would be required to do so in the proper exercise of its fiduciary duties; in such case,
the Board may withdraw, modify or refrain from making its recommendation of the transactions
contemplated by this Agreement, and, to the extent it does so, the Company may refrain from
calling, providing notice of or holding a meeting of its stockholders to adopt this Agreement or
from soliciting proxies or consents to secure the vote or written consent of its stockholders to
adopt this Agreement, if any such meeting, vote and/or consent is otherwise required, and may
terminate this Agreement;
provided
,
however
, that the Company shall provide Buyer
at least two business days prior written notice (together with a complete copy of the relevant
agreement and any subsequent amendment thereto) of the Company’s intention to execute or enter into
an agreement relating to such Superior Proposal and shall provide Buyer the
35
opportunity to submit
revised proposals to it during this period of at least two business days. Notwithstanding anything
to the contrary contained in this SECTION 6.03 or elsewhere in this Agreement or the
Confidentiality Agreement, prior to the Effective Time, the Company may, in connection with an
unsolicited Acquisition Proposal, refer the third party making such unsolicited Acquisition
Proposal to this SECTION 6.03 and SECTION 10.03(b) and make a copy of this SECTION 6.03 and SECTION
10.03(b) available to a third party.
(c) Upon receiving any Acquisition Proposal, the Company shall promptly notify Buyer thereof
and provide to Buyer a copy of the correspondence and documents, if any, related to such
Acquisition Proposal.
SECTION 6.04
Notices of Certain Events
. The Company shall promptly notify Buyer of,
and, except as prohibited by applicable law, provide the correspondence and documents, if any,
related to:
(a) any notice or other communication from any person alleging that the consent of such person
is or may be required in connection with the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory agency or authority
in connection with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced or, to the best of its
knowledge threatened, against the Company or any Company Subsidiary which would reasonably be
expected to interfere with the consummation of the transactions contemplated by this Agreement.
SECTION 6.05
Takeover Statutes
. If any state takeover statute shall become applicable
to the transactions contemplated hereby, the Company and the members of the Board, subject to their
fiduciary duties and to the extent applicable under such state takeover statute, shall grant such
approvals and take such actions as are necessary so that the transactions contemplated hereby may
be eliminate or minimize the effects of such state takeover statute on the transactions contemplated
hereby.
SECTION 6.06
Section 16 Matters
. Prior to the Stock Purchase Closing Date, the Board
shall use its reasonable best efforts to take all such steps as may be required and permitted to
cause the transactions contemplated by this Agreement, including any dispositions of Shares
(including derivative securities with respect to such Shares) by each individual who is or will be
subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the
Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
SECTION 6.07
Financing
. Between the date hereof and the Stock Purchase Closing Date,
the Company shall provide to Buyer, and shall cause the Company Subsidiaries to, and shall use its
commercially reasonable efforts to cause the respective officers, employees, representatives and
advisors, including legal and accounting, of the Company and the Company Subsidiaries to, provide
to Buyer, all cooperation reasonably requested by Buyer that is necessary, proper or advisable in
connection with the Financing, including (i) participation in
36
meetings, presentations, road shows,
due diligence sessions and sessions with rating agencies, (ii) using its commercially reasonable
efforts to assist with the preparation of materials for rating agency presentations, offering
documents, private placement memoranda, bank information memoranda, prospectuses and similar
documents required in connection with the Financing, (iii) using its commercially reasonable
efforts to furnish Buyer and its Financing sources with financial and other pertinent information
regarding the Company as may be reasonably requested by Buyer, including all financial statements
and financial data of the type required by Regulation S-X and Regulation S-K under the Securities
Act and of type and form customarily included in offering memoranda for private placements under
Rule 144A of the Securities Act, to consummate the offerings of debt securities contemplated by the
Financing at the time during the Company’s fiscal year such offerings will be made, (iv) using
commercially reasonable efforts to obtain accountants’ comfort letters, legal opinions, surveys and
title insurance as reasonably requested by Buyer, (v) using its commercially reasonable efforts to
provide monthly financial statements (excluding footnotes) within 25 days of the end of each month
prior to the Stock Purchase Closing Date, (vi) using its commercially reasonable efforts to take
all actions necessary and appropriate to (A) permit the prospective lenders involved in the
Financing to evaluate the Company’s current assets, cash management and accounting systems,
policies and procedures relating thereto for the purposes of establishing collateral arrangements
and (B) establish bank and other accounts and blocked account agreements and lock box arrangements
effective with respect to the period commencing at the Merger Closing, and (vii) using its
commercially reasonable efforts to facilitate the repayment of Company debt on the Merger Closing
Date using available cash of the Company. The Company hereby consents to the use of its and the
Company Subsidiaries’ logos in connection with the Financing. Notwithstanding any of the
foregoing, the Company shall not be required to provide any assistance or other cooperation, or
take any other action, under this SECTION 6.07 which would materially interfere with the business
or operations of the Company or the Company Subsidiaries or violate any law, rule or regulation
applicable to the Company or
any Company Subsidiary. If this Agreement is terminated without the Stock Purchase being
completed or the Merger being consummated, Buyer shall promptly, upon request by the Company,
reimburse the Company for all out of pocket costs and expenses incurred by the Company or any of
the Company Subsidiaries in connection with this SECTION 6.07.
SECTION 6.08
Houston Facility Permits
. As soon as practicable after the date hereof,
the Company shall (i) commence the process of determining whether one or more air permits are
required for its facility in Houston, Texas, and, if so, commence the process of obtaining such air
permit(s), and (ii) commence the process of obtaining a storm water permit for such facility.
37
ARTICLE VII
COVENANTS OF BUYER
SECTION 7.01
Confidentiality
. Buyer shall ensure that all information obtained by or
on behalf of Buyer (including by Merger Subsidiary) in connection with the Transaction shall be
kept confidential in accordance with the Confidentiality Agreement.
SECTION 7.02
Obligations of Merger Subsidiary and the Surviving Corporation
. Buyer
will take all action necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement.
Buyer will take all action necessary to cause the Surviving Corporation to perform its obligations
under this Agreement as of and after the Effective Time.
SECTION 7.03
Director and Officer Liability.
(a) The Certificate of Incorporation and Bylaws of the Surviving Corporation shall contain the
provisions with respect to indemnification and limitation of liability set forth in the Certificate
of Incorporation and Bylaws of the Company on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of six years after the Effective Time
in any manner that would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of the Company in respect of actions or
omissions occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is required by law.
(b) From and after the Effective Time, Buyer and the Surviving Corporation shall indemnify,
defend and hold harmless the present and former officers and directors of the Company
(collectively, the “
Indemnified Parties
”) against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of the Surviving
Corporation (which approval shall not unreasonably be withheld), or otherwise incurred in
connection with any claim, action, suit, proceeding or investigation (a “
Claim
”), based in
whole or in part by reason of the fact that such person is or was a director or officer of the
Company and arising out of actions, events or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this Agreement), in each case to
the full extent permitted under the DGCL (and shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the fullest extent
permitted under the DGCL, upon receipt from the Indemnified Party to whom expenses are advanced of
the undertaking to repay such advances contemplated by Section 145(e) of the DGCL).
(c) Without limiting the foregoing, in the event any Claim is brought against any Indemnified
Party (whether arising before or after the Effective Time) after the Effective Time (i) the
Indemnified Parties may retain the Company’s regularly engaged independent legal counsel or other
independent legal counsel satisfactory to them, provided that such other counsel shall be
reasonably acceptable to the Surviving Corporation, (ii) the Surviving Corporation shall
38
pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received and (iii) the Surviving Corporation will use its reasonable best efforts to
assist in the vigorous defense of any such matter, provided that the Surviving Corporation shall
not be liable for any settlement of any Claim effected without its written consent, which consent
shall not be unreasonably withheld. Any Indemnified Party wishing to claim indemnification under
this SECTION 7.03 upon learning of any such Claim shall notify the Surviving Corporation (although
the failure to so notify the Surviving Corporation shall not relieve the Surviving Corporation from
any liability which the Surviving Corporation may have under this SECTION 7.03, except to the
extent such failure materially prejudices the Surviving Corporation’s position with respect to such
claim), and shall deliver to the Surviving Corporation the undertaking contemplated by Section
145(e) of the DGCL. The Indemnified Parties as a group may retain no more than one law firm (in
addition to local counsel) to represent them with respect to each such matter unless there is,
under applicable standards of professional conduct (as determined by counsel to the Indemnified
Parties), an actual conflict between the interests of any two or more Indemnified Parties, in which
event such additional counsel as may be required may be retained by the Indemnified Parties.
(d) For a period of six years after the Effective Time, the Surviving Corporation shall cause
to be maintained in effect the liability insurance policies for directors and officers which are
currently maintained by the Company with respect to claims arising from facts or events which
occurred at or before the Effective Time;
provided
that the Surviving Corporation may
substitute therefor policies of substantially equivalent coverage and amounts (including, at the
Surviving Corporation’s option, “tail” coverage policies) containing terms no less favorable to
such former directors or officers.
(e) Each Indemnified Party shall have rights as a third party beneficiary under this SECTION
7.03 as separate contractual rights for his or her benefit and such right shall be enforceable by
such Indemnified Party, his heirs and personal representatives and shall be binding on Buyer and
the Surviving Corporation and their respective successors and assigns. If requested by an
Indemnified Party, Buyer or the Surviving Corporation shall enter into an
indemnity agreement with such Indemnified Party evidencing Buyer’s and the Surviving
Corporation’s obligations under this SECTION 7.03.
SECTION 7.04
Employee Benefits
.
(a) Except as otherwise may be provided pursuant to a collective bargaining agreement, for at
least one year after the Effective Time, Buyer shall cause the Surviving Corporation to maintain or
provide the employees of the Surviving Corporation and its subsidiaries with employee benefits
comparable, in the aggregate, to the benefits provided to such employees by the Company and the
Company Subsidiaries on the date hereof (excluding, in each case, equity incentives and retiree
welfare benefits). Notwithstanding the foregoing, nothing herein shall require the Buyer or the
Surviving Corporation and its subsidiaries to (i) provide or consider any employee benefits related
to or denominated in the equity securities of the Company or the Surviving Corporation; (ii)
continue or maintain any particular Plan, or (iii) employ or continue to employ any person. For
the period beginning at the Effective Time and ending one year after such time, Buyer shall cause
the Surviving Corporation to maintain in full force and effect and to honor the severance policies
and commitments of the Company and the
39
Company Subsidiaries listed on SECTION 7.04(a) of the
Company Disclosure Schedule. Without limiting the generality of the foregoing, Buyer shall, or
shall cause the Surviving Corporation to cause all current deductibles under the Company’s health
and welfare plans to be recognized by the Surviving Corporation’s health and welfare plan
providers. Buyer shall cause the Surviving Corporation to honor all collective bargaining
agreements by which the Company or any of the Company Subsidiaries is bound.
(b) For purposes of determining eligibility to participate, vesting and accrual (other than
the accrual of benefits under any defined benefit pension plan) where length of service is relevant
under any employee benefit plan or arrangement of Buyer, the Surviving Corporation or any of their
respective subsidiaries, employees of the Company and the Company Subsidiaries as of the Effective
Time shall receive service credit for service with the Company and the Company Subsidiaries to the
same extent such service credit was granted under the Company’s benefit plans, subject, in the case
of defined benefit arrangements, to offsets for previously accrued benefits and no duplication of
benefits.
(c) Between the date of this Agreement and the Effective Time, the Company will coordinate
with Buyer regarding the implementation of any changes to any Plans that are nonqualified deferred
compensation plans (within the meaning of Code Section 409A) which the Company determines to be
necessary to comply with Code Section 409A. Following the Effective Date, Buyer shall use
reasonable efforts to cause the Surviving Corporation to amend, reform or supplement the terms of
any nonqualified deferred compensation plan (within the meaning of Code Section 409A and related
guidance) covering any Employee in a manner intended to comply with, and avoid adverse tax
consequences under, Code Section 409A, while preserving to the extent practicable the intended
treatment of the original plan.
(d) Nothing herein is intended to, or shall be construed to, create any third party
beneficiary rights of any kind or nature, including, without limitation, the right of any Employee
or director or other individual to seek to enforce any right to compensation, benefits, or any
other right or privilege of employment with the Buyer or any of its affiliates.
SECTION 7.05
Notices of Certain Events
. Buyer shall promptly notify the Company of,
and, except as prohibited by applicable law, provide the correspondence and documents, if any,
related to:
(a) any notice or other communication from any person alleging that the consent of such person
is or may be required in connection with the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory agency or authority
in connection with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced or, to the best of its
knowledge threatened, against the Buyer or the Merger Subsidiary which would reasonably be expected
to interfere with the consummation of the transactions contemplated by this Agreement.
40
ARTICLE VIII
COVENANTS OF BUYER AND THE COMPANY
SECTION 8.01
Reasonable Best Efforts
. Subject to the terms and conditions of this
Agreement, each of the Company, Buyer and Merger Subsidiary will use its reasonable best efforts to
promptly take, or cause to be taken, all action and to promptly do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations (including, without
limitation, under the HSR Act and the competition laws under which the filings set forth in SECTION
5.04(b) of the Buyer Disclosure Schedule are required) to consummate the transactions contemplated
by this Agreement (including, without limitation, making appropriate disclosures after the
Effective Time to the former shareholders of the Company).
SECTION 8.02
Certain Filings
. The Company and Buyer shall cooperate with one another
(a) in determining whether any action by or in respect of, or filing with, any governmental body,
agency or official, or authority or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts in connection with the consummation of the
transactions contemplated by this Agreement and (b) in seeking any such actions, consents,
approvals or waivers or making any such filings (including pursuant to the HSR Act and the
competition laws under which the filings set forth in SECTION 5.04(b) of the Buyer Disclosure
Schedule are required), furnishing information required in connection therewith and seeking timely
to obtain any such actions, consents, approvals or waivers.
SECTION 8.03
Public Announcements.
Buyer and the Company will consult with each other before making any filings with any third
party and/or Governmental Entity or issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and will not make any filings
with any third party and/or Governmental Entity or issue any such press release or make any such
public statement prior to such consultation, except as may be required by applicable law or any
listing agreement with any national securities exchange. Any such press release or public
statement shall comply with the Exchange Act.
ARTICLE IX
CONDITIONS TO THE TRANSACTION
SECTION 9.01
Conditions to the Obligations of Each Party to Consummate the Stock
Purchase
. The obligations of each of the Principal Stockholders, Buyer and Merger Subsidiary
to consummate the Stock Purchase are subject to the satisfaction or waiver of the following
conditions:
(a) the applicable waiting period under the HSR Act relating to the Stock Purchase shall have
expired or been terminated;
41
(b) no Governmental Entity or federal or state court of competent jurisdiction shall have
enacted, issued or enforced any statute, regulation, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and which prohibits consummation of
the Stock Purchase or the Merger or has the effect of making the purchase of Shares illegal
(provided that each of the Company, Buyer and Merger Subsidiary shall use its reasonable best
efforts to cause any such decree, judgment, injunction or other order to be vacated or lifted);
(c) with respect to the obligations of Buyer and Merger Subsidiary, each of the
representations and warranties of the Company contained in this Agreement shall be true and correct
in all respects (determined, other than with respect to the first sentence of SECTION 4.09, without
regard to any materiality or “Company Material Adverse Effect” qualifier therein) as of the Stock
Purchase Closing as though made at and as of the Stock Purchase Closing, except (i) that those
representations and warranties which address matters only as of a particular date need be true and
correct only as of such date and (ii) to the extent that the failures in the aggregate of the
representations and warranties of the Company contained in this Agreement to be true and correct
(determined, other than with respect to the first sentence of SECTION 4.09, without regard to any
materiality or “Company Material Adverse Effect” qualifier therein) would not reasonably be
expected to have, and have not had, a Company Material Adverse Effect;
(d) with respect to the obligations of Buyer and Merger Subsidiary, the Company shall have
performed and complied in all material respects with all agreements and
covenants contained in this Agreement required to be performed or complied with by it at or
prior to the Stock Purchase Closing;
(e) with respect to the obligations of Buyer and Merger Subsidiary, the Company shall have
delivered to Buyer a certificate of the Company signed by an officer of the Company certifying the
matters set forth in SECTIONS 9.01(c) and 9.01(d), and a certificate signed by the Secretary of the
Company as to the incumbency of the officers of the Company executing this Agreement;
(f) Buyer, Merger Subsidiary and the Company shall have obtained prior to the Stock Purchase
Closing the approvals set forth on SECTION 5.04(b) of the Buyer Disclosure Schedule (but only if
marked with an asterisk (*));
(g) with respect to the obligations of Buyer and Merger Subsidiary, the Financing shall have
been consummated on the terms and conditions contemplated in the Commitment Letter or upon terms
and conditions which are substantially equivalent thereto, provided that Buyer hereby irrevocably
and unconditionally waives, as of the close of business on October 31, 2005, the condition
contained in this SECTION 9.01(g) to the extent not satisfied prior to such time;
(h) with respect to the obligations of Buyer and Merger Subsidiary, the Company shall have
delivered to Buyer the financial statements and financial data listed on the
Financing
Deliveries Schedule
attached hereto prior to the delivery date specified for such financial
statements and/or financial data set forth on the
Financing Deliveries Schedule
, in each
case to the extent required by Regulation S-X and Regulation S-K under the Securities Act and
42
customarily included in offering memoranda for private placements of debt securities under Rule
144A of the Securities Act;
(i) with respect to the obligations of Buyer and Merger Subsidiary, the Company shall have
delivered to Buyer an affidavit dated as of the Stock Purchase Closing Date, sworn under penalties
of perjury and in form and substance similar to that described in Treasury Regulations issued
pursuant to Section 1445 of the Code and Treasury Regulations Section 1.897-2(h) (but not including
the applicable provisions relating to filing requirements or those that would otherwise be required
if Buyer were a foreign person), stating that the Company is not and has not been, during the
preceding five-year period, a United States real property holding corporation;
(j) with respect to the obligations of each of the Principal Stockholders, each of the
representations and warranties of Buyer contained in this Agreement shall be true and correct in
all respects (determined without regard to any materiality or “Buyer Material Adverse Effect”
qualifier therein) as of the Stock Purchase Closing as though made at and as of the Stock Purchase
Closing, except (i) that those representations and warranties which address matters only as of a
particular date need be true and correct only as of such date and (ii) to the extent that the
failures in the aggregate of the representations and warranties of Buyer contained in this
Agreement to be true and correct (determined without regard to any materiality or “Buyer Material
Adverse Effect” qualifier therein) would not reasonably be expected to have, and have not had, a
Buyer Material Adverse Effect;
(k) with respect to the obligations of each of the Principal Stockholders, each of Buyer and
Merger Subsidiary shall have performed and complied in all material respects with all agreements
and covenants contained in this Agreement required to be performed or complied with by it at or
prior to the Stock Purchase Closing;
(l) with respect to the obligations of each of the Principal Stockholders, Buyer and Merger
Subsidiary shall have delivered to the Company a certificate of each of Buyer and Merger Subsidiary
signed by an officer of each of Buyer and Merger Subsidiary certifying the matters set forth in
SECTIONS 9.01(j) and (k), and a certificate signed by the Secretary of each of Buyer and Merger
Subsidiary as to the incumbency of the officers of each of Buyer and Merger Subsidiary executing
this Agreement;
(m) the number of Principal Stockholder Shares held by the Principal Stockholders as of
immediately prior to the Stock Purchase Closing shall be greater than or equal to the result of (i)
90% of the Shares then outstanding, minus (ii) 7,710 Shares; and
(n) with respect to the obligations of Buyer and Merger Subsidiary, no Company Material
Adverse Effect shall have occurred since December 31, 2004 (other than any change, condition,
circumstance or effect expressly disclosed in any of the Company SEC Reports filed with the SEC
prior to the date hereof and/or the Company Disclosure Schedule and/or of which Buyer or Merger
Subsidiary has actual knowledge as of the date hereof).
SECTION 9.02
Conditions to the Obligations of Each Party to Consummate the Merger
.
The obligations of each of the Company, Buyer and Merger
43
Subsidiary to consummate the Merger are
subject to the satisfaction or waiver of the condition set forth in SECTION 9.02(a) below and, if
but only if the Stock Purchase has not previously occurred, the conditions set forth in SECTIONS
9.02(b) through (m):
(a) this Agreement shall have been approved and adopted by the stockholders of the Company in
accordance with the DGCL, or Merger Subsidiary shall own 90% or more of the outstanding Shares
immediately prior to the Effective Time;
(b) the applicable waiting period under the HSR Act relating to the Merger shall have expired
or been terminated;
(c) no Governmental Entity or federal or state court of competent jurisdiction shall have
enacted, issued or enforced any statute, regulation, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and which prohibits consummation of
the Merger or has the effect of making the purchase of Shares illegal (provided that each of the
Company, Buyer and Merger Subsidiary shall use its reasonable best efforts to cause any such
decree, judgment, injunction or other order to be vacated or lifted);
(d) with respect to the obligations of Buyer and Merger Subsidiary, each of the
representations and warranties of the Company contained in this Agreement shall be true and correct
in all respects (determined, other than with respect to the first sentence of SECTION 4.09, without
regard to any materiality or “Company Material Adverse Effect” qualifier therein)
as of the Merger Closing as though made at and as of the Merger Closing, except (i) that those
representations and warranties which address matters only as of a particular date need be true and
correct only as of such date and (ii) to the extent that the failures in the aggregate of the
representations and warranties of the Company contained in this Agreement to be true and correct
(determined, other than with respect to the first sentence of SECTION 4.09, without regard to any
materiality or “Company Material Adverse Effect” qualifier therein) would not reasonably be
expected to have, and have not had, a Company Material Adverse Effect;
(e) with respect to the obligations of Buyer and Merger Subsidiary, the Company shall have
performed and complied in all material respects with all agreements and covenants contained in this
Agreement required to be performed or complied with by it at or prior to the Merger Closing;
(f) with respect to the obligations of Buyer and Merger Subsidiary, the Company shall have
delivered to Buyer a certificate of the Company signed by an officer of the Company certifying the
matters set forth in SECTIONS 9.02(d) and 9.02(e), and a certificate signed by the Secretary of the
Company as to the incumbency of the officers of the Company executing this Agreement;
(g) Buyer, Merger Subsidiary and the Company shall have obtained prior to the Merger Closing
the approvals set forth on SECTION 5.04(b) of the Buyer Disclosure Schedule (but only if marked
with an asterisk (*));
(h) with respect to the obligations of Buyer and Merger Subsidiary, the Financing shall have
been consummated on the terms and conditions contemplated in the Commitment Letter or upon terms
and conditions which are substantially equivalent thereto,
44
provided that each of Buyer and Merger
Subsidiary hereby irrevocably and unconditionally waives, as of the close of business on October
31, 2005, the condition contained in this SECTION 9.02(h) to the extent not satisfied prior to such
time;
(i) with respect to the obligations of Buyer, the Company shall have delivered to Buyer the
financial statements and financial data listed on the
Financing Deliveries Schedule
attached hereto prior to the delivery date specified for such financial statements and/or financial
data set forth on the
Financing Deliveries Schedule
, in each case to the extent required by
Regulation S-X and Regulation S-K under the Securities Act and customarily included in offering
memoranda for private placements of debt securities under Rule 144A of the Securities Act;
(j) with respect to the obligations of Buyer, the Company shall have delivered to Buyer an
affidavit dated as of the Merger Closing Date, sworn under penalties of perjury and in form and
substance similar to that described in Treasury Regulations issued pursuant to Section 1445 of the
Code and Treasury Regulations Section 1.897-2(h) (but not including the applicable provisions
relating to filing requirements or those that would otherwise be required if Buyer were a foreign
person), stating that the Company is not and has not been, during the preceding five-year period, a
United States real property holding corporation;
(k) with respect to the obligations of the Company, each of the representations and warranties
of Buyer contained in this Agreement shall be true and correct in all respects (determined without
regard to any materiality or “Buyer Material Adverse Effect” qualifier therein) as of the Merger
Closing as though made at and as of the Merger Closing, except (i) that those representations and
warranties which address matters only as of a particular date need be true and correct only as of
such date and (ii) to the extent that the failures in the aggregate of the representations and
warranties of Buyer contained in this Agreement to be true and correct (determined without regard
to any materiality or “Buyer Material Adverse Effect” qualifier therein) would not reasonably be
expected to have, and have not had, a Buyer Material Adverse Effect;
(l) with respect to the obligations of the Company, each of Buyer and Merger Subsidiary shall
have performed and complied in all material respects with all agreements and covenants contained in
this Agreement required to be performed or complied with by it at or prior to the Merger Closing;
(m) with respect to the obligations of the Company, Buyer and Merger Subsidiary shall have
delivered to the Company a certificate of each of Buyer and Merger Subsidiary signed by an officer
of each of Buyer and Merger Subsidiary certifying the matters set forth in SECTIONS 9.02(k) and
9.02(l), and a certificate signed by the Secretary of each of Buyer and Merger Subsidiary as to the
incumbency of the officers of each of Buyer and Merger Subsidiary executing this Agreement; and
(n) with respect to the obligations of Buyer and Merger Subsidiary, no Company Material
Adverse Effect shall have occurred since December 31, 2004 (other than any change, condition,
circumstance or effect expressly disclosed in any of the Company SEC
45
Reports filed with the SEC
prior to the date hereof and/or the Company Disclosure Schedule and/or of which Buyer or Merger
Subsidiary has actual knowledge as of the date hereof).
ARTICLE X
TERMINATION; EXPENSES
SECTION 10.01
Termination
. This Agreement may be terminated and the Transaction
abandoned at any time prior to the earlier of the Stock Purchase Closing and the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the Company):
(a) by mutual written consent of the Company and Buyer;
(b) by either Buyer or the Company, if any permanent injunction or action by any Governmental
Entity preventing the consummation of the Stock Purchase or the Merger shall have become final and
nonappealable;
(c) by either Buyer or the Company, if neither the Stock Purchase nor the Merger shall have
occurred before November 30, 2005 (the “
Termination Date
”);
provided
that (i) the
Company may elect, in its sole discretion by providing written notice of such election to Buyer, to
extend the Termination Date to December 31, 2005, if any of the conditions set forth in SECTION
9.01(f), 9.01(h), 9.02(g) and/or 9.02(i) have not been satisfied or waived prior to the original
Termination Date and (ii) the Termination Date shall be automatically extended to December 31,
2005, if the condition set forth in SECTION 9.01(m) or 9.02(a) has not been satisfied prior to the
original Termination Date and all of the other conditions set forth in SECTIONS 9.01 and 9.02
(other than those that by their nature are to be satisfied at the Stock Purchase Closing or Merger
Closing, as applicable) have been satisfied or waived;
provided
,
further
, the right
to terminate this Agreement under this SECTION 10.01(c) shall not be available to any party whose
failure to fulfill an obligation under this Agreement has been the cause of, or resulted in, the
failure of the Stock Purchase to be completed or the Merger to be consummated on or before the
Termination Date;
(d) by either Buyer or the Company, if the Merger shall fail to receive the requisite vote, if
any such vote is required, for approval and adoption of this Agreement by the stockholders of the
Company;
provided
,
however
, Buyer shall not have the right to terminate this
Agreement pursuant to this SECTION 10.01(d) if the Stock Purchase Closing has occurred.
(e) by the Company, if the Board determines to accept a Superior Proposal in compliance with
the provisions of SECTION 6.03; or
(f) by Buyer, prior to the Stock Purchase Closing, if: (i) the Board shall have withdrawn or
materially and adversely modified its recommendation of this Agreement or the transactions
contemplated hereby (it being understood, however, that for all purposes of this Agreement, the
fact that the Company has supplied any person with information regarding the
46
Company or has entered
into discussions or negotiations with such person as permitted by this Agreement, or the disclosure
of such facts, shall not be deemed a withdrawal or modification of the Board’s recommendation of
this Agreement or the transactions contemplated hereby); (ii) the Board shall have recommended to
the stockholders of the Company that they approve an Acquisition Proposal other than the
transactions contemplated by this Agreement; or (iii) a tender offer or exchange offer that, if
successful, would result in any person or “group” becoming a “beneficial owner” (such terms having
the meaning in this Agreement as is ascribed under Regulation 13D under the Exchange Act) of 50% or
more of the outstanding Shares is commenced (other than by Buyer or an affiliate of Buyer) and the
Board recommends that the stockholders of the Company tender their Shares in such tender or
exchange offer.
The rights of Buyer and the Company to terminate this Agreement pursuant to this SECTION 10.01
shall remain operative and in full force and effect regardless of any investigation made by or on
behalf of any party hereto, any person controlling or controlled by any such party or any of their
respective officers or directors, whether prior to or after the execution of this Agreement.
SECTION 10.02
Effect of Termination
. If this Agreement is terminated pursuant to SECTION 10.01, this Agreement shall immediately
terminate with no liability on the part of any party hereto, except that the agreements contained
in SECTIONS 7.01, 10.03 and Article XI shall survive the termination hereof, and except that each
party shall be liable for its willful breaches of this Agreement or willful failure by such party
to perform its obligations hereunder prior to the time of such termination.
SECTION 10.03
Fees, Expenses and Other Payments.
(a) All out-of-pocket costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred directly or indirectly by
the parties hereto in respect of the transactions contemplated hereby shall be borne by the party
which has incurred such costs and expenses (with respect to such party, its “
Expenses
”);
provided
,
however
, that, if the Stock Purchase is completed or the Merger is
consummated, all Expenses of the Principal Stockholders and the Company shall be paid by the
Surviving Corporation;
provided
,
further
, if this Agreement is terminated without
the Stock Purchase being completed or the Merger being consummated, all filing fees under the HSR
Act shall be borne equally by the Company and Buyer, unless Buyer has materially breached any of
its obligations hereunder prior to such termination (in which case Buyer shall be responsible for
100% of such fees).
(b) The Company agrees that if this Agreement is terminated (i) by the Company or Buyer
pursuant to SECTION 10.01(d) or by the Company pursuant to SECTION 10.01(c) (unless, in either
case, Buyer has materially breached any of its obligations hereunder prior to such termination) and
(A) an Acquisition Proposal was publicly announced, proposed, offered or made to the Company or its
stockholders after the date hereof and before such termination, (B) such Acquisition Proposal has
not expired or been withdrawn at the time of such termination and (C) the Company enters into an
agreement with respect to or consummates an Acquisition Proposal within twelve months following
such termination, (ii) by the Company pursuant to SECTION 10.01(e), or (iii) by Buyer pursuant to
SECTION 10.01(f), then the
47
Company shall pay to Buyer an amount equal to the result of (I) (x) 3%,
multiplied by (y) the sum of (A) the product of (1) the Per Share Purchase Price (provided that,
for purposes of this SECTION 10.03(b) only, the Per Share Purchase Price shall be calculated as if
the Merger occurred on the date of such termination) and (2) the number of Shares outstanding as of
the date of such termination and (B) the aggregate amount that would be due under SECTIONS 2.05 and
2.06 if the Merger occurred on the date of such termination (such sum, the “
Base Amount
”)
plus (II) all documented, third-party out-of-pocket costs and expenses reasonably incurred by Buyer
and Merger Subsidiary in connection with the transactions contemplated by this Agreement
(including, but not limited to, those reasonably incurred in connection with the Financing);
provided
that the aggregate amount payable pursuant to this SECTION 10.03(b) shall not
exceed 3.5% of the Base Amount.
(c) Any payment required to be made pursuant to SECTION 10.03(b)(i) shall be made
contemporaneously with the earlier of the entry into the agreement or the consummation of the
relevant Acquisition Proposal, any payment required to be made pursuant to SECTION 10.03(b)(ii)
shall be made contemporaneously with the Company’s termination of this Agreement and any payment
required to be made pursuant to SECTION 10.03(b)(iii) shall be
made as promptly as practicable after Buyer’s termination of this Agreement, in each case by
wire transfer of immediately available funds to an account designated by Buyer.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01
Notices
. All notices, requests and other communications to any party
hereunder shall be in writing (including facsimile or similar writing) and shall be given,
if to Buyer or Merger Subsidiary, to:
c/o First Reserve Corporation
600 Travis
Suite 6000
Houston, Texas 77002
Facsimile: (713) 437-5146
Attention: Timothy Day
with a copy to:
c/o First Reserve Corporation
One Lafayette Place
Greenwich, CT 06830
Facsimile: (203) 625-8520
Attention: Thomas R. Denison
48
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Facsimile: 212-455-2502
Attention: Patrick J. Naughton
if to the Company, to:
Chart Industries, Inc.
One Infinity Corporate Centre Drive, Suite 300
Garfield Heights, Ohio 44125
Facsimile: (440) 753-1491
Attention: Chief Executive Officer
Chief Financial Officer
with a copy to:
Kirkland & Ellis LLP
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
Attention: John A. Weissenbach
Christopher J. Greeno
if to the Principal Stockholders, to:
c/o Oaktree Capital Management, LLC
333 South Grand Avenue, 28
th
Floor
Los Angeles, CA 90071
Fax: (213) 830-6394
Attn: Michael Harmon
Jordon Kruse
c/o Audax Management Company, LLC
101 Huntington Avenue
Boston, MA 02199
Fax: (617) 859-1600
Attn: Geoffrey Rehnert
Oliver Ewald
49
with a copy to:
Kirkland & Ellis LLP
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
Attention: John A. Weissenbach
Christopher J. Greeno
or such other address, as such party may hereafter specify for the purpose by notice to the other
parties hereto. Each such notice, request or other communication shall be effective (i) when
delivered personally to the recipient, (ii) one (1) business day after being sent to the recipient
by reputable overnight courier service (charges prepaid), (iii) upon machine-generated
acknowledgment of receipt after transmittal by facsimile if so acknowledged to have been received
before 5:00 p.m. on a business day at the location of receipt and otherwise on the next
business day, provided that such notice, demand or other communication is also deposited within 24
hours thereafter with a reputable overnight courier service (charges prepaid) for delivery to the
same addressee, or (iv) five (5) days after being mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid, when delivered at the address
specified in this SECTION 11.01.
SECTION 11.02
Survival of Representations, Warranties and Covenants
. The
representations and warranties contained herein shall not survive the earlier of the Stock Purchase
Closing and the Effective Time. The covenants and agreements contained herein shall not survive
the earlier of the Stock Purchase Closing and the Effective Time, except for the covenants and
agreements set forth in SECTIONS 7.01, 7.02, 7.03, 7.04 and 10.03.
SECTION 11.03
Acknowledgment by Buyer and Merger Subsidiary
. Each of Buyer and Merger
Subsidiary acknowledges that it has conducted to its satisfaction an independent investigation and
verification of the financial condition, operations, assets, liabilities and properties of the
Company and, in making its determination to proceed with the transactions contemplated by this
Agreement, each of Buyer and Merger Subsidiary has relied and will rely on the results of its own
independent investigation and verification and the representations and warranties of the Company
expressly and specifically set forth in this Agreement, as modified by the Company Disclosure
Schedule. Each of Buyer and Merger Subsidiary further acknowledges that, except as set forth
herein, no promise or inducement for this Agreement was offered by the Company, any of the
Principal Stockholders or any of their respective representatives or relied upon by Buyer or Merger
Subsidiary. SUCH REPRESENTATIONS AND WARRANTIES BY THE COMPANY CONSTITUTE THE SOLE AND EXCLUSIVE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY TO BUYER AND MERGER SUBSIDIARY IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY, AND BUYER AND MERGER SUBSIDIARY UNDERSTAND, ACKNOWLEDGE AND AGREE
THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING,
BUT NOT LIMITED TO, ANY RELATING TO THE
50
FUTURE FINANCIAL OR HISTORICAL CONDITION, RESULTS OF
OPERATIONS, ASSETS OR LIABILITIES OR PROSPECTS OF THE COMPANY NOT REFLECTED IN THE REPRESENTATIONS
AND WARRANTIES SET FORTH HEREIN) ARE SPECIFICALLY DISCLAIMED BY THE COMPANY AND EACH OF THE
PRINCIPAL STOCKHOLDERS. EACH OF BUYER AND MERGER SUBSIDIARY ACKNOWLEDGES THAT IT DID NOT RELY ON
ANY REPRESENTATION OR WARRANTY NOT CONTAINED IN THIS AGREEMENT WHEN MAKING ITS DECISIONS TO ENTER
INTO THIS AGREEMENT AND WILL NOT RELY ON ANY SUCH REPRESENTATION OR WARRANTY IN DECIDING TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. With respect to all materials that
are described as having been made available or delivered to Buyer or Merger Subsidiary, such
materials shall be deemed to have been delivered or made available to Buyer or Merger Subsidiary if
Buyer, Merger Subsidiary or any of their representatives or agents have been granted access to a
dataroom, electronic dataroom or website in which such materials are available or by transmitting
such materials to Buyer or Merger Subsidiary or their representatives or agents by any other
electronic means.
SECTION 11.04
Amendments; No Waivers
.
(a) Any provision of this Agreement may be amended or waived prior to the Effective Time if,
and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the
Company, Buyer, Merger Subsidiary and the Principal Stockholder(s) who hold at least a majority of
the Shares set forth on the
Principal Stockholders Schedule
attached hereto (the
“
Required Holder(s)
”) or in the case of a waiver, by Buyer if such waiver is to be
effective against Buyer and/or Merger Subsidiary, by the Company if such waiver is to be effective
against the Company, or by the Required Holder(s) if such waiver is to be effective against the
Principal Stockholders;
provided
that, if any such amendment or waiver by its terms treats
disproportionately any Principal Stockholder in an adverse manner relative to any other Principal
Stockholder, then such amendment or waiver shall require the prior written approval of such
Principal Stockholder so disproportionately and adversely treated;
provided
,
further
, that, after the adoption of this Agreement by the stockholders of the Company, no
such amendment or waiver shall, without the approval of the stockholders, alter or change (i) the
amount or kind of consideration to be received in exchange for any shares of capital stock of the
Company, (ii) any term of the Certificate of Incorporation of the Surviving Corporation or (iii)
any of the terms or conditions of this Agreement if such alteration or change would adversely
affect the holders of any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11.05
Successors and Assigns
. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns;
provided
,
however
, that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the consent of the other
parties hereto.
51
Notwithstanding the foregoing, (a) Buyer and Merger Subsidiary may assign their
rights and obligations hereunder to an affiliate upon the consent of the Company, which consent
shall not be unreasonably withheld; and (b) each of the Principal Stockholders may assign its
respective rights and obligations hereunder with respect to all or any portion of its respective
Shares to any transferee of such Shares, provided that (i) the transferee is an affiliate of such
Principal Stockholder, is an “accredited investor” (as defined in the Securities Act and the rules
and regulations promulgated thereunder) or acquires all of the Principal Stockholder Shares of such
Principal Stockholder, and (ii) prior to such transfer, the transferee agrees in writing to be
bound by the terms and conditions of this Agreement to the same extent as the transferor.
SECTION 11.06
Governing Law.
(a) This Agreement shall be construed in accordance with and governed in all respects,
including validity, interpretation and effect, by the law of the State of Delaware without giving
effect to the principles of conflicts of laws thereof.
(b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of any Delaware State court, or Federal court of the
United States of America, sitting in Delaware, and any appellate court thereof, in any action or
proceeding arising out of or relating to this Agreement or the agreements delivered in connection
herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of
any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i)
agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any
claim in respect of any such action or proceeding may be heard and determined in such Delaware
State court or, to the extent permitted by law, in such Federal court, (iii) waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or hereafter have to
the laying of venue of any such action or proceeding in any such Delaware State or Federal court,
and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in SECTION 11.01. Nothing in this Agreement will affect the right
of any party to this Agreement to serve process in any other manner permitted by law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE
52
EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 11.06(c).
SECTION 11.07
Counterparts; Effectiveness
. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by all of the other parties hereto. This Agreement may be
executed by facsimile signature.
SECTION 11.08
Headings
. Section headings used in this Agreement are for convenience
only and shall be ignored in the construction and interpretation hereof.
SECTION 11.09
No Third Party Beneficiaries
. Except for SECTION 7.03 (which is
intended to and shall confer upon the persons referenced therein all rights and remedies by reason
of this Agreement as if such person was a party hereto), no provision of this Agreement is intended
to, or shall, confer any third party beneficiary or other rights or remedies upon any person other
than the parties hereto.
SECTION 11.10
Entire Agreement
. This Agreement (together with the Company Disclosure
Schedule, the Buyer Disclosure Schedule and the other documents delivered pursuant hereto and
thereto) and the Confidentiality Agreement constitute the entire agreements of the parties and
supersede all prior agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof.
SECTION 11.11
Severability
. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties as closely
as possible to the fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
SECTION 11.12
Specific Enforcement
. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not performed in accordance
with their specific terms. It is accordingly agreed that the parties shall be entitled to specific
performance of the terms hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
* * * *
53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
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CHART INDUSTRIES
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By:
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/s/ Michael F. Biehl
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Its:
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Chief Financial Officer and Treasurer
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FIRST RESERVE FUND X, L.P.
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By:
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/s/ Tim Day
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Its:
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Vice President
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CI ACQUISITION, INC.
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By:
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/s/ Tim Day
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Its:
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Vice President
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PRINCIPAL STOCKHOLDERS:
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OCM PRINCIPAL OPPORTUNITIES FUND II, L.P.
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By:
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Oaktree Capital Management, LLC
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Its:
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General Partner
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By:
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/s/ Michael P. Harmon
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Its:
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Managing Director
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By:
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/s/ Jordan Kruse
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Its:
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Vice President
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AUDAX CHART LLC
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By:
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/s/ Geoff Rehnert
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Its:
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Co-CEO
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CARL MARKS STRATEGIC INVESTMENTS, L.P.
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By:
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Carl Marks Management Company, L.P.
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Its:
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General Partner
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By:
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/s/ James F. Wilson
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Its:
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General Partner
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CARL MARKS STRATEGIC INVESTMENTS, III, L.P.
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By:
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Carl Marks Management Company, L.P.
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Its:
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General Partner
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By:
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/s/ James F. Wilson
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Its:
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General Partner
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VAN KAMPEN SENIOR LOAN FUND
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By: Van Kampen Asset Management
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By:
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/s/ Howard Tiffen
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Its:
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Managing Director
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MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
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By:
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/s/ Michael Lee
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Its:
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Director
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GE CAPITAL CFE, INC.
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By:
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/s/ Gregory Hong
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Its:
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Duly Authorized Signatory
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ARTHUR S. HOLMES, AS TRUSTEE OF THE ARTHUR S. HOLMES
TRUST DATED DECEMBER 20, 1993 AS RESTATED JANUARY 22,
1998 AND MARCH 4, 2003
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By:
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/s/ Arthur S. Holmes, Trustee
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Arthur S. Holmes, as Trustee
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CHRISTINE H. HOLMES, AS TRUSTEE OF THE CHRISTINE H.
HOLMES TRUST DATED DECEMBER 20, 1993 AS RESTATED
JANUARY 22, 1998 AND MARCH 4, 2003
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By:
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/s/ Christine H. Holmes, Trustee
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Christine H. Holmes, as Trustee
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EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
Among
GT ACQUISITION COMPANY,
and
GREENVILLE TUBE, LLC
JULY 1, 2003
TABLE OF CONTENTS
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Page
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1.
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DEFINITIONS AND USAGE
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1
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1.1
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Definitions
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1
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1.2
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Usage
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12
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2.
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SALE AND TRANSFER OF ASSETS; CLOSING.
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13
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2.1
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Assets to be Sold
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13
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2.2
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Excluded Assets
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15
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2.3
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Consideration
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16
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2.4
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Liabilities
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16
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2.5
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Allocation
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19
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2.6
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Closing
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19
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2.7
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Closing Obligations
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20
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2.8
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Adjustment Amount and Payment
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23
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2.9
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Adjustment Procedure
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23
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2.10
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Consents
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25
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2.11
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Accounts Receivable
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26
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2.12
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Contingent Note
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27
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2.13
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Termination of Promissory Note
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27
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3.
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REPRESENTATIONS AND WARRANTIES OF SELLER
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28
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3.1
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Organization and Good Standing; Name
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28
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3.2
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Enforceability; Authority; No Conflict
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28
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3.3
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Capitalization
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30
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3.4
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Financial Statements
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30
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3.5
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Books and Records
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30
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3.6
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Sufficiency of Assets
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31
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3.7
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Description of Owned Real Property
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31
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3.8
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The Leased Real Property
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31
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3.9
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Title to Assets; Encumbrances
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31
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3.10
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Condition of Facilities
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32
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3.11
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Accounts Receivable
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32
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3.12
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Inventories
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33
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3.13
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No Undisclosed Liabilities
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33
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3.14
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Taxes
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33
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3.15
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No Material Adverse Change
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35
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3.16
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Employee Benefits
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35
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3.17
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Compliance with Legal Requirements; Governmental Authorizations
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37
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3.18
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Legal Proceedings; Orders
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39
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3.19
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Absence of Certain Changes and Events
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40
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3.20
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Contracts; No Defaults
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41
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i
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Page
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3.21
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Insurance
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44
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3.22
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Environmental Matters
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45
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3.23
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Employees
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47
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3.24
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Labor Disputes; Compliance
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48
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3.25
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Intellectual Property Assets
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49
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3.26
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Parent Ownership of Assets
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52
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3.27
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Compliance with the Foreign Corrupt Practices Act and Export Control and
Antiboycott Laws
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52
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3.28
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Relationships With Related Persons
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53
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3.29
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Brokers or Finders
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54
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3.30
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Securities Law Matters
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54
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4.
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REPRESENTATIONS AND WARRANTIES OF BUYER
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55
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4.1
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Organization and Good Standing
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55
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4.2
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Authority; No Conflict
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55
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4.3
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Certain Proceedings
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55
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4.4
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Brokers or Finders
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56
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4.5
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Sufficient Funds
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56
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5.
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[Intentionally Omitted]
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56
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6.
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[Intentionally Omitted]
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56
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7.
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CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
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56
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7.1
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Consents
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56
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7.2
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Additional Documents
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56
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7.3
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Title Insurance
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57
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7.4
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Governmental Authorizations
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57
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7.5
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Employees
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57
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7.6
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Ancillary Agreements
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57
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7.7
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Financing
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57
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7.8
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Management Investment
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57
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8.
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CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
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57
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8.1
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Consents
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57
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9.
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NO TERMINATION
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58
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10.
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ADDITIONAL COVENANTS
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58
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10.1
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Employees and Employee Benefits
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58
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10.2
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Payment of Certain Taxes
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61
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10.3
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Payment of Other Retained Liabilities
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61
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10.4
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Financial Information
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61
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10.5
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Removing Excluded Assets
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61
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ii
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Page
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10.6
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Reports and Returns
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62
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10.7
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Assistance in Proceedings
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62
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10.8
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|
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Noncompetition, Nonsolicitation and Nondisparagement
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62
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10.9
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Customer and Other Business Relationships
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63
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10.10
|
|
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Retention of and Access to Records
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64
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10.11
|
|
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Further Assurances
|
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64
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10.12
|
|
|
TCE Sealant
|
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64
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10.13
|
|
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Master Lease Payments
|
|
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64
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10.14
|
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Effective Date
|
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64
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11.
|
|
INDEMNIFICATION; REMEDIES
|
|
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65
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11.1
|
|
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Survival
|
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65
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11.2
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|
|
Indemnification and Reimbursement by Seller
|
|
|
65
|
|
|
|
|
|
11.3
|
|
|
Indemnification and Reimbursement by Seller — Environmental Matters
|
|
|
66
|
|
|
|
|
|
11.4
|
|
|
Indemnification and Reimbursement by Buyer
|
|
|
74
|
|
|
|
|
|
11.5
|
|
|
Limitations on Amount — Seller
|
|
|
76
|
|
|
|
|
|
11.6
|
|
|
Limitations on Amount — Buyer
|
|
|
76
|
|
|
|
|
|
11.7
|
|
|
Time Limitations
|
|
|
76
|
|
|
|
|
|
11.8
|
|
|
Right of Setoff
|
|
|
77
|
|
|
|
|
|
11.9
|
|
|
Third-Party Claims
|
|
|
78
|
|
|
|
|
|
11.10
|
|
|
Direct Claims
|
|
|
79
|
|
|
|
|
|
11.11
|
|
|
Insurance; Tax
|
|
|
79
|
|
|
|
|
|
11.12
|
|
|
Limitation on Consequential Damages
|
|
|
80
|
|
|
|
|
|
11.13
|
|
|
Payment of Claims
|
|
|
80
|
|
|
|
|
|
11.14
|
|
|
Exclusive Means
|
|
|
80
|
|
|
|
|
|
11.15
|
|
|
Indemnification in Case of Strict Liability or Indemnitee Negligence
|
|
|
80
|
|
|
|
|
|
11.16
|
|
|
Facility Lease
|
|
|
80
|
|
|
|
|
12.
|
|
CONFIDENTIALITY
|
|
|
81
|
|
|
|
|
|
|
|
12.1
|
|
|
Definition of Confidential Information
|
|
|
81
|
|
|
|
|
|
12.2
|
|
|
Restricted Use of Confidential Information
|
|
|
82
|
|
|
|
|
|
12.3
|
|
|
Exceptions
|
|
|
82
|
|
|
|
|
|
12.4
|
|
|
Legal Proceedings
|
|
|
82
|
|
|
|
|
|
12.5
|
|
|
Return or Destruction of Confidential Information
|
|
|
83
|
|
|
|
|
|
12.6
|
|
|
Attorney-Client Privilege
|
|
|
83
|
|
|
|
|
|
12.7
|
|
|
Tax Disclosure
|
|
|
83
|
|
|
|
|
13.
|
|
GENERAL PROVISIONS
|
|
|
84
|
|
|
|
|
|
|
|
13.1
|
|
|
Expenses
|
|
|
84
|
|
|
|
|
|
13.2
|
|
|
Public Announcements
|
|
|
84
|
|
|
|
|
|
13.3
|
|
|
Notices
|
|
|
84
|
|
|
|
|
|
13.4
|
|
|
Jurisdiction; Service of Process
|
|
|
85
|
|
|
|
|
|
13.5
|
|
|
Enforcement of Agreement
|
|
|
85
|
|
|
|
|
|
13.6
|
|
|
Waiver; Remedies Cumulative
|
|
|
86
|
|
iii
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
13.7
|
|
|
Entire Agreement and Modification
|
|
|
86
|
|
|
|
|
|
13.8
|
|
|
Disclosure Schedule
|
|
|
86
|
|
|
|
|
|
13.9
|
|
|
Assignments, Successors and No Third-Party Rights
|
|
|
86
|
|
|
|
|
|
13.10
|
|
|
Severability
|
|
|
87
|
|
|
|
|
|
13.11
|
|
|
Construction
|
|
|
87
|
|
|
|
|
|
13.12
|
|
|
Time of Essence
|
|
|
87
|
|
|
|
|
|
13.13
|
|
|
Governing Law
|
|
|
87
|
|
|
|
|
|
13.14
|
|
|
Execution of Agreement
|
|
|
87
|
|
iv
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (“Agreement”) is dated July 1, 2003, between GT Acquisition
Company, a Delaware corporation (“Buyer”) and Greenville Tube, LLC, a Delaware limited liability
company (“Seller”).
RECITALS
Chart, Inc., a Delaware corporation (“Member”), owns one hundred percent (100%) of the issued
and outstanding equity interest of Seller. Seller is, and since February 24, 2002, has been, in
the business of manufacturing and selling steel and stainless steel tubing (the “Business”). From
January 1, 2000, through June 30, 2000, Member, through an incorporated subsidiary, Chart Holdings,
Inc., a Delaware Corporation (“CHI”), operated the Business. From July 1, 2000 through February
23, 2002, Member through an unincorporated division, operated the Business. Before January 1,
2000, Member’s wholly owned subsidiary, Greenville Tube Corporation, an Arkansas corporation
(“GTC,” and, together with CHI and Member, the “Prior Owner”) operated the Business. Member is a
wholly owned subsidiary of Chart Industries, Inc., a Delaware corporation (“Parent”). Seller
desires to sell, and Buyer desires to purchase, the Assets of Seller for the consideration and on
the terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1.
DEFINITIONS AND USAGE
.
1.1
Definitions
. For purposes of this Agreement, the following terms and variations
thereof have the meanings specified or referred to in this Section 1.1:
“Accounts Receivable” — (a) all trade accounts receivable and other rights to payment from
customers of Seller and the full benefit of all security for such accounts or rights to payment,
including all trade accounts receivable representing amounts receivable in respect of goods shipped
or products sold or services rendered to customers of Seller, (b) all other accounts or notes
receivable of Seller and the full benefit of all security for such accounts or notes, and (c) any
claim, remedy or other right related to any of the foregoing.
“Active Employees” — as defined in Section 10.1(a).
“ADEQ Consent Order” — the Arkansas Department of Environmental Quality Consent Administrative
Order #LIS 99-152, issued June 30, 1999, and any amendments thereto.
“Adjustment Amount” — as defined in Section 2.8.
“Affiliate” — with respect to a Person (the “First Person”), any other Person who controls,
is under common control with, or is controlled by the First Person.
“Appurtenances” — all privileges, rights, easements, hereditaments, and appurtenances
belonging to or for the benefit of the Land, including all easements appurtenant to and for the
benefit of any Land (a “Dominant Parcel”) for, and as the primary means of access between, the
Dominant Parcel and a public way, or for any other use upon which lawful use of the Dominant
Parcel for the purposes for which it is presently being used is dependent, and all rights of Seller
existing in and to any streets, alleys, passages and other rights-of-way included thereon or
adjacent thereto (before or after vacation thereof) and vaults beneath any such streets.
“Assets” — as defined in Section 2.1.
“Assignment and Assumption Agreement” — as defined in Section 2.7(a)(ii).
“Assumed Contracts” — as defined in the definition of “Breach.”
“Assumed Liabilities” — as defined in Section 2.4(a).
“Balance Sheet” — as defined in Section 3.4.
“Best Efforts” — the efforts that a reasonably prudent Person desirous of achieving a result
would use in similar circumstances to achieve that result as expeditiously as possible, provided,
however, that a Person required to use Best Efforts under this Agreement will not be thereby
required to take actions that would, in the reasonable sole determination of such Person, result in
a material adverse change in the benefits to such Person of this Agreement and the Contemplated
Transactions or to dispose of or make any change to its business, expend any funds in excess of
Five Thousand Dollars ($5,000.00) or incur any other material burden.
“Bill of Sale” — as defined in Section 2.7(a)(i).
“Breach” — any breach of, or any inaccuracy in, any representation or warranty or any breach
of, or failure to perform or comply with, any covenant or obligation, in or of this Agreement, or
any agreement or instrument executed and delivered by the parties hereto or their Affiliates in
connection with the transactions contemplated by this Agreement, or any contract which is being
assigned to or assumed by Buyer (the “Assumed Contracts”) (which are listed on Part 1.1(a) of the
Disclosure Schedule), or any event that with the passing of time or the giving of notice, or both,
would constitute such a breach, inaccuracy or failure.
“Bulk Sales Laws” — as defined in Section 5.10.
“Business” — as defined in the Recitals.
“Business Day” — any day other than (a) Saturday or Sunday or (b) any other day on which banks
in Delaware are permitted or required to be closed.
“Buyer” — as defined in the first paragraph of this Agreement.
“Buyer Change of Control”—shall mean any of the following: (a) a liquidation, dissolution or
winding up of the affairs Buyer (whether voluntary or involuntary), (b) the merger or consolidation
of Buyer with or into another Person in a transaction pursuant to which the
Investor Group, including its Affiliates, fails, directly or indirectly, to retain record or
beneficial ownership or control in excess of 50% of the voting power of the surviving Person, (c) a
sale by the Investor Group of more than 50% of the voting power of Buyer, excluding sales by
members of the Investor Group to other members of the Investor Group or their Affiliates, (d) a
sale of all
2
or substantially all of the assets of Buyer, the consummation of which occurred when
the Investor Group owned in excess of 50% of the voting power of Buyer, and (e) any capital
reorganization or other transaction which creates a situation which is substantially similar to the
situation that would result from any transaction described in the foregoing clauses (a) through
(d).
“Buyer Indemnified Persons” — as defined in Section 11.2.
“Closing” — as defined in Section 2.6.
“Closing Date” — the date on which the Closing actually takes place.
“Closing Financial Statements” — as defined in Section 2.9(b).
“Closing Working Capital” — as defined in Section 2.9(b).
“COBRA” — as defined in Section 3.16(f).
“Code” — the Internal Revenue Code of 1986.
“Confidential Information” — as defined in Section 12.1.
“Consequential Damages” — incidental, special, derivative or punitive damages or any loss or
liability arising from lost property, lost business opportunities, diminution of value, damage to
reputation or lost profits or damages based upon a multiple of earnings, EBITDA, or cash flow.
“Consent” — any approval, consent, ratification, waiver or other authorization.
“Contemplated Transactions” — all of the transactions contemplated by this Agreement and the
agreements executed and delivered hereunder.
“Contingent Note” — as defined in Section 2.12.
“Contract” — any legally binding agreement, contract, Lease, consensual obligation, promise or
undertaking (whether written or oral and whether express or implied).
“Copyrights” — as defined in Section 3.25(a)(iii).
“Core Business” — the products and product lines produced, marketed or sold by Seller on the
Closing Date and during the six (6) month period immediately preceding the Closing Date. Core
Business shall not include other businesses, products, or product lines that Buyer adds or acquires
after the Closing Date.
“Damages” — as defined in Section 11.2 and, except as otherwise provided in this Agreement
excludes Consequential Damages.
“Disclosure Schedule” — the disclosure schedule delivered by Seller to Buyer concurrently with
the execution and delivery of this Agreement.
3
“Diversion Agreement” — as defined in Section 2.2(m).
“Earnout Agreement” — as defined in Section 2.7(a)(xii).
“EBITDA” — as defined in the Earnout Agreement.
“Effective Time” — the time of the closing of Seller’s business on the Closing Date.
“Employee Plans” — as defined in Section 3.16(a).
“Encumbrance” — any charge, claim, community or other marital property interest, condition,
equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement,
encroachment, servitude, right of first option, right of first refusal or similar restriction,
including any restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or exercise of any other attribute of ownership.
“Environment” — soil, land surface or subsurface strata, surface waters (including navigable
waters and ocean waters), groundwaters, drinking water supply, stream sediments and ambient air
(including indoor air).
“Environmental Claims” — any Third Party Claim relating to any Environmental Liabilities or
any demand by a Third Party in connection with a proposed acquisition of the Assets from Buyer or a
proposed loan to Buyer relating to any Environmental Liabilities.
“Environmental Law” — any applicable Federal, state, or local law, statute, ordinance, code,
rule, regulation, authorization, permit, judgment, decision, order, decree, or rule of common law
which pertains to the Environment or any Hazardous Material and shall include, without limitation,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Emergency Planning
and Community Right-to-Know Act, 42 U.S.C. Section 11001, et seq., the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the National
Environmental Policy Act, 42 U.S.C. Section 4331, et seq., the Oil Pollution Act, 33 U.S.C. Section
2701, et seq., the Rivers and Harbors Act of 1899, 33 U.S.C. Section 401, et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Federal Water Pollution Control Act, 33
U.S.C. Section 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the
Safe Drinking Water Act, 42 U.S.C. 300f, et seq., the Arkansas Water and Pollution Control Act,
Sec. 8-4-101, Arkansas Code, et seq., the Arkansas Solid Waste Management Act, Sec. 8-6-201,
Arkansas Code, et seq., the Solid Waste Management and Recycling Fund Act, Sec. 8-6-601 Arkansas
Code, et seq., the Hazardous Waste Management Act, Sec. 8-7-201, Arkansas Code, et seq., Arkansas
Resource Reclamation Act of 1979, Sec. 8-7-301, Arkansas Code, et seq., the Emergency Response Fund
Act, Sec. 8-7-401, Arkansas Code, et seq., the Remedial Action Trust Fund Act, Sec. 8-7-501,
Arkansas Code, et seq.
“Environmental Liabilities” — any liabilities for personal injury, property damage, fines,
penalties, Remedial Action or other costs and expenses incurred in connection with any
Environmental Law or Occupational Health and Safety Law, including those consisting of or relating
to:
4
|
|
(a)
|
|
any disposal, discharge, Release or presence in the Environment
of any Hazardous Material on, under or from the Facility;
|
|
|
|
|
(b)
|
|
any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand or response,
investigation, remedial or inspection cost or expense arising under any
Environmental Law or Occupational Health and Safety Law;
|
|
|
|
|
(c)
|
|
financial responsibility under any Environmental Law or
Occupational Health and Safety Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment or other remediation
or response actions (“Cleanup”) and for any natural resource damages; or
|
|
|
|
|
(d)
|
|
any other compliance, corrective, investigative, or remedial
measure required under any Environmental Law or Occupational Safety and Health
Law.
|
The terms “removal,” “remedial,” and “response action” include the types of activities covered
by the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA).
“ERISA” — Employee Retirement Income Security Act of 1974.
“Exchange Act” — the Securities Exchange Act of 1934.
“Excluded Assets” — as defined in Section 2.2
“Facility” or “Facilities” — the Real Property and the Tangible Personal Property used or
operated by Seller at the Real Property.
“Facility Lease” — as defined in Section 2.7(a)(iii).
“GAAP” — generally accepted accounting principles for financial reporting in the United
States, as in effect from time to time, applied on a basis consistent with the basis on which the
Balance Sheet and the other financial statements referred to in Section 3.4 were prepared.
“Governing Documents” — with respect to any particular entity, (a) if a corporation, the
articles or certificate of incorporation and the bylaws; (b) if a general partnership, the
partnership agreement and any statement of partnership; (c) if a limited partnership, the limited
partnership agreement and the certificate of limited partnership; (d) if a limited liability
company, the articles of organization or certificate of formation and operating agreement; (e) if another type of
Person, any other charter or similar document adopted or filed in connection with the creation,
formation or organization of the Person; (f) all equityholders’ agreements, voting agreements,
voting trust agreements, joint venture agreements, registration rights agreements or other
agreements or documents relating to the organization, management or operation of any Person or
relating to the rights, duties and obligations of the equityholders of any Person; and (g) any
amendment or supplement to any of the foregoing.
5
“Governmental Authorization” — any Consent, license, registration or permit issued, granted,
given or otherwise made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
“Governmental Body” — any:
|
|
(a)
|
|
nation, state, county, city, town, borough, village, district
or other jurisdiction;
|
|
|
|
|
(b)
|
|
federal, state, local, municipal, or other government;
|
|
|
|
|
(c)
|
|
governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission, court, tribunal
or other entity exercising governmental or quasi-governmental powers);
|
|
|
|
|
(d)
|
|
body exercising or legally entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power; or
|
|
|
|
|
(e)
|
|
official of any of the foregoing.
|
“Greenville Property” — the real property and improvements thereon located at 451 4th Street,
Greenville, Pennsylvania, formerly owned by GTC.
“GTC” — Greenville Tube Corporation, an Arkansas corporation and wholly owned subsidiary of
Member that until 1999 owned the Owned Real Property and operated the business currently operated
by Seller.
“GT Proceeding” — means the proceedings related to that certain Diversion Agreement.
“Hazardous Material” — any substance, material or waste which is regulated by any
Environmental Law, including any material, substance or waste which is defined as a “hazardous
waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” “pollution,” “contaminant,” “toxic waste” or “toxic substance” under any
provision of Environmental Law, and including petroleum, petroleum products, asbestos, or
asbestos-containing material, urea formaldehyde and polychlorinated biphenyls.
“Hired Active Employees” — as defined in Section 10.1(b)(i) and listed on Exhibit 10.1(b)(i).
“Improvements” — all buildings, structures, fixtures and improvements located on the Land.
“Indemnified Person” — as defined in Section 11.9.
“Indemnifying Person” — as defined in Section 11.9.
“Intellectual Property Assets” — as defined in Section 3.25(a).
6
“Interim Balance Sheet” — as defined in Section 3.4
“Inventories” — all inventories of Seller, wherever located, including all finished goods,
work in process, raw materials, spare parts and all other materials and supplies to be used or
consumed by Seller in the production of finished goods.
“Investor Group”— C.F.B. Venture Fund I, Inc., MidStates Capital L.P., Diamond State Ventures
Limited Partnership, Hickory Venture Capital Corporation, and Alpha Capital III SBIC, L.P.,
collectively.
“IRS” — the United States Internal Revenue Service and, to the extent relevant, the United
States Department of the Treasury.
“Knowledge” — a named individual acting within the scope of his or her authority will be
deemed to have Knowledge of a particular fact or other matter if:
|
|
(a)
|
|
the named individual is actually aware of that fact or matter;
or
|
|
|
|
|
(b)
|
|
the named individual would discover such fact or matter after
conducting a reasonable investigation (consistent with his or her duties) of
the books and Records, and making reasonable inquiry of employees, agents, and
representatives of Seller and the Prior Owner regarding the accuracy of an
applicable representation or warranty contained in this Agreement.
|
For the purposes of this Agreement, the term “named individual” shall mean Michael Biehl,
Charles E. Downs, Richard L. Vareha, Harry R. Holstead, and Larry B. McGaslin.
A Person (other than an individual) will be deemed to have Knowledge of a particular fact or
other matter if any named individual who is serving as a director, officer, partner, or trustee of
that Person (or in any similar capacity) has Knowledge of that fact or other matter (as set forth
in (a) and (b) above), and any such individual will be deemed to have conducted a reasonably
comprehensive investigation regarding the accuracy of the representations and warranties made
herein by or about such Person.
“Land” — all parcels and tracts of land in which Seller has an ownership or leasehold
interest.
“Lease” — any Real Property lease or any lease or rental agreement, license, right to use or
installment and conditional sale agreement to which Seller is a party, other than the Facility
Lease, and any other Seller Contract pertaining to the leasing or use of any Tangible Personal
Property.
“Lease Assignment” — as defined in Section 2.7(a)(iii).
“Leased Real Property” — the Land, Appurtenances located at 316 Hadley Road, Greenville,
Pennsylvania 16125-9700, and the subject of the Office Lease.
7
“Legal Requirement” — any federal, state, local, municipal, foreign or other constitution,
law, ordinance, principle of common law, code, regulation, statute or treaty in existence prior to
or as of the Closing Date.
“Liability” — with respect to any Person, any liability or obligation of such Person of any
kind, character or description, whether known or unknown, absolute or contingent, accrued or
unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or
several, due or to become due, vested or unvested, executory, determined, determinable or
otherwise, and whether or not the same is required to be accrued on the financial statements of
such Person.
“Marks” — as defined in Section 3.25(a)(i).
“Material Consents” — as defined in Section 7.1.
“Member” — Chart, Inc., a Delaware corporation that is a wholly owned subsidiary of Parent.
“Occupational Safety and Health Law” — any Legal Requirement designed to provide safe and
healthful working conditions and to reduce occupational safety and health hazards, including the
Occupational Safety and Health Act.
“Office Lease” — that certain Lease entered into in 1978, between Seller as lessee and Diane
L. Frye as assignee of the original lessor, Gordon A. Frye, relating to the Leased Real Property,
as amended.
“Office Lessor” — Diane L. Frye as assignee of the original lessor under the Office Lease.
“Order” — any order, injunction, judgment, decree, ruling, assessment or arbitration award of
any Governmental Body or arbitrator.
“Ordinary Course of Business” — an action taken by a Person will be deemed to have been taken
in the Ordinary Course of Business only if that action:
|
|
(a)
|
|
is consistent in all material respects in nature, scope and
magnitude with the past practices of such Person and is taken in the ordinary
course of the normal, day-to-day operations of such Person; and
|
|
|
|
|
(b)
|
|
does not require authorization by the board of directors, board
of managers, shareholders, partners, or members of such Person (or by any
Person or group of Persons exercising similar authority).
|
“Owned Real Property” — the Land, Appurtenances, and Improvements located at 501 South
Montgomery Street, Clarksville, Arkansas.
“Parent” — Chart Industries, Inc.
“Patents” — as defined in Section 3.25(a)(ii).
8
“Permitted Encumbrances” — as defined in Section 3.9 and Part 3.9(a) of the Disclosure
Schedule.
“Petty Cash” — cash balances of Seller’s accounts listed on Exhibit 2.3.
“Person” — an individual, partnership, corporation, business trust, limited liability company,
limited liability partnership, joint stock company, trust, unincorporated association, joint
venture or other entity or a Governmental Body.
“Prepaid Expenses” — all rights of Seller relating to deposits and prepaid expenses, claims
for refunds and rights to offset in respect thereof.
“Prior Owner” — as defined in the Recitals.
“Proceeding” — any action, arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, judicial or investigative whether public or private)
commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body
or arbitrator, including any agreement related to the resolution of any of the foregoing.
“Promissory Note” as defined in Section 2.7(b)(ii).
“Purchase Price” — as defined in Section 2.3.
“Purchased Inventories” — as defined in Section 2.1(c).
“Purchased Receivables” — as defined in Section 2.1(d).
“Real Property” — the Owned Real Property and Leased Real Property, collectively.
“Record” — information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form.
“Related
Person” —
With respect to a particular individual:
|
|
(a)
|
|
each other member of such individual’s Family;
|
|
|
|
|
(b)
|
|
any Person that is directly or indirectly controlled by any one
or more members of such individual’s Family;
|
|
|
|
|
(c)
|
|
any Person in which members of such individual’s Family hold
(individually or in the aggregate) a Material Interest; and
|
|
|
|
|
(d)
|
|
any Person with respect to which one or more members of such
individual’s Family serves as a director, officer, partner, executor or trustee
(or in a similar capacity).
|
9
With respect to a specified Person other than an individual:
|
|
(a)
|
|
any Person that directly or indirectly controls, is directly or
indirectly controlled by or is directly or indirectly under common control with
such specified Person;
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(b)
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any Person that holds a Material Interest in such specified
Person;
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(c)
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any person that serves as a director, officer, partner,
executor or trustee of such specified Person (or in a similar capacity);
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(d)
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any Person in which such specified Person holds a Material
Interest; and
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(e)
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any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity).
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For purposes of this definition, (a) “control” (including “controlling,” “controlled by,” and
“under common control with”) means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise, and shall be construed as such term is used in the
rules promulgated under the Securities Act; (b) the “Family” of an individual includes (i) the
individual, (ii) the individual’s spouse, (iii) any other natural person who is related to the
individual or the individual’s spouse within the second degree and (iv) any other natural person
who resides with such individual; and (c) “Material Interest” means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting
interests representing at least twenty percent (20%) of the outstanding voting power of a Person or
equity securities or other equity interests representing at least twenty percent (20%) of the
outstanding equity securities or equity interests in a Person.
“Release” — any release, spill, emission, leaking, pumping, pouring, dumping, emptying,
injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the
Environment or into or out of any property.
“Remedial Action” — all actions, including any capital expenditures, undertaken (a) to clean
up, remove or treat any Hazardous Material; (b) to minimize the extent of a Release of any
Hazardous Material so that it does not migrate or endanger or threaten to endanger public health or
welfare or the Environment; (c) to perform studies and investigations of a Release of any Hazardous
Material or post-remedial monitoring and care after such a Release of Hazardous
Material has been cleaned up, removed, or treated; or (d) to correct all violations or alleged
violations of Environmental Law that occurred prior to the Closing Date.
“Representative” — with respect to a particular Person, any director, officer, manager,
employee, agent, consultant, advisor, accountant, financial advisor, investment banker, or legal
counsel of that Person.
“Retained Liabilities” — as defined in Section 2.4(b).
“Sale Transaction” — as defined in the Earnout Agreement.
10
“SEC” — the United States Securities and Exchange Commission.
“Securities Act” — as defined in Section 3.3.
“Seller” — as defined in the first paragraph of this Agreement.
“Seller Contract” — any Contract (a) under which Seller has or may acquire any rights or
benefits; (b) under which Seller has or may become subject to any obligation or liability; or (c)
by which Seller or any of the assets owned or used by Seller is or may become bound.
“Software” — all computer software and subsequent versions thereof, including source code,
object, executable or binary code, objects, comments, screens, user interfaces, report formats,
templates, menus, buttons and icons and all files, data, materials, manuals, design notes and other
items and documentation related thereto or associated therewith, other than “off-the-shelf”
software with a retail price of Two Hundred Dollars ($200.00) or less.
“Subsidiary” — with respect to any Person (the “Owner”), any corporation or other Person of
which securities or other interests having the power to elect a majority of that corporation’s or
other Person’s board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than securities or
other interests having such power only upon the happening of a contingency that has not occurred),
are held by the Owner or one or more of its Subsidiaries.
“Tangible Personal Property” — all machinery, equipment, tools, furniture, office equipment,
computer hardware and peripherals, production equipment, supplies, materials, vehicles and other
items of tangible personal property (other than Inventories) of every kind owned or leased by
Seller (wherever located and whether or not carried on Seller’s books), together with any express
or implied warranty by the manufacturer, seller, or lessor of any item or component part thereof
and all maintenance records and other documents relating thereto.
“Tax” — any income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane, boat,
vessel or other title or registration, capital stock, franchise, employees’ income withholding,
foreign or domestic withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee,
assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition
or additional amount thereon imposed, assessed or collected by or under the
authority of any Governmental Body or payable under any tax-sharing agreement or any other
Contract.
“Tax Return” — any return (including any information return), report, statement, schedule,
notice, form, declaration, claim for refund or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal Requirement relating
to any Tax.
11
“TCE Contamination” — any trichloroethylene (“TCE”), 1,1,1-trichloroethane or any chemical to
which they break down in the environment (such as 1,1-dichloroethane, 1,2-dichloroethene, and
1,1-dichloroethene) that was (i) present on or before the Closing Date on or at the Facilities (or
present on any other property, if such TCE Contamination emanated from any Facility or the
Greenville Property and was present on or emanated from any Facility or the Greenville Property, on
or prior to the Closing Date) or (ii) Released by any Person on or at any Facilities, Assets, or
the Greenville Property at any time on or prior to the Closing Date.
“TCE Remedial Action” — any Remedial Action required pursuant to the ADEQ Consent Order.
“Third Party” — a Person that is not a party to this Agreement.
“Third-Party Claim” — any claim against any Indemnified Person by a Third Party, including a
claim made by a Governmental Body, whether or not involving a Proceeding.
“Threat of Release” — a reasonable likelihood of a Release in violation of Environmental Law
that would reasonably be likely to require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
“Transaction Documents” — as defined in Section 2.2(j).
“WARN Act” — as defined in Section 3.23(d).
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(a)
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Interpretation
. In this Agreement, unless a clear
contrary intention appears:
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(i)
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the singular number includes the plural number
and vice versa;
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(ii)
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reference to any Person includes such Person’s
successors and assigns but, if applicable, only if such successors and
assigns are not prohibited by this Agreement, reference to a Person in
a particular capacity excludes such Person in any other capacity or
individually, and reference to a Person does not include the Person’s
predecessors unless specifically indicated to the contrary;
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(iii)
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reference to any gender includes each other
gender;
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(iv)
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reference to any agreement, document or
instrument means such agreement, document or instrument as amended or
modified and in effect from time to time in accordance with the terms
thereof;
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(v)
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reference to any Legal Requirement in any
representation or warranty means such Legal Requirement as amended,
modified, codified, replaced or reenacted, in whole or in part, and
currently
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12
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or previously in effect, including all currently or
previously effective rules and regulations promulgated thereunder;
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(vi)
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“hereunder,” “hereof,” “hereto,” and words of
similar import shall be deemed references to this Agreement as a whole
and not to any particular Article, Section or other provision hereof;
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(vii)
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“including” (and with correlative meaning
“include”) means including without limiting the generality of any
description preceding such term;
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(viii)
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“or” is used in the inclusive sense of “and/or”;
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(ix)
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with respect to the determination of any period
of time, “from” means “from and including” and “to” means “to but
excluding”; and
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(x)
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references to documents, instruments or
agreements shall be deemed to refer as well to all addenda, exhibits,
schedules or amendments thereto.
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(b)
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Accounting Terms and Determinations
. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance with GAAP.
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(c)
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Legal Representation of the Parties
. This Agreement
was negotiated by the parties with the benefit of legal representation, and any
rule of construction or interpretation otherwise requiring this Agreement to be
construed or interpreted against any party shall not apply to any construction
or interpretation hereof.
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2.
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SALE AND TRANSFER OF ASSETS; CLOSING.
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Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, but
effective as of the Effective Time, Seller shall sell, convey, assign, transfer and deliver to
Buyer, and Buyer shall purchase and acquire from Seller, free and clear of any Encumbrances
other than Permitted Encumbrances, all of Seller’s right, title and interest in and to all of
Seller’s property and assets, tangible and intangible, of every kind and description, wherever
located, including the following (but excluding the Excluded Assets):
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(a)
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Petty Cash;
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(b)
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all Tangible Personal Property, including those items
(including trade fixtures) described in Part 2.1(b) of the Disclosure Schedule;
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13
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(c)
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all Inventories existing on the Closing Date, all of which are
listed on Part 2.1(c) of the Disclosure Schedule (the “Purchased Inventory”);
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(d)
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all Accounts Receivable existing on the Closing Date other than
those excluded under Section 2.2(l), all of which are listed on Part 2.1(d) of
the Disclosure Schedule (the “Purchased Receivables”);
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(e)
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except as provided in Section 2.2(e), all Seller Contracts that
are Assumed Contracts, all of which are listed in Part 3.20(a) of the
Disclosure Schedule (including all outstanding offers or solicitations made by
or to Seller to enter into any Contract, all of which are also separately
listed on Part 3.20(a) of the Disclosure Schedule);
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(f)
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all Governmental Authorizations and all pending applications
therefor or renewals thereof, in each case to the extent transferable to Buyer,
including those listed in Part 3.17(b) of the Disclosure Schedule;
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(g)
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other than any Records related to the Diversion Agreement or
matters related to it, all data and Records related to the operations of
Seller, including client and customer lists and Records, referral sources,
research and development reports and Records, production reports and Records,
service and warranty Records, equipment logs, operating guides and manuals,
financial and accounting Records, creative materials, advertising materials,
promotional materials, studies, reports, correspondence and other similar
documents and Records and, subject to Legal Requirements, copies of all
personnel Records and other Records described in Section 2.2(f); provided,
however, that Seller may retain copies of such Records;
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(h)
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all of the intangible rights and property of Seller, including
Intellectual Property Assets and the names “Greenville Tube, LLC,” “Greenville
Tube Corporation” and “Greenville Tube,” going concern value, goodwill,
telephone, telecopy and e-mail addresses and listings and those items listed in
Parts 3.25(d), (e), (f) and (h) of the Disclosure Schedule;
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(i)
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all claims of Seller against third parties relating to the
Assets, whether choate or inchoate, known or unknown, contingent or
noncontingent, including all such claims listed in Part 2.1(i) of the
Disclosure Schedule; and
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(j)
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all Prepaid Expenses, other than those listed in Parts 2.2(c)
and 2.2(h) of the Disclosure Schedule.
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All of the property and assets to be transferred to Buyer hereunder are herein referred to
collectively as the “Assets.”
Notwithstanding the foregoing, the transfer of the Assets pursuant to this Agreement shall not
include the assumption of any Liability related to the Assets unless Buyer expressly assumes that
Liability pursuant to Section 2.4(a).
14
Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere in this
Agreement, the following assets of Seller (collectively, the “Excluded Assets”) are not part of the
sale and purchase contemplated hereunder, are excluded from the Assets and shall remain the
property of Seller after the Closing:
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(a)
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the Owned Real Property, subject to the rights of Buyer under
the Facility Lease;
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(b)
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all minute books, equity security Records, company seals, and
Records related to the Member’s capital contributions to the Seller;
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(c)
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those rights relating to the deposits and prepaid expenses and
claims for refunds and rights to offset in respect thereof listed in Part
2.2(c) of the Disclosure Schedule;
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(d)
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all insurance policies and rights thereunder;
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(e)
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each of the Seller Contracts (including any and all software
licenses which are not assignable) that is not an Assumed Contract, including,
without limitation, those listed in Part 2.2(e) of the Disclosure Schedule, and
any employment, severance, termination, salary continuation, retention,
stay-bonus, or similar agreements with Seller’s employees;
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(f)
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all personnel Records and other Records that Seller is required
by law to retain in its possession;
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(g)
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all Tax assets;
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(h)
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all claims for refund of Taxes and other governmental charges
listed on Part 2.2(h) of the Disclosure Schedule;
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(i)
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all rights in connection with and assets of the Employee Plans;
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(j)
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all rights of Seller under this Agreement, the Earnout
Agreement, the Facility Lease, the Bill of Sale, the Assignment and Assumption
Agreement, the Lease Assignment, Assignment of Intellectual Property,
Noncompetition Agreement, the Subordination Agreement, the Buyer Subordination
Agreement, the Promissory Note, and the Contingent Note, (collectively, the
“Transaction Documents”);
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(k)
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except as otherwise agreed by Buyer and Seller, all insurance
benefits, insurance policies and all prepaid insurance premiums of Seller;
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(l)
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all accounts receivable from the Member or any Related Person
of Seller or the Member;
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15
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(m)
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that certain Agreement for Pre-Trial Diversion executed by
Seller on July 2, 2002 in connection with the GT Proceeding and any other
agreement, instrument, or document associated therewith (collectively, the
“Diversion Agreement”);
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(n)
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the ADEQ Consent Order and all other agreements of Seller and
its Affiliates with the ADEQ;
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(o)
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all of Seller’s cash, cash equivalents, and short term
investments (except Petty Cash); and
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(p)
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any and all rights in or to the names “Chart,” “Chart
Industries,” or any derivative thereof.
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The consideration for the Assets (the “Purchase Price”) will be (a) Fifteen Million Five
Hundred Thousand Dollars ($15,500,000.00) plus the amount of Petty Cash plus or minus the
Adjustment Amount and (b) the assumption of the Assumed Liabilities. In accordance with Section
2.7(b), at the Closing, the Purchase Price, prior to adjustment on account of the Adjustment
Amount, shall be delivered by Buyer to Seller as follows: (a) Thirteen Million Four Hundred Fifty
Thousand Dollars ($13,450,000.00) by wire transfer; (b) One Million Nine Hundred Fifty Thousand
Dollars ($1,950,000.00) payable in the form of the Promissory Note; (c) a check in the amount of
the Petty Cash; and (d) the balance of the Purchase Price by the execution and delivery of the
Assignment and Assumption Agreement. The Adjustment Amount shall be paid in accordance with
Section 2.8. As additional consideration for the Assets, Seller may receive additional payments
resulting from the adjustments to the Promissory Note that may occur pursuant to the Earnout
Agreement identified in Section 2.7(a)(xii). Not included in the Purchase Price are amounts that
may become payable under the Earnout Agreement and Contingent Note.
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(a)
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Assumed Liabilities
. On the Closing Date, but
effective as of the Effective Time, Buyer shall assume and agree to discharge
only the following Liabilities of Seller (the “Assumed Liabilities”):
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(i)
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any trade account payable listed on Part
2.4(a)(i) of the Disclosure Schedule (other than a trade account
payable to the Member, Parent or a Related Person of Seller, Parent, or
the Member);
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(ii)
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any unpaid accrued expenses of the kind
described on Part 2.4(a)(ii) of the Disclosure Schedule;
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(iii)
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any Liability to Seller’s customers incurred
by Seller in the Ordinary Course of Business for nondelinquent orders
outstanding as of the Effective Time reflected on Seller’s books (other
than any
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16
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Liability arising out of or relating to a Breach that occurred
prior to the Effective Time);
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(iv)
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any Liability to Seller’s customers under
written warranty agreements in the forms disclosed in Part 2.4(a)(iv)
of the Disclosure Schedule given by Seller to its customers in the
Ordinary Course of Business prior to the Effective Time (other than a
Liability arising out of or relating to a Breach that occurred before
the Effective Time); and
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(v)
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any Liability arising after the Effective Time
under the Assumed Contracts (other than any Liability arising under the
Seller Contracts described on Part 2.4(a)(v) of the Disclosure Schedule
or arising out of or relating to a Breach that occurred prior to the
Effective Time).
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(b)
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Retained Liabilities
. The Retained Liabilities shall
remain the sole responsibility of and shall be retained, paid, performed and
discharged solely by Seller. “Retained Liabilities” shall mean every Liability
of Seller other than the Assumed Liabilities, including:
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(i)
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any Liability arising out of or relating to
products of Seller to the extent manufactured or sold prior to the
Effective Time other than to the extent assumed under Section
2.4(a)(iii), (iv) or (v) and Buyer’s obligations under Section 11.2(d);
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(ii)
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any Liability under any Assumed Contract that
arises after the Effective Time but that arises out of or relates to
any Breach that occurred prior to the Effective Time;
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(iii)
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any Liability for Taxes not specifically
assumed under Section 2.4(a), including (A) any Taxes arising as a
result of Seller’s or the Prior Owner’s operation of its business or ownership of the Assets
before the Effective Time, (B) any Taxes that will arise, as a result
of the sale of the Assets pursuant to this Agreement but excluding
Taxes relating to the transfer and registration of any vehicles
included in the Assets listed on Part 2.4(b)(iii) of the Disclosure
Schedule that Buyer will assume and pay, and (C) any deferred Taxes
of any nature;
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(iv)
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any Liability (including interest) under any
Seller Contract (other than the Assumed Contracts), including any
Liability arising out of or relating to Seller’s credit facilities or
any security interest related thereto or any liability under any
retention or salary continuation agreement with employees of Seller;
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17
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(v)
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any Environmental Liabilities of Seller or any
of its Related Persons that relate to acts, omissions or the condition
of the Facilities or any other property on or prior to the Closing
Date;
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(vi)
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any Liability arising out of, or relating to
Seller’s failure to comply with the ADEQ Consent Order;
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(vii)
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any Liability of Seller or any of its Related
Persons under the Employee Plans (including liability for any
underfunding and accrued expenses for group insurance) or relating to
sick leave, workers’ compensation, unemployment benefits, pension
benefits, employee equity security option or profit-sharing plans,
health care plans or benefits or any other employee plans or benefits
of any kind (including payment of all life insurance premiums and life
insurance death benefits relating to all life insurance policies
offered by Seller, whether Seller is self-insured for the same or not,
including, without limitation, those set forth on Part 3.32(b) of the
Disclosure Schedule) for Seller’s employees or former employees or
both;
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(viii)
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any Liability of Seller or any of its Related Persons under any
employment, severance, retention, stay bonus, salary continuation, or
termination agreement with any employee of Seller or any of its Related
Persons;
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(ix)
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any Liability of Seller or any of its Related
Persons arising out of or relating to any employee grievance with
respect to any period before the Effective Time;
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(x)
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any Liability of Seller to the Member or
Related Person of Seller or the Member;
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(xi)
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any Liability of Seller or any of its Related
Persons to indemnify, reimburse or advance amounts to any officer,
manager, employee or agent of Seller;
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(xii)
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any Liability of Seller to distribute to the
Member or otherwise apply all or any part of the consideration received
hereunder;
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(xiii)
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any Liability of Seller or any of its Related Persons arising out of
any Proceeding pending as of the Effective Time (including the GT
Proceeding or the Diversion Order);
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(xiv)
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any Liability of Seller or any of its Related
Persons arising out of any Proceeding commenced after the Effective
Time and arising out of or relating to any occurrence or event
happening before the Effective Time, with the exception of any such
Liability of Seller
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18
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arising as a result of Buyer’s failure to perform
or satisfy any Assumed Liability;
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(xv)
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any Liability of Seller or any of its Related
Persons arising out of or resulting from Seller’s compliance or
noncompliance with any Legal Requirement or Order of any Governmental
Body arising from, or related to, operation of the Business by Seller
or the Prior Owner during the period prior to the Closing Date;
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(xvi)
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any Liability of Seller or any of its Related
Persons under this Agreement or any other document executed in
connection with the Contemplated Transactions;
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(xvii)
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any other Liability (other than an Assumed Liability) arising out of
the ownership or operation of the Assets or the Facility before the
Effective Time;
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(xviii)
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any Liability of Seller or any of its Related Persons based upon
Seller’s or such Related Person’s acts or omissions occurring after the
Effective Time;
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(xix)
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any Liability not specified in this Section
2.4(b) and excluded from assumption under Sections 2.4(a)(i)-(v); and
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(xx)
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accrued expenses payable to or on behalf of the
Member or a Related Person of the Seller or Member.
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The Purchase Price shall be allocated in accordance with Exhibit 2.5. After the Closing, the
parties shall make consistent use of the allocation, fair market value and useful lives specified
in Exhibit 2.5 for all Tax purposes and in all filings, declarations and reports with the IRS
and other taxing authorities in respect thereof, including the reports required to be filed under
Section 1060 of the Code. Buyer shall prepare and deliver IRS Form 8594 to Seller within
sixty-five (65) days after the Closing Date for Seller’s review and agreement, which shall not be
unreasonably denied, withheld, or delayed, and the parties agree to each file a Form 8594 with the
IRS following such form, except to the extent that they mutually agree to any changes to such form.
Amounts payable under the Earnout Agreement or Contingent Note shall be allocated to goodwill if
they are treated as part of the Purchase Price. In any Proceeding related to the determination of
any Tax, neither Buyer nor Seller shall contend or represent that such allocation is not a correct
allocation.
The purchase and sale provided for in this Agreement (the “Closing”) will take place at the
offices of Husch & Eppenberger, LLC, 190 Carondelet Plaza, Suite 600, St. Louis, Missouri 63105,
commencing at 9:00 a.m. (local time) on July 1, 2003, unless Buyer and Seller otherwise agree.
19
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2.7
|
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Closing Obligations
.
|
In addition to any other documents to be delivered under other provisions of this Agreement,
at the Closing:
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(a)
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Seller shall deliver to Buyer the following:
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(i)
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a bill of sale for all of the Assets that are
Tangible Personal Property in the form of Exhibit 2.7(a)(i) (the “Bill
of Sale”) executed by Seller;
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(ii)
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an assignment of all of the Assets that are
intangible personal property other than Intellectual Property Assets in
the form of Exhibit 2.7(a)(ii), which assignment shall also contain
Buyer’s undertaking and assumption of the Assumed Liabilities (the
“Assignment and Assumption Agreement”) executed by Seller;
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(iii)
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for each interest in Real Property identified
on Parts 3.7 and 3.8 of the Disclosure Schedule, (x) a lease and
memorandum of Lease in the form of Exhibit 2.7(a)(iii)(x)
(collectively, the “Facility Lease”) executed by Seller, (y) an
Assignment and Assumption of Lease in the form of Exhibit
2.7(a)(iii)(y) (the “Lease Assignment”), or (z) such other appropriate
document or instrument of transfer, as the case may require, each in
form and substance satisfactory to Buyer and its counsel and executed
by Seller;
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(iv)
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assignments of all Intellectual Property Assets
and separate assignments of all registered Marks, Patents and
Copyrights in the forms set forth in Exhibit 2.7(a)(iv) executed by
Seller;
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(v)
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a Registrant Name Change Agreement, executed by
Seller, transferring the right to the website www.greenvilletube.com to
Buyer, in the form of Exhibit 2.7(a)(v);
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(vi)
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such other bills of sale, assignments,
certificates of title, documents and other instruments of transfer and
conveyance as may reasonably be requested by Buyer, each in form and
substance satisfactory to Buyer and its legal counsel and executed by
Seller;
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(vii)
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noncompetition agreement in the form of
Exhibit 2.7(a)(vii), executed by Seller, Member, and Parent (the
“Noncompetition Agreement”);
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(viii)
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evidence satisfactory to Buyer of the termination of the employment
agreements and salary continuation agreements listed on Exhibit
2.7(a)(viii), on terms and conditions satisfactory to Seller;
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(ix)
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a Guaranty in the form attached to this
Agreement, executed by Member and Parent;
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(x)
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a certificate of the Secretary of Seller
certifying, as complete and accurate as of the Closing, attached copies
of the Governing Documents of Seller, certifying and attaching all
requisite resolutions or actions of Seller’s sole manager and Member
approving the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions and the change of
Seller’s name to GTC of Clarksville, LLC, and certifying to the
incumbency and signatures of the officers of Seller executing this
Agreement and any other document relating to the Contemplated
Transactions and accompanied by the requisite documents for amending
the relevant Governing Documents of Seller required to effect such
change of name in form sufficient for filing with the appropriate
Governmental Body;
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(xi)
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a certificate of the Secretary of the Member
certifying as complete and accurate as of the Closing attached copies
of the Governing Documents of the Member, certifying and attaching
requisite resolutions of the Member’s board of directors approving the
execution and delivery of this Agreement and the other agreements and
documents relating to the Contemplated Transactions to be executed and
delivered by the Member, and certifying to the incumbency and
signatures of the officers of the Member executing this Agreement and any other agreements or documents
relating to the Contemplated Transactions;
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(xii)
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an Earnout Agreement in the form of Exhibit
2.7(a)(xii) executed by Seller (the “Earnout Agreement”);
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(xiii)
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the consent of the lessor to the Lease Assignment of the Office Lease
and the consent of any other lessor to the Lease Assignment of any
other Leased Real Property;
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(xiv)
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an owner’s affidavit related to the Owned Real
Property in the form of Exhibit 2.7(a)(xiv) executed by Seller;
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(xv)
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such affidavits as the issuer(s) of the title
insurance policies specified in Section 7.3 may require;
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(xvi)
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Consents, where required, of the other
contracting Persons to the Assumed Contracts;
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(xvii)
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A subordination agreement with the Buyer’s senior secured lender (or
the agent thereof) (the “Subordination Agreement”) executed by Seller;
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(xviii)
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A subordination agreement with Buyer (the “Buyer Subordination
Agreement”) executed by Seller;
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(xix)
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Nineteen Thousand Eight Hundred Eighty One
Dollars Fifty-five Cents Dollars ($19,881.55), representing an amount
equal to fifty percent (50%) of the fee payable by Buyer for the Phase
II assessment conducted by Buyer pursuant to an Access Agreement
between Seller and Capital for Business, Inc., dated December 9, 2002,
which amount has been paid to Buyer through a reduction in the amount
to be wire transferred to Seller under Section 2.7(b)(i); and
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(xx)
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Such other agreements, documents, and
instruments as Buyer may reasonably request, including, without
limitation, certificates of good standing of Seller, Member, and Parent
in their states of incorporation, Certificate of Seller’s good standing
as a foreign corporation in the States of Arkansas and Pennsylvania,
and Certificates of no tax due for Seller in the States of Arkansas and
Pennsylvania.
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(b)
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Buyer shall deliver to Seller and Member, as the case may be:
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(i)
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Thirteen Million Four Hundred Fifty Thousand
Dollars ($13,450,000.00) by wire transfer to the account set forth on
Part 2.7(b)(i) of the Disclosure Schedule;
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(ii)
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A promissory note executed by Buyer and payable
to Seller in the principal amount of One Million Nine Hundred Fifty
Thousand Dollars ($1,950,000.00) in the form of Exhibit 2.7(b)(ii) (the
“Promissory Note”);
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(iii)
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the Assignment and Assumption Agreement
executed by Buyer;
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(iv)
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the Facility Lease executed by Buyer
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(v)
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the Lease Assignment executed by Buyer;
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(vi)
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the Noncompetition Agreement executed by Buyer;
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(vii)
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the Buyer Subordination Agreement executed by
the Buyer;
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(viii)
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a certificate of the Secretary of Buyer certifying, as complete and
accurate as of the Closing, attached copies of the Governing Documents
of Buyer and certifying and attaching all requisite resolutions or
actions of Buyer’s board of directors approving the execution and
delivery of this Agreement and the consummation of the Contemplated
Transactions and certifying to the incumbency
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and signatures of the officers of Buyer executing this Agreement and any other document
relating to the Contemplated Transactions;
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(ix)
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an Earnout Agreement in the form of Exhibit
2.7(a)(xii) executed by Buyer;
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(x)
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Buyer check in the amount of the Petty Cash;
and
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(xi)
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Copies of (i) certificate of good standing of
Buyer in Delaware, (ii) certificate of good standing of Buyer as a
foreign corporation in Arkansas, and (iii) such other state
certificates as Buyer simultaneously provides to LaSalle Business
Credit, LLC.
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2.8
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Adjustment Amount and Payment
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The “Adjustment Amount” (which may be a positive or negative number) will be equal to the
amount determined by subtracting the Closing Working Capital from Seven Million Five Hundred
Twenty-Seven Thousand Seven Hundred Eighty Four Dollars ($7,527,784). If the Adjustment Amount is
positive, the Adjustment Amount shall be paid by Seller first by reduction of the principal balance
of the Promissory Note by such amount to fund payment of the Adjustment Amount and second, by wire
transfer to an account specified by Buyer in the amount by which the Adjustment Amount exceeds the
principal amount of the Promissory Note. If the Adjustment Amount is negative, the difference
between the Closing Working Capital and Seven Million Five Hundred Twenty-Seven Thousand Seven
Hundred Eighty Four Dollars ($7,527,784) shall be paid by increasing the principal balance of the
Promissory Note by the amount of such Adjustment Amount. Within three (3) business days after the calculation of the
Closing Working Capital becomes binding and conclusive on the parties pursuant to Section 2.9, the
applicable reduction or increase of the principal balance of the Promissory Note, if any, shall
automatically be effective and Seller shall make any wire transfer payment provided for in this
Section 2.8.
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2.9
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Adjustment Procedure
.
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(a)
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“Working Capital” as of a given date shall mean the amount
calculated by subtracting (i) the sum on such date of Seller’s (1) trade
accounts payable and listed on Part 2.4(a)(i) of the Disclosure Schedule, (2)
accrued expenses specified in Section 2.4(a)(ii) and set for on Part 2.4(a)(ii)
of the Disclosure Schedule, and (3) advances to its customers arising in the
Ordinary Course of Business from (ii) the sum on such date of (1) the Purchased
Receivables, (2) Prepaid Expenses and (3) the Purchased Inventory. Deferred
Taxes shall not be included in items 1 through 3 of clause (ii) above. All
amounts payable to or receivable from Related Persons of the Seller shall be
excluded from the calculation of Working Capital on any date. Seller’s cash,
cash equivalents, and short term investments shall not be included in the
computation of Working Capital. In computing Working Capital, there shall be
no accruals for product warranty or product return claims, and the parties
shall include in accrued
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employee expenses only accruals for the Hired Active
Employees that Buyer specifies on the Closing Date as employees it expects to
hire. Accrued employee expenses shall not include accruals of retention
bonuses or payments or amounts payable to pension or other retirement plans to
which Seller contributes. Neither the Purchased Receivables nor the Purchased
Inventory shall be subject to any reserves.
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(b)
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Buyer shall prepare financial statements (“Closing Financial
Statements”) of Seller as of the Effective Time in accordance with the
accounting principles, policies and practices historically used by Seller and
set forth on Exhibit 2.9. Buyer shall then determine the Working Capital as of
the Effective Time (the “Closing Working Capital”) based upon the Closing
Financial Statements and using the methodology specified in Section 2.9(a) and
Exhibit 2.9. Buyer shall deliver the Closing Financial Statements and its
determination of the Closing Working Capital to Seller within sixty (60) days
following the Closing Date.
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(c)
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If, within thirty (30) days following delivery of the Closing
Financial Statements and the Closing Working Capital calculation, Seller has
not given Buyer written notice of its objection as to the Closing Working
Capital calculation (which notice shall state the basis of Seller’s objection
in reasonable detail), then the Closing Working Capital calculated by
Buyer shall be binding and conclusive on the parties and be used in
computing the Adjustment Amount.
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(d)
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If Seller duly gives Buyer such notice of objection, and if
Seller and Buyer fail to resolve the issues outstanding with respect to the
Closing Financial Statements and the calculation of the Closing Working Capital
within thirty (30) days of Buyer’s receipt of Seller’s objection notice, Seller
and Buyer shall submit the issues remaining in dispute to Grant Thornton LLP in
Chicago, Illinois, (the “Independent Accountants”) for resolution applying the
principles, policies and practices referred to in Section 2.9(a) and Exhibit
2.9. If issues are submitted to the Independent Accountants for resolution,
(i) Seller and Buyer shall furnish or cause to be furnished to the Independent
Accountants such work papers and other documents and information relating to
the disputed issues as the Independent Accountants may request and are
available to that party or its agents and shall be afforded the opportunity to
present to the Independent Accountants any material relating to the disputed
issues and to discuss the issues with the Independent Accountants; (ii) the
determination by the Independent Accountants, as set forth in a notice to be
delivered to both Seller and Buyer within sixty (60) days of the submission to
the Independent Accountants of the issues remaining in dispute, shall be final,
binding and conclusive on the parties and shall be used in the calculation of
the Closing Working Capital; and (iii) Seller and Buyer will each bear fifty
percent (50%) of the fees and costs of the Independent Accountants for
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such determination. Set forth on Exhibit 2.9.1 is a calculation of the estimated
Working Capital of Seller as of June 30, 2003.
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(a)
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If there are any Material Consents that have not yet been
obtained (or otherwise are not in full force and effect as of the Closing, in
the case of each Seller Contract as to which such Material Consents were not
obtained (or otherwise are not in full force and effect) (the “Restricted
Material Contracts”), Buyer may waive the closing conditions as to any such
Material Consent and either:
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(i)
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elect to have Seller continue its efforts to
obtain the Material Consents; or
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(ii)
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elect to have Seller retain that Restricted
Material Contract and all Liabilities arising therefrom or relating
thereto.
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If Buyer elects to have Seller continue its efforts to obtain any Material
Consents, notwithstanding Sections 2.1 and 2.4, neither this Agreement nor
the Assignment and Assumption Agreement nor any other document
related to the consummation of the Contemplated Transactions shall
constitute a sale, assignment, assumption, transfer, conveyance or delivery
or an attempted sale, assignment, assumption, transfer, conveyance or
delivery of the Restricted Material Contracts, and following the Closing,
the parties shall use Best Efforts, and cooperate with each other, to obtain
the Material Consent relating to each Restricted Material Contract as
quickly as practicable. Pending the obtaining of such Material Consents
relating to any Restricted Material Contract, the parties shall cooperate
with each other in any reasonable and lawful arrangements designed to
provide to Buyer the benefits of use of the Restricted Material Contract for
its term (or any right or benefit arising thereunder, including the
enforcement for the benefit of Buyer of any and all rights of Seller against
a third party thereunder). Once a Material Consent for the sale,
assignment, assumption, transfer, conveyance and delivery of a Restricted
Material Contract is obtained, Seller shall promptly assign, transfer,
convey and deliver such Restricted Material Contract to Buyer, and Buyer
shall assume the obligations under such Restricted Material Contract
assigned to Buyer from and after the date of assignment to Buyer pursuant to
a special-purpose assignment and assumption agreement substantially similar
in terms to those of the Assignment and Assumption Agreement (which
special-purpose agreement the parties shall prepare, execute and deliver in
good faith at the time of such transfer, all at no additional cost to
Buyer).
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(b)
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If there are any Consents not listed on Exhibit 7.1 necessary
for the assignment and transfer of any Assumed Contracts (the “Nonmaterial
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Consents”) which have not yet been obtained (or otherwise are not in full force
and effect) as of the Closing, Buyer shall elect at the Closing, in the case of
each of the Seller Contracts as to which such Nonmaterial Consents were not
obtained (or otherwise are not in full force and effect) (the “Restricted
Nonmaterial Contracts”), whether to:
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(i)
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Accept the assignment of such Restricted
Nonmaterial Contract, in which case, as between Buyer and Seller, such
Restricted Nonmaterial Contract shall, to the maximum extent
practicable and notwithstanding the failure to obtain the applicable
Nonmaterial Consent, be transferred at the Closing pursuant to the
Assignment and Assumption Agreement as elsewhere provided under this
Agreement; or
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(ii)
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Reject the assignment of such Restricted
Nonmaterial Contract, in which case, notwithstanding Sections 2.1 and
2.4, (A) neither this Agreement nor the Assignment and Assumption
Agreement nor any other document related to the consummation of the
Contemplated Transactions shall constitute a sale, assignment,
assumption, conveyance or delivery or an attempted sale, assignment,
assumption, transfer, conveyance or delivery of such
Restricted Nonmaterial Contract, and (B) Seller shall retain such
Restricted Nonmaterial Contract and all Liabilities arising therefrom or relating thereto.
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2.11
Accounts Receivable
.
Following the Closing, Buyer shall use its Best Efforts in the Ordinary Course of Business to
collect the Purchased Receivables, provided, that, Buyer shall not be required to commence
litigation to collect any of the Purchased Receivables. If during the ninety (90) days following
the Closing Seller receives any payment on a Purchased Receivable, Seller shall give Buyer notice
of such receipt and promptly pay the amount received to an account specified by Buyer. If Buyer
receives a payment from an account debtor for which there is an outstanding account receivable both
before and after the Closing Date, such payment shall be applied to the oldest outstanding
invoice(s) not in dispute. Buyer shall not encourage any account debtor to dispute any Purchased
Receivable or otherwise offer future discounts with respect to the nonpayment or dispute of any
Purchased Receivable. If after the close of business on the ninetieth (90th) day (or if such day
is not a Business Day, the close of business on the next following Business Day) after the Closing
(including the Closing Date) any of the Purchased Receivable remain outstanding and uncollected in
whole or in part, Buyer may give Seller notice of those Purchased Receivables (the “Resale
Receivables”) that Buyer will assign to Seller and Seller will purchase from Buyer. Buyer will
give such notice no later than the close of business on the one hundredth (100th) day (or if such
day is not a Business Day, the close of business on the next following Business Day) after the
Closing, with the notice to identify the Resale Receivable by payor and the amount payable. Within
three (3) Business Days after the date of the notice, Buyer shall assign the Resale Receivables to
Seller, and Seller shall pay Buyer the outstanding amount payable of the Resale Receivables,
provided, that if Buyer collects any
26
Resale Receivables before such assignment, Buyer shall retain
the amount collected and shall not assign the collected Resale Receivables to Seller.
2.12
Contingent Note
.
Seller shall be entitled to receive additional contingent payments (the “Contingent Amount”)
up to a maximum of $500,000 (“Maximum Contingent Amount”) based on the EBITDA of the Core Business
for the twelve-month period ending December 31, 2003 (the “Contingent Measurement Period”). If the
EBITDA of the Core Business for the Contingent Measurement Period ending December 31, 2003 exceeds
Three Million Two Hundred Thousand Dollars ($3,200,000) (the “2003 Target EBITDA”), Seller shall be
entitled to receive seventy one percent (71%) of such excess, if any (the “2003 Contingent Amount”)
up to an aggregate amount of $500,000. For the months of calendar year 2003 that the Business is
owned by Seller prior to Closing, the EBITDA in those months will be adjusted by amounts that are
identified as excessive or nonessential allocations from Member or Parent to Seller and agreed upon
by Buyer and Seller, provided that Buyer and Seller agree that the aggregate EBITDA for January
through June 2003 was $1,039,500.00. The 2003 Contingent Amount, if any, shall become a note in
substantially the form of Exhibit 2.12 (the “Contingent Note”) hereto with the principal
amount due in equal amounts at the end of forty-eight (48) months from Closing and sixty (60)
months from Closing. The Contingent Note shall bear an annual interest rate of six percent (6.0%)
beginning January 1, 2004. The interest on the Contingent Note will accrue during 2004, and will
be paid in cash annually the third (3rd), fourth (4th), and fifth (5th) years after the Closing.
If the Contingent Note is required, Buyer shall deliver it, executed by Buyer, to Seller within
thirty (30) days after the Buyer receives its audited financial statements for the fiscal year
ending December 31, 2003. In no event shall the aggregate Contingent Amount payable to Seller
hereunder exceed the Maximum Contingent Amount. The Buyer’s independent public accountants will
determine the EBITDA of the Core Business for the Contingent Measurement Period in accordance with
Exhibit 2.12 as consistently applied by Seller to the Core Business. The computation of EBITDA
shall be conducted in accordance with Section 4.1 of the Earnout Agreement. Buyer will deliver a
report setting out the computation of EBITDA to Seller for review, and unless Seller notifies Buyer
within thirty (30) days after receipt of the report that it objects to the computation, the report
shall be binding and conclusive for the purposes of this Agreement. If Seller gives Buyer notice
of its objection to the computation of EBITDA within the thirty (30) day period, the amount of
EBITDA for the Contingent Measurement Period shall be determined by negotiation between Seller and
Buyer. If Seller and Buyer are unable to reach agreement within thirty (30) business days after
such notification, the determination of the amount of EBITDA for the Contingent Measurement Period
shall be submitted to a mutually agreeable third-party firm of independent certified public
accountants for determination, whose determination shall be binding and conclusive on the parties.
All transactions between or among the Core Business or Buyer or Buyer’s Affiliates shall be on term
and conditions no less favorable to the Core Business than those available through comparable
transactions with third parties. Seller represents and warrants to Buyer that all transactions
between or among the Core Business and Seller or Seller’s Affiliates in 2003 before the Closing
have been no less favorable to the Core Business than those available through comparable
transactions with third parties.
2.13
Termination of Promissory Note
. If Parent, or any of its U.S. or foreign
subsidiaries, including Seller, is a debtor in any proceeding under Title 11 of the United States
27
Code (the “Bankruptcy Code”) or any similar reorganization or liquidation statute in any foreign
jurisdiction (“Foreign Insolvency Law”) where any of the following occur: (a) the environmental
indemnity obligations set forth in (i) Section 11.3 of this Agreement or (ii) Section 11.2 of this
Agreement with respect to Section 3.22 of the Asset Purchase Agreement, to the extent not addressed
by Section 11.3(b) (collectively the “Indemnity Obligations”) are rejected under Section 365 of the
Bankruptcy Code or a similar provision under any Foreign Insolvency Law, or (b) any of the debtors
in such a proceeding propose a plan of reorganization that seeks to impair or alter any of the
Indemnity Obligations, the Buyer’s obligation to make any remaining payments under the Promissory
Note and Contingent Note, if any, shall terminate and the Buyer shall not thereafter be in default
under the Promissory Note or Contingent Note, if any.
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3.
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REPRESENTATIONS AND WARRANTIES OF SELLER
. Seller represents and warrants to Buyer as
follows:
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3.1
Organization and Good Standing; Name
.
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(a)
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Part 3.1(a) of the Disclosure Schedule contains a complete and
accurate list of Seller’s jurisdiction of organization and any other
jurisdictions in which Seller is qualified to do business as a foreign entity.
Seller is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, with full power and authority to conduct
its business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its obligations under
the Seller Contracts. Seller is duly qualified to do business as a foreign
entity and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification, except for the failure to be so qualified would not have a
material adverse affect on Seller.
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(b)
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Complete and accurate copies of the Governing Documents of
Seller as currently in effect, are attached to Part 3.1(b) of the Disclosure
Schedule.
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(c)
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Seller does not have any Subsidiaries and does not, directly or
indirectly, own any shares of capital stock or other securities of any other
Person.
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(d)
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Since January 1, 1998, the Business has been operated only
under the names “Greenville Tube,” “Greenville Tube, LLC,” and the “Greenville
Tube division of Chart, Inc.”
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3.2
Enforceability; Authority; No Conflict
.
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(a)
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This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Legal Requirements affecting
creditors’ rights generally and by general principles of equity or the fact
that specific performance or other equitable remedies are within the
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discretion of any court. Upon the execution and delivery by Seller, Parent, and Member of
each Transaction Document to which it is a party by Seller, Parent, or the
Member each Transaction Document will constitute the legal, valid and binding
obligation of each of Seller, Parent, or the Member, as the case may be,
enforceable against each of them in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Legal Requirements affecting creditors’ rights
generally and by general principles of equity or the fact that specific
performance or other equitable remedies are within the discretion of any court.
Seller has the absolute and unrestricted right, power and authority to execute and deliver this
Agreement and the Transaction Documents to which it is a party and to
perform its obligations under this Agreement and such Transaction Documents,
and such action has been duly authorized by all necessary action by Member and Seller’s board of managers.
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(b)
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Except as set forth in Part 3.2(b) of the Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
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(i)
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Breach (A) any provision of any of the
Governing Documents of Seller (B) any resolution adopted by the board
of managers or Seller;
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(ii)
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Breach or give any Governmental Body or other
Person the right to challenge any of the Contemplated Transactions or
to exercise any remedy or obtain any relief under any Legal Requirement
or any Order to which Seller or any of the Assets may be subject;
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(iii)
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contravene, conflict with or result in a
violation or breach of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by
Seller or any of its Subsidiaries or that otherwise relates to the
Assets or to the business of Seller or any of its Subsidiaries;
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(iv)
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Breach any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or payment under, or to
cancel, terminate or modify, any Assumed Contract; or
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(v)
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result in the imposition or creation of any
Encumbrance upon or with respect to any of the Assets, (other than
Encumbrances to be imposed in connection with Buyer’s financing of the
Contemplated Transaction).
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(c)
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Except as set forth in Part 3.2(c) of the Disclosure Schedule,
Seller is not required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
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3.3
Capitalization
. All of the equity interests in Seller are owned by Member, free and
clear of all Encumbrances. There are no Contracts relating to the issuance, sale or transfer of
any equity interests in other securities of Seller. Seller has no Subsidiaries.
3.4
Financial Statements
. Seller has delivered to Buyer: (a) an unaudited consolidated
balance sheet of Seller as at December 31, 2002 (including the notes, if any, thereto, the “Balance
Sheet”), and the related consolidated unaudited statements of income and cash flows for the fiscal
year then ended; (b) unaudited consolidated balance sheets of Seller as at December 31, in each of
the fiscal years 1999 through 2001, and the related unaudited consolidated statements of income and
cash flows for each of the fiscal years then ended; and (c) an unaudited consolidated balance sheet
of Seller as at May 31, 2003 (the “Interim Balance Sheet”) and the related unaudited consolidated
statements of income and cash flows for the five (5) months then ended, certified by Seller’s chief
financial officer. Such financial statements fairly present in all material respects the financial
condition and the results of operations, changes in Member’s equity and cash flows of Seller as at
the respective dates of and for the periods referred to in such financial statements, all in
accordance with GAAP, except (i) normal year-end adjustments that individually and in the aggregate
would not be material (ii) the omission of footnote disclosure required by GAAP, and (iii) the
practices disclosed in Part 3.4 of the Disclosure Schedule. Except as set forth in Part 3.4 of the
Disclosure Schedule, the financial statements referred to in this Section 3.4 reflect and will
reflect the consistent application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. The financial statements have been
prepared from and are in accordance with the accounting Records of Seller. Seller has also
delivered to Buyer copies of the portions of all letters related to Seller or its financial
condition, results of operations, financial statements, books of account, or internal controls from
Member’s auditors to Member or its parent corporation or the audit committee of its or its parent’s
board of directors during the thirty-six (36) months preceding the execution of this Agreement,
together with copies of all responses thereto.
3.5
Books and Records
. The books of account and other financial Records of Seller and the
Prior owner with respect to the Business all of which have been made available to Buyer, are
complete and correct and represent actual, bona fide transactions and have been maintained in
accordance with sound business practices, including the maintenance of an adequate system of
internal controls. The minute books of Seller and the Prior Owner with respect to the Business for
the period commencing January 1, 2000, to the Closing Date, all of which have been made available
to Buyer, contain accurate and complete Records of all meetings held of, and action taken by, the
member and manager of Seller and shareholders and boards of directors of the Prior Owner, and no
meeting of any such member or board of managers of the Seller or boards of directors or
shareholders of the Prior Owner has been held for which minutes have not been prepared or are not
contained in such minute books.
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3.6
Sufficiency of Assets
. Except as set forth in Part 3.6 of the Disclosure Schedule, the
Assets (a) constitute all of the assets, tangible and intangible, of any nature whatsoever,
necessary to operate Seller’s business in the manner presently operated by Seller, and (b) include
all of the operating assets of Seller.
3.7
Description of Owned Real Property
. Part 3.7 of the Disclosure Schedule contains a correct legal description, street address and tax
parcel identification numbers of the Owned Real Property.
3.8
The Leased Real Property
. Part 3.8 of the Disclosure Schedule contains the street
address of the Leased Real Property and an accurate description (by location, name of lessor, date
of Lease and term expiry date) of the Office Lease. Seller is the sole tenant under the Office
Lease, and, except as contemplated by this Agreement, Seller has not assigned, transferred or
hypothecated the Office Lease or any interest therein. Purchaser has been furnished a true,
correct and complete copy of the Office Lease. Seller has not received any notice from Lessor
modifying or changing the terms of the Office Lease in any way, except that the term of the Office
Lease has been extended until December 31, 2003 and the current monthly rental is $1,100.00.
Seller has obtained all consents or other instruments from the Office Lessor necessary to assign
the Office Lease to Purchaser. Seller has paid all rent and expenses through Closing, including,
without limitation, real estate taxes and utilities, payable by tenant under the terms of the
Office Lease. Seller has performed all of its obligations under the Office Lease and is not in
default under the Office Lease. To the best of Seller’s Knowledge, no facts exist under which
Seller may be deemed in default under the Office Lease merely upon service of notice or passage of
time or both. To the best of Seller’s Knowledge, (i) the Office Lessor is not in default under the
Office Lease and (ii) no facts exist under which Lessor may be deemed in default under the Office
Lease merely upon the service of notice or passage of time or both. To the best of Seller’s
Knowledge, Lessor has not assigned the Office Lease or otherwise transferred its interest in the
Office Lease or its premises.
3.9
Title to Assets; Encumbrances
.
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(a)
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Seller owns fee simple title to its respective estates in the
Owned Real Property free and clear of any Encumbrances other than:
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(i)
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liens for Taxes for the current year which are
not yet due and payable; and
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(ii)
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those described in Part 3.9(a) of the
Disclosure Schedule (“Permitted Real Property Encumbrances”).
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Seller has delivered true and complete copies of (A) all deeds, existing
title insurance policies and surveys of or pertaining to the Owned Real
Property and (B) all instruments, agreements and other documents evidencing,
creating or constituting any Permitted Real Property Encumbrances to Buyer.
Seller warrants to Buyer that the Leased Real Property is free and clear of
all Encumbrances other than Permitted Real Property Encumbrances.
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(b)
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Seller owns good and transferable title to all Assets other
than Real Property free and clear of any Encumbrances other than those
described in Part 3.9(b) of the Disclosure Schedule (“Permitted Non-Real
Property Encumbrances” and together with Permitted Real Property Encumbrances,
“Permitted Encumbrances”).
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(c)
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The Owned Real Property and Leased Real Property are the only
real property owned, leased, or used by Seller.
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3.10
Condition of Facilities
.
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(a)
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To the Knowledge of Seller use of the Owned Real Property for
the various purposes for which it is presently being used is permitted as of
right under all applicable zoning legal requirements and is not subject to
“permitted nonconforming” use or structure classifications. All Improvements
on the Owned Real Property are in compliance with all applicable Legal
Requirements, including those pertaining to zoning, building and the disabled,
are in good repair and in good condition, ordinary wear and tear excepted, and
are free from latent and patent defects. The Land included in the Owned Real
Property abuts on and has direct vehicular access to a public road or has
access to a public road via a permanent, irrevocable, appurtenant easement
benefiting such Land is supplied with public or quasi-public utilities and
other services appropriate for the operation of the Owned Real Property (as
conducted or operated by Seller) located thereon. To the Knowledge of Seller,
there is no existing or proposed plan to modify or realign any street or
highway or any existing or proposed eminent domain proceeding that would result
in the taking of all or any part of any Facility or that would prevent or
hinder the continued use of any Facility as heretofore used in the conduct of
the business of Seller. There are no leases or other rights of occupancy
(other than Seller’s right of occupancy) of the Owned Real Property.
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(b)
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Each item of Tangible Personal Property is in good repair and
good operating condition, ordinary wear and tear excepted, is suitable for
immediate use in the Ordinary Course of Business and is free from latent and
patent defects. No item of Tangible Personal Property is in need of repair or
replacement other than as part of routine maintenance in the Ordinary Course of
Business. Except as disclosed in Part 3.10(b) of the Disclosure Schedule, all
Tangible Personal Property used in Seller’s business is in the possession of
Seller.
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3.11
Accounts Receivable
. The Purchased Receivables represent valid obligations arising
from sales actually made or services actually performed by Seller in the Ordinary Course of
Business. There is no contest, claim, defense, or right of setoff, other than returns in the
Ordinary Course of Business of Seller, under any Assumed Contract with any account debtor of a
Purchased Receivable relating to the amount or validity of such Purchased Receivable. Part 3.11 of
the Disclosure Schedule contains a complete and accurate list of the Purchased
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Receivables as of the date of this Agreement, which
list sets forth the aging of each such Purchased Receivable.
3.12
Inventories
. All items included in the Purchased Inventory consist of a quality and
quantity usable and, with respect to finished goods, saleable, in the Ordinary Course of Business
of Seller except for obsolete items and items of below-standard quality slow moving or excessive
items, all of which (with the exception of the items set forth in Part 3.12 of the Disclosure
Schedule (the “Special Inventory”)) have been written off or written down to net realizable value
in the Balance Sheet or the Interim Balance Sheet or on the accounting Records of Seller as of the
Closing Date, as the case may be. Seller is not in possession of any inventory not owned by
Seller, including goods already sold. All of the Purchased Inventory has been valued at the lower
of cost or market value on a first in, first out basis. Inventories now on hand that were
purchased after the date of the Balance Sheet or the Interim Balance Sheet were purchased in the
Ordinary Course of Business of Seller at a cost not exceeding market prices prevailing at the time
of purchase. With the exception of the Special Inventory, the quantities of each item of Purchased
Inventory (whether raw materials, work-in-process, or finished goods) are not excessive but are
reasonable in the present circumstances of Seller. Work-in-process Inventories are valued
according to GAAP, consistently applied.
3.13
No Undisclosed Liabilities
. Except as set forth in Part 3.13 of the Disclosure
Schedule, Seller has no Liability required to be disclosed by GAAP except for Liabilities reflected
or reserved against in the Balance Sheet or the Interim Balance Sheet or reflected in the notes
(including off-balance sheet liabilities) thereto and current liabilities incurred in the Ordinary
Course of Business of Seller since May 31, 2003.
3.14
Taxes
.
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(a)
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Tax Returns Filed and Taxes Paid
. Since January 1,
1997, Seller and the Prior Owner (solely in their capacities as the prior
owners and operators of the Business) have each filed or caused to be filed on
a timely basis all Tax Returns, reports, or requests for extensions with
respect to Taxes relating to the Business that are or were required to be filed
pursuant to applicable Legal Requirements. All of such Tax Returns relating to
the Business filed by Seller and the Prior Owner (solely in their capacities as
the prior owners and operators of the Business) are true, correct and complete
in all material respects. Seller and the Prior Owner (solely in their
capacities as the prior owners and operators of the Business) as the case may
be, have paid, or made provision for the payment of, all Taxes relating to the
Business that have or may have become due for all periods covered by the Tax
Returns or otherwise (including amounts payable as a result of any Tax Audit or
similar inquiry), except such Taxes, if any, as are listed in Part 3.14(a) of
the Disclosure Schedule and are being contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Balance Sheet and the
Interim Balance Sheet. Except as provided in Part 3.14(a) of the Disclosure
Schedule, neither Seller nor Prior Owner is currently the beneficiary of any
extension of time within which to file any Tax Return.
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No claim has been
made by any Governmental Body in a jurisdiction where Seller does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Encumbrances on any of the Assets that arose in connection with
any failure (or alleged failure) to pay any Tax.
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(b)
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Delivery of Tax Returns and Information Regarding Audits
and Potential Audits
. Seller has made available to Buyer copies of, and
Part 3.14(b) of the Disclosure Schedule contains a complete and accurate list
of, all Tax Returns described in the first sentence of Section 3.14(a). Part
3.14(b) of the Disclosure Schedule contains a complete and accurate list of all
Tax Returns of Seller and the Prior Owner (solely in their capacities as the
prior owners and operators of the Business) relating to the Business currently
under audit and accurately describe any deficiencies or other amounts that were
paid or are currently being contested. All deficiencies proposed as a result
of such audits have been paid, reserved against, settled or are being contested
in good faith by appropriate proceedings as described in Part 3.14(b) of the
Disclosure Schedule. Seller and Prior Owner have made available to Buyer,
copies of any examination reports, statements or deficiencies or similar items
with respect to such audits. Except as described in Part 3.14(b) of the
Disclosure Schedule, neither Seller nor the Prior Owner (solely in their
capacities as the prior owners and operators of the Business) have given or
been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of Taxes concerning the Business for which Seller or
the Prior Owners (solely in such capacities) may be liable.
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(c)
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Specific Potential Tax Liabilities and Tax Situations
.
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(i)
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Withholding
. All Taxes that Seller is
or was required by Legal Requirement to withhold, deduct or collect
have been duly withheld, deducted and collected and, to the extent
required, have been paid to the proper Governmental Body or other
Person.
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(ii)
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Tax Sharing or Similar Agreements
.
There is no tax sharing agreement, tax allocation agreement, tax
indemnity obligation or similar written or unwritten agreement,
arrangement, understanding or practice with respect to Taxes (including
any advance pricing agreement, closing agreement or other arrangement
relating to Taxes) that will require any payment by Seller.
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(iii)
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Consolidated Group
. Seller (A) has
been a member of an affiliated group within the meaning of Code Section
1504(a) (or any similar group defined under a similar provision of
state, local or foreign law) and (B) has no liability for Taxes of any
person (other than
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34
itself) under Teas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or
successor by contract or otherwise.
3.15
No Material Adverse Change
. Since May 31, 2003, except as specifically set forth in
Part 3.15 of the Disclosure Schedule there has not been any material adverse change in the
business, operations, assets, liabilities or results of operations of Seller.
3.16
Employee Benefits
.
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(a)
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Set forth in Part 3.16(a) of the Disclosure Schedule is a
complete and correct list of all “employee benefit plans” as defined by Section
3(3) of ERISA, all specified fringe benefit plans as defined in Section 6039D
of the Code, and all other bonus, incentive-compensation,
deferred-compensation, profit-sharing, security-option,
security-appreciation-right, security-bonus, security-purchase,
employee-security-ownership, savings, severance, change-in-control,
supplemental-unemployment, layoff, salary-continuation, retirement, pension,
health, life-insurance, disability, accident, group-insurance, vacation,
holiday, sick-leave, fringe-benefit or welfare plan, and any other employee
compensation or benefit plan, agreement, policy, practice, commitment, contract
or understanding (whether qualified or non-qualified, currently effective or
terminated, written or unwritten) and any trust, escrow or other agreement
related thereto that (i) is currently maintained or contributed to by Seller or
with respect to which Seller has liability, and (ii) provides benefits, or
describes policies or procedures applicable to any current or former manager,
officer, employee or service provider of Seller or the dependents of any
thereof, regardless of how (or whether) liabilities for the provision of
benefits are accrued or assets are acquired or dedicated with respect to the
funding thereof (collectively the “Employee Plans”). Part 3.16(a) of the
Disclosure Schedule identifies as such any Employee Plan that is (w) a “Defined
Benefit Plan” (as defined in Section 414(1) of the Code), (x) a plan intended
to meet the requirements of Section 401(a) of the Code, (y) a “Multiemployer
Plan” (as defined in Section 3(37) of ERISA) or (z) a plan subject to Title IV
of ERISA, other than a Multiemployer Plan.
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(b)
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Seller has delivered to Buyer true, accurate and complete
copies of (i) the documents comprising each Employee Plan (or, with respect to
any Employee Plan which is unwritten, a detailed written description of
eligibility, participation, benefits, funding arrangements, and assets),
(ii) all trust agreements, insurance contracts or any other funding
instruments related to the Employee Plans, (iii) all rulings, determination
letters, no-action letters or advisory opinions from the IRS, the U.S.
Department of Labor, the Pension Benefit Guaranty Corporation (PBGC) or any
other Governmental Body that pertain to each Employee Plan and any open
requests therefor, (iv) all collective bargaining agreements pursuant to
which contributions to any Employee Plan(s) have been made or
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obligations incurred by Seller and all collective bargaining agreements pursuant to
which contributions are being made or obligations are owed by such entities,
and (v) all summary plan descriptions, summaries of material modifications
and memoranda, employee handbooks and other written communications regarding
the Employee Plans.
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(c)
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[Intentionally Omitted]
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(d)
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[Intentionally Omitted]
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(e)
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[Intentionally Omitted]
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(f)
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Seller has, at all times, complied, and currently complies, in
all material respects with the applicable continuation requirements for its
welfare benefit plans, including (1) Section 4980B of the Code (as well as its
predecessor provision, Section 162(i) of the Code) and Sections 601 through
608, inclusive, of ERISA, which provisions are hereinafter referred to
collectively as “COBRA” and (2) any applicable state statutes mandating health
insurance continuation coverage for employees.
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(g)
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The form of all Employee Plans is in material compliance with
the applicable terms of ERISA, the Code, and any other applicable laws,
including the Americans with Disabilities Act of 1990, the Family Medical Leave
Act of 1993 and the Health Insurance Portability and Accountability Act of
1996, and such plans have been operated in material compliance with such laws
and the written Employee Plan documents. Neither Seller nor any fiduciary of
an Employee Plan has violated the requirements of Section 404 of ERISA. All
required reports and descriptions of the Employee Plans (including Internal
Revenue Service Form 5500 Annual Reports, Summary Annual Reports and Summary
Plan Descriptions and Summaries of Material Modifications) have been (when
required) timely filed with the IRS, the U.S. Department of Labor or other
Governmental Body and distributed as required, and all notices required by
ERISA or the Code or any other Legal Requirement with respect to the Employee
Plans have been appropriately given.
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(h)
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Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS. Each trust created under any Employee Plan has been determined to be
exempt from taxation under Section 501(a) of the Code. Each Employee
Welfare Benefit Plan (as defined in Section 3(1) of ERISA) that utilizes a
funding vehicle described in Section 501(c)(9) of the Code or is subject to
the provisions of Section 505 of the Code qualifies for tax-exempt status
under Section 501(c)(9) of the Code or complies with Section 505 of the
Code.
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(i)
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[Intentionally Omitted]
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(j)
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Seller has maintained workers’ compensation coverage as
required by applicable state law.
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(k)
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[Intentionally Omitted]
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(l)
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Except for the continuation coverage requirements of COBRA,
Seller has no obligations or potential liability for benefits to employees,
former employees or their respective dependents following termination of
employment or retirement under any of the Employee Plans that are Employee
Welfare Benefit Plans.
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(m)
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Except as provided in Section 10.1(d) and except for Seller’s
intention to freeze its pension plan, none of the Contemplated Transactions
will result in an amendment, modification or termination of any of the Employee
Plans. No written or oral representations have been made to any employee or
former employee of Seller promising or guaranteeing any employee payment or
funding for the continuation of medical, dental, life or disability coverage
for any period of time beyond the end of the current plan year (except to the
extent of coverage required under COBRA). Seller has made no written or oral
representations to its current employee or former employees concerning the
employee benefits of Buyer.
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(n)
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Seller has no obligation to contribute to any Employee Plan
that is a “multiemployer plan” within the meaning of Section 4001(a)(3) of
ERISA (“Multiemployer Plan”).
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3.17
Compliance with Legal Requirements; Governmental Authorizations
.
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(a)
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Except as set forth in Part 3.17(a) of the Disclosure Schedule:
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(i)
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Seller is, in all material respects, in
compliance with each Legal Requirement that is applicable to the
conduct or operation of the Business or the ownership or use of any of
its assets, except where the failure to be in compliance would not have
a material adverse effect on Seller;
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(ii)
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Since January 1, 2000, each of Seller and the
Prior Owner (solely in their capacities as the prior owners and
operators of the Business) has been, in all material respects, in
compliance with each Legal Requirement that was applicable to it or to
the conduct or operation of the Business or the ownership or use of any
of its assets, except where the failure to be in compliance would not
have a material adverse effect on Seller or the Prior Owner as
applicable;
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(iii)
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To Seller’s Knowledge, since January 1, 2000,
no event has occurred or fact exists that (with or without notice or
lapse of time or both) (A) may be reasonably likely to constitute or
result in a
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material violation by Seller of, or a failure on the part
of Seller to comply with, any Legal Requirement or (B) may be
reasonably likely to give rise to any obligation on the part of Seller
to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
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(iv)
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Neither Seller nor the Prior Owner (solely in
their capacities as the prior owners and operators of the Business) has
received, at any time since January 1, 2000, any written, electronic,
or to Seller’s Knowledge, oral notice from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible or potential
violation of, or failure to comply with, any Legal Requirement, which,
if true, may be reasonably likely to have a material adverse effect on
Seller or the Business or (B) any actual, alleged, possible or
potential obligation on the part of Seller to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature, which
may be reasonably likely to have a material adverse effect on Seller or
the Business.
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This Section 3.17(a) shall not apply to matters addressed by the
representations and warranties contained in Sections 3.14 (Taxes), 3.16
(Employee Benefits), 3.22 (Environmental Matters), 3.23 (Employees) or 3.24
(Labor Disputes).
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(b)
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Part 3.17(b) of the Disclosure Schedule contains a complete and
accurate list of each Governmental Authorization that is held by Seller or that
otherwise relates to the Business or the Assets. Each Governmental
Authorization required to be listed in Part 3.17(b) of the Disclosure Schedule
is valid and in full force and effect. Except as set forth in Part 3.17(b) of
the Disclosure Schedule:
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(i)
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Seller is and since January 1, 2000, Seller and
Prior Owner (solely in their capacities as the prior owners and
operators of the Business) have been in full compliance with all of the
terms and requirements of each Governmental Authorization identified or
required to be identified in Part 3.17(b) of the Disclosure Schedule
except where such failure to be in compliance would not have a
material adverse effect on the Seller or the Business.
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(ii)
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To Seller’s Knowledge, no event has occurred or
facts arisen since January 1, 2000, that is likely to (with or without
notice or lapse of time or both) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization required to be listed in
Part 3.17(b) of the Disclosure Schedule that is likely to have a
material adverse effect on Seller or the Business or (B) result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation
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or termination of, or any modification to, any
Governmental Authorization required to be listed in Part 3.17(b) of the
Disclosure Schedule;
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(iii)
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Since January 1, 2000, neither Seller nor
Prior Owner (solely in their capacities as the prior owners and
operators of the Business) has received any written or electronic, or
to the Knowledge of Seller, oral notice from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible or
potential violation of or failure to comply with any term or
requirement of any Governmental Authorization or (B) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination of or modification to any Governmental
Authorization; and
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(iv)
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all applications required to have been filed
since January 1, 2000, for the renewal of the Governmental
Authorizations listed or required to be listed in Part 3.17(b) of the
Disclosure Schedule have been duly filed on a timely basis with the
appropriate Governmental Bodies, and, to the knowledge of Seller, all
other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with
the appropriate Governmental Bodies.
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The Governmental Authorizations listed in Part 3.17(b) of the Disclosure Schedule collectively
constitute all of the Governmental Authorizations necessary to permit Seller to lawfully conduct
and operate its business in the manner in which it currently conducts and operates such business
and to permit Seller to own and use its assets in the manner in which it currently owns and uses
such assets.
3.18
Legal Proceedings; Orders
.
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(a)
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Except as set forth in Part 3.18(a) of the Disclosure Schedule,
there is no pending or, to Seller’s Knowledge, threatened Proceeding:
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(i)
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by or against Seller or that otherwise relates
to or may affect the Business or any of the assets owned or used by
Seller; or
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(ii)
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that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any
of the Contemplated Transactions.
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To the Knowledge of Seller, no event has occurred or facts exist that are reasonably
likely to give rise to or serve as a basis for the commencement of any such
Proceeding. Seller has delivered to Buyer copies of all pleadings, correspondence
and other documents relating to each Proceeding listed in Part 3.18(a) of the
Disclosure Schedule (other than pleadings, correspondence and other documents
relating to the Diversion Agreement which Seller has fully and
39
accurately described
to Buyer). Except as set forth on Part 3.18(a) of the Disclosure Schedule, there
are no Proceedings listed or required to be listed in Part 3.18(a) of the Disclosure
Schedule that would, if adversely determined, have a material adverse effect on the
Business as conducted by Seller or the operations or financial condition of Seller
or upon the Assets.
(b) Except as set forth in Part 3.18(b) of the Disclosure Schedule:
|
|
(i)
|
|
there is no Order to which Seller, its business
or any of the Assets is subject; and
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|
|
|
|
(ii)
|
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to the Knowledge of Seller, no officer,
manager, agent or employee of Seller is subject to any Order that
prohibits such officer, manager, agent or employee from engaging in or
continuing any conduct, activity or practice relating to the business
of Seller.
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|
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(c)
|
|
Except as set forth in Part 3.18(c) of the Disclosure Schedule:
|
|
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(i)
|
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Each of Seller and the Prior Owners (solely in
their capacities as the prior owners and operators of the Business) is,
and, at all times since January 1, 2000, has been in compliance in all
material respects, with all of the terms and requirements of each Order
to which it or any of the Assets is or has been subject;
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(ii)
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To Seller’s Knowledge, no event has occurred or
facts exist that are likely to constitute or result in (with or without
notice or lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which Seller or any of the Assets
is subject; and
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|
|
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(iii)
|
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Each of Seller and the Prior Owners (solely in
their capacities as the prior owners and operators of the Business),
has not received, at any time since January 1, 2000, any notice or
other communication (whether written or, to the Knowledge of Seller,
oral) from any Governmental Body or any other Person regarding any
actual, alleged, possible or potential violation of, or failure to
comply with, any term or requirement of any Order to which Seller or
the Prior Owners (solely in their capacities as the prior owners and
operators of the Business) or any of the Assets is or has been subject.
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3.19
Absence of Certain Changes and Events
. Except as set forth in Part 3.19 of the
Disclosure Schedule, since May 31, 2003, Seller has conducted its business only in the Ordinary
Course of Business and there has not been any:
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(a)
|
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amendment to the Governing Documents of Seller;
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40
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(b)
|
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payment or increase (except in the Ordinary Course of Business)
by Seller of any bonuses, salaries or other compensation to the Member, or any
manager, officer or employee or entry into any employment, severance or similar
Contract with any manager, officer or employee;
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|
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(c)
|
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adoption of, amendment to or increase in the payments to or
benefits under, any Employee Plan;
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(d)
|
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damage to or destruction or loss of any asset of Seller having
a value in excess of One Thousand Dollars ($1,000), whether or not covered by
insurance;
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(e)
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entry into, termination of or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit or similar Contract to which Seller is a party, or (ii) any
Contract or transaction involving a total remaining commitment by Seller of at
least Twenty Thousand Dollars ($20,000.00);
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(f)
|
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sale (other than sales of Inventories in the Ordinary Course of
Business), lease or other disposition of any one or more of the Assets or
properties of Seller (including the Intellectual Property Assets) having a
value in excess of Twenty-Five Thousand Dollars ($25,000) individually or in
the aggregate or the creation of any Encumbrance on any Asset;
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(g)
|
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cancellation or waiver of any claims or rights with a value to
Seller in excess of Fifteen Thousand Dollars ($15,000.00);
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(h)
|
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indication by any customer or supplier having purchases from or
sales to Seller of Ten Thousand Dollars ($10,000.00) or more in the twelve
months ended December 31, 2002, of an intention to discontinue or change the
terms of its relationship with Seller;
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|
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(i)
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material change in the accounting methods used by Seller; or
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(j)
|
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contract by Seller or the Member to do any of the foregoing.
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3.20
Contracts; No Defaults
.
|
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(a)
|
|
Part 3.20(a) of the Disclosure Schedule contains an accurate
and complete list, and Seller has delivered to Buyer accurate and complete
copies, of:
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|
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(i)
|
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each Seller Contract that involves performance
of services or delivery of goods or materials by Seller of an amount or
value in excess of Twenty Thousand Dollars ($20,000.00);
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(ii)
|
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each Seller Contract (including outstanding
purchase orders) that involves performance of services or delivery of
goods or materials
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41
|
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|
|
to Seller of an amount or value in excess of Twenty Thousand Dollars ($20,000.00);
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|
|
(iii)
|
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each Seller Contract that was not entered into
in the Ordinary Course of Business and that involves expenditures or
receipts of Seller in excess of Twenty Thousand Dollars ($20,000.00);
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(iv)
|
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each Seller Contract affecting the ownership
of, leasing of, title to, use of or any leasehold or other interest in
any real or personal property (except personal property leases and
installment and conditional sales agreements for personal property
having a value per item or aggregate annual payments of less than Ten
Thousand Dollars ($10,000.00) and with a term of less than one year;
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(v)
|
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each Seller Contract with any labor union or
other employee representative of a group of employees relating to
wages, hours and other conditions of employment;
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(vi)
|
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each Seller Contract (however named) involving
a sharing of Seller’s profits, losses, costs or liabilities by Seller
with any other Person;
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(vii)
|
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each Seller Contract containing covenants that
in any way purport to restrict Seller’s business activity or limit the
freedom of Seller to engage in any line of business or to compete with
any Person;
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(viii)
|
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each Seller Contract providing for payments to or by any Person based
on sales, purchases or profits, other than direct payments for goods;
|
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|
|
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(ix)
|
|
each power of attorney of Seller that is
currently effective and outstanding;
|
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|
|
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(x)
|
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each Seller Contract entered into other than in
the Ordinary Course of Business that contains or provides for an
express undertaking by Seller to be responsible for consequential
damages;
|
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(xi)
|
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each Seller Contract for capital expenditures
in excess of Twenty Thousand Dollars ($20,000.00);
|
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(xii)
|
|
each Seller Contract not denominated in U.S.
dollars;
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(xiii)
|
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each written warranty, guaranty and/or other similar undertaking with
respect to contractual performance extended by Seller other than in the
Ordinary Course of Business; and
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|
|
(xiv)
|
|
each amendment, supplement and modification
(whether oral or written) in respect of any of the foregoing.
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42
Part 3.20(a) of the Disclosure Schedule sets forth, the amount of the remaining
commitment of Seller under the Seller Contracts and the location of Seller’s or
Member’s office where details relating to the Seller Contracts are located.
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(b)
|
|
Except as set forth in Part 3.20(b) of the Disclosure Schedule,
the Member has not and will not acquire any rights under, and the Member has
not and will not become subject to any obligation or liability under, any
Seller Contract that relates to the business of Seller or any of the Assets.
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(c)
|
|
Except as set forth in Part 3.20(c) of the Disclosure Schedule:
|
|
|
(i)
|
|
each Assumed Contract is in full force and
effect and is valid and enforceable in accordance with its terms except
as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar legal requirements affecting creditors’
rights generally;
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(ii)
|
|
each Assumed Contract is assignable by Seller
to Buyer without the consent of any other Person; and
|
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|
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(iii)
|
|
to the Knowledge of Seller, no Assumed
Contract would, upon completion or performance thereof, have a material
adverse affect on the business, assets or condition of Seller.
|
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(d)
|
|
Except as set forth in Part 3.20(d) of the Disclosure Schedule:
|
|
|
(i)
|
|
each of Seller, Member (in its capacity as
Prior Owner), and GTC is, and at all times since January 1, 2000, has
been, in compliance in all material respects with all applicable terms
and requirements of each Assumed Contract;
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(ii)
|
|
to the Knowledge of Seller, each other Person
that has or had any obligation or liability under any Assumed Contract
is currently in material compliance with all applicable terms and
requirements of such Assumed Contract;
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(iii)
|
|
no event has occurred or, to the Knowledge of
Seller, circumstance exists that (with or without notice or lapse of
time or both) is likely to contravene, conflict with or result in a
Breach of, or give Seller or other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel, terminate or modify,
any Assumed Contract;
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|
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(iv)
|
|
to the Knowledge of Seller, no event has
occurred or facts exist under or by virtue of any Assumed Contract that
(with or without notice or lapse of time) would cause the creation of
any Encumbrance affecting any of the Assets; and
|
43
|
|
(v)
|
|
each of Seller and Prior Owner have not given
to or received from any other Person, at any time since January 1,
2000, any notice or other communication (whether written or, to
Seller’s Knowledge, oral) regarding any actual, alleged, possible or
potential violation or Breach of, or default under, any Assumed
Contract.
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|
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(e)
|
|
There are no renegotiations of, attempts to renegotiate or
outstanding rights to renegotiate any material amounts paid or payable to
Seller under current or completed Seller Contracts with any Person having the
contractual or statutory right to demand or require such renegotiation and no
such Person has made written demand for such renegotiation.
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(f)
|
|
Each Seller Contract relating to the sale, design, manufacture
or provision of products or services by Seller (including executory Contracts
originally entered into by the Prior Owner) has been entered into in the
Ordinary Course of Business of the Seller or Prior Owner and has been entered
into without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or would be
in violation of any Legal Requirement.
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|
|
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(g)
|
|
All contracts between the Seller and Member or any of its
Related Persons have been provided to Buyer and Buyer has notified Seller of
those that it will assume and those that it will not assume.
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3.21
Insurance
.
|
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(a)
|
|
Part 3.21(a) of the Disclosure Schedule provides a summary of
the kinds of insurance currently maintained by Seller, Member, or Parent
insuring the Business, including the kind of coverage, the amount insured and
the insurer. Seller, Member, and Parent do not self insure the Business.
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|
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(b)
|
|
Part 3.21(b) of the Disclosure Schedule describes all current
(i) obligations of Seller to provide insurance coverage to Third Parties (for
example, under Leases or service agreements) and identifies the policy under
which such coverage is provided, and (ii) Contracts or arrangements, other than
a policy of insurance, for the transfer or sharing of any risk to which Seller
is a party or that involves the Business.
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|
|
|
|
(c)
|
|
Part 3.21(c) of the Disclosure Schedule sets forth for the
current policy year and each of the three (3) preceding policy years:
|
|
|
(i)
|
|
a summary of the loss experience under each
policy of insurance maintained by Seller, Member, or Parent with
respect to the Business;
|
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|
|
(ii)
|
|
a statement describing each claim under any
such policy of insurance for an amount in excess of Five Thousand
Dollars
|
44
|
|
|
|
($5,000.00) (Five Thousand Dollars ($5,000.00) in the case of
workers’ compensation insurance), which sets forth:
|
|
|
(A)
|
|
the name of the claimant;
|
|
|
|
|
(B)
|
|
a description of the policy by
insurer, type of insurance and period of coverage; and
|
|
|
|
|
(C)
|
|
the amount and a brief
description of the claim.
|
|
|
(d)
|
|
Except as set forth in Part 3.21(d) of the Disclosure Schedule:
|
|
|
(i)
|
|
all policies of insurance to which Seller,
Member, or Parent is a party that provide coverage of Seller or the
Business:
|
|
|
(A)
|
|
taken together, provide adequate
insurance coverage for the Assets, Seller, and Business for all
risks normally insured against by a Person carrying on the same
business or businesses as Seller in the same location; and
|
|
|
|
|
(B)
|
|
to Seller’s knowledge are
sufficient for compliance with all Legal Requirements and Seller
Contracts;
|
|
|
(ii)
|
|
Since January 1, 2000, neither Seller, Prior
Owner, or Parent has received with respect to coverage of affecting the
Business (A) any refusal of coverage (except for a notice that a defense will be
afforded with reservation of rights) or (B) any notice of
cancellation or any other indication that any policy of insurance is
no longer in full force or effect or that the issuer of any policy of
insurance is not willing or able to perform its obligations
thereunder;
|
|
|
|
|
(iii)
|
|
Seller, Member, and Parent have paid all
premiums due, and have otherwise performed all of their respective
obligations, under each current policy of insurance to which it is a
party or that provides coverage to Seller or the Business, provided
that an insurer may assert a reservation of rights without regard to
the payment of premiums; and
|
|
|
|
|
(iv)
|
|
Seller, Member or Parent have given notice to
the insurer of all claims with respect to Seller that in Seller’s,
Member’s, or Parent’s reasonable judgment may be insured thereby.
|
3.22
Environmental Matters
. Except as disclosed in Part 3.22 of the Disclosure Schedule or
in that certain Phase II Environmental Assessment dated December 20, 2002 and prepared by The
Forrester Group and all correspondence, documents and reports related thereto (collectively, the
“Phase II Report”):
45
|
|
(a)
|
|
Since January 1, 1997, Seller has been in material compliance
with, and has not been and is not in material violation of, any Environmental
Law. Seller has not received any written order, notice, warning, request for
information, from (i) any Governmental Body or private citizen acting in the
public interest or (ii) the current or prior owner or operator of any
Facilities, of any actual or alleged violation or failure to comply with any
Environmental Law or Occupational Safety or Health Law, or of any actual or
threatened obligation to undertake or bear the cost of any Environmental
Liabilities with respect to any Facility or, to the Knowledge of Seller, other
property or asset (whether real, personal or mixed) in which Seller has or had
an interest, or any property to which Hazardous Materials generated,
manufactured, imported, used or processed by Seller have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
|
|
|
|
|
(b)
|
|
There are no pending or, to the Knowledge of Seller, threatened
claims, Encumbrances, or other restrictions of any nature resulting from any
Environmental Liabilities or Occupational Safety and Health Liabilities with
respect to or affecting any Facility or, to the Knowledge of Seller, any other
property or asset (whether real, personal or mixed) in which Seller has or had
an interest.
|
|
|
|
|
(c)
|
|
Seller has not received any written citation, directive,
inquiry, notice, Order, summons, or warning that relates to Hazardous
Materials, or any alleged or actual violation or material failure to comply
with any Environmental Law, or of any alleged or actual obligation to undertake
or bear the cost of any Environmental Liabilities or Occupational Safety and
Health Liabilities with respect to any Facility or with respect to any property
or facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used or processed by Seller have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
|
|
|
|
|
(d)
|
|
[Intentionally Omitted]
|
|
|
|
|
(e)
|
|
There are no Hazardous Materials present on or in the
Environment at any Facility or, to the Knowledge of Seller, at any geologically
or hydrologically adjoining property, (except for such Hazardous Materials in
such amounts necessary for the Ordinary Course of Business and which are in
compliance with Environmental Laws).
|
|
|
|
|
(f)
|
|
There has been no Release or, to the Knowledge of Seller,
Threat of Release, of any Hazardous Materials at or from any Facility or to the
Knowledge of Seller, at any other location where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by any Facility, or from any other property or asset in which
Seller has or, to the Knowledge of Seller, had an interest.
|
46
|
|
(g)
|
|
Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller, Member, or any of their Related Persons within the past
ten (10) years pertaining to Hazardous Materials in, on, or under the
Facilities, or concerning compliance, by Seller, Member, with Environmental
Laws in respect of the Facilities, except for the results of analyses, tests or
monitoring performed in the Ordinary Course of Business pursuant to any
Governmental Authorization issued under Environmental Law, which documents have
been provided for the past three (3) years.
|
3.23
Employees
.
|
|
(a)
|
|
Part 3.23(a) of the Disclosure Schedule contains a complete and
accurate list of the following information for each employee, manager,
independent contractor, consultant and agent of Seller, including each employee
on leave of absence or layoff status: name; job title; date of commencement of
employment or engagement; current compensation paid or payable; sick and
vacation leave that is accrued but unused; service credited for purposes of
vesting and eligibility to participate under any Employee Plan
and, with respect to employees compensated on a salaried rather than hourly
basis, any change in compensation paid by Seller or Prior Owner since January 1, 2002;
|
|
|
|
|
(b)
|
|
Part 3.23(b) of the Disclosure Schedule contains a complete and
accurate list of the following information for each retired employee or manager
of Seller or Prior Owner (solely in their capacities as the prior owners and
operators of the Business) or their dependents, receiving benefits or scheduled
to receive benefits in the future: name; pension benefits; pension option
election; and other benefits. Seller and Prior Owner (solely in their
capacities as the prior owners and operators of the Business) not obligated and
do not provide any retiree medical or retiree life insurance coverage to any of
their former employees.
|
|
|
|
|
(c)
|
|
Part 3.23(c) of the Disclosure Schedule states the number of
employees terminated by Seller since December 1, 2002, and contains a complete
and accurate list of the following information for each employee of Seller who
has been terminated or laid off, or whose hours of work have been reduced by
more than fifty percent (50%) by Seller, same December 1, 2002: (i) the date of
such termination, layoff or reduction in hours; (ii) the reason for such
termination, layoff or reduction in hours; and (iii) the location to which the
employee was assigned.
|
|
|
|
|
(d)
|
|
Seller has not violated the Worker Adjustment and Retraining
Notification Act (the “WARN Act”) or any similar state or local Legal
Requirement. Since April 1, 2003, Seller has not terminated any employees.
|
47
|
|
(e)
|
|
To the Knowledge of Seller, no officer, manager, agent,
employee, consultant, or contractor of Seller is bound by any Contract that
purports to limit the ability of such officer, manager, agent, employee,
consultant, or contractor (i) to engage in or continue or perform any conduct,
activity, duties or practice relating to the business of Seller or (ii) to
assign to Seller or to any other Person any rights to any invention,
improvement, or discovery.
|
3.24
Labor Disputes; Compliance
.
|
|
(a)
|
|
Since June 1, 2000, Seller and Prior Owner (solely in their
capacities as the prior owners and operators of the Business), have complied in
all material respects with all (and are not, and have not been, liable for
fines penalties or other amounts for violations of any) (i) Legal Requirements
relating to employment practices, terms and conditions of employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and
similar Taxes, and the employment of individuals who are not Citizens of the
United States and (ii) Occupational Safety and Health Laws.
|
|
|
|
|
(b)
|
|
Except as disclosed in Part 3.24(b) of the Disclosure Schedule:
(i) neither Seller nor Prior Owner (solely in their capacities as the prior
owners and operators of the Business) has been, and is not now, a party to any
collective bargaining agreement or other labor contract; (ii) since January 1,
2000, there has not been, there is not presently pending or existing, and to
Seller’s Knowledge there is not threatened, any strike, slowdown, picketing,
work stoppage or employee grievance process involving Seller or Prior Owner
(solely in their capacities as the prior owners and operators of the Business);
(iii) to Seller’s Knowledge, no event has occurred or fact exists, that could
provide the basis for any work stoppage or other labor dispute; (iv) there is
not pending or, to Seller’s Knowledge, threatened against or affecting Seller,
any Proceeding relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed with the National Labor Relations Board or any comparable
Governmental Body, and to Knowledge of Seller, there is no organizational
activity or other labor dispute against or affecting Seller or the Facilities;
(v) no application or petition for an election of or for certification of a
collective bargaining agent is pending; (vi) no grievance or arbitration
Proceeding exists that might have an adverse effect upon Seller or the conduct
of its business; (vii) there is no lockout of any employees by Seller, and no
such action is contemplated by Seller; and (viii) to Seller’s Knowledge, there
has been no charge of discrimination filed against or threatened against Seller
with the Equal Employment Opportunity Commission or similar Governmental Body.
|
48
3.25
Intellectual Property Assets
.
|
|
(a)
|
|
The term “Intellectual Property Assets” means all intellectual
property owned or licensed (as licensor or licensee) by Seller in which Seller
has a proprietary interest, including:
|
|
|
(i)
|
|
Seller’s name, all assumed fictional business
names, trade names, registered and unregistered trademarks, service
marks and applications (collectively, “Marks”);
|
|
|
|
|
(ii)
|
|
all patents, patent applications and inventions
and discoveries that may be patentable (collectively, “Patents”);
|
|
|
|
|
(iii)
|
|
all registered and unregistered copyrights in
both published works and unpublished works (collectively,
“Copyrights”);
|
|
|
|
|
(iv)
|
|
all rights in mask works;
|
|
|
|
|
(v)
|
|
all know-how, trade secrets, confidential or
proprietary information, customer lists, Software, technical
information, data, process technology, plans, drawings and blue prints
(collectively, “Trade Secrets”); and
|
|
|
|
|
(vi)
|
|
all rights in internet web sites and internet
domain names presently used by Seller (collectively “Net Names”).
|
|
|
(b)
|
|
Part 3.25(b) of the Disclosure Schedule contains a complete and
accurate list and summary description, including any royalties paid or received
by Seller, and Seller has delivered to Buyer accurate and complete copies, of
all Seller Contracts relating to the Intellectual Property Assets, except for
any license implied by the sale of a product and perpetual, paid-up licenses
for commonly available Software programs with a value of less than Two Hundred
Dollars ($200.00) under which Seller is the licensee. There are no outstanding
and, to Seller’s Knowledge, no threatened disputes or disagreements with
respect to any such Contract.
|
(c)
|
|
(i)
|
|
Except as set forth in Part 3.25(c) of the
Disclosure Schedule, the Intellectual Property Assets are all those
necessary for the operation of Seller’s business as it is currently
conducted. Seller is the owner or licensee of all right, title and
interest in and to each of the Intellectual Property Assets, free and
clear of all Encumbrances, and has the right to use without payment to
a Third Party all of the Intellectual Property Assets, other than in
respect of licenses listed in Part 3.25(c) of the Disclosure Schedule.
|
49
|
|
(ii)
|
|
Except as set forth in Part 3.25(c) of the
Disclosure Schedule, all former and current employees of Seller have
executed written Contracts with Seller that assign to Seller all rights
to any inventions, improvements, discoveries or information relating to
the business of Seller.
|
(d)
|
|
(i)
|
|
Part 3.25(d) of the Disclosure Schedule
contains a complete and accurate list and summary description of all
Patents.
|
|
|
|
|
(ii)
|
|
All of the issued Patents are currently in
compliance with formal legal requirements (including payment of filing,
examination and maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing
Date.
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|
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(iii)
|
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No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition Proceeding. To
Seller’s Knowledge, there is no potentially interfering patent or
patent application of any Third Party.
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(iv)
|
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Except as set forth in Part 3.25(d) of the
Disclosure Schedule, (A) no Patent is infringed or, to Seller’s
Knowledge, has been challenged or threatened in any way and (B) none of
the products manufactured or sold, nor any process or know-how used, by
Seller infringes or is alleged to infringe any patent or other
proprietary right of any other Person.
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(v)
|
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All products made, used or sold under the
Patents have been marked with the proper patent notice.
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(e)
|
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(i)
|
|
Part 3.25(e) of the Disclosure Schedule
contains a complete and accurate list and summary description of all
Marks.
|
|
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|
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(ii)
|
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All Marks filed or registered with the United
States Patent and Trademark Office, are currently in compliance with
all formal Legal Requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are not subject to any maintenance fees or taxes or
actions falling due within ninety (90) days after the Closing Date,
and, to Sellers Knowledge, are valid and enforceable.
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(iii)
|
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No Mark has been or is now involved in any
opposition, invalidation or cancellation Proceeding and, to Seller’s
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50
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|
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Knowledge, no such action is threatened with respect to any of the
Marks.
|
|
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|
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(iv)
|
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To Seller’s Knowledge, there is no potentially
interfering trademark or trademark application of any other Person.
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(v)
|
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No Mark is infringed or, to Seller’s Knowledge,
has been challenged or threatened in any way. None of the Marks used
by Seller infringes or is alleged to infringe any trade name, trademark
or service mark of any other Person.
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(f)
|
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(i)
|
|
Part 3.25(f) of the Disclosure Schedule
contains a complete and accurate list and summary description of all
Copyrights.
|
|
|
|
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(ii)
|
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All of the registered Copyrights are, to
Seller’s Knowledge, valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days after the date
of Closing.
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(iii)
|
|
No Copyright is infringed or, to Seller’s
Knowledge, has been challenged or threatened in any way. None of the
subject matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any Third Party or is a derivative work based
upon the work of any other Person.
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(iv)
|
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All works encompassed by the Copyrights have
been marked with the proper copyright notice.
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(g)
|
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(i)
|
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With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate and
sufficient in detail and content to identify and explain it and to
allow its full and proper use without reliance on the knowledge or
memory of any individual.
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(ii)
|
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Seller has taken all reasonable precautions to
protect the secrecy, confidentiality and value of all Trade Secrets
(including the enforcement by Seller of a policy requiring each
employee or contractor to execute proprietary information and
confidentiality agreements substantially in Seller’s standard form, and
all current and former employees and contractors of Seller have
executed such an agreement).
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(iii)
|
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Seller has good title to and an absolute right
to use the Trade Secrets. The Trade Secrets are not part of the public
knowledge or
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51
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|
|
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literature and, to Seller’s Knowledge, have not been used,
divulged or appropriated either for the benefit of any Person (other
than Seller) or to the detriment of Seller. No Trade Secret is subject
to any adverse claim or has been challenged or threatened in any way or
infringes any intellectual property right of any other Person.
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(h)
|
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(i)
|
|
Part 3.25(h) of the Disclosure Schedule
contains a complete and accurate list and summary description of all
Net Names.
|
|
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|
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(ii)
|
|
All Net Names have been registered in the name
of Seller and are in compliance with all formal Legal Requirements.
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(iii)
|
|
No Net Name has been or is now involved in any
dispute, opposition, invalidation or cancellation Proceeding and, to
Seller’s Knowledge, no such action is threatened with respect to any
Net Name.
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|
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|
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(iv)
|
|
To Seller’s Knowledge, there is no domain name
application pending of any other person which would or would
potentially interfere with or infringe any Net Name.
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|
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(v)
|
|
No Net Name is infringed or, to Seller’s
Knowledge, has been challenged, interfered with or threatened in any
way. No Net Name infringes, interferes with or is alleged to interfere
with or infringe the trademark, copyright or domain name of any other
Person.
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3.26
Parent Ownership of Assets
. At no time has Parent owned any of the Assets.
3.27
Compliance with the Foreign Corrupt Practices Act and Export Control and Antiboycott
Laws
.
|
|
(a)
|
|
Since January 1, 2000, Seller and the Prior Owners (solely in
their capacities as the prior owners and operators of the Business) have not,
to obtain or retain business, directly or indirectly, offered, paid or promised
to pay, or authorized the payment of, any money or other thing of value
(including any fee, gift, sample, travel expense or entertainment with a value
in excess of One Hundred Dollars ($100.00) in the aggregate to any one
individual in any year) or any commission payment to:
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(i)
|
|
any person who is an official, officer, agent,
employee or representative of any Governmental Body or of any existing
or prospective customer (whether government owned or nongovernment
owned);
|
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|
|
|
(ii)
|
|
any political party or official thereof;
|
52
|
|
(iii)
|
|
any candidate for political or political party office; or
|
|
|
|
|
(iv)
|
|
any other individual or entity;
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|
|
|
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while knowing that all or any portion of such money or thing of value would
be offered, given, or promised directly or indirectly to any such official,
officer, agent, employee, representative, political party, political party
official, candidate, individual, or any entity affiliated with such
customer, political party or official or political office.
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|
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(b)
|
|
Except as set forth in Part 3.27(b) of the Disclosure Schedule,
since January 1, 2002, Seller and Member (solely in its capacity as a prior
owner and operator of the Business) have made all payments to Third Parties by
check mailed to such Third Parties’ principal place of business
or by wire transfer to a bank located in the same jurisdiction as such
party’s principal place of business.
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|
|
|
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(c)
|
|
Seller maintains no off-the-books accounts.
|
|
|
|
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(d)
|
|
Since January 1, 2000, Seller and the Prior Owner (solely in
their capacities as the prior owners and operators of the Business), have at
all times been in material compliance with all Legal Requirements relating to
export control and trade embargoes. No product sold or service provided by
Seller or the Prior Owners (solely in their capacities as the prior owners and
operators of the Business) during such period has been directly sold to or
performed by Seller or the Prior Owners (solely in their capacities as the
prior owners and operators of the Business), on behalf of Cuba, Iraq, Iran,
Libya or North Korea.
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(e)
|
|
Except as set forth in Part 3.27(e) of the Disclosure Schedule,
Seller and Prior Owner (in their capacities as the prior owners and operators
of the Business) have not violated of any of the antiboycott prohibitions
contained in 50 U.S.C. Section 2401 et seq. or taken any action that can be
penalized under Section 999 of the Code. Except as set forth in Part 3.27(e)
of the Disclosure Schedule, during the last five (5) years Seller and Prior
Owner (in their capacities as the prior owners and operators of the Business)
are not a party to, are not a beneficiary under and have not performed any
service or sold any product under any Seller Contract or other Contract under
which a product has been sold to customers in Bahrain, Iraq, Jordan, Kuwait,
Lebanon, Libya, Oman, Quatar, Saudi Arabia, Sudan, Syria, United Arab Emirates
or the Republic of Yemen.
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3.28
Relationships With Related Persons
. Except as disclosed in Part 3.28 of the
Disclosure Schedule, neither Seller nor the Member nor any Related Person of either of them has, or
since January 1, 2000, has had, any interest in any property (whether real, personal or mixed and
whether tangible or intangible) used in or pertaining to Seller’s business. Neither Seller nor the
Member nor any Related Person of any of them owns, or since January 1, 2000,
53
has owned, of record
or as a beneficial owner, an equity interest or any other financial or profit interest in any
Person that has (a) had business dealings or a material financial interest in any transaction with
Seller other than business dealings or transactions disclosed in Part 3.28 of the Disclosure
Schedule, each of which has been conducted in the Ordinary Course of Business with Seller at
substantially their prevailing market prices and on substantially their prevailing market terms or
(b) to the Knowledge of Seller, engaged in competition with Seller with respect to any line of the
products or services of Seller (a “Competing Business”) in any market presently served by Seller,
except for ownership of less than one percent (1%) of the outstanding capital stock of any
Competing Business that is publicly traded on any recognized exchange or in the over-the-counter
market. Except as set forth in Part 3.28 of the Disclosure Schedule, neither Seller nor the Member
nor any Related Person of any of them is a party to any Contract with, or has any claim or right
against, Seller.
3.29
Brokers or Finders
. Except for McDonald Investments, Inc., neither Seller nor any of
its Representatives have incurred any obligation or liability, contingent or otherwise, for
brokerage or finders’ fees or agents’ commissions or other similar payments in connection with the
sale of Seller’s business or the Assets or the Contemplated Transactions.
3.30
Securities Law Matters
.
|
|
(a)
|
|
Seller is acquiring the Promissory Note, its interest in the
Earnout Agreement and, if issued, the Contingent Note for its own account and
not with a view to its distribution within the meaning of Section 2(11) of the
Securities Act.
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(b)
|
|
Seller confirms that Buyer has made available to Seller and its
Representatives the opportunity to ask questions of the officers and management
employees of Buyer and to acquire such additional information about the
business and financial condition of Buyer as Seller has requested, and all such
information has been received.
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EXCEPT AS SET FORTH IN THIS ARTICLE 3, AS SUPPLEMENTED OR MODIFIED BY THE DISCLOSURE SCHEDULE,
THE CERTIFICATES DELIVERED PURSUANT TO SECTION 2.7(a), AND THE OTHER AGREEMENTS AND INSTRUMENTS
EXECUTED AND DELIVERED BY SELLER IN CONNECTION WITH THE CONTEMPLATED TRANSACTIONS, SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATION OR
WARRANTY OF MARKETABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. BUYER
ACKNOWLEDGES AND AGREES THAT SELLER MAKE NO REPRESENTATIONS OR WARRANTY WITH RESPECT TO ANY
FORECASTS, PROJECTIONS, ESTIMATES OR BUDGETS DELIVERED OR MADE AVAILABLE TO BUYER OF FUTURE
REVENUES, FUTURE CASH FLOWS, ETC. THE FOREGOING REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY
LIMITED TO THE BUSINESS AND ITS ASSETS, PROPERTIES, AND LIABILITIES. ANY REFERENCE TO MEMBER,
PARENT, THE PRIOR OWNER OR THEIR RESPECTIVE RELATED PERSONS OR AFFILIATES IS LIMITED TO MATTERS
CONCERNING THE BUSINESS AND ITS ASSETS, PROPERTIES, AND LIABILITIES.
54
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4.
|
|
REPRESENTATIONS AND WARRANTIES OF BUYER
. Buyer represents and warrants to Seller as
follows:
|
4.1
Organization and Good Standing
. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full corporate power
and authority to conduct its business as it is now conducted.
4.2
Authority; No Conflict
.
|
|
(a)
|
|
This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Transaction Documents to which
it is a party, each of which will constitute the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its
respective terms. Buyer has the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and the Transaction Documents
to which it is a party and to perform its obligations under this Agreement and
thereunder, and such action has been duly authorized by all necessary corporate
action.
|
|
|
|
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(b)
|
|
Neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay or otherwise interfere
with any of the Contemplated Transactions pursuant to:
|
|
|
(i)
|
|
any provision of Buyer’s Governing Documents;
|
|
|
|
|
(ii)
|
|
any resolution adopted by the board of
directors or the shareholders of Buyer;
|
|
|
|
|
(iii)
|
|
any Legal Requirement or Order to which Buyer
may be subject; or
|
|
|
|
|
(iv)
|
|
any Contract to which Buyer is a party or by
which Buyer may be bound.
|
Buyer is not and will not be required to obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3
Certain Proceedings
. There is no pending Proceeding that has been commenced against
Buyer and that challenges, or may have the effect of preventing, delaying, making illegal or
otherwise interfering with, any of the Contemplated Transactions. To Buyer’s Knowledge, no such
Proceeding has been threatened.
55
4.4
Brokers or Finders
. Neither Buyer nor any of its Representatives have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’
commissions or other similar payment in connection with the Contemplated Transactions.
4.5
Sufficient Funds
. Buyer has sufficient funds to satisfy and discharge its obligations
or promises (monetary or otherwise) under the Transaction Documents to which it is a party.
|
5.
|
|
[Intentionally Omitted]
|
|
|
|
6.
|
|
[Intentionally Omitted]
|
|
|
|
7.
|
|
CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
. Buyer’s obligation to purchase
the Assets and to take the other actions required to be taken by Buyer at the Closing is
subject to the satisfaction, at the Closing, of each of the following conditions (any of which
may be waived by Buyer, in whole or in part):
|
7.1
Consents
. Each of the Consents identified in Exhibit 7.1 (the “Material Consents”)
shall have been obtained and shall be in full force and effect.
7.2
Additional Documents
. Seller shall have caused the documents and instruments required
by Section 2.7(a) and the following documents to be delivered (or tendered subject only to Closing)
to Buyer:
|
|
(a)
|
|
The Certificate of Formation and all amendments thereto of
Seller, duly certified as of a recent date by the Secretary of State of
Delaware;
|
|
|
|
|
(b)
|
|
If requested by Buyer, any Consents or other instruments that
may be required to permit Buyer’s qualification in each jurisdiction in which
Seller is licensed or qualified to do business as a foreign entity under the
name “Greenville Tube” or any derivative thereof;
|
|
|
|
|
(c)
|
|
Releases of all Encumbrances on the Assets, other than
Permitted Encumbrances;
|
|
|
|
|
(d)
|
|
Certificates dated as of a date not earlier than the third
(3rd) business day prior to the Closing as to the good standing of Seller,
executed by the appropriate officials of the State of Delaware and each
jurisdiction in which Seller is licensed or qualified to do business as a
foreign corporation as specified in Part 3.1(a) of the Disclosure Schedule;
|
|
|
|
|
(e)
|
|
Certificates dated as of a date not earlier than the tenth
(10th) business day before the Closing as to the payment of all applicable
state Taxes executed by the appropriate officials in Pennsylvania and Arkansas;
and
|
|
|
|
|
(f)
|
|
Such other documents as Buyer may reasonably request for the
purpose of facilitating the consummation or performance of any of the
Contemplated Transactions.
|
56
7.3
Title Insurance
. Buyer shall have received unconditional and binding commitments to
issue policies of title insurance, dated the Closing Date, in an aggregate amount equal to
$2,000,000, deleting all requirements listed in ALTA Schedule B-1, amending the effective date to
the date and time of recordation of the memorandum of the Facility Lease with no exception for the
gap between Closing and recordation, deleting or insuring over Buyer’s or its lenders’ title
objections attaching all endorsements required by Buyer in order to ensure provision of coverage
required by Buyer or its lenders and otherwise in form satisfactory to Buyer insuring Buyer’s
leasehold interest in each parcel of Owned Real Property or interest therein. Such title insurance
commitments must be acceptable to Buyer in its sole discretion. Buyer shall pay the fee for such
commitments.
7.4
Governmental Authorizations
. Buyer shall have received such Governmental
Authorizations as are necessary or desirable to allow Buyer to operate the Assets from and after
the Closing.
7.5
Employees
.
|
|
(a)
|
|
Buyer shall have entered into employment agreements with those
employees of Seller identified in Exhibit 7.5.
|
|
|
|
|
(b)
|
|
Those key employees of Seller identified on Exhibit 7.5, or
substitutes therefor who shall be acceptable to Buyer, in its sole discretion,
shall have accepted employment with Buyer on terms mutually agreeable to the
Buyer and each such respective employee, with such employment to commence on
and as of the Closing Date.
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|
|
|
|
(c)
|
|
Substantially all other employees of Seller shall be available
for hiring by Buyer, in its sole discretion, on and as of the Closing Date.
|
7.6
Ancillary Agreements
. The relevant Persons shall have entered into ancillary
agreements in form and substance as set forth in Exhibit 7.6 hereto.
7.7
Financing
. Buyer shall have received proceeds under its credit and subscription
agreements with the providers of Buyer’s debt and equity financing sufficient for Buyer to fund the
consummation of the Contemplated Transactions and satisfy its working capital requirements after
the Closing.
7.8
Management Investment
. The employees listed on Exhibit 7.8 shall have purchased at
least Two Hundred Ninety Thousand Dollars ($290,000) of the Buyer’s common stock.
|
8.
|
|
CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
. Seller’s obligation to sell
the Assets and to take the other actions required to be taken by Seller at the Closing is
subject to the satisfaction, at the Closing, of each of the following conditions (any of which
may be waived by Seller in whole or in part):
|
8.1
Consents
. Each of the Consents identified in Exhibit 8.1 shall have been obtained and
shall be in full force and effect.
57
Buyer and Seller acknowledge and agree that the execution and delivery of this Agreement and
the closing of the transactions contemplated hereby are occurring simultaneously. Accordingly,
this Agreement shall not be deemed to be executed and delivered unless and until all of the
conditions to Closing have been satisfied or waived, and all deliveries at Closing required
hereunder have been made, and once the conditions to Closing have been satisfied or waived and all
deliveries required hereunder have been made, no party hereto will have any right to terminate this
Agreement.
10.1
Employees and Employee Benefits
.
|
|
(a)
|
|
Information on Active Employees
. For the purpose of
this Agreement, the term “Active Employees” shall mean all employees employed
on the Closing Date by Seller in the operation of the business acquired by
Buyer hereunder, including employees on temporary leave of absence, including
family medical leave, military leave, temporary disability or sick leave, but
excluding employees on long-term disability leave. A list of Seller’s
employees as of the Closing Date is attached hereto as Exhibit 10.1(a).
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|
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|
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(b)
|
|
Employment of Active Employees by Buyer
.
|
|
|
(i)
|
|
Attached hereto as Exhibit 10.1(b)(i) is a list
of Active Employees to whom Buyer has made an offer of employment that
has been accepted to be effective on the Closing Date (the “Hired
Active Employees”). Effective immediately before the Closing, Seller
will terminate the employment of all of its Hired Active Employees.
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|
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(ii)
|
|
Neither Seller nor its Related Persons shall
solicit the continued employment of any Active Employee (unless and
until Buyer has informed Seller in writing that the particular Active
Employee will not receive any employment offer from Buyer) or the
employment of any Hired Active Employee after the Closing. Set forth
on Exhibit 10.1(b)(ii) is a list of those Active Employees to whom
Buyer will not make employment offers (the “Non-Hired Active
Employees”).
|
|
|
|
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(iii)
|
|
It is understood and agreed that (A) Buyer’s
expressed intention to extend offers of employment as set forth in this
Section shall not constitute any commitment, Contract or understanding
(expressed or implied) of any obligation on the part of Buyer to a
post-Closing employment relationship of any fixed term or duration or
upon any terms or conditions other than those that Buyer may establish
pursuant to individual offers of employment, and (B) employment offered
by Buyer is “at will” and may be terminated by Buyer or
|
58
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by an employee
at any time for any reason (subject to any written commitments to the
contrary made by Buyer or an employee and Legal Requirements). Nothing
in this Agreement shall be deemed to prevent or restrict in any way the
right of Buyer to terminate, reassign, promote or demote any of the
Hired Active Employees after the Closing or to change adversely or
favorably the title, powers, duties, responsibilities, functions,
locations, salaries, other compensation or terms or conditions of
employment of such employees.
|
|
|
|
|
(iv)
|
|
As of the Closing Date, each Hired Active
Employee shall, without duplication of benefits, be given credit for
all service with Seller before the Effective Time under all employee
benefit plans (including credit for service as applicable to
pre-existing conditions under Buyer’s health insurance plans),
programs, and arrangements maintained by or contributed to by Buyer in
which the Hired Active Employee becomes a participant for the purposes
of eligibility to participate, vesting, and determination of level of
benefits (excluding however benefit accrual under any defined benefit
plans, if any).
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(v)
|
|
Seller shall be responsible for providing
continuation coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, for all Non-Hired Active
Employees, all of Seller’s former employees, and all Hired Active
Employees who elect not to participate or are unable to participate in
Buyer’s health plans and, in each case, elects such continuation
coverage,
provided that Buyer will not advise Hired Active Employees who are
eligible for coverage by Buyer’s health plans to elect to receive
such continuation coverage.
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|
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|
(vi)
|
|
Effective as of the Closing Date, Hired Active
Employees who are participants in Seller’s 401(k) plan shall become
fully vested in their account balances in such plan (the “Seller
Savings Plan”) and distributions of such account balance shall be made
available to such Hired Active Employees as soon as reasonably
practicable following the Closing Date, in accordance with the
provisions of the Seller Savings Plan and Legal Requirements. As soon
as reasonably practicable after the Closing Date, Buyer will establish
a 401(k) plan that will accept rollover contributions from the Seller
Savings Plan.
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|
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(vii)
|
|
Buyer and Seller will cooperate as necessary
to effect the requirements of this Section 10.1.
|
59
|
|
(c)
|
|
Salaries and Benefits
.
|
|
|
(i)
|
|
Seller shall be responsible for (A) the payment
of any termination or severance payments (excluding all retention and
salary continuation bonuses or payments) and the provision of health
plan continuation coverage in accordance with the requirements of COBRA
and Sections 601 through 608 of ERISA, (B) any and all payments to
employees required under the WARN Act, and (D) payment of all retention
payments or salary continuation payments to which Seller is
contractually obligated.
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(ii)
|
|
Seller shall be liable for any claims made or
incurred by Active Employees and their beneficiaries through the
Closing Date under the Employee Plans. For purposes of the immediately
preceding sentence, a charge will be deemed incurred, in the case of
hospital, medical or dental benefits, when the services that are the
subject of the charge are performed and, in the case of other benefits
(such as disability or life insurance), when an event has occurred or
when a condition has been diagnosed that entitles the employee to the
benefit.
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|
|
(d)
|
|
Seller’s Retirement and Savings Plans
. All Hired
Active Employees who are participants in Seller’s or Member’s retirement plans
shall retain their accrued benefits under such retirement plans as of the
Closing Date, and Seller or Member (or Seller’s or Member’s retirement plans)
shall retain sole liability for the payment of such benefits as and when such
Hired Active Employees become eligible therefor under such plans. All Hired
Active Employees shall become fully vested in their accrued benefits under
Seller’s or Member’s retirement plans as of the Closing Date, and
Seller or Member will so amend such plans if necessary to achieve this
result.
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(e)
|
|
No Transfer of Assets
. Neither Seller nor Member nor
their respective Related Persons will make any transfer of pension or other
employee benefit plan assets to Buyer.
|
|
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|
(f)
|
|
General Employee Provisions
.
|
|
|
(i)
|
|
Seller and Buyer shall give any notices
required by Legal Requirements and take whatever other actions with
respect to the plans, programs and policies described in this Section
10.1 as may be necessary to carry out the arrangements described in
this Section 10.1.
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(ii)
|
|
Seller and Buyer shall provide each other with
such plan documents and summary plan descriptions, employee data or
other
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60
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information as may be reasonably required to carry out the
arrangements described in this Section 10.1.
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(iii)
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If any of the arrangements described in this
Section 10.1 are determined by the IRS or other Governmental Body to be
prohibited by law, Seller and Buyer shall modify such arrangements to
as closely as possible reflect their expressed intent and retain the
allocation of economic benefits and burdens to the parties contemplated
herein in a manner that is not prohibited by law.
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(iv)
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On the Closing Date, Seller shall provide Buyer
with completed I-9 forms and attachments with respect to all Hired
Active Employees, except for such employees as Seller certifies in
writing to Buyer are exempt from such requirement.
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(v)
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Buyer shall not have any responsibility,
liability or obligation, whether to Active Employees, former employees,
their beneficiaries or to any other Person, with respect to any
employee benefit plans, practices, programs or arrangements (including
the establishment, operation or termination thereof and the
notification and provision of COBRA coverage extension) maintained by
Seller.
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10.2
Payment of Certain Taxes
. Buyer shall pay all personal property taxes due on the
Assets for 2003. Seller shall pay all personal property taxes that are due on the Assets for 2002.
10.3
Payment of Other Retained Liabilities
. In addition to payment of Taxes pursuant to Section 10.2, Seller shall pay, or make adequate
provision for the payment, in full all of the Retained Liabilities and other Liabilities of Seller
under this Agreement, except to the extent being reasonably contested in good faith by Seller. If
any such Liabilities are not so paid or provided for, and are not being reasonably contested in
good faith by Seller, or if Buyer reasonably determines that failure to make any payments will
impair Buyer’s use or enjoyment of the Assets or conduct of the Business, Buyer may, at any time
after the Closing Date, elect to make all such payments directly (but shall have no obligation to
do so) and pursuant to Section 11.8 set off and deduct the amount of all such payments then
remaining from the first one or more maturing installments of the unpaid principal balance of the
Promissory Note, each effective as of the date such payments are actually made by Buyer. Buyer
shall receive full credit under the Promissory Note and this Agreement for all payments so made.
10.4
Financial Information
. For as long as Buyer has any monetary obligations to Seller
under any of the Transaction Documents, Buyer shall furnish Seller with its unaudited quarterly and
audited annual financial statements at the time and in the format it delivers such financial
statements to its senior secured lender.
10.5
Removing Excluded Assets
. Not later than thirty (30) days after the Closing Date,
Seller shall remove all Excluded Assets from the Real Property. Buyer shall provide Seller
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and its
Representatives with reasonable access during normal business hours and upon reasonable advance
notice to the Real Property to effect the removal of any Excluded Assets. Such removal shall be
done in such manner as to avoid any damage to the Facilities and other properties to be occupied by
Buyer and any disruption of the business operations to be conducted by Buyer after the Closing.
Seller shall promptly reimburse Buyer for any damage to the Assets or to the Real Property
resulting from such removal. Should Seller fail to remove the Excluded Assets as required by this
Section, Buyer shall have the right, but not the obligation, (a) to remove the Excluded Assets at
Seller’s sole cost and expense, (b) to treat the Excluded Assets as unclaimed and to proceed to
dispose of the same under the laws governing unclaimed property or (c) to exercise any other right
or remedy conferred by this Agreement or otherwise available at law or in equity. Seller shall
promptly reimburse Buyer for all costs and expenses incurred by Buyer in connection with any
Excluded Assets not removed by Seller as provided in this Section 10.5.
10.6
Reports and Returns
. Seller shall reasonably promptly after the Closing prepare and
file all reports and returns required by Legal Requirements relating to the Business as conducted
by Seller using the Assets, to and including the Effective Time, and when required after the
Closing Seller, and Buyer shall prepare and file all reports and returns required by Legal
Requirements with respect to the Contemplated Transactions.
10.7
Assistance in Proceedings
. The parties hereto will cooperate with other parties and their counsel in the contest or defense
of, and make available its personnel and provide any testimony and access to its books and Records
in connection with, any Proceeding involving or relating to (a) any Contemplated Transaction or (b)
any action, activity, circumstance, condition, conduct, event, fact, failure to act, incident,
occurrence, plan, practice, situation, status or transaction on or before the Closing Date
involving Seller or its business, Member, or Buyer.
10.8
Noncompetition, Nonsolicitation and Nondisparagement
.
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(a)
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Noncompetition
. For a period of five (5) years after
the Closing Date, neither Seller nor its Related Persons shall, anywhere in the
United States, directly or indirectly invest in, own, manage, operate, finance,
control, advise, render services to or guarantee the obligations of any Person
engaged in or planning to become engaged in the business of manufacturing steel
and stainless steel tubing (“Competing Business”), provided, however, that
Seller or its Related Persons may purchase or otherwise acquire up to (but not
more than) one percent (1%) of any class of the securities of any Person (but
may not otherwise participate in the activities of such Person) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Exchange Act.
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(b)
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Nonsolicitation
. For a period of five (5) years after
the Closing Date, neither Seller nor its Related Persons shall, directly or
indirectly:
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(i)
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cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor, franchisee, employee,
consultant or other
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business relation of Buyer to cease doing business
with Buyer, to deal with any competitor of Buyer or in any way
interfere with its relationship with Buyer;
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(ii)
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cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor, franchisee, employee,
consultant or other business relation of Seller on the Closing Date or
within the year preceding the Closing Date to cease doing business with
Buyer, to deal with any competitor of Buyer or in any way interfere
with its relationship with Buyer; or
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(iii)
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hire, retain or attempt to hire or retain any
employee or independent contractor of Buyer or in any way interfere
with the relationship between Buyer and any of its employees or
independent contractors.
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(c)
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Nondisparagement
. After the Closing Date, none of the
parties hereto will disparage either of the other parties’ shareholders,
members, managers, directors, officers, employees, agents or Representatives.
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(d)
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Modification of Covenant
. If a final judgment of a
court or tribunal of competent jurisdiction determines that any term or
provision contained in Section 10.8(a) through (c) is invalid or unenforceable,
then the parties agree that the court or tribunal will have the power to reduce
the scope, duration or geographic area of the term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision. This Section 10.8 will be enforceable as so modified after the
expiration of the time within which the judgment may be appealed. This Section
10.8 is reasonable and necessary to protect and preserve Buyer’s legitimate
business interests and the value of the Assets and to prevent any unfair
advantage conferred on Seller.
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10.9
Customer and Other Business Relationships
. After the Closing, Seller at no additional
cost or expense to Seller, will cooperate with Buyer in its efforts to continue and maintain for
the benefit of Buyer those business relationships of Seller existing prior to the Closing and
relating to the business to be operated by Buyer after the Closing, including relationships with
lessors, employees, regulatory authorities, licensors, customers, suppliers and others. Seller
will refer to Buyer all inquiries relating to the Business. Neither Seller nor its officers or
Related Persons shall, and Seller shall instruct its managers, employees, and agents not to,
intentionally or recklessly take any action that would diminish the value of the Assets after the
Closing or that would interfere with the business of Buyer to be engaged in after the Closing,
including disparaging the name or business of Buyer. Notwithstanding the foregoing, Seller will
not be in breach of this Section 10.9 if its Member has a dispute with a supplier or customer who
is or was a customer or supplier of Seller or Buyer if the dispute is not related to
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Seller or the
business that Seller or Buyer have conducted or is conducting with the Acquired Assets and Assumed
Liabilities.
10.10
Retention of and Access to Records
. After the Closing Date, Buyer shall retain for a
period of not less than six (6) years those Records of Seller delivered to Buyer. Buyer also shall
provide Seller and its Representatives reasonable access thereto, during normal business hours and
on at least three (3) days’ prior written notice, to enable them to prepare financial statements or
tax returns or deal with tax audits. After the Closing Date, Seller shall provide Buyer and its
Representatives reasonable access to Records that are Excluded Assets, during normal business hours
and on at least three days’ prior written notice, for any reasonable business purpose specified by
Buyer in such notice.
10.11
Further Assurances
. The parties shall cooperate reasonably with each other and with
their respective Representatives in connection with any steps required to be taken as part of their
respective obligations under this Agreement, and shall (a) furnish upon request to each other such
further information, (b) execute and deliver to each other such other documents and (c) do such
other
acts and things, all as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the Contemplated Transactions.
10.12
TCE Sealant
. While it is the lessee under the Facility Lease, Buyer shall be
responsible for applying and maintaining, in accordance with the sealant manufacturer’s
specifications, at least the current sealant on the TCE degreaser sump and the area in which
degreasing operation occur, and Buyer shall reseal such area from time to time as its environmental
consultant shall recommend.
10.13
Master Lease Payments
. Seller and its Affiliates lease vehicles and equipment under
that certain Master Lease Agreement dated on or about August 1, 2001, among Amembal Capital
Corporation, as lessor, and Chart Leasing, Inc. (“CLI”), and Parent, as lessees (the “Master
Lease”). Following the Closing, Buyer will possess, and will operate certain equipment that is
subject to the Master Lease (the “Leased Equipment”). Seller shall provide Buyer with detail of
the portion of the monthly lease payments under the Master Lease that are allocable to the Leased
Equipment thereunder and Notice of the date upon which the lessees under the Master Lease must make
lease payments at least ten (10) days prior to such payment date, and Buyer shall pay to Seller the
amount of the Buyer’s portion of the payment not later than five (5) days before the date lessee’s
payment is due. Seller agrees that it shall promptly pay over the amount it receives from Buyer to
CLI and Parent. If at the end of the term of the Master Lease, the Buyer desires to exercise the
purchase option for any of the leased equipment, Buyer shall give Seller notice of such exercise at
least six (6) months before the end of such lease term, and Buyer shall pay to Seller the amount of
any applicable option exercise price.
10.14
Effective Date
. The effective date of this Agreement shall be July 1, 2003. If the
Closing does not occur on July 1, 2003, Buyer shall reimburse Seller, Parent, or Member (as
applicable) for all self-insured medical insurance costs it incurs with respect to the Hired Active
Employees during the period commencing July 1, 2003, and ending on the Closing Date. Seller shall
provide Buyer with evidence of all such costs and its payment thereof. Buyer shall reimburse
Seller for all payroll expenses it incurs with respect to Hired Active Employees during
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the period
commencing July 1, 2003, and ending on the Closing Date. Seller shall provide Buyer with evidence
of such payroll expenses.
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11.
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INDEMNIFICATION; REMEDIES
.
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11.1
Survival
. All representations, warranties, covenants and obligations in this
Agreement, the Disclosure Schedule, and the Transaction Documents shall survive the Closing and the
consummation of the Contemplated Transactions, subject to Section 11.7. The right to
indemnification, reimbursement or other remedy based upon such representations, warranties,
covenants and
obligations shall not be affected by any investigation (including any environmental investigation
or assessment or any due diligence review or investigation) conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time before the execution and delivery of
this Agreement on the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with any such representation, warranty, covenant or obligation.
11.2
Indemnification and Reimbursement by Seller
. Subject to the limitations described
herein, Seller will indemnify and hold harmless Buyer, and its shareholders, subsidiaries,
officers, directors and employees (collectively, the “Buyer Indemnified Persons”), and will
reimburse the Buyer Indemnified Persons for any loss, liability, claim, damage, expense (including
costs of investigation and defense and reasonable attorneys’ fees and expenses) or diminution of
value, whether or not involving a Third-Party Claim (collectively, “Damages”), arising from or in
connection with:
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(a)
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any Breach of any representation or warranty made by Seller in
(i) this Agreement, or (ii) the Transaction Documents (excluding the Facility
Lease);
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(b)
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any Breach of any covenant or obligation of Seller in this
Agreement or the Transaction Documents (excluding the Facility Lease);
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(c)
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any brokerage or finder’s fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have
been made, by any Person with Seller or the Member (or any Person acting on
their behalf) in connection with any of the Contemplated Transactions;
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(d)
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any product or component thereof manufactured by or shipped, or
any services provided by, Seller, in whole or in part, prior to the Closing
Date, provided that Buyer shall be responsible for the first Ten Thousand
Dollars ($10,000) of product warranty claims arising in the eighteen (18)
months immediately following the Closing and product warranty claims
specifically assumed under Section 2.4(a)(iv);
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(e)
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any matter disclosed in Part 11.2(e) of the Disclosure
Schedule;
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(f)
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any noncompliance with any Bulk Sales Laws or fraudulent
transfer law in respect of the Contemplated Transactions;
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(g)
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any liability under the WARN Act or any similar state or local
Legal Requirement that may result from an “Employment Loss”, as defined by 29
U.S.C. Section 2101(a)(6), caused by any action of Seller prior to the Closing;
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(h)
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any Employee Plan established or maintained by Seller; or
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(i)
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any Retained Liabilities.
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Notwithstanding any provision in this Agreement to the contrary, Buyer agrees that it shall be
prohibited from asserting any claims for indemnification for expenses it incurs (i) for replacing
any “shrink wrap” software programs that Seller is unable to assign to Buyer because Seller cannot
obtain the consent of the software licensor to the assignment, or (ii) for Damages with respect to
the Special Inventory.
11.3
Indemnification and Reimbursement by Seller — Environmental Matters
.
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(i)
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Subject to the material compliance by Buyer
with its obligations in Section 11.3(f) herein, Seller will indemnify
and hold harmless Buyer and the other Buyer Indemnified Persons, and
will reimburse Buyer and the other Buyer Indemnified Persons, for any
Damages (including costs of any other Remedial Action) arising from or
in connection with:
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(A)
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the TCE Contamination, provided,
however, that as between Buyer and Seller, and without limiting
the Buyer’s right to indemnification with respect to the matters
described in Section 11.3(a)(i)(B) through 11.3(a)(i)(D) herein,
upon a determination by the Arkansas Department of Environmental
Quality (“ADEQ”) that Seller has complied with the ADEQ Consent
Order to the full extent required by ADEQ, the TCE
Contamination, referenced in this Section 11.3(a)(i)(A), will be
considered a Non-TCE Environmental Condition, as provided in
Section 11.3(b);
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(B)
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any Environmental Claim related
to the TCE Contamination;
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(C)
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the failure of the Seller to
comply with the ADEQ Consent Order; and
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(D)
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any bodily injury (including
illness, disability and death, regardless of when any such
bodily injury manifested itself), personal injury, property
damage (including trespass, nuisance, diminution in property
value, wrongful eviction and deprivation of the use of real
property) or
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other damage of or to any Person, property (real or
personal), or any Assets from the TCE Contamination.
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(ii)
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For purposes of Section 11.3(a), there shall be
a rebuttable presumption, subject to Section 11.3(a)(iii), that any TCE
Contamination that was present in the Environment at, on or emanating
from the Facilities or present in Facility building components (e.g., concrete flooring) was present at or prior to the
Closing Date provided that, so long as Buyer uses TCE, Buyer complies
with the following requirements set forth in this Section
11.3(a)(ii):
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(A)
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maintain the
trichloroethylene-resistant sealant currently on the Facility
floor pursuant to the sealant manufacturer’s instructions;
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(B)
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provide written notification to
Seller of any Release of fifty (50) pounds of TCE to soil and/or
groundwater at, on or from the Greenville Property;
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(C)
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provide a certification to Seller
within one (1) year of the Closing Date and annually thereafter
as to whether there have been any Releases of greater than fifty
(50) pounds of TCE to soil and/or groundwater at, on or from the
Greenville Property during the preceding year and, if
applicable, a description of any such Releases, including,
without limitation, the date, location and circumstances of the
Release, the estimated amount of TCE Released, a description of
remedial measures taken to address such TCE Release(s) and a
statement as to whether such TCE Release was reported to any
Governmental Body and the date of such report, if applicable;
and
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(D)
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provide to Seller written notice
at least ten (10) days prior to the performance of regularly
scheduled preventative maintenance on the TCE degreaser
involving transfer of TCE from the degreaser to and from an
in-line aboveground storage tank or any similar container; and
provide Parent, Member, Seller or their respective
Representatives an opportunity to observe any activities related
thereto.
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(iii)
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Subject to the provisions contained in this
Section 11.3(a)(iii), Buyer may assign its rights under Section 11.3(a)
without Seller’s consent, provided, that Buyer, its successors and
assigns, shall provide written notice to Seller within five (5) days of
any such
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assignment.
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A Buyer Change of Control shall affect assignment
of the rebuttable presumption as follows:
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(A)
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Following the consummation of a
Buyer Change of Control, the rebuttable presumption that the TCE
Contamination pre-dated the Closing Date shall terminate and not
apply and Buyer shall not be entitled to rely upon the same;
provided, that, (x) members of the Investor
Group, in their capacities as Buyer Indemnified Parties, and
(y) Buyer, in the event the Buyer Change of Control was a
sale of assets and the Investor Group, or any combination of
the members of the Investor Group or their Affiliates
continues to own in excess of 50% of the voting power of
Buyer, shall, subject to Section 11.3(a)(ii), continue to be
entitled to the benefit of the rebuttable presumption.
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(B)
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Other than as provided in the
immediately preceding Section 11.3(a)(iii)(A), the right of the
Buyer Indemnified Parties to indemnification and reimbursement,
and Seller’s obligation to provide the same, under Section
11.3(a), including, without limitation, indemnification for any
Third-Party Claim shall continue and the rebuttable presumption
discussed above, shall not be impaired.
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(i)
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Subject to the material compliance by Buyer
with its obligations in Sections 11.3(c), (d), (e) and (f) herein,
Seller will indemnify and hold harmless Buyer and the other Buyer
Indemnified Persons, and will reimburse Buyer and the other Buyer
Indemnified Persons, for any Damages (including costs of any other
Remedial Action) arising from or in connection with any Environmental
Claims arising out of or relating to:
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(A)
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any Breach of any representation
or warranty made by Seller in Section 3.22 of this Agreement,
provided that such Breach is not a result of fraud;
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(B)
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ownership or operation at any
time on or prior to the Closing Date of any of the Facilities,
Assets, the Business or the Greenville Property;
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(C)
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any Hazardous Materials that are
present on, under, or emanating from the Facilities, Assets, or
the Greenville Property or that were disposed or transferred
from the Facilities, Assets or the Greenville Property at any
time by Seller on or prior to the Closing Date,
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(D)
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any bodily injury (including
illness, disability and death, regardless of when any such
bodily injury manifested itself), personal injury, property
damage (including trespass, nuisance, diminution in property
value, wrongful eviction and deprivation of the use of real
property) or other damage of or to any Person, property (real or
personal), or any Assets prior to the Closing Date or from
any Hazardous Material that (i) was present or reasonably
suspected to be present on or before the Closing Date on or
at the Facilities (or present or reasonably suspected to be
present on any other property, if such Hazardous Material
emanated from any Facility or the Greenville Property and was
present or reasonably suspected to be present on any Facility
or the Greenville Property, on or prior to the Closing Date),
or (ii) Released by any Person on or at any Facilities,
Assets, or the Greenville Property at any time on or prior to
the Closing Date, and
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(E)
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any Remedial Actions taken by
Seller at the Facilities.
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(ii)
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The circumstances and conditions described in
Sections 11.3(b)(i)(A) through 11.3(b)(i)(E) are collectively referred
to herein as “Non-TCE Environmental Conditions.” The parties
acknowledge and agree that Section 11.3(b) shall not include
obligations with respect to TCE Contamination, except as provided in
Section 11.3(a)(i)(A). In the event of a Buyer Change of Control, the
right of the Buyer Indemnified Parties to indemnification and
reimbursement under Section 11.3(b) shall terminate automatically and
be void and of no force and effect; Notwithstanding the foregoing
sentence, (x) the Buyer Indemnified Parties (excluding Charles E.
Downs, Richard L. Vareha, Harry R. Holstead, and Larry B. McGaslin),
and (y) Buyer, in the event the Buyer Change of Control was a sale of
assets and the Investor Group, or any combination of its members,
continues to own in excess of 50% of the voting power of Buyer, shall
be permitted to assert a claim against Seller under Section 11.3(b);
provided that in the event that such claim is made against the Buyer
Indemnified Parties by a successor owner of Buyer or its assets, the
right to indemnification or reimbursement is limited to claims
substantially similar to those in Section 11.3(b)(i).
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(c)
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In the event of an Environmental Claim related to Non-TCE
Environmental Conditions initiated by any Third Party related to any
Environmental Liabilities in connection with a proposed acquisition of assets
from Buyer or a proposed loan to Buyer (the “Acquisition Environmental Claim”),
Seller shall have no obligation of indemnification or reimbursement under
Section 11.3(b) herein if the concentrations of
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constituents identified by such
Third Party are at or below the screening levels for industrial land use
developed by U.S. EPA-Region 6 pursuant to its Corrective Action Strategy
(“SLs”), any similar standards applicable in Arkansas subsequently adopted in
the event U.S. EPA-Region 6 withdraws or revokes the SLs. In the event that
the concentrations of constituents exceed such levels or no applicable limit
exists for a particular constituent, Seller will perform a risk assessment for
that constituent, in compliance with any applicable protocols or guidance
acceptable to the Arkansas Department of Environmental Quality and U.S. EPA,
Region 6 at the time of the risk assessment at Seller’s sole cost, and will
perform such Remedial Action, if any, reasonably necessary to meet the risk
level acceptable to the Arkansas Department of Environmental Quality and the
U.S. EPA Region 6 for an industrial facility at the time of the risk
assessment. Input parameters into the risk assessment must be consistent
with the then current use of the Facilities, as long as such use is
industrial.
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(d)
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In the event of an Environmental Claim related to Non-TCE
Environmental Conditions initiated by any Governmental Body or for which a
Governmental Body requires a response, Seller will be responsible for any
Remedial Action required by such Governmental Body under Environmental Law with
respect to such Non-TCE Environmental Conditions. Upon completion of Remedial
Action to the satisfaction of any Governmental Body having jurisdiction over
any Non-TCE Environmental Condition, Seller shall have no further indemnity or
reimbursement obligation with respect to any such Environmental Claim.
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(e)
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Buyer shall not be entitled to indemnification or reimbursement
under Section 11.3(b) with respect to any Non-TCE Environmental Condition in
the absence of an Environmental Claim.
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(f)
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The procedure described in Section 11.9 will apply to any claim
(whether for monetary damages or injunctive relief) relating to a matter
covered by Section 11.3 and as provided in Section 11.4(g), subject to the
following: Seller shall be entitled to control any Proceeding with respect to
which indemnity may be sought under this Section 11.3. Buyer shall be
prohibited from undertaking any TCE Remedial Action or any other Remedial
Action arising out of an Environmental Claim related to any Non-TCE
Environmental Condition without the prior written consent of Seller; provided,
however, if Seller refuses or neglects to perform a Remedial Action after
notice from Buyer, as provided in Section 11.9, and Buyer has a reasonable,
good faith belief that it will be subject to damages, penalties, fines or
action taken by a Governmental Body in response to Seller’s failure to
undertake the TCE Remedial Action or any other Remedial Action, Buyer may
control the Proceeding. Buyer hereby grants to Seller, its employees,
managers, agents, consultants, contractors and subcontractors, access to such
portions of the Real Property as may be
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reasonably required so as to permit
Seller to perform the TCE Remedial Action or any other Remedial Action. In the
course of any Remedial Action performed by Seller at the Facilities pursuant to
this Agreement or in relation to the TCE Remedial Action, the following
conditions shall apply:
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(i)
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Seller shall provide Buyer with copies of any
and all analysis results, workplans, reports and any correspondence
with a Governmental Body associated with such Remedial Action;
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(ii)
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Seller shall not unreasonably or unnecessarily
interfere in any way with Buyer’s operation of the Facilities;
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(iii)
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Seller follow all reasonable safety rules
communicated to Seller in writing by Buyer, but in no event shall Buyer
be responsible for the safety of Seller, its employees, contractors or
invitees;
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(iv)
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Seller shall inform Buyer in writing at least
five (5) days in advance of any activity that is to take place at the
Facilities;
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(v)
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Seller shall perform all such Remedial Actions
during normal business hours, except with the written permission of
Buyer (such permission not to be unreasonably withheld, delayed, denied
or conditioned);
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(vi)
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Seller shall not communicate to any
Governmental Body, a neighboring property owner, or any other Person
that Buyer is responsible for the TCE Remedial Action or the TCE
Contamination, provided Buyer maintains the trichloroethylene-resistant
sealant on the Facility floor;
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(vii)
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Seller shall provide copies to Buyer of any
such Remedial Action workplan at least ten (10) days in advance of the
submittal of any such workplan to any Governmental Body and revise such
Remedial Action workplan to incorporate any reasonable comments made by
Buyer;
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(viii)
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all of Seller’s contractors or subcontractors operating at the
Facilities shall have in force during any such Remedial Action
performed by that contractor or subcontractor on the Facilities
insurance coverage of the following types, in at least the following
amounts:
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(A)
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Workers’ compensation in
accordance with all applicable statutory requirements;
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(B)
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Comprehensive general liability
insurance with a combined single limit of not less than
$1,000,000 per occurrence for bodily injury and property damage;
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(C)
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Comprehensive automobile
liability, including coverage for all owned and non-owned
vehicles used in connection with any Remedial Action, with a
combined single limit of not less than $1,000,000 per occurrence for bodily injury and
property damage;
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(D)
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Employers’ liability insurance
with limits of not less than $1,000,000 per occurrence;
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(E)
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Environmental impairment
liability insurance with limits of not less than $1,000,000 per
occurrence and $1,000,000 aggregate, or higher if required by
state or federal Law; and
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(F)
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Any such insurance policy shall
name Buyer as an additional insured and shall contain an
agreement or endorsement that it will not be canceled or
materially modified by the insurer without at least thirty (30)
days prior written notice to Buyer.
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(ix)
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the TCE Remedial Action or any such Remedial
Action at the Facilities shall be performed in conformance with all
applicable Environmental Laws;
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(x)
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Seller shall be responsible for the handling,
storage and disposal of any Hazardous Materials created, collected or
otherwise generated in connection with the TCE Remedial Action or any
such Remedial Action performed pursuant to this Agreement;
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(xi)
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Seller shall take all precautions necessary to
prevent damage to the Facilities and shall promptly repair or replace
any and all damage to the Facilities caused by any Remedial Action. At
the conclusion of the Remedial Action, Seller shall restore the
Facilities substantially the same condition it was in prior to the
commencement of the Remedial Action;
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(xii)
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if required by any Governmental Body having
jurisdiction over the TCE Remedial Action or if required in conformance
with Occupational Safety and Health Laws, Seller shall perform such
Remedial Actions as are necessary to reduce exposures by workers at the
Facilities to the levels required pursuant to Occupational Health and
Safety Law;
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(xiii)
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Seller shall provide Buyer in advance with the name of any contractor
to perform any such Remedial Action or activity in
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relation to the TCE
Remedial Action, provided, however, that Buyer shall be deemed to have
approved those contractors identified on Exhibit 11.3(f)(xiii). Buyer
may reasonably reject a contractor not identified on Exhibit
11.3(f)(xiii), provided, however, that in the event that Buyer fails to
notify Seller of such rejection in writing within ten (10) days of
receipt of notice from
Seller of the name of any contractor, Buyer will be deemed to have
approved such contractor;
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(xiv)
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Seller shall provide Buyer, at Buyer’s sole
cost and expense, with split samples of any environmental media
sampled, if requested by Buyer. In no event shall Buyer be deemed the
generator or the arranger for disposal of any wastes or materials
generated by or during any such Remedial Action;
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(xv)
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Buyer shall cooperate with Seller in the
conduct of any such Remedial Action, including, without limitation,
providing reasonable access to any necessary services, such as water,
sewer and electricity, provided that Seller reimburses Buyer promptly
for the additional out-of-pocket costs of such services;
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(xvi)
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Buyer shall not initiate any communication
with any Governmental Body with respect to any Remedial Action
performed under this Agreement without Seller’s prior written consent,
except in the event that Buyer:
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(A)
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notifies Seller, in writing, at
least seven (7) days prior to such communication, which
notification shall include a description of the agenda or topics
for discussion; and
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(B)
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provides Seller the opportunity
to participate in such communication.
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In such case, Seller may, by written notice to Buyer prior to the date of the proposed
communication, postpone the communication for up to fourteen (14) days. If, following the
expiration of the period of twenty-one (21) days from the date of Buyer’s notice to Seller, Seller
has not agreed to the proposed communication, with or without Seller’s participation (in Seller’s
sole discretion), Buyer may proceed to contact the Governmental Body pursuant to its original
notice to Seller.
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(xvii)
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Buyer may initiate any communication with any Governmental Body with
respect to any Environmental Liability performed under this Agreement
other than a Remedial Action without Seller’s prior written consent,
provided that, in the event that Buyer has a reasonable belief that
Seller is obligated to indemnify it with respect to such Environmental
Liability, Seller must notify Buyer
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and afford Buyer an opportunity to
participate in any such communication pursuant to Section 11.3(f)(xvi)
of this Agreement.
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(xviii)
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In the case of any Remedial Action performed under this Agreement
other than the TCE Remedial Action, the clean-up standards selected
shall reflect the least stringent remediation standards acceptable
under Environmental Law, assuming such Remedial Action is conducted
using the most cost-effective
commercially reasonable methods for investigation, remediation and/or
containment, including, without limitation, the use of
“institutional” or “engineering” controls or deed restrictions
limiting the use of the relevant Facility to industrial purposes,
provided that such controls or restrictions: (A) are consistent with
applicable Environmental Law; and (B) do not materially preclude
Buyer from using such Facility in the manner it was used in as of the
Closing Date.
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(g)
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Without limiting the generality of the foregoing, absent fraud,
the provisions of this Section 11.3 shall exclusively govern the rights and
obligations of the parties and shall be the only remedies available to the
parties hereto in respect of any matter arising hereunder with respect to the
matters expressed herein, provided, however, that this Section 11.3(g) shall
have no force and effect for Non-TCE Environmental Conditions on the first day
following the expiration of the “Non-TCE Survival Period” (as defined in
Section 11.7 herein). Following the expiration of the Non-TCE Survival Period,
the Buyer Indemnified Parties may, subject to Section 11.3(b)(ii), pursue all
other remedies for Non-TCE Environmental Conditions, whether statutory,
regulatory, common law or otherwise.
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11.4
Indemnification and Reimbursement by Buyer
. Buyer will indemnify and hold harmless
Seller and its shareholders, directors, officers and employees (the “Seller Indemnified Persons”)
and will reimburse Seller and Seller Indemnified Persons, for any Damages arising from or in
connection with:
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(a)
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any Breach of any representation or warranty made by Buyer in
this Agreement or the Transaction Documents (excluding the Facility Lease);
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(b)
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any Breach of any covenant or obligation of Buyer in this
Agreement or the Transaction Documents (excluding the Facility Lease);
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(c)
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any claim by any Person for brokerage or finder’s fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
Buyer’s behalf) in connection with any of the Contemplated Transactions;
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(d)
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any Assumed Liabilities;
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(e)
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any liability resulting or arising from Buyer’s ownership and
operation of the Assets or business after the Closing that is not a Liability
for which Seller otherwise indemnifies Buyer under Sections 11.2 or 11.3
hereof; or
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(f)
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any liability under WARN Act caused by Buyer’s decision not to
hire the requisite number of Active Employees so as to avoid liability under
the WARN Act;
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(g)
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any Environmental Claims arising out of or relating to:
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(i)
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operation by Buyer at any time subsequent to
the Closing Date of any of the Facilities, Assets, the Business or the
Greenville Property;
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(ii)
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any Hazardous Materials that Buyer causes to be
present on, under, or emanating from the Facilities, Assets, or the
Greenville Property or that Buyer disposes or transfers from the
Facilities, Assets or the Greenville Property at any time subsequent to
the Closing Date, and
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(iii)
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any bodily injury (including illness,
disability and death, regardless of when any such bodily injury
manifested itself), personal injury, property damage (including
trespass, nuisance, diminution in property value, wrongful eviction and
deprivation of the use of real property) or other damage of or to any
Person, property (real or personal), or any Assets subsequent to the
Closing Date or from any Hazardous Material that Buyer causes to be (i)
present or reasonably suspected to be present subsequent to the Closing
Date on or at the Facilities (or present or reasonably suspected to be
present on any other property, if such Hazardous Material emanated from
any Facility or the Greenville Property and Buyer caused the Hazardous
Material to be present on the Facility or the Greenville Property,
subsequent to the Closing Date), or (ii) Released on or at any
Facilities, Assets, or the Greenville Property at any time subsequent
to the Closing Date any liability arising under Environmental Law,
including, without limitation, any Environmental Liabilities, resulting
or arising from the acts or omissions of Buyer or the ownership or
operation of the Facilities, Assets, the Business or the Greenville
Property after the Closing Date; and
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(h)
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any damage or destruction to the Leased Equipment, normal wear
and tear excepted and further excepting any existing wear, tear, and damage
existing on the Closing Date.
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The circumstances and conditions described in Sections 11.4(g)(i)-(iii) are collectively referred
to herein as “Seller Environmental Claims.” Seller shall not be entitled to indemnification or
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reimbursement under this Section 11.4 (g) with respect to any Seller Environmental Claim in the
absence of an Environmental Claim. In the event of an Environmental Claim related to Seller
Environmental Claims, the provisions of Section 11.3 (d) and (f) (except Section 11.3 (f)(vi))
shall apply, with the term “Seller Environmental Claims” substituted for “Non-TCE Environmental
Claims,” the term “Buyer” substituted for “Seller,” “Seller” substituted for “Buyer” and Section
11.4(g) substituted for Section 11.3.
11.5
Limitations on Amount — Seller
. Seller shall have no liability (for indemnification or otherwise) with respect to claims under
Section 11.2(a), 11.2(f), 11.2(g), 11.2(i), and 11.3(b) until the total of all Damages with respect
to such matters exceeds $150,000.00 (the “Threshold”) and then only for the amount by which such
Damages exceed the Threshold. However, the Threshold will not apply to claims under Sections
11.2(b), 11.2(c), 11.2(d), 11.2(e) and 11.2(h) or to matters arising in respect of Sections 3.9,
3.14, 3.22, 3.29, 3.30, 11.3(a) or fraud. Subject to the immediately preceding sentence:
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(a)
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Seller’s aggregate liability for Damages under Section 11.2(a),
11.2(f), 11.2(g) and 11.2(i) shall not exceed $2,000,000 provided that this
Section 11.5(a) shall not apply to Sections 2.4(b)(iii), (v), (vi), (vii) (ix),
(xii) and (xv); and
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(b)
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Seller’s aggregate liability for Damages for Non-TCE
Contamination under Section 11.3(b) shall not exceed $13,500,000 provided,
however, that the limitation under this Section 11.5(b) shall not apply to
Damages for Non-TCE Contamination under Section 11.3(b)(i)(D).
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11.6
Limitations on Amount — Buyer
. Buyer will have no liability (for indemnification or
otherwise) with respect to claims under Section 11.4(a) until the total of all Damages with respect
to such matters exceeds $150,000.00 and then only for the amount by which such Damages exceed
$150,000.00. However, this Section 11.6 will not apply to claims under Section 11.4(b) through
Section 11.4(h) or matters arising in respect of Sections 4.4 or 4.5, fraud, or to any Breach of
any of Buyer’s representations and warranties of which Buyer had Knowledge at any time before the
date on which such representation and warranty is made or any intentional Breach by Buyer of any
covenant or obligation, and Buyer will be liable for all Damages with respect to such Breaches.
11.7
Time Limitations
.
Seller will have liability (for indemnification or otherwise) with respect to any Breach of
(i) a covenant or obligation to be performed or complied with (other than those in Sections 2.1 and
2.4(b), (v) (except as provided in Section 11.3(b)), (ix), (xi), (xii), and (xv), and Articles 10,
12, and 13, as to which a claim may be made at any time and those in Sections 2.4(b)(iii), (vi),
and (vii) as to which a claim may be made during the period before the applicable statute of
limitations, including extensions thereof, becomes effective to bar claims), or (ii) a
representation or warranty (other than those in Sections 3.9, and 3.22 (except for nonfraudulent
Breaches as provided in Section 11.3(b)), as to which a claim may be made at any time and Section
3.14, and 3.16, as to which a claim may be made during the period before the applicable statute of
limitations, including extensions thereof, becomes effective to bar claims), only if on
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or before
January 1, 2005, Buyer notifies Seller in writing of a claim specifying the factual basis of the
claim in reasonable detail to the extent then known by Buyer. Nothing in the preceding sentences
shall constitute or be construed as an assumption of any of Seller’s Retained Liabilities by Buyer.
Seller’s obligation to indemnify the Buyer Indemnified Parties for Non-TCE Environmental
Conditions in Section 11.3(b) shall expire on the twenty-fifth (25) anniversary of the Closing Date
(the “Non-TCE Survival Period”). Thereafter, the Buyer Indemnified Parties may, subject to Section
11.3(b)(ii), pursue all other remedies for Non-TCE Environmental Conditions, whether statutory,
regulatory, common law or otherwise.
Buyer will have liability (for indemnification or otherwise) with respect to any Breach of (i)
a covenant or obligation to be performed or complied with (other than those in Articles 10, 12, and
13 as to which a claim may be made at any time) or (ii) a representation or warranty (other than
that set forth in Section 4.4, as to which a claim may be made at any time), only if on or before
January 1, 2005, Seller notifies Buyer in writing of a claim specifying the factual basis of the
claim in reasonable detail to the extent then known by Seller.
11.8
Right of Setoff
. Upon notice to Seller specifying in reasonable detail the basis
therefor, Buyer shall set off any amount to which it may be entitled under this Article 11 against
amounts otherwise remaining payable under the Promissory Note. If the Buyer’s Damages exceed
amounts available for setoff, Buyer may recover the excess from Seller directly. The exercise of
such right of setoff by Buyer in good faith, whether or not ultimately determined to be justified,
will not constitute an event of default under the Promissory Note or any instrument securing the
Promissory Note. Neither the exercise of nor the failure to exercise such right of setoff will
constitute an election of remedies or limit Buyer in any manner in the enforcement of any other
remedies that may be available to it. If Seller disputes an exercise of Buyer’s right of set off
against the Promissory Note, Seller shall give Buyer written notice of such dispute and its basis
in fact and law, and Buyer and Seller shall have thirty (30) days after Buyer’s receipt of Seller’s
notice to negotiate a resolution of such dispute, which shall be evidenced in a written agreement
signed by Buyer and Seller. If Buyer and Seller are unable to settle such dispute within such
period, either Buyer or Seller will have the right, exercisable during the next thirty (30) day
period, to refer the dispute to arbitration pursuant to the Commercial Arbitration Rules of the
American Arbitration Association. If no such referral is made within the thirty (30) day period,
the dispute shall be deemed to have been conclusively resolved in favor of the Buyer. If the
dispute is referred to arbitration, each of (i) Buyer and (ii) Seller shall within thirty (30) days
after the date of the referral, designate one arbitrator, and the two arbitrators shall select a
third arbitrator, and the decision of a majority of the arbitrators shall be final and binding upon
the parties to the arbitration and such decision may be enforced by a court of competent
jurisdiction.
The decision of the arbitrators shall be in writing and shall be delivered within thirty days
after the parties to the arbitration have been afforded an opportunity to present evidence and
examine and cross-examine witnesses before the arbitrators. Buyer and Seller shall each pay one
half of the arbitrators’ fees and expenses.
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11.9
Third-Party Claims
.
Promptly after receipt by a Person entitled to indemnity under Sections 11.2, 11.3, or 11.4
(an “Indemnified Person”) of notice of the assertion of a Third-Party Claim against it, such
Indemnified Person shall give notice to the Person obligated to indemnify under such Section (an
“Indemnifying Person”) of the assertion of such Third-Party Claim, provided that the failure to
notify the Indemnifying Person will not relieve the Indemnifying Person of any liability that it
may have to any Indemnified Person, except to the extent that the Indemnifying Person demonstrates
that the defense of such Third-Party Claim is prejudiced by the Indemnified Person’s failure to
give such notice.
If an Indemnified Person gives notice to the Indemnifying Person pursuant to Section 11.9 of
the assertion of a Third-Party Claim, the Indemnifying Person shall be entitled to participate in
the defense of such Third-Party Claim and, to the extent that it wishes (unless (i) the
Indemnifying Person is also a Person against whom the Third-Party Claim is made and the Indemnified
Person determines in good faith that joint representation would be inappropriate or (ii) the
Indemnifying Person fails to provide reasonable assurance to the Indemnified Person of its
financial capacity to defend such Third-Party Claim and provide indemnification with respect to
such Third-Party Claim), to assume the defense of such Third-Party Claim with counsel reasonably
satisfactory to the Indemnified Person. After notice from the Indemnifying Person to the
Indemnified Person of its election to assume the defense of such Third-Party Claim, the
Indemnifying Person shall not, so long as it diligently conducts such defense, be liable to the
Indemnified Person under this Article 11 for any fees of other counsel or any other expenses with
respect to the defense of such Third-Party Claim, in each case subsequently incurred by the
Indemnified Person in connection with the defense of such Third-Party Claim. If the Indemnifying
Person assumes the defense of a Third-Party Claim, (i) such assumption will conclusively establish
for purposes of this Agreement that the claims made in that Third-Party Claim are within the scope
of and subject to indemnification, provided, however, that the right of the Indemnifying Person to
contest the right of the Indemnified Person to indemnification with respect to Third-Party Claims
arising under Section 11.3 or 11.4(g) of the Agreement shall not be extinguished until thirty (30)
days after the assumption, and (ii) no compromise or settlement of such Third-Party Claims may be
effected by the Indemnifying Person without the Indemnified Person’s Consent unless (A) there is no
finding or admission of any violation of Legal Requirement or any violation of the rights of any
Person, (B) the sole relief provided is monetary damages that are paid in full by the Indemnifying
Person, and (C) the Indemnified Person shall have no liability with respect to any compromise or
settlement of such Third-Party Claims effected without its Consent. If notice is given to an
Indemnifying Person of the assertion of any Third-Party Claim and the Indemnifying Person does not,
within ten (10) days after the Indemnified Person’s notice is given, give notice to the Indemnified
Person of its election to assume the defense of such Third-Party Claim, the Indemnifying Person
will be bound by any determination made in such Third-Party Claim or any compromise or settlement
effected by the Indemnified Person.
Notwithstanding the foregoing, if an Indemnified Person determines in good faith that there is
a reasonable probability that a Third-Party Claim may adversely affect it or its Related Persons
other than as a result of monetary damages for which it would be entitled to indemnification under
this Agreement, the Indemnified Person may, by notice to the
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Indemnifying Person, assume the
exclusive right to defend, compromise or settle such Third-Party Claim, but the Indemnifying Person
will not be bound by any determination of any Third-
Party Claim so defended for the purposes of this Agreement or any compromise or settlement
effected without its Consent (which may not be unreasonably withheld, delayed or conditioned).
Notwithstanding the provisions of Section 13.4, each of Buyer and Seller hereby consents to
the nonexclusive jurisdiction of any court in which a Proceeding in respect of a Third-Party Claim
is brought against any Indemnified Person for purposes of any claim that a Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters alleged therein and agree
that process may be served on such party with respect to such a claim anywhere in the world.
With respect to any Third-Party Claim subject to indemnification under this Article 11: (i)
both the Indemnified Person and the Indemnifying Person, as the case may be, shall keep the other
Person fully informed of the status of such Third-Party Claim and any related Proceedings at all
stages thereof where such Person is not represented by its own counsel, and (ii) the parties agree
(each at its own expense) to render to each other such assistance as they may reasonably require of
each other and to cooperate in good faith with each other in order to ensure the proper and
adequate defense of any Third-Party Claim.
With respect to any Third-Party Claim subject to indemnification under this Article 11, the
parties agree to cooperate in such a manner as to preserve in full (to the extent possible) the
confidentiality of all Confidential Information and the attorney-client and work-product
privileges. In connection therewith, each party agrees that: (i) it will use its Best Efforts, in
respect of any Third-Party Claim in which it has assumed or participated in the defense, to avoid
production of Confidential Information (consistent with applicable law and rules of procedure), and
(ii) all communications between any party hereto and counsel responsible for or participating in
the defense of any Third-Party Claim shall, to the extent possible, be made so as to preserve any
applicable attorney-client or work-product privilege.
11.10
Direct Claims
. If an Indemnified Person may have a claim under Section 11.2 or 11.4
other than a Third Party Claim (a “Direct Claim”), the Indemnified Person shall provide written
notice to the Indemnifying Person of such Direct Claim promptly after such Direct Claim becomes
known to the Indemnified Person. A delay in giving such notice shall relieve the Indemnifying
Person of liability for the Direct Claim only to the extent Indemnifying Person suffers actual
prejudice because of delay. Upon receipt of notice of the Direct Claim, the Indemnified Party and
Indemnifying Person shall in good faith promptly seek to resolve such Direct Claim. If the Parties
cannot resolve the Direct Claim within sixty (60) days following receipt of the notice of Direct
Claim, the Indemnified Person or Indemnified Person may elect to enforce their rights under this
Agreement
11.11
Insurance; Tax
. Any indemnification shall be (i) net of any reasonably anticipated
federal or state income tax benefit specifically arising from the facts or circumstances giving
rise to the Damages, realizable by the Indemnified Person by a reduction in Taxes payable, or by
the receipt of a refund of Taxes, by the Indemnified Person (or such Affiliate); and (ii) net of
any amounts recovered or recoverable from any surety, insurance carrier or third party obligor, including any customer (and
shall not include the cost of maintaining any surety or
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insurance policies). The Indemnified Party
shall submit in a timely manner to any applicable surety, insurance carrier or third party obligor,
including any customer, all claims for indemnifiable Damages for which it is reasonably likely that
such entity would have a payment obligation to any such indemnified party (or its predecessors) and
the indemnifying party shall be subrogated to the rights of such Indemnified Person to claim
against such surety, insurance carrier or third party; provided, however, that any failure to
collect any such amounts shall not constitute a defense to an obligation to indemnify for any such
Damages. Any Tax benefit shall be determined in good faith by the independent public accountants
of the indemnified party and shall apply to the earliest year reasonably permissible.
11.12
Limitation on Consequential Damages
. Neither Buyer nor Seller shall be entitled to
indemnification under this Article 11 for Consequential Damages related to Direct Claims. If a
Third Party Claim includes claims by the third party for Consequential Damages, the Indemnifying
Person shall indemnify and hold Indemnified Person harmless against the claims for Consequential
Damages but only to the extent actually paid to the third party by the Indemnified Person pursuant
to a non-appealable final Order.
11.13
Payment of Claims
. After (i) any Order of a Governmental Authority that is
non-appealable (or for which the time for appeal has passed) shall have been entered with respect
to a Direct Claim or Third Party Claim, or (ii) the Indemnified Person and Indemnifying Person
shall have agreed to a mutually binding settlement with respect to a Direct Claim or Third Party
Claim, the Indemnified Person shall give the Indemnifying Person notice of any amount payable by
the Indemnifying Person to the Indemnified Person pursuant to this Agreement, and the Indemnifying
Person shall pay such amount by wire transfer to the Indemnified Person within five Business Days
after receipt of such notice.
11.14
Exclusive Means
. Except for claims alleging fraud, this Section 11 provides the
exclusive means by which Seller or Buyer may assert claims for indemnification.
11.15
Indemnification in Case of Strict Liability or Indemnitee Negligence
. THE
INDEMNIFICATION PROVISIONS IN THIS ARTICLE 11 SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE
LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY
PAST, PRESENT OR FUTURE BULK SALES LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL
SAFETY AND HEALTH LAW OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT) AND REGARDLESS
OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES
THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING
INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON THE PERSON SEEKING
INDEMNIFICATION.
11.16
Facility Lease
. The various temporal and monetary limitations disclosed in Sections
11.4, 11.5, 11.6 and 11.7 shall not apply to any claim (whether or not for Damages) asserted by
Buyer (as tenant) or Seller (as landlord) in connection with any breach or alleged breach of any
representation, warranty, covenant, or promises contained in the Facility Lease.
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12.1
Definition of Confidential Information
.
As used in this Article 12, the term “Confidential Information” includes any and all of the
following information of Seller or Buyer that has been or hereafter may be disclosed in any form,
whether in writing, orally, electronically or otherwise, or otherwise made available by
observation, inspection or otherwise by either party (Buyer on the one hand or Seller on the other
hand) or its Representatives (collectively, a “Disclosing Party”) to the other party or its
Representatives (collectively, a “Receiving Party”):
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(i)
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all information that is a trade secret under
applicable trade secret or other law;
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(ii)
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all information concerning product
specifications, data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions
and ideas, past, current and planned research and development, current
and planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer hardware, Software and
computer software and database technologies, systems, structures and
architectures;
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(iii)
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all information concerning the business and
affairs of the Disclosing Party (which includes historical and current
financial statements, financial projections and budgets, tax returns
and accountants’ materials, historical, current and projected sales,
capital spending budgets and plans, business plans, strategic plans,
marketing and advertising plans, publications, client and customer
lists and files, contracts, the names and backgrounds of key personnel
and personnel training techniques and materials, however documented),
and all information obtained from review of the Disclosing Party’s
documents or property or discussions
with the Disclosing Party regardless of the form of the
communication; and
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(iv)
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all notes, analyses, compilations, studies,
summaries and other material prepared by the Receiving Party to the
extent containing or based, in whole or in part, upon any information
included in the foregoing.
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Any trade secrets of a Disclosing Party shall also be entitled to all of the protections and
benefits under applicable trade secret law and any other applicable law. If any information that a
Disclosing Party deems to be a trade secret is found by a court of competent jurisdiction not to be
a trade secret for purposes of this Article 12, such information shall still be considered
Confidential Information of that Disclosing Party for purposes of this Article 12 to the extent
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included within the definition. In the case of trade secrets, each of Buyer and Seller hereby
waives any requirement that the other party submit proof of the economic value of any trade secret
or post a bond or other security.
12.2
Restricted Use of Confidential Information
.
Each Receiving Party acknowledges the confidential and proprietary nature of the Confidential
Information of the Disclosing Party and agrees that such Confidential Information (i) shall be kept
confidential by the Receiving Party, (ii) shall not be used for any reason or purpose other than to
evaluate and consummate the Contemplated Transactions and (iii) without limiting the foregoing,
shall not be disclosed by the Receiving Party to any Person, except in each case as otherwise
expressly permitted by the terms of this Agreement or with the prior written consent of an
authorized representative of Seller with respect to Confidential Information of Seller (each, a
“Seller Contact”) or an authorized representative of Buyer with respect to Confidential Information
of Buyer (each, a “Buyer Contact”). Each of Buyer and Seller shall disclose the Confidential
Information of the other party only to its Representatives who require such material for the
purpose of evaluating the Contemplated Transactions and are informed by Buyer or Seller, as the
case may be, of the obligations of this Article 12 with respect to such information. Each of Buyer
and Seller shall use their Best Efforts to enforce the terms of this Article 12 as to its
respective Representatives.
Seller shall maintain as confidential any Confidential Information (including for this purpose
any information of Seller of the type referred to in Sections 12.1(a)(i), (ii) and (iii), whether
or not disclosed to Buyer) of the Seller relating to any of the Assets or the Assumed Liabilities.
Notwithstanding the preceding sentence, Seller may use any Confidential Information of Seller
before the Closing in the Ordinary Course of Business in connection with the transactions permitted
by Section 5.2.
From and after the Closing, the provisions of Section 12.2(a) above shall not apply to or
restrict in any manner Buyer’s use of any Confidential Information of the Seller relating to any of
the Assets or the Assumed Liabilities.
12.3
Exceptions
. Sections 12.2(a) and (b) do not apply to that part of the Confidential Information of a
Disclosing Party that a Receiving Party demonstrates (a) was, is or becomes generally available to
the public other than as a result of a breach of this Article 12 or the Confidentiality Agreement
by the Receiving Party or its Representatives, (b) was or is developed by the Receiving Party
independently of and without reference to any Confidential Information of the Disclosing Party or
(c) was, is or becomes available to the Receiving Party on a nonconfidential basis from a Third
Party not bound by a confidentiality agreement or any legal, fiduciary or other obligation
restricting disclosure. Seller shall not disclose any Confidential Information of Seller relating
to any of the Assets or the Assumed Liabilities in reliance on the exceptions in clauses (b) or (c)
above.
12.4
Legal Proceedings
. If a Receiving Party becomes compelled in any Proceeding or is
requested by a Governmental Body having regulatory jurisdiction over the Contemplated Transactions
to make any disclosure that is prohibited or otherwise constrained by this Article 12, that
Receiving Party shall provide the Disclosing Party with prompt notice of such
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compulsion or request
so that it may seek an appropriate protective order or other appropriate remedy or waive compliance
with the provisions of this Article 12. In the absence of a protective order or other remedy, the
Receiving Party may disclose that portion (and only that portion) of the Confidential Information
of the Disclosing Party that, based upon advice of the Receiving Party’s counsel, the Receiving
Party is legally compelled to disclose or that has been requested by such Governmental Body,
provided, however, that the Receiving Party shall use reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded by any Person to whom any Confidential
Information is so disclosed. The provisions of this Section 12.4 do not apply to any Proceedings
between the parties to this Agreement.
12.5
Return or Destruction of Confidential Information
. If this Agreement is terminated,
each Receiving Party shall (a) destroy all Confidential Information of the Disclosing Party
prepared or generated by the Receiving Party without retaining a copy of any such material, (b)
promptly deliver to the Disclosing Party all other Confidential Information of the Disclosing
Party, together with all copies thereof, in the possession, custody or control of the Receiving
Party with all copies thereof, in the possession, custody or control of the Receiving Party or,
alternatively, with the written consent of a Seller Contact or a Buyer Contact (whichever
represents the Disclosing Party) destroy all such Confidential Information and (c) certify all such
destruction in writing to the Disclosing Party, provided, however, that the Receiving Party may
retain a list that contains general descriptions of the information it has returned or destroyed to
facilitate the resolution of any controversies after the Disclosing Party’s Confidential
Information is returned.
12.6
Attorney-Client Privilege
. The Disclosing Party is not waiving, and will not be
deemed to have waived or diminished, any of its attorney work product protections, attorney-client
privileges or similar protections and privileges as a result of disclosing its Confidential
Information (including Confidential Information related to pending or threatened litigation) to the
Receiving Party, regardless of
whether the Disclosing Party has asserted, or is or may be entitled to assert, such privileges and
protections. The parties (a) share a common legal and commercial interest in all of the Disclosing
Party’s Confidential Information that is subject to such privileges and protections, (b) are or may
become joint defendants in Proceedings to which the Disclosing Party’s Confidential Information
covered by such protections and privileges relates, (c) intend that such privileges and protections
remain intact should either party become subject to any actual or threatened Proceeding to which
the Disclosing Party’s Confidential Information covered by such protections and privileges relates
and (d) intend that after the Closing the Receiving Party shall have the right to assert such
protections and privileges. No Receiving Party shall admit, claim or contend, in Proceedings
involving either party or otherwise, that any Disclosing Party waived any of its attorney
work-product protections, attorney-client privileges or similar protections and privileges with
respect to any information, documents or other material not disclosed to a Receiving Party due to
the Disclosing Party disclosing its Confidential Information (including Confidential Information
related to pending or threatened litigation) to the Receiving Party.
12.7
Tax Disclosure
. Notwithstanding anything in this Section 12 to the contrary, each
party to the transactions contemplated herein (and each Affiliate and person acting on behalf of
any such party) agree that each party (and each employee, representative, and other agent of such
party) may disclose to any and all persons, without limitation of any kind, the tax treatment and
83
tax structure of the transactions contemplated herein and all materials of any kind (including
opinions or other tax analyses) that are provided to such party or such person relating to such tax
treatment and tax structure, except to the extent necessary to comply with any applicable federal
or state securities laws. This authorization is not intended to permit disclosure of any other
information including (without limitation) (i) any portion of any materials to the extent not
related to the tax treatment or tax structure of the transaction, (ii) the identities of
participants or potential participants in the transaction, (iii) the existence or status of any
negotiations, (iv) any pricing or financial information (except to the 3extent such pricing or
financial information is related to the tax treatment or tax structure of the transaction), or (v)
any other term or detail not relevant to the tax treatment or the tax structure of the transactions
contemplated herein.
13.1
Expenses
. Except as otherwise provided in this Agreement, each party to this
Agreement will bear its respective fees and expenses incurred in connection with the preparation,
negotiation, execution and performance of this Agreement and the Contemplated Transactions,
including all fees and expense of its Representatives.
13.2
Public Announcements
. Except as required by Legal Requirement or Governmental Body
due to Parent’s status as a publicly-traded company, any public announcement, press release or
similar publicity with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time
and in such manner as Buyer determines. Except with the prior consent of Buyer or as permitted by
this Agreement, neither Seller nor any of its Representatives shall disclose to any Person (a) the
fact that any Confidential Information of Seller has been disclosed to Buyer or its
Representatives, that Buyer or its Representatives have inspected any portion of the Confidential
Information of Seller, that any Confidential Information of Buyer has been disclosed to Seller or
its Representatives or that Seller or its Representatives have inspected any portion of the
Confidential Information of Buyer or (b) any information about the Contemplated Transactions,
including the status of such discussions or negotiations, the execution of any documents (including
this Agreement) or any of the terms of the Contemplated Transactions or the related documents
(including this Agreement). Seller and Buyer will consult with each other concerning the means by
which Seller’s employees, customers, suppliers and others having dealings with Seller will be
informed of the Contemplated Transactions, and Buyer will have the right to be present for any such
communication.
13.3
Notices
. All notices, Consents, waivers and other communications required or
permitted by this Agreement shall be in writing and shall be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized overnight courier service
(costs prepaid), (b) sent by facsimile or e-mail with confirmation of transmission by the
transmitting equipment or (c) received or rejected by the addressee, if sent by certified mail,
return receipt requested, in each case to the following addresses, facsimile numbers or e-mail
addresses and marked to the attention of the person (by name or title) designated below (or to such
other address, facsimile number, e-mail address or person as a party may designate by notice to the
other parties):
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Seller:
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Greenville Tube, LLC
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c/o Chart Industries, Inc.
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5885 Landerbrook Drive
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Cleveland, OH 44124
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Attention:
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Chief Financial Officer
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Fax no.:
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440-753-1491
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E-mail address:
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michael.biehl@Chart-ind.com
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With a mandatory
copy to:
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Calfee, Halter & Griswold, LLP
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800 Superior Avenue
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Cleveland, OH 44114
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Attention:
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Thomas F. McKee, Esq.
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Fax no.:
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216-241-0816
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E-mail address:
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tmckee@calfee.com
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Buyer:
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GT Acquisition Company
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c/o CFB Venture Fund III, L.P.
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Eleven South Meramec, Suite 1430
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St. Louis, Missouri 63105
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Attention:
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Stephen B. Broun
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Fax no.:
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314-746-8739
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E-mail address:
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steve.broun@capitalforbusiness.com
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With a mandatory copy to:
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Husch & Eppenberger, LLC
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190 Carondelet Plaza, Suite 600
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St. Louis, Missouri 63105
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Attention:
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James V. Stepleton, Esq.
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Fax no.:
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314-480-1505
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E-mail address:
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james.stepleton@husch.com
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13.4
Jurisdiction; Service of Process
. Any Proceeding arising out of or relating to this
Agreement or any Contemplated Transaction may be brought in the courts of the State of Delaware,
County of New Castle or, if it has or can acquire jurisdiction, in the United States District Court
for the District of Delaware, and each of the parties irrevocably submits to the exclusive
jurisdiction of each such court in any such Proceeding, waives any objection it may now or
hereafter have to venue or to convenience of forum, agrees that all claims in respect of the
Proceeding shall be heard and determined only in any such court and agrees not to bring any
Proceeding arising out of or relating to this Agreement or any Contemplated Transaction in any
other court. The parties agree that either or both of them may file a copy of this paragraph with
any court as written evidence of the knowing, voluntary and bargained agreement between the parties
irrevocably to waive any objections to venue or to convenience of forum. Process in any Proceeding
referred to in the first sentence of this section may be served on any party anywhere in the world.
13.5
Enforcement of Agreement
. The parties acknowledge and agree that the other parties
would be irreparably damaged if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any Breach of this Agreement by such
85
other parties
could not be adequately compensated in all cases by monetary damages alone. Accordingly, in
addition to any other right or remedy to which a party may be entitled, at law or in equity, it
shall be entitled to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent Breaches or threatened
Breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.
13.6
Waiver; Remedies Cumulative
. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents referred to in this
Agreement will operate as a waiver of such right, power or privilege, and no single or partial
exercise of any such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or any of the documents referred to in this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of that party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in this Agreement or
the documents referred to in this Agreement.
13.7
Entire Agreement and Modification
. This Agreement supersedes all prior agreements,
whether written or oral, between the parties with respect to its subject matter (including any
letter of intent and any confidentiality agreement between Buyer and Seller) and constitutes (along
with the Disclosure Schedule, Exhibits and other documents delivered pursuant to this Agreement) a
complete and exclusive statement of the terms of the agreement between the parties with respect to
its subject matter. This Agreement may not be amended, supplemented, or otherwise modified except
by a written agreement executed by the party to be charged with the amendment.
13.8
Disclosure Schedule
. The information in the Disclosure Schedule constitutes (i)
exceptions to particular representations, warranties, covenants and obligations of Seller as set
forth in this Agreement or (ii) descriptions or lists of assets and liabilities and other items
referred to in this Agreement. If there is any inconsistency between the statements in this
Agreement and those in the Disclosure Schedule (other than an exception expressly set forth as such
in the Disclosure Schedule with respect to a specifically identified representation or warranty),
the statements in this Agreement will control. The statements in the Disclosure Schedule relate
only to the provisions in the
Section of this Agreement to which they expressly relate and not to any other provision in this
Agreement, provided that Seller may use cross references to one section containing the original
disclosure of a matter without repeating the disclosure.
13.9
Assignments, Successors and No Third-Party Rights
. Except as otherwise provided in
this Agreement no party may assign any of its rights or delegate any of its obligations under this
Agreement without the prior written consent of the other parties, except that either Buyer or
Seller may assign any of its rights and delegate any of its obligations under this Agreement to any
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of its Subsidiaries and may collaterally assign its rights hereunder to any of its respective
financial institutions (and, without limiting the foregoing, Seller may collaterally assign its
rights hereunder to JPMorgan Chase Bank (including any successors thereto), in its capacity as
Administrative Agent under that certain Credit Agreement dated as of April 12, 1999 between Chart
Industries, Inc., the Subsidiary Borrowers party thereto, the lenders party thereto and such
Administrative Agent for such lenders, as amended, restated, supplemented or otherwise modified
from time to time, or any refinancing thereof), provided that no such permitted assignment shall
release the assignor from its obligations and liabilities hereunder. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon and inure to the benefit of
the successors and permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy or claim under or with respect to this Agreement or any provision of
this Agreement, except such rights as shall inure to a successor or permitted assignee pursuant to
this Section 13.9.
13.10
Severability
. If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will remain in full
force and effect. Any provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or unenforceable.
13.11
Construction
. The headings of Articles and Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation. All references to
“Articles,” “Sections,” and “Parts” refer to the corresponding Articles, Sections and Parts of this
Agreement and the Disclosure Letter.
13.12
Time of Essence
. With regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
13.13
Governing Law
. This Agreement will be governed by and construed under the laws of
the State of Delaware without regard to conflicts-of-laws principles that would require the
application of any other law.
13.14
Execution of Agreement
. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. The exchange of copies of this
Agreement and of signature pages by facsimile transmission shall constitute effective execution and
delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for
all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their
original signatures for all purposes.
[Remainder of this Page Intentionally Left Blank. Next Page is Signature Page.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
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GT ACQUISITION COMPANY
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By:
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/s/ Stephen B. Broun
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Name: Stephen B. Broun
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Title: President
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GREENVILLE TUBE, LLC
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By:
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/s/ Michael F. Biehl
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Name: Michael F. Biehl
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Title: Assistant Secretary
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GUARANTY
1. Chart Industries, Inc. and Chart, Inc. (collectively, the “Guarantor”) hereby jointly and
severally, unconditionally and irrevocably guarantee to GT Acquisition Company (“GTAC”) the
punctual payment and performance when due of the indebtedness and other obligations of Greenville
Tube, LLC (“GTLLC”) to GTAC pursuant to the Asset Purchase Agreement between GTAC and GTLLC to
which this Guaranty is attached (“APA”) and the Lease between GTAC as lessee and GTLLC as lessor of
real estate located in Clarksville, Arkansas, dated the date of the APA (the “Lease” with such
indebtedness and obligations under the APA and Lease hereinafter referred to as “Obligations”).
This Guaranty is a present and continuing guaranty of payment and not of collectibility, and GTAC
shall not be required to prosecute collection, enforcement or other remedies against GTLLC before
calling on Guarantor for payment. If for any reason GTLLC shall fail or be unable to pay or
perform, punctually and fully, any of the Obligations it is required to satisfy in accordance with
the APA or Lease, Guarantor shall, jointly and severally with GTLLC, be obligated to pay such
obligations to GTAC in full immediately upon demand. One or more successive actions may be brought
against Guarantor, as often as GTAC deems advisable, until all of the Obligations are paid and
performed in full. The Obligations, together with all other payment and performance obligations of
Guarantor hereunder are referred to herein as “Guarantor’s Obligations”.
2. Guarantor agrees that performance of Guarantor’s obligations hereunder by Guarantor shall
be a primary obligation, shall not be subject to any counterclaim, set-off, abatement, deferment or
defense based upon any claim that any Guarantor may have against GTAC or any other person or
entity, and shall remain in full force and effect without regard to, and shall not be released,
discharged or affected in any way by, any circumstance or condition (whether or not any Guarantor
shall have any knowledge thereof), including without limitation:
a. any lack of validity or enforceability of the APA or Lease;
b. any termination, amendment, modification or other change in the APA or Lease;
c. any failure, omission or delay on the part of GTLLC, any Guarantor, or GTAC to
conform or comply with any term of the APA or Lease or any failure of GTAC to give notice of
any event of default or breach under the APA or Lease;
d. any waiver, compromise, release, settlement or extension of time of payment or
performance or observance of any of the obligations or agreements contained in the APA or
Lease;
e. any action or inaction by GTAC under or in respect of the APA or Lease, any failure,
lack of diligence, omission or delay on the part of GTAC to enforce, assert or exercise any
right, power or remedy conferred on it in the APA or Lease, or any other action or inaction
on the part of GTAC;
f. any voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement,
readjustment, assignment for the benefit of creditors, composition, receivership,
liquidation, marshalling of assets and liabilities or similar events or
proceedings with respect to GTLLC or Guarantor or any of their respective property or
creditors, or any action taken by any trustee or receiver or by any court in any such
proceeding;
g. any merger or consolidation of GTLLC into or with any entity, or any sale, lease or
transfer of any of the assets of GTLLC or Guarantor to any other person or entity;
h. any change in the ownership of GTLLC or any change in the relationship between GTLLC
or Guarantor or any termination of any such relationship;
i. any release or discharge by operation of law of GTLLC or Guarantor from any
obligation or agreement contained in the APA or Lease; or
j. any other occurrence, circumstance, happening or event, whether similar or
dissimilar to the foregoing and whether foreseen or unforeseen, which otherwise might
constitute a legal or equitable defense or discharge of the liabilities of a guarantor or
surety or which otherwise might limit recourse against GTLLC or Guarantor to the fullest
extent permitted by law.
3. To the extent permitted by applicable law, Guarantor expressly and unconditionally waives
(i) notice of any of the matters referred to in Section 2 above, (ii) all notices which may be
required by statute, rule of law or otherwise, now or hereafter in effect, to preserve intact any
rights against Guarantor, including, without limitation, any demand, presentment and protest, proof
of notice of non-performance or non-payment under the APA or Lease and notice of any event of
default or breach under or any failure on the part of GTLLC or Guarantor to perform or comply with
any covenant, agreement, term or condition of the APA or Lease, (iii) any right to the enforcement,
assertion or exercise against GTLLC or Guarantor of any right or remedy conferred under the APA or
Lease, (iv) any requirement of diligence on the part of any person or entity, (v) to the fullest
extent permitted by law and except as otherwise expressly provided in this Guaranty, the APA or
Lease, any claims based on allegations that GTAC has failed to act in a commercially reasonable
manner or failed to exercise GTAC’s so-called obligation of good faith and fair dealing, and (vi)
any requirement to exhaust any remedies or to mitigate the damages resulting from any default under
the APA or Lease.
4. Until Guarantor’s Obligations are paid in full and all periods under applicable bankruptcy
law for the contest of any payment by Guarantor or GTLLC as a preferential or fraudulent payment
have expired, each Guarantor knowingly, and with advice of counsel, waives, relinquishes, releases
and abandons all rights and claims to indemnification, contribution, reimbursement, subrogation and
payment which any Guarantor may now or hereafter have by and from GTLLC and the successors and
assigns of GTLLC, for any payments made by Guarantor to GTAC, including, without limitation, any
rights which might allow GTLLC, GTLLC’s successors, a creditor of GTLLC, or a trustee in bankruptcy
of GTLLC to claim in bankruptcy or any other similar proceedings that any payment made by GTLLC or
GTLLC’s successors and assigns to GTAC was on behalf of or for the benefit of Guarantor and that
such payment is recoverable by GTLLC, a creditor or trustee in bankruptcy of GTLLC as a
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preferential payment, fraudulent conveyance, payment of an insider or any other classification
of payment which may otherwise be recoverable from GTAC.
5. The obligations of Guarantor pursuant to this Guaranty shall continue to be effective or
automatically be reinstated, as the case may be, if at any time payment of any of Guarantor’s
Obligations under this Guaranty is rescinded or otherwise must be restored or returned by GTAC upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Guarantor or GTLLC or
otherwise, all as though such payment had not been made.
Dated: July 1, 2003
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CHART INDUSTRIES, INC.
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By:
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/s/ Michael F. Biehl
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Name:
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Michael F. Biehl
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Title:
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Chief Financial Officer and Treasurer
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CHART, INC.
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By:
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/s/ Michael F. Biehl
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Name:
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Michael F. Biehl
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Title:
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Chief Financial Officer and Treasurer
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3
Exhibit 4.2
EXECUTION COPY
CHART INDUSTRIES, INC.
$170,000,000
9
1
/
8
% SENIOR SUBORDINATED NOTES DUE 2015
INDENTURE
Dated as of October 17, 2005
THE BANK OF NEW YORK
CROSS-REFERENCE TABLE*
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Trust Indenture
Act Section
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Indenture Section
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310 (a)(1)
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7.10
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(a)(2)
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7.10
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(a)(3)
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N.A.
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(a)(4)
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N.A.
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(a)(5)
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7.10
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(b)
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7.10
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(c)
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N.A.
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311 (a)
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7.11
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(b)
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7.11
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(c)
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N.A.
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312 (a)
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2.05
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(b)
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13.03
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(c)
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13.03
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313 (a)
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7.06
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(b)(1)
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N.A.
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(b)(2)
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7.06; 7.07
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(c)
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7.06; 13.02
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(d)
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7.06
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314 (a)
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4.03; 13.02; 13.05
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(b)
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N.A.
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(c)(1)
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13.04
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(c)(2)
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13.04
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(c)(3)
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N.A.
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(d)
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N.A.
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(e)
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13.05
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(f)
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N.A.
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315 (a)
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7.01
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(b)
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7.05; 13.02
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(c)
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7.01
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(d)
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7.01
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(e)
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6.11
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316 (a) (last
sentence)
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2.09
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(a)(1)(A)
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6.05
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(a)(1)(B)
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6.04
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(a)(2)
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N.A.
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(b)
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6.07
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(c)
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2.12
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317 (a)(1)
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6.08
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(a)(2)
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6.09
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(b)
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2.04
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318 (a)
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13.01
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(b)
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N.A.
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(c)
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13.01
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N.A. means not applicable.
* This Cross Reference Table is not part of this Indenture.
TABLE OF CONTENTS
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Page
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ARTICLE 1
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DEFINITIONS AND INCORPORATION BY REFERENCE
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Section 1.01
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Definitions
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1
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Section 1.02
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Other Definitions
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34
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Section 1.03
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Incorporation by Reference of Trust Indenture Act
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34
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Section 1.04
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Rules of Construction
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35
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ARTICLE 2
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THE NOTES
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Section 2.01
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Form and Dating
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35
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Section 2.02
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Execution and Authentication
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36
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Section 2.03
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Registrar and Paying Agent
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37
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Section 2.04
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Paying Agent to Hold Money in Trust
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37
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Section 2.05
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Holder Lists
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38
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Section 2.06
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Transfer and Exchange
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38
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Section 2.07
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Replacement Notes
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52
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Section 2.08
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Outstanding Notes
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53
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Section 2.09
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Treasury Notes
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53
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Section 2.10
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Temporary Notes
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53
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Section 2.11
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Cancellation
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54
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Section 2.12
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Defaulted Interest
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54
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Section 2.13
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CUSIP Numbers
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54
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ARTICLE 3
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REDEMPTION AND PREPAYMENT
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Section 3.01
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Notices to Trustee
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54
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Section 3.02
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Selection of Notes to Be Redeemed
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55
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Section 3.03
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Notice of Redemption
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55
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Section 3.04
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Effect of Notice of Redemption
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56
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Section 3.05
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Deposit of Redemption Price
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56
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Section 3.06
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Notes Redeemed in Part
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57
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Section 3.07
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Optional Redemption
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57
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Section 3.08
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Mandatory Redemption
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58
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Section 3.09
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Intentionally Omitted
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58
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-i-
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Page
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ARTICLE 4
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COVENANTS
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Section 4.01
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Payment of Notes
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58
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Section 4.02
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Maintenance of Office or Agency
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59
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Section 4.03
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Reports
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59
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Section 4.04
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Compliance Certificate
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60
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Section 4.05
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Intentionally Omitted
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61
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Section 4.06
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Limitation on Incurrence of Senior Subordinated Indebtedness
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61
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Section 4.07
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Restricted Payments
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61
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Section 4.08
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Dividend and Other Payment Restrictions Affecting Subsidiaries
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66
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Section 4.09
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Incurrence of Indebtedness and Issuance of Preferred Equity
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68
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Section 4.10
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Asset Sales
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73
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Section 4.11
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Transactions with Affiliates
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76
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Section 4.12
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Liens
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78
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Section 4.13
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Business Activities
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79
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Section 4.14
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Intentionally Omitted
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79
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Section 4.15
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Offer to Repurchase upon Change of Control
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79
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Section 4.16
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Payments for Consent
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81
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Section 4.17
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Additional Note Guarantees
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81
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Section 4.18
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Designation of Restricted and Unrestricted Subsidiaries
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81
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Section 4.19
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Changes in Covenants upon Notes Being Rated Investment Grade
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82
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ARTICLE 5
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SUCCESSORS
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Section 5.01
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Merger, Consolidation, or Sale of Assets
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82
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Section 5.02
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Successor Substituted
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83
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ARTICLE 6
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DEFAULTS AND REMEDIES
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Section 6.01
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Events of Default
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84
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Section 6.02
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Acceleration
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86
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Section 6.03
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Other Remedies
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86
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Section 6.04
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Waiver of Past Defaults
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87
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Section 6.05
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Control by Majority
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87
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Section 6.06
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Limitation on Suits
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87
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Section 6.07
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Rights of Holders of Notes to Receive Payment
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88
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Section 6.08
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Collection Suit by Trustee
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88
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Section 6.09
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Trustee May File Proofs of Claim
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88
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Section 6.10
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Priorities
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89
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Section 6.11
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Undertaking for Costs
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89
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-ii-
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Page
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ARTICLE 7
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TRUSTEE
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Section 7.01
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Duties of Trustee
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89
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Section 7.02
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Rights of Trustee
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91
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Section 7.03
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Individual Rights of Trustee
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92
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Section 7.04
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Trustee’s Disclaimer
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92
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Section 7.05
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Notice of Defaults
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92
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Section 7.06
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Reports by Trustee to Holders of the Notes
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93
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Section 7.07
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Compensation and Indemnity
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93
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Section 7.08
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Replacement of Trustee
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94
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Section 7.09
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Successor Trustee by Merger, Etc.
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95
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Section 7.10
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Eligibility; Disqualification
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95
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Section 7.11
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Preferential Collection of Claims Against the Company
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95
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ARTICLE 8
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
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Section 8.01
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Option to Effect Legal Defeasance or Covenant Defeasance
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95
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Section 8.02
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Legal Defeasance and Discharge
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96
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Section 8.03
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Covenant Defeasance
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96
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Section 8.04
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Conditions to Legal or Covenant Defeasance
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97
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Section 8.05
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Deposited Money and Government
Securities to Be Held in Trust; Other Miscellaneous Provisions
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98
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Section 8.06
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Repayment to Company
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99
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Section 8.07
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Reinstatement
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99
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ARTICLE 9
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AMENDMENT, SUPPLEMENT AND WAIVER
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Section 9.01
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Without Consent of Holders of Notes
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99
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Section 9.02
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With Consent of Holders of Notes
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100
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Section 9.03
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Compliance with Trust Indenture Act
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102
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Section 9.04
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Revocation and Effect of Consents
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102
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Section 9.05
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Notation on or Exchange of Notes
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102
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Section 9.06
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Trustee to Sign Amendments, Etc.
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103
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ARTICLE 10
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SUBORDINATION
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Section 10.01
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Agreement to Subordinate
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103
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Section 10.02
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Liquidation; Dissolution; Bankruptcy
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103
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Section 10.03
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Default on Designated Senior Indebtedness
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104
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-iii-
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Page
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Section 10.04
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Acceleration of Notes
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105
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Section 10.05
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When Distribution Must Be Paid Over
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105
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Section 10.06
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Notice by the Company
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105
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Section 10.07
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Subrogation
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105
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Section 10.08
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Relative Rights
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106
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Section 10.09
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Subordination May Not Be Impaired by the Company
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106
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Section 10.10
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Rights of Trustee and Paying Agent
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106
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Section 10.11
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Authorization to Effect Subordination
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106
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ARTICLE 11
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NOTE GUARANTEES
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Section 11.01
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Guarantee
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107
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Section 11.02
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Limitation on Guarantor Liability
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108
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Section 11.03
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Intentionally Omitted
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108
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Section 11.04
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Guarantors May Consolidate, Etc., on Certain Terms
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108
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Section 11.05
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Releases
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109
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Section 11.06
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Subordination of Note Guarantee
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110
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ARTICLE 12
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SATISFACTION AND DISCHARGE
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Section 12.01
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Satisfaction and Discharge
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110
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Section 12.02
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Application of Trust Money
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111
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ARTICLE 13
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MISCELLANEOUS
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Section 13.01
|
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Trust Indenture Act Controls
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112
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Section 13.02
|
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Notices
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112
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Section 13.03
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Communication by Holders of Notes with Other Holders of Notes
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113
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Section 13.04
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Certificate and Opinion as to Conditions Precedent
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113
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Section 13.05
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Statements Required in Certificate or Opinion
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113
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Section 13.06
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Rules by Trustee and Agents
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114
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Section 13.07
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No Personal Liability of Directors, Officers, Employees and Stockholders
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114
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Section 13.08
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Governing Law
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114
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Section 13.09
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Successors
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114
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Section 13.10
|
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Severability
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115
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Section 13.11
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Counterpart Originals
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115
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Section 13.12
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Table of Contents, Headings, Etc.
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115
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-iv-
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EXHIBITS
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Exhibit A
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FORM OF GLOBAL NOTE
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Exhibit B
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FORM OF CERTIFICATE OF TRANSFER
|
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Exhibit C
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FORM OF CERTIFICATE OF EXCHANGE
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Exhibit D
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FORM OF CERTIFICATE OF ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR
|
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Exhibit E
|
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FORM OF SUPPLEMENTAL INDENTURE
|
-v-
INDENTURE dated as of October 17, 2005 among Chart Industries, Inc., a Delaware corporation
(the “
Company
”), the Guarantors (as defined herein) and The Bank of New York, a New York banking
corporation, as trustee.
The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders (as defined herein) of (a) the $170,000,000
aggregate principal amount of the Company’s
9
1
/
8
% Senior Subordinated Notes due 2015 (the “
Initial
Notes
”), (b) any Additional Notes (as defined herein) that may be issued after the date hereof and
(c) if and when issued pursuant to the Registration Rights Agreement (as defined herein), the
Company’s Exchange Notes (as defined herein) issued in the Registered Exchange Offer (as defined
herein) in exchange for any outstanding Initial Notes or Additional Notes (all such securities in
clauses (a), (b) and (c) being referred to collectively as the “
Notes
”):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01
Definitions
.
“
144A Global Note
” means a Global Note substantially in the form of Exhibit A hereto bearing
the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and
registered in the name of, the Depositary or its nominee that will be issued in a denomination
equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
“
Acquired Debt
” means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is merged
with or into or became a Restricted Subsidiary of such specified Person, whether or not such
Indebtedness is incurred in connection with, or in contemplation of, such other Person
merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
“
Additional Interest
” means all Additional Interest then owing pursuant to the Registration
Rights Agreement.
“
Additional Notes
” means additional Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
Initial Notes.
“
Affiliate
” of any specified Person means any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified Person. For
purposes of this definition, “control,” as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting securities, by
agreement or
otherwise. For purposes of this definition, the terms “
controlling
,” “
controlled by
”
and “
under common control with
” have correlative meanings.
“
Agent
” means any Registrar, co-registrar, Paying Agent or additional paying agent.
“
Applicable Premium
” means, with respect to any Note on any redemption date, the greater of:
(1) 1.0% of the principal amount of the Note; or
(2) the excess of: (a) the present value at the redemption date of (i) the redemption
price of the Note at October 15, 2010 (such redemption price being set forth in the table
appearing in Section 3.07(c) hereof) plus (ii) all required interest payments due on the
Note through October 15, 2010 (excluding accrued but unpaid interest to the redemption
date), computed using a discount rate equal to the Treasury Rate as of such redemption date
plus 50 basis points; over (b) the principal amount of the Note.
“
Applicable Procedures
” means, with respect to any transfer or exchange of or for beneficial
interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream
that apply to such transfer or exchange.
“
Asset Acquisition
” means:
(1) an Investment by the Company or any Restricted Subsidiary of the Company in any
other Person pursuant to which such Person shall become a Restricted Subsidiary of the
Company or any Restricted Subsidiary of the Company, or shall be merged with or into or
consolidated with the Company or any Restricted Subsidiary of the Company; or
(2) the acquisition by the Company or any Restricted Subsidiary of the Company of the
assets of any Person (other than a Restricted Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprise any division or line of
business of such Person or any other properties or assets of such Person other than in the
ordinary course of business.
“
Asset Sale
” means:
(1) the sale, lease, conveyance or other disposition of any assets or rights;
provided
that the sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by
Section 4.15 hereof and/or Section 5.01 hereof and not by Section 4.10 hereof; and
(2) the issuance or sale of Equity Interests in any of the Company’s Restricted
Subsidiaries.
-2-
Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale:
(1) any single transaction or series of related transactions that involves assets or
Equity Interests of any Restricted Subsidiary having a Fair Market Value of less than $5.0
million;
(2) a transfer of assets between or among the Company and any of its Restricted
Subsidiaries;
(3) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Company
to the Company or to another Restricted Subsidiary of the Company;
(4) the sale or lease of inventory, products or services or the lease, assignment or
sub-lease of any real or personal property in the ordinary course of business;
(5) the sale or discounting of accounts receivable in the ordinary course of business;
(6) any sale or other disposition of damaged, worn-out, obsolete or no longer useful
assets or properties in the ordinary course of business;
(7) any sale of assets received by the Company or any of its Restricted Subsidiaries
upon the foreclosure on a Lien;
(8) the sale or other disposition of cash, Cash Equivalents or Marketable Securities;
(9) a sale of accounts receivable and related assets of the type specified in the
definition of “Receivables Financing” to a Receivables Subsidiary in a Qualified Receivables
Financing;
(10) a transfer of accounts receivable and related assets of the type specified in the
definition of “Receivables Financing” (or a fractional undivided interest therein) by a
Receivables Subsidiary in a Qualified Receivables Financing;
(11) a Restricted Payment that does not violate Section 4.07 hereof or any Permitted
Investment;
(12) any sale of Equity Interests in, or Indebtedness or other securities of, an
Unrestricted Subsidiary;
(13) the granting of Liens not otherwise prohibited by this Indenture;
(14) the surrender, or waiver of contract rights or settlement, release or surrender of
contract, tort or other claims; and
-3-
(15) any exchange of assets related to a Permitted Business of comparable market value,
as determined in good faith by the Company.
“
Bank Agent
” means the agent for the lenders under the Credit Agreement or its successors as
agent for the lenders under the Credit Agreement.
“
Bankruptcy Law
” means Title 11, U.S. Code or any similar federal or state law for the relief
of debtors.
“
Beneficial Owner
” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that in calculating the beneficial ownership of any particular “person”
(as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to
have beneficial ownership of all securities that such “person” has the right to acquire by
conversion or exercise of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned”
have a corresponding meaning.
“
Board of Directors
” means:
(1) with respect to a corporation, the board of directors of the corporation or any
committee thereof duly authorized to act on behalf of such board;
(2) with respect to a partnership, the Board of Directors or other governing body of
the general partner of the partnership;
(3) with respect to a limited liability company, the Board of Directors or other
governing body, and in the absence of the same, the manager or board of managers or the
managing member or members or any controlling committee thereof; and
(4) with respect to any other Person, the board or committee of such Person serving a
similar function.
“
Broker-Dealer
” has the meaning set forth in the Registration Rights Agreement.
“
Business Day
” means a day other than a Saturday, Sunday or other day on which banking
institutions are authorized or required by law to close in New York State.
“
Capital Lease Obligation
” means, at the time any determination thereof is to be made, the
amount of the liability in respect of a capital lease that would at that time be required to be
capitalized on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP.
“
Capital Stock
” means:
(1) in the case of a corporation, corporate stock;
-4-
(2) in the case of an association or business entity that is not a corporation, any and
all shares, interests, participations, rights or other equivalents (however designated) of
corporate stock;
(3) in the case of a partnership or limited liability company, partnership interests
(whether general or limited) or membership interests; and
(4) any other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing Person, but
excluding from all of the foregoing any debt securities convertible into Capital Stock,
whether or not such debt securities include any right of participation with Capital Stock.
“
Cash Contributions
” means the aggregate amount of cash contributions made to the
capital of the Company or any Guarantor described in the definition of “Contribution
Indebtedness.”
“
Cash Equivalents
” means:
(1) United States dollars or, in the case of any Foreign Subsidiary, such local
currencies held by it from time to time in the ordinary course of business;
(2) securities issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality of the United States government (
provided
that
the full faith and credit of the United States is pledged in support of those securities)
having maturities of not more than one year from the date of acquisition;
(3) certificates of deposit, time deposits and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers’ acceptances with maturities not
exceeding one year and overnight bank deposits, in each case, with any lender party to the
Credit Agreement or with any domestic commercial bank having capital and surplus in excess
of $500.0 million and a rating at the time of acquisition thereof of P-1 or better from
Moody’s or A-1 or better from S&P;
(4) repurchase obligations for underlying securities of the types described in clauses
(2) and (3) above entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having one of the two highest ratings obtainable from Moody’s or
S&P and, in each case, maturing within one year after the date of acquisition;
(6) securities issued or fully guaranteed by any state or commonwealth of the United
States, or by any political subdivision or taxing authority thereof having one of the two
highest ratings obtainable from Moody’s or S&P, and, in each case, maturing within one year
after the date of acquisition;
(7) money market funds at least 95% of the assets of which constitute Cash Equivalents
of the kinds described in clauses (1) through (5) of this definition;
-5-
(8) Indebtedness or preferred stock issued by Persons with a rating of “A” or higher
from S&P or “A-2” from Moody’s; and
(9) in the case of any Foreign Subsidiary, investments denominated in the currency of
the jurisdiction in which that Foreign Subsidiary is organized or has its principal place of
business, which are similar to and have similar ratings from similar rating agencies to the
items specified in clauses (2), (3), (4), (6), (7), and (8).
“
Change of Control
” means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets of the Company and its Restricted
Subsidiaries, in each case, taken as a whole, to any “person” (as that term is used in
Section 13(d)(3) of the Exchange Act), other than the Permitted Holders;
(2) the adoption of a plan relating to the liquidation or dissolution of the Company;
(3) the consummation of any transaction (including, without limitation, any merger or
consolidation), the result of which is that any “person” or “group” (as such terms are used
in sections 13(d) and 14(d) of the Exchange Act), other than the Permitted Holders, becomes
the Beneficial Owner, directly or indirectly, of more than 50% of the voting power of the
Voting Stock of the Company; or
(4) the first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
“
Clearstream
” means Clearstream Banking, S.A. and any successor thereto.
“
Company
” means Chart Industries, Inc., a Delaware corporation and any and all successors
thereto.
“
Consolidated Cash Flow
” means, with respect to any specified Person for any period, the
Consolidated Net Income of such Person for such period (A)
plus
, without duplication to the extent
the same was excluded in calculating Consolidated Net Income:
(1) provision for taxes based on income, profits, losses or capital of such Person and
its Restricted Subsidiaries for such period, to the extent that such provision for taxes was
deducted in computing such Consolidated Net Income;
plus
(2) the Fixed Charges of such Person and its Restricted Subsidiaries for such period,
to the extent that such Fixed Charges were deducted in computing such Consolidated Net
Income;
plus
(3) depreciation, amortization (including, without limitation, amortization of
intangibles and deferred financing fees), and other non-cash expenses (including without
limitation write-downs and impairment of property, plant, equipment and intangibles and
-6-
other long-lived assets and the impact of purchase accounting on such Person and its
Restricted Subsidiaries for such period), but excluding any non-cash items for which a
future cash payment will be required and for which an accrual or reserve is required by GAAP
to be made, to the extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income;
plus
(4) the amount of any restructuring charges (which, for the avoidance of doubt, shall
include retention, severance, systems establishment cost or excess pension, other post
employment benefits, curtailment or other excess charges);
plus
(5) the minority interest expense consisting of subsidiary income attributable to
minority equity interests of third parties in any non-wholly owned Subsidiary in such period
or any prior period, except to the extent of dividends declared or paid on Equity Interests
held by third parties;
plus
(6) the amount of management, consulting, monitoring and advisory fees and related
expenses paid to the Permitted Holders or to previous equity holders (or any accruals
related to such fees and related expenses) during such period;
provided
that such amount
shall not exceed in any four quarter period the greater of (x) $2.5 million and (y) 2% of
Consolidated Cash Flow of the Company and its Restricted Subsidiaries for each period;
plus
(7) equity in earnings or losses in affiliates;
plus
(8) other non-operating expenses;
plus
(9) accretion of asset retirement obligations in accordance with SFAS No. 143,
Accounting for Asset Retirement Obligations, and any similar accounting in prior periods;
minus
(B) non-cash items increasing such Consolidated Net Income for such period, other than (i) any
items which represent the reversal in such period of any accrual of, or cash reserve for,
anticipated charges in any prior period where such accrual or reserve is no longer required; or
(ii) items related to percentage of completion accounting,
in each case, on a consolidated basis and determined in accordance with GAAP.
“
Consolidated Net Income
” means, with respect to any specified Person for any period, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP;
provided
that:
(1) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all
fees and expenses relating thereto) or income or expense or charge (including, without
limitation, pension expense, casualty losses, severance expenses, relocation expenses, other
restructuring expenses and fees, expenses or charges related to any offering of Equity
Interests of such Person, any Investment, acquisition or Indebtedness permitted to be
incurred hereunder (in each case, whether or not successful)), including
-7-
all fees, expenses, charges and change in control payments related to the Transactions,
in each case shall be excluded;
(2) any net after-tax income or loss from discontinued operations and any net after-tax
gain or loss on disposal of discontinued operations shall be excluded;
(3) any net after-tax gains or losses (minus all fees and expenses or charges relating
thereto) attributable to business dispositions or asset dispositions other than in the
ordinary course of business (as determined in good faith by the Board of Directors of the
Company) shall be excluded;
(4) any net after-tax income or loss (minus all fees and expenses or charges relating
thereto) attributable to the early extinguishment of indebtedness and Hedging Obligations
shall be excluded;
(5) (A) the Net Income for such period of any Person that is not a Restricted
Subsidiary, or that is accounted for by the equity method of accounting, shall be included
only to the extent of the amount of dividends or distributions or other payments in respect
of equity that are actually paid in cash (or to the extent converted into cash) by the
referent Person to the Company or a Restricted Subsidiary thereof in respect of such period
and (B) the Net Income for such period shall include any dividend, distribution or other
payments in respect of equity paid in cash by such Person to the Company or a Restricted
Subsidiary thereof in excess of the amount included in clause (A);
(6) any non-cash charges from the application of the purchase method of accounting in
connection with the Transactions or any future acquisition, to the extent that any such
charges are deducted in computing such Consolidated Net Income, shall be excluded;
(7) accruals and reserves that are established within twelve months after the
consummation of the Stock Purchase (as defined in Merger Agreement) and that are so required
to be established in accordance with GAAP shall be excluded;
(8) any non-cash charges relating to write-downs and impairments of property, plant,
equipment and intangibles and other long-lived assets shall be excluded;
(9) any long-term incentive plan accruals and any non-cash compensation expense
realized from grants of stock appreciation or similar rights, stock options or other rights
to officers, directors and employees of such Person or any of its Restricted Subsidiaries
shall be excluded;
(10) solely for the purpose of determining the amount available for Restricted Payments
under Section 4.07(a)(C)(i) hereof, the Net Income of any Restricted Subsidiary that is not
a Guarantor will be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or
-8-
governmental regulation applicable to that Restricted Subsidiary or its stockholders or
members, unless such restriction with respect to the payment of dividends or similar
distributions has been legally waived;
provided
that Consolidated Net Income of such Person
shall be increased by the amount of dividends or distributions or other payments that are
actually paid in cash (or to the extent converted into cash) by such Person to the Company
or another Restricted Subsidiary thereof in respect of such period, to the extent not
already included therein; and
(11) the cumulative effect of a change in accounting principles will be excluded.
“
Contingent Obligations
” means, with respect to any Person, any obligation of such Person
guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness
(“
primary obligations
”) of any other Person in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not contingent:
(1) to purchase any such primary obligation or any property constituting direct or
indirect security thereof;
(2) to advance or supply funds (A) for the purchase or payment of any such primary
obligation or (B) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor; or
(3) to purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor to make
payment of such obligation against loss in respect thereof.
“
Continuing Directors
” means, as of any date of determination, any member of the Board of
Directors of the Company or any Parent, as the case may be, who:
(1) was a member of such Board of Directors on the date of this Indenture, or
(2) was nominated for election or elected to such Board of Directors by one or more of
the Equity Investors or with the approval of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or election.
“
Contribution Indebtedness
” means Indebtedness of the Company or any Guarantor in an aggregate
principal amount not greater than twice the aggregate amount of cash contributions (other than
Excluded Contributions) made to the equity capital of the Company or such Guarantor after the date
of this Indenture,
provided
that:
(1) if the aggregate principal amount of such Contribution Indebtedness is greater than
one times such cash contributions to the equity capital of the Company or such Guarantor, as
applicable, the amount in excess shall be Indebtedness (other than secured Indebtedness)
with a Stated Maturity later than the Stated Maturity of the Notes, and
-9-
(2) such Contribution Indebtedness (x) is incurred within 180 days after the making of
such cash contributions and (y) is designated as Contribution Indebtedness pursuant to an
Officers’ Certificate on the incurrence date thereof.
“
Corporate Trust Office of the Trustee
” will be at the address of the Trustee specified in
Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company.
“
Credit Agreement
” means that certain credit agreement, dated the Issue Date, by and among FR
X Chart Holdings LLC, CI Acquisition Inc., as borrower, the guarantors named therein, Citicorp
North America, Inc., as administrative agent, Morgan Stanley Senior Funding, Inc., as syndication
agent, Citigroup Global Markets Inc. and Morgan Stanley Senior Funding, Inc., as joint lead
arrangers and book runners and each lender party thereto, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection therewith, and, in each
case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after
termination or otherwise) or refinanced (including by means of sales of debt securities to
institutional investors) in whole or in part from time to time in one or more agreements or
indentures (in each case with the same or new lenders or institutional investors), including any
agreement or indenture extending the maturity thereof or otherwise restructuring all or any portion
of the Indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the
maturity thereof.
“
Credit Facilities
” means one or more debt facilities (including, without limitation, the
Credit Agreement) or commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to borrow from such
lenders against such receivables) or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or
refinanced (including by means of sales of debt securities to institutional investors) in whole or
in part from time to time in one or more agreements or indentures (in each case with the same or
new lenders or institutional investors), including any agreement or indenture extending the
maturity thereof or otherwise restructuring all or any portion of the indebtedness thereunder or
increasing the amount loaned or issued thereunder or altering the maturity thereof.
“
Custodian
” means the Trustee, as custodian with respect to the Notes in global form, or any
successor entity thereto.
“
Default
” means any event that is, or with the passage of time or the giving of notice or both
would be, an Event of Default.
“
Definitive Note
” means a certificated Note registered in the name of the Holder thereof and
issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except
that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges
of Interests in the Global Note” attached thereto.
“
Depositary
” means, with respect to the Notes issuable or issued in whole or in part in global
form, the Person specified in Section 2.03 hereof as the Depositary with respect to
-10-
the Notes, and any and all successors thereto appointed as depositary hereunder and having
become such pursuant to the applicable provision of this Indenture.
“
Designated Non-cash Consideration
” means the Fair Market Value of non-cash consideration
received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that
is so designated as “Designated Non-cash Consideration” pursuant to an Officers’ Certificate,
setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in
connection with a subsequent sale of such Designated Non-cash Consideration.
“
Designated Preferred Stock
” means preferred stock of the Company or any Parent (other than
Disqualified Stock) that is issued for cash (other than to the Company or any of its Subsidiaries
or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries)
and is so designated as Designated Preferred Stock, pursuant to an Officers’ Certificate, on the
issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in
Section 4.07(a)(C)(ii) hereof.
“
Designated Senior Indebtedness
” means (1) any Indebtedness under the Credit Agreement and (2)
any other Indebtedness constituting Senior Indebtedness that, at the date of determination, has an
aggregate principal amount outstanding of at least $25.0 million and that is specifically
designated by the Company in the instrument creating or evidencing such Senior Indebtedness as
“Designated Senior Indebtedness” or, in the alternative, as to which the Trustee is given written
notice that such Indebtedness is “Designated Senior Indebtedness.”
“
Disqualified Stock
” means any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible, or for which it is exchangeable, in each case, at the option
of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock will not
constitute Disqualified Stock solely because the holders of the Capital Stock have the right to
require the Company to repurchase such Capital Stock upon the occurrence of a change of control or
an asset sale. The amount of Disqualified Stock deemed to be outstanding at any time for purposes
of this Indenture will be the maximum amount that the Company and its Restricted Subsidiaries may
become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions
of, such Disqualified Stock, exclusive of accrued dividends. The term “Disqualified Stock” shall
also include any options, warrants or other rights that are convertible into Disqualified Stock or
that are redeemable at the option of the holder or required to be redeemed, prior to the date that
is 91 days after the date on which the Notes mature.
“
Domestic Subsidiary
” means any Restricted Subsidiary of the Company that was formed under the
laws of the United States or any state of the United States or the District of Columbia.
-11-
“
Equity Interests
” means Capital Stock and all warrants, options or other rights to acquire
Capital Stock (but excluding any debt security that is convertible into, or exchangeable for,
Capital Stock).
“
Equity Investors
” means First Reserve Corporation and its Affiliates.
“
Equity Offering
” means (i) an offer and sale of Capital Stock (other than Disqualified Stock)
of the Company or any Parent (to the extent the net proceeds therefrom are contributed to the
equity capital of the Company) pursuant to (x) a registration statement that has been declared
effective by the SEC pursuant to the Securities Act (other than a registration statement on Form
S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the
Company or any Parent), or (y) a private issuance exempt from registration under the Securities
Act.
“
Euroclear
” means Euroclear Bank, S.A./N.V., as operator of the Euroclear system, and any
successor thereto.
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
“
Exchange Notes
” means the Notes issued in the Registered Exchange Offer pursuant to Section
2.06(f) hereof.
“
Exchange Offer Registration Statement
” has the meaning set forth in the Registration Rights
Agreement.
“
Excluded Contributions
” means the net cash proceeds received by the Company after the date of
this Indenture from:
(1) contributions to its common equity capital, and
(2) the sale (other than to a Subsidiary of the Company) of Capital Stock (other than
Disqualified Stock and Designated Preferred Stock) of the Company,
in each case designated as “Excluded Contributions” pursuant to an Officers’ Certificate of the
Company, the net cash proceeds of which are excluded from the calculation set forth in Section
4.07(a)(C)(ii) hereof.
“
Fair Market Value
” means the value that would be paid by a willing buyer to an unaffiliated
willing seller in a transaction not involving distress or necessity of either party, determined in
good faith by the Board of Directors of the Company (unless otherwise provided in this Indenture)
for transactions valued at, or in excess of, $10.0 million;
provided
that, if the Company or any
Restricted Subsidiary is required by any antitrust authority to sell any asset, the consideration
received upon such Asset Sale shall be deemed to be the “Fair Market Value” of such asset.
“
Fixed Charge Coverage Ratio
” means with respect to any specified Person for any period, the
ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such
Person for such period. In the event that the specified Person or any of its
-12-
Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or
otherwise discharges any Indebtedness (other than (i) ordinary working capital borrowings and (ii)
in the case of revolving credit borrowings or revolving advances under any Qualified Receivables
Financing, in which case interest expense will be computed based upon the average daily balance of
such Indebtedness during the applicable period) or issues, repurchases or redeems preferred equity
subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated and on or prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the “
Calculation Date
”), then the Fixed Charge Coverage Ratio will
be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment,
repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase
or redemption of preferred equity, and the use of the proceeds therefrom, as if the same had
occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio, Asset Acquisitions,
dispositions, mergers, consolidations and discontinued operations (as determined in accordance with
GAAP), and any related financing transactions, that the specified Person or any of its Restricted
Subsidiaries has both determined to make and made after the date of this Indenture and during the
four-quarter reference period or subsequent to such reference period and on or prior to or
simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all
such Asset Acquisitions, dispositions, mergers, consolidations and discontinued operations (and the
change of any associated Fixed Charges and the change in Consolidated Cash Flow resulting
therefrom) had occurred on the first day of the four-quarter reference period, including any pro
forma expense and cost reductions and other operating improvements that have occurred or are
reasonably expected to occur, in the reasonable judgment of the chief financial officer of the
Company (regardless of whether these cost savings or operating improvements could then be reflected
in pro forma financial statements in accordance with Regulation S-X promulgated under the
Securities Act or any other regulation or policy of the SEC related thereto). Any Person that is a
Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary
at all times during such four-quarter period, and if, since the beginning of the four-quarter
reference period, any Person that subsequently became a Restricted Subsidiary or was merged with or
into the Company or any of its other Restricted Subsidiaries since the beginning of such period
shall have made any acquisition, Investment, disposition, merger, consolidation or discontinued
operation, in each case with respect to an operating unit of a business, that would have required
adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be adjusted
giving pro forma effect thereto for such period as if such Asset Acquisition, disposition,
discontinued operation, merger or consolidation had occurred at the beginning of the applicable
four-quarter reference period. Any Person that is not a Restricted Subsidiary on the Calculation
Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter
period.
For purposes of this definition, whenever pro forma effect is to be given to any transaction,
the pro forma calculations shall be made in good faith by a responsible financial or accounting
officer of the Company. If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on
the Calculation Date had been the applicable rate for the entire period (taking into account any
Hedging Obligations applicable to such Indebtedness if such Hedging Obligation
-13-
has a remaining term in excess of 12 months). Interest on a Capital Lease Obligation shall be
deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting
officer of the Company to be the rate of interest implicit in such Capital Lease Obligation in
accordance with GAAP. For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed
based upon the average daily balance of such Indebtedness during the applicable period. Interest
on Indebtedness that may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to
have been based upon the rate actually chosen, or, if none, then based upon such optional rate
chosen as the Company may designate. Any such pro forma calculation may include adjustments
appropriate, in the reasonable determination of the Company as set forth in an Officers’
Certificate, to reflect operating expense reductions reasonably expected to result from any
acquisition or merger.
“
Fixed Charges
” means, with respect to any specified Person for any period, the sum, without
duplication, of:
(1) the consolidated interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued, excluding amortization of debt issuance costs and
the expensing of any bridge or other financing fees, but including original issue discount,
non-cash interest payments, the interest component of any deferred payment obligations
(classified as Indebtedness under this Indenture), the interest component of all payments
associated with Capital Lease Obligations and net of the effect of all payments made or
received pursuant to Hedging Obligations in respect of interest rates;
plus
(2) the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period;
plus
(3) all cash dividend payments or other cash distributions on any series of preferred
equity of such Person and all other dividend payments or other distributions on the
Disqualified Stock of such Person;
less
(4) interest income;
in each case, on a consolidated basis and in accordance with GAAP.
“
Foreign Subsidiary
” means any Restricted Subsidiary of the Company other than a Domestic
Subsidiary.
“
GAAP
” means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a significant segment of the
accounting profession, which are in effect on the date of this Indenture.
“
Global Note Legend
” means the legend set forth in Section 2.06(g)(2) hereof, which is
required to be placed on all Global Notes issued under this Indenture.
-14-
“
Global Notes
” means, individually and collectively, each of the Restricted Global Notes and
the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the
Depository or its nominee, substantially in the form of Exhibit A hereto and that bears the Global
Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached
thereto, issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2), 2.06(d)(3) or
2.06(f) hereof.
“
Government Securities
” means securities that are direct obligations of the United States of
America for the timely payment of which its full faith and credit is pledged.
“
guarantee
” means a guarantee other than by endorsement of negotiable instruments for
collection in the ordinary course of business, direct or indirect, in any manner including, without
limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements
in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or
services, to take or pay or to maintain financial statement conditions or otherwise).
“
Guarantors
” means each of:
(1) the subsidiaries of the Company that execute this Indenture on the Issue Date; and
(2) any other Subsidiary of the Company that becomes a Guarantor in accordance with the
provisions of this Indenture,
and their respective successors and assigns, in each case, until the Note Guarantee of such Person
has been released in accordance with the provisions of this Indenture.
“
Hedging Obligations
” means, with respect to any specified Person, the obligations of such
Person under:
(1) interest rate swap agreements (whether from fixed to floating or from floating to
fixed), interest rate cap agreements and interest rate collar agreements;
(2) other agreements or arrangements designed to manage interest rates or interest rate
risk; and
(3) other agreements or arrangements designed to protect such Person against
fluctuations in currency exchange rates or commodity prices.
“
Holder
” means a Person in whose name a Note is registered.
“
IAI Global Note
” means a Global Note substantially in the form of Exhibit A hereto bearing
the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee that will be issued in a denomination equal
to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.
-15-
“
Immaterial Subsidiary
” means any Subsidiary that is not a Material Subsidiary.
“
Indebtedness
” means, with respect to any specified Person, any indebtedness of such Person,
whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit
(or reimbursement agreements in respect thereof);
(3) in respect of banker’s acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the purchase price of any property
or services due more than six months after such property is acquired or such services are
completed;
(6) representing any Hedging Obligations; or
(7) to the extent not otherwise included, with respect to the Company and its
Restricted Subsidiaries, the amount then outstanding (i.e., advanced, and received by, and
available for use by, the Company or any of its Restricted Subsidiaries) under any
Receivables Financing (as set forth in the books and records of the Company or any
Restricted Subsidiary and confirmed by the agent, trustee or other representative of the
institution or group providing such Receivables Financing),
if and to the extent any of the preceding items (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in
accordance with GAAP. In addition, the term “Indebtedness” includes (i) all Indebtedness of others
secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed
by the specified Person);
provided
,
however
, that the amount of such Indebtedness shall be the
lesser of (x) the Fair Market Value of such asset as of such date of determination and (y) the
amount of such Indebtedness of such other Person; and (ii) to the extent not otherwise included,
the guarantee by the specified Person of any Indebtedness of any other Person. Notwithstanding the
foregoing, “Indebtedness” shall not include (a) accrued expenses, royalties and Trade Payables; (b)
Contingent Obligations incurred in the ordinary course of business; and (c) asset retirement
obligations and obligations in respect of reclamation and workers’ compensation (including pensions
and retiree medical care) that are not overdue by more than 90 days.
“
Indenture
” means this Indenture, as amended or supplemented from time to time.
“
Indirect Participant
” means a Person who holds a beneficial interest in a Global Note through
a Participant.
“
Initial Notes
” has the meaning assigned to it in the preamble to this Indenture.
-16-
“
Institutional Accredited Investor
” means an institution that is an “accredited investor” as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs.
“
Investment Grade Rating
” means a rating equal to or higher than Baa3 (or the equivalent) by
Moody’s or BBB- (or the equivalent) by S&P or, if either such entity ceases to rate the Notes for
reasons outside of the control of the Company, the equivalent investment grade credit rating from
any other Rating Agency.
“
Investment Grade Securities
” means:
(1) securities issued or directly and fully guaranteed or insured by the U.S.
government or any agency or instrumentality thereof (other than Cash Equivalents) and in
each case with maturities not exceeding two years from the date of acquisition;
(2) investments in any fund that invests exclusively in investments of the type
described in clause (1) which fund may also hold immaterial amounts of cash pending
investment and/or distribution; and
(3) corresponding instruments in countries other than the United States customarily
utilized for high quality investments and in each case with maturities not exceeding two
years from the date of acquisition.
“
Investments
” means, with respect to any Person, all direct or indirect investments by such
Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other
obligations), advances or capital contributions (excluding accounts receivable, trade credit and
advances to customers and commission, travel and similar advances to officers, employees and
consultants made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together with all items that
are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If
the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company will be deemed to
have made an Investment on the date of any such sale or disposition equal to the Fair Market Value
of the Company’s Investments in such Subsidiary that were not sold or disposed of in an amount
determined as provided in Section 4.07(c) hereof.
“
Issue Date
” means October 17, 2005.
“
Legended Regulation S Global Note
” means a Global Note in the form of Exhibit A bearing the
Global Note Legend and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount at maturity of the Notes initially sold in reliance on Rule 903 of
Regulation S.
“
Letter of Transmittal
” means the letter of transmittal to be prepared by the Company and sent
to all Holders of the Notes for use by such Holders in connection with the Registered Exchange
Offer.
-17-
“
Lien
” means, with respect to any asset (except in connection with a Qualified Receivables
Financing), any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in the nature thereof,
any option or other agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
“
Management Notes
” means any notes evidencing Indebtedness which, by their terms, are
expressly subordinated to the Notes, that are issued by the Company, any Subsidiary or any Parent
to existing or former employees, officers, consultants, or directors of the Company or any
Subsidiary or any Parent in consideration for such person’s Equity Interests of the Company, any
Subsidiary or any Parent.
“
Marketable Securities
” means, with respect to any Asset Sale, any readily marketable equity
securities that are (i) traded on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market; and (ii) issued by a corporation having a total equity market
capitalization of not less than $250.0 million;
provided
that the excess of (A) the aggregate
amount of securities of any one such corporation held by the Company and any Restricted Subsidiary
over (B) ten times the average daily trading volume of such securities during the 20 immediately
preceding trading days shall be deemed not to be Marketable Securities, as determined on the date
of the contract relating to such Asset Sale.
“
Material Subsidiary
” means any Subsidiary that would be a “significant subsidiary” as defined
in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation is in effect on the date of this Indenture,
provided
,
however
, that all references to
“10 percent” in such definition shall be replaced with “5 percent.”
“
Merger Agreement
” means the Agreement and Plan of Merger dated as of August 2, 2005 among
Chart Industries, Inc., certain stockholders of Chart Industries, Inc., First Reserve Fund X L.P.
and CI Acquisition, Inc.
“
Moody’s
” means Moody’s Investors Service, Inc. and its successors and assigns.
“
Net Income
” means, with respect to any Person for any period, the net income (loss) of such
Person for such period, determined in accordance with GAAP and before any reduction in respect of
dividends on preferred interests, excluding, however, (a) any gain or loss, together with any
related provision for taxes on such gain or loss, realized in connection with (1) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback transactions) or (2)
the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment
of any Indebtedness of such Person or any of its Subsidiaries and (b) any extraordinary or
nonrecurring gain or loss, together with any related provision for taxes on such extraordinary or
nonrecurring gain or loss.
“
Net Proceeds
” means the aggregate cash proceeds received by the Company or any of its
Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash
received upon the sale or other disposition of any Designated Non-cash Consideration
-18-
received in any Asset Sale and any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as and when received,
but excluding the assumption by the acquiring Person of Indebtedness relating to the disposed
assets or other consideration received in any non-cash form), net of the direct costs relating to
such Asset Sale and the sale of such Designated Non-cash Consideration, including, without
limitation, legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result of the Asset Sale or taxes paid or payable as a result of
the Asset Sale, in each case, after taking into account any available tax credits or deductions and
any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness,
other than Indebtedness under a Credit Facility, secured by a Lien on the asset or assets that were
the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP, including without limitation, pension and
post-employment benefit liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with such transaction.
“
Non-Recourse Debt
” means Indebtedness:
(1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides
credit support of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness) other than a pledge of the Equity Interest of any Unrestricted
Subsidiaries, (b) is directly or indirectly liable (as a guarantor or otherwise) other than
by virtue of a pledge of the Equity Interests of any Unrestricted Subsidiaries, or (c)
constitutes the lender; and
(2) no default with respect to which (including any rights that the holders of the
Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would
permit, upon notice, lapse of time or both, any holder of any other Indebtedness (other than
the Notes offered hereby) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment of the Indebtedness to be
accelerated or payable prior to its Stated Maturity.
“
Non-U.S. Person
” means a Person who is not a U.S. Person.
“
Note Guarantee
” means the guarantee by each Guarantor of the Company’s obligations under this
Indenture and the Notes.
“
Notes
” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes,
any Additional Notes and any Exchange Notes shall be treated as a single class for all purposes
under this Indenture, and unless the context otherwise requires, all references to the Notes shall
include the Initial Notes, any Additional Notes and any Exchange Notes.
“
Obligations
” means any principal, interest, penalties, fees, indemnifications,
reimbursements, damages, costs, expenses and other liabilities payable under the documentation
governing any Indebtedness.
“
Offering Memorandum
” means that certain offering memorandum, dated September 30, 2005,
relating to the initial offering of the Notes.
-19-
“
Officer
” means, with respect to any Person, the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer,
any Assistant Treasurer, the Controller, the Secretary, any Senior Vice President, any Vice
President or any Assistant Vice President of such Person.
“
Officers’ Certificate
” means a certificate signed on behalf of the Company by at least two
Officers of the Company, one of whom must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of the Company, that meets the
requirements of Section 13.05 hereof.
“
Opinion of Counsel
” means an opinion from legal counsel that meets the requirements of
Section 13.05 hereof. The counsel may be an employee of or counsel to the Company or any
Subsidiary of the Company.
“
Parent
” means any direct or indirect parent company of the Company.
“
Participant
” means, with respect to the Depositary, Euroclear or Clearstream, a Person who
has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to
DTC, shall include Euroclear and Clearstream).
“
Permitted Business
” means the businesses of the Company and its Subsidiaries engaged in on
the date of this Indenture and any other activities that are similar, ancillary or reasonably
related to, or a reasonable extension, expansion or development of, such businesses or ancillary
thereto.
“
Permitted Holders
” means the Equity Investors and Related Parties. Any person or group whose
acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of
Control Offer is made in accordance with the requirements of this Indenture will thereafter,
together with its Affiliates, constitute an additional Permitted Holder.
“
Permitted Investments
” means:
(1) any Investment in the Company or in a Restricted Subsidiary of the Company;
(2) any Investment in cash, Cash Equivalents, Marketable Securities or Investment Grade
Securities;
(3) any Investment by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) such Person, in one transaction or a series of related transactions, is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company,
-20-
and, in each of cases (a) and (b), any Investment then held by such person;
provided
that any such Investment was not made by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary of
the Company or such merger, consolidation, amalgamation, transfer, conveyance or
liquidation;
(4) any Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;
(5) any Investment the payment for which consists of Equity Interests (other than
Disqualified Stock) of the Company or any Parent (which Investment, in the case of any
Parent, is contributed to the common equity capital of the Company;
provided
that any such
contribution shall be excluded from Section 4.07(a)(C)(ii) hereof);
(6) any Investments received (i) in compromise or resolution of (A) obligations of
trade creditors or customers that were incurred in the ordinary course of business of the
Company or any of its Restricted Subsidiaries, including pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of any trade
creditor or customer; or (B) litigation, arbitration or other disputes; or (ii) as a result
of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any
secured Investment or other transfer of title with respect to any secured Investment in
default;
(7) Investments represented by Hedging Obligations;
(8) loans or advances to officers, directors and employees made in the ordinary course
of business of the Company or any Restricted Subsidiary of the Company in an aggregate
principal amount not to exceed $2.5 million at any one time outstanding;
(9) repurchases of the Notes;
(10) Investments in Permitted Businesses, joint ventures or Unrestricted Subsidiaries
having an aggregate Fair Market Value, taken together with all other Investments made
pursuant to this clause (10) that are at that time outstanding, not to exceed the greater of
(x) $35.0 million and (y) 5% of Total Assets at the time of such Investment (with the Fair
Market Value of each Investment being measured at the time made and without giving effect to
subsequent changes in value);
(11) any Investment in a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person in connection with a Qualified Receivables Financing,
including Investments of funds held in accounts permitted or required by the arrangements
governing such Qualified Receivables Financing or any related Indebtedness;
provided
,
however
, that any Investment in a Receivables Subsidiary is in the form of a Purchase Money
Note, contribution of additional receivables or an equity interest;
-21-
(12) any transaction to the extent it constitutes an Investment that is permitted by
and made in accordance with the provisions of Section 4.11(b) hereof (except for
transactions described in clauses (6), (8), (10) and (12) of Section 4.11(b));
(13) guarantees issued in accordance with Section 4.09 and Section 4.17 hereof;
(14) any Investment existing on the date of this Indenture and any Investment that
replaces, refinances or refunds an existing Investment;
provided
that the new Investment is
in an amount that does not exceed the amount replaced, refinanced or refunded, and is made
in the same Person as the Investment replaced, refinanced or refunded;
(15) Investments consisting of purchases and acquisitions of inventory, supplies,
materials and equipment or purchases of contract rights or licenses or leases of
intellectual property, in each case in the ordinary course of business; and
(16) additional Investments by the Company or any Restricted Subsidiary having an
aggregate Fair Market Value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), taken together with all other Investments
made pursuant to this clause (16) that are at the time outstanding not to exceed 2.0% of
Total Assets;
provided
,
however
, that if any Investment pursuant to this clause (16) is made
in a Person that is not a Restricted Subsidiary of the Company at the date of the making of
such Investment and such Person becomes a Restricted Subsidiary of the Company after such
date, such Investment shall thereafter be deemed to have been made pursuant to clause (1)
above and shall cease to have been made pursuant to this clause (16) for so long as such
Person continues to be a Restricted Subsidiary;
provided
,
however
, that with respect to any Investment, the Company may, in its sole discretion,
allocate all or any portion of any Investment to one or more of the above clauses (1) through (16)
so that the entire Investment would be a Permitted Investment.
“
Permitted Junior Securities
” means:
(1) Equity Interests in the Company; or
(2) debt securities that are subordinated to all Senior Indebtedness and any debt
securities issued in exchange for Senior Indebtedness to substantially the same extent as,
or to a greater extent than, the Notes are subordinated to Senior Indebtedness under this
Indenture.
“
Permitted Liens
” means:
(1) Liens securing Indebtedness and other Obligations under Credit Facilities incurred
pursuant to Section 4.09 hereof and/or securing Hedging Obligations related thereto;
(2) Liens in favor of the Company or any of its Restricted Subsidiaries;
-22-
(3) Liens on property of a Person existing at the time such Person is merged with or
into or consolidated with the Company or any Restricted Subsidiary of the Company;
provided
that such Liens were in existence prior to the contemplation of such merger or consolidation
and do not extend to any assets other than those of the Person merged into or consolidated
with the Company or the Restricted Subsidiary;
(4) Liens on property (including Capital Stock) existing at the time of acquisition of
the property by the Company or any Subsidiary of the Company;
provided
that such Liens were
in existence prior to, such acquisition, and not incurred in contemplation of, such
acquisition and do not extend to any property other than the property so acquired by the
Company or such Restricted Subsidiary;
(5) Liens or deposits to secure the performance of statutory or regulatory obligations,
or surety, appeal, indemnity or performance bonds, warranty and contractual requirements or
other obligations of a like nature incurred in the ordinary course of business;
(6) Liens securing reimbursement obligations with respect to commercial letters of
credit which encumber documents and other assets relating to such letters of credit and
products and proceeds thereof;
(7) Liens to secure Indebtedness (including Capital Lease Obligations) permitted to be
incurred pursuant to Section 4.09(b)(4) hereof covering only the assets acquired with or
financed by such Indebtedness;
(8) Liens securing Indebtedness permitted to be incurred pursuant to Section
4.09(b)(15) and (17) hereof;
(9) Liens existing on the date of this Indenture;
(10) Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded;
provided
that any reserve or other appropriate
provision as is required in conformity with GAAP has been made therefor;
(11) Liens created for the benefit of (or to secure) the Notes (or the Note
Guarantees);
(12) Liens securing Indebtedness or other obligations incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to obligations that
do not exceed 5% of Total Assets at any one time outstanding;
(13) Liens on accounts receivable and related assets of the type specified in the
definition of “Receivables Financing” incurred in connection with a Qualified Receivables
Financing;
(14) licenses of intellectual property in the ordinary course of business;
-23-
(15) Liens to secure a defeasance trust;
(16) Liens on equipment of the Company or any Restricted Subsidiary granted in the
ordinary course of business to clients upon whose property or premises such equipment is
located;
(17) Liens imposed by law (including, without limitation, Liens in favor of customers
for equipment under order or in respect of advances paid in connection therewith), such as
carriers’, warehousemen’s, landlord’s, lessor’s, suppliers, banks, repairmen’s and
mechanics’ Liens, and Liens of landlords securing obligations to pay lease payments that are
not yet due and payable or in default, in each case, incurred in the ordinary course of
business;
(18) Liens securing the aggregate amount of Indebtedness (including Acquired Debt)
incurred in connection with (or at any time following the consummation of) an Asset
Acquisition made in accordance with this Indenture equal to, at the time of incurrence, the
net increase in inventory, accounts receivable and net property, reserves, plant and
equipment attributable to such Asset Acquisition from the amounts reflected on the Company’s
historical consolidated balance sheet as of the end of the full fiscal quarter ending on or
prior to the date of such Asset Acquisition, calculated after giving effect on a pro forma
basis to such Asset Acquisition (which amount may, but need not, be incurred in whole or in
part under the Credit Agreement) less the amount of Indebtedness incurred in connection with
such Asset Acquisition secured by Liens pursuant to clause (4) or (7) above;
(19) Liens incurred or deposits made in the ordinary course of business to secure
payment of workers’ compensation or to participate in any fund in connection with workmen’s
compensation, unemployment insurance, old-age pensions or other social security programs;
(20) easements, rights of way, zoning and similar restrictions, reservations (including
severances, leases or reservations of oil, gas, coal, minerals or water rights),
restrictions or encumbrances in respect of real property or title defects that were not
incurred in connection with Indebtedness and that do not in the aggregate materially
adversely affect the value of said properties (as such properties are used by the Company or
its Subsidiaries) or materially impair their use in the operation of the business of the
Company and its Subsidiaries;
(21) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred
under this Indenture;
provided
,
however
, that:
(a) the new Lien shall be limited to all or part of the same property and
assets that secured or, under the written agreements pursuant to which the original
Lien arose, could secure the original Lien (plus improvements and accessions to such
property or proceeds or distributions thereof); and
(b) the Indebtedness secured by the new Lien is not increased to any amount
greater than the sum of (x) the outstanding principal amount, or, if
-24-
greater, committed amount, of the Permitted Refinancing Indebtedness and (y) an
amount necessary to pay any fees and expenses, including premiums, related to such
renewal, refunding, refinancing, replacement, defeasance or discharge;
(22) Liens arising from precautionary Uniform Commercial Code financing statement
filings regarding operating leases entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business;
(23) judgment Liens not giving rise to an Event of Default so long as any appropriate
legal proceedings that may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such legal proceedings may be
initiated shall not have expired;
(24) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or
other obligations of such Unrestricted Subsidiary;
(25) leases and subleases of real property which do not materially interfere with the
ordinary conduct of the business of the Company and its Restricted Subsidiaries; and
(26) Liens securing insurance premium financing arrangements,
provided
that such Lien
is limited to the applicable insurance contracts.
“
Permitted Payments to Parent
” means, without duplication as to amounts:
(1) payments to any Parent in amounts equal to the amounts required for any direct
payment of the Company to pay fees and expenses (including franchise or similar taxes)
required to maintain its corporate existence, customary salary, bonus and other benefits
payable to officers and employees of any direct parent of the Company and general corporate
overhead expenses of any direct parent of the Company to the extent such fees and expenses
are attributable to the ownership or operation of the Company and its Subsidiaries;
(2) for so long as the Company is a member of a group filing a consolidated or combined
tax return with any Parent, payments to any Parent in respect of an allocable portion of the
tax liabilities of such group that is attributable to the Company and its Subsidiaries (“
Tax
Payments
”). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant
tax (including any penalties and interest) that the Company would owe if the Company were
filing a separate tax return (or a separate consolidated or combined return with its
Subsidiaries that are members of the consolidated or combined group), taking into account
any carryovers and carrybacks of tax attributes (such as net operating losses) of the
Company and such Subsidiaries from other taxable years and (ii) the net amount of the
relevant tax that such Parent actually owes to the appropriate taxing authority. Any Tax
Payments received from the Company shall be paid over to the appropriate taxing authority
within 30 days of any Parent’s receipt of such Tax Payments or refunded to the Company; and
-25-
(3) dividends or distributions paid to any Parent, if applicable, in amounts equal to
amounts required for any Parent, if applicable, to pay interest and/or principal on
Indebtedness the proceeds of which have been contributed to the Company or any of its
Restricted Subsidiaries and that has been guaranteed by, or is otherwise considered
Indebtedness of, the Company incurred in accordance with Section 4.09 hereof.
“
Permitted Refinancing Indebtedness
” means any Indebtedness of the Company or any of its
Restricted Subsidiaries (other than Disqualified Stock) issued in exchange for, or the net proceeds
of which are used to extend, renew, refund, refinance, replace, defease or discharge other
Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany
Indebtedness);
provided
that:
(1) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness extended, renewed, refunded, refinanced, replaced, defeased
or discharged (plus any premium required to be paid on the Indebtedness being so renewed,
refunded, replaced, defeased or discharged, plus the amount of all fees and expenses
incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date equal to or later
than the final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the remaining Weighted Average Life to Maturity of, the Indebtedness being
extended, renewed, refunded, refinanced, replaced, defeased or discharged; provided that
this clause (2) shall not apply to Senior Indebtedness;
(3) if the Indebtedness being extended, renewed, refunded, refinanced, replaced,
defeased or discharged is subordinated in right of payment to the Notes or the Note
Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on terms at
least as favorable to the Holders of Notes as those contained in the documentation governing
the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or
discharged;
(4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is
pari passu
in right of payment with the Notes or any Note Guarantees, such
Permitted Refinancing Indebtedness is
pari passu
in right of payment with, or subordinated
in right of payment to, the Notes or such Note Guarantees; and
(5) such Permitted Refinancing Indebtedness shall not include Indebtedness of the
Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
“
Person
” means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited liability company or government or
other entity.
“
Placement Agents
” means Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., and
Natexis Bleichroeder Inc.
-26-
“
Private Placement Legend
” means the legend set forth in Section 2.06(g)(1) hereof to be
placed on all Notes issued under this Indenture except where otherwise permitted by the provisions
of this Indenture.
“
Purchase Money Note
” means a promissory note of a Receivables Subsidiary evidencing a line of
credit, which may be irrevocable, from the Company or any Subsidiary of the Company to a
Receivables Subsidiary in connection with a Qualified Receivables Financing, which note is intended
to finance that portion of the purchase price that is not paid by cash or a contribution of equity.
“
QIB
” means a “qualified institutional buyer” as defined in Rule 144A.
“
Qualified Receivables Financing
” means any Receivables Financing of a Receivables Subsidiary
that meets the following conditions:
(1) the Board of Directors of the Company will have determined in good faith that such
Qualified Receivables Financing (including financing terms, covenants, termination events
and other provisions) is in the aggregate economically fair and reasonable to the Company
and the Receivables Subsidiary,
(2) all sales of accounts receivable and related assets to the Receivables Subsidiary
are made at Fair Market Value (as determined in good faith by the Company), and
(3) the financing terms, covenants, termination events and other provisions thereof
will be market terms (as determined in good faith by the Company) and may include Standard
Securitization Undertakings.
The grant of a security interest in any accounts receivable of the Company or any of its
Restricted Subsidiaries (other than a Receivables Subsidiary) to secure a Credit Facility will not
be deemed a Qualified Receivables Financing. For purposes of this Indenture, a receivables
facility whether now in existence or arising in the future (and any replacement thereof with
substantially similar terms in the aggregate) will be deemed to be a Qualified Receivables
Financing that is not recourse to the Company (except for Standard Securitization Undertakings).
“
Rating Agency
” means each of S&P and Moody’s, or if S&P or Moody’s or both shall not make a
rating on the Notes publicly available, a nationally recognized statistical rating organization or
organizations, within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by
the Company as a replacement agency or agencies for S&P or Moody’s, or both, as the case may be.
“
Receivables Financing
” means any transaction or series of transactions that may be entered
into by the Company or any of its Subsidiaries pursuant to which the Company or any of its
Subsidiaries may sell, convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of
a transfer by the Company or any of its Subsidiaries), and (b) any other Person (in the case of a
transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable
(whether now existing or arising in the future) of the Company or any of its
-27-
Subsidiaries, and any assets related thereto including, without limitation, all collateral
securing such accounts receivable, all contracts and all guarantees or other obligations in respect
of such accounts receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are customarily granted in
connection with asset securitization transactions involving accounts receivable and any Hedging
Obligations entered into by the Company or any such Subsidiary in connection with such accounts
receivable.
“
Receivables Repurchase Obligation
” means any obligation of a seller of receivables in a
Qualified Receivables Financing to repurchase receivables arising as a result of a breach of a
representation, warranty or covenant or otherwise, including as a result of a receivable or portion
thereof becoming subject to any asserted defense, dispute, off-set or counterclaim of any kind as a
result of any action taken by, any failure to take action by or any other event relating to the
seller.
“
Receivables Subsidiary
” means a Wholly Owned Restricted Subsidiary of the Company (or another
Person formed for the purposes of engaging in a Qualified Receivables Financing with the Company in
which the Company or any Subsidiary of the Company makes an Investment and to which the Company or
any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no
activities other than in connection with the financing of accounts receivable of the Company and
its Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other
assets relating thereto, and any business or activities incidental or related to such business, and
which is designated by the Board of Directors of the Company (as provided below) as a Receivables
Subsidiary and:
(1) no portion of the Indebtedness or any other obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any other Subsidiary of the Company (excluding
guarantees of Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the
Company or any other Subsidiary of the Company in any way other than pursuant to Standard
Securitization Undertakings, or (iii) subjects any property or asset of the Company or any
other Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization Undertakings,
(2) with which neither the Company nor any other Subsidiary of the Company has any
material contract, agreement, arrangement or understanding other than on terms which the
Company reasonably believes to be no less favorable to the Company or such Subsidiary than
those that might be obtained at the time from Persons that are not Affiliates of the
Company, and
(3) to which neither the Company nor any other Subsidiary of the Company has any
obligation to maintain or preserve such entity’s financial condition or cause such entity to
achieve certain levels of operating results.
Any such designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the Board
-28-
of Directors of the Company giving effect to such designation and an Officers’ Certificate
certifying that such designation complied with the foregoing conditions
“
Registered Exchange Offer
” has the meaning set forth in the Registration Rights Agreement.
“
Registration Rights Agreement
” means the registration rights agreement to be dated the date
of this Indenture, among the Company, the Guarantors and the Placement Agents.
“
Related Party
” means:
(1) any controlling stockholder, partner, member, 50% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any Equity Investor;
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a 50% or more controlling
interest of which consist of any one or more Equity Investors and/or such other Persons
referred to in the immediately preceding clause; or
(3) any Person with whom an Equity Investor or a Related Party (under clauses (1) or
(2) of the definition of Related Party) may be deemed as part of a “group” within the
meaning of Section 13(d)(3) of the Exchange Act.
“
Regulation S
” means Regulation S promulgated under the Securities Act.
“
Regulation S Global Note
” means a Legended Regulation S Global Note or an Unlegended
Regulation S Global Note, as appropriate.
“
Responsible Officer
,” when used with respect to the Trustee, means any officer within the
Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other
officer of the Trustee customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his knowledge of and familiarity with the
particular subject, in each case having direct responsibility for the administration of this
Indenture.
“
Restricted Definitive Note
” means a Definitive Note bearing the Private Placement Legend.
“
Restricted Global Note
” means a Global Note bearing the Private Placement Legend.
“
Restricted Investment
” means an Investment other than a Permitted Investment.
“
Restricted Period
” means the 40-day distribution compliance period as defined in Regulation
S.
-29-
“
Restricted Subsidiary
” of a Person means any Subsidiary of the referent Person that is not an
Unrestricted Subsidiary.
“
Rule 144
” means Rule 144 promulgated under the Securities Act.
“
Rule 144A
” means Rule 144A promulgated under the Securities Act.
“
Rule 903
” means Rule 903 promulgated under the Securities Act.
“
Rule 904
” means Rule 904 promulgated under the Securities Act.
“
S&P
” means Standard & Poor’s Ratings Services and its successors and assigns.
“
SEC
” means the Securities and Exchange Commission.
“
Securities Act
” means the Securities Act of 1933, as amended.
“
Senior Indebtedness
” means the following obligations of the Company or any Guarantor, whether
outstanding on the Issue Date or thereafter incurred: (1) all Indebtedness and all other monetary
obligations (including, without limitation, expenses, fees, principal, interest, reimbursement
obligations under letters of credit and indemnities payable in connection therewith) under (or in
respect of) the Credit Agreement or Hedging Obligation relating to the Indebtedness under the
Credit Agreement and (2) all other Indebtedness and all other monetary obligations of the Company
or any Guarantor (other than the Notes and any Note Guarantee), including principal and interest on
such Indebtedness, unless such Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, is
pari passu
with, or subordinated in
right of payment to, the Notes or any Note Guarantee; provided that the term “Senior Indebtedness”
shall not include (a) any Indebtedness of the Company or any Guarantor that, when incurred, was
without recourse to the Company or such Guarantor, (b) any Indebtedness of the Company or any
Guarantor to a Subsidiary of the Company, or to a joint venture in which the Company or any
Restricted Subsidiary has an interest, (c) any Indebtedness of the Company or any Guarantor, to the
extent not permitted by Section 4.09 or Section 4.06 hereof;
provided
that Indebtedness under the
Credit Agreement shall be deemed Senior Indebtedness if the Company or any Guarantor, as the case
may be, believed in good faith at the time of incurrence that it was permitted to incur such
Indebtedness under this Indenture and delivers an Officers’ Certificate to the lenders under the
Credit Agreement to such effect, (d) any repurchase, redemption or other obligation in respect of
Disqualified Stock, (e) any Indebtedness to any employee of the Company or any of its Subsidiaries,
(f) any liability for taxes owed or owing by the Company or any Guarantor, or (g) any Trade
Payables.
“
Senior Subordinated Obligations
” means any principal of, premium, if any, or interest on the
Notes payable pursuant to the terms of the Notes or any Note Guarantee or upon acceleration,
including any amounts received upon the exercise of rights of rescission or other rights of action
(including claims for damages) or otherwise, to the extent relating to the purchase price of the
Notes or amounts corresponding to such principal, premium, if any, or interest on the Notes.
-30-
“
Shelf Registration Statement
” means the Shelf Registration Statement as defined in the
Registration Rights Agreement.
“
Significant Subsidiary
” means any Subsidiary that would be a “significant subsidiary” as
defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as
such Regulation is in effect on the date of this Indenture.
“
Standard Securitization Undertakings
” means representations, warranties, covenants,
indemnities and guarantees of performance entered into by the Company or any Subsidiary of the
Company which the Company has determined in good faith to be customary in a Receivables Financing
including, without limitation, those relating to the servicing of the assets of a Receivables
Subsidiary, it being understood that any Receivables Repurchase Obligation shall be deemed to be a
Standard Securitization Undertaking.
“
Stated Maturity
” means, with respect to any installment of principal on any series of
Indebtedness, the date on which the final payment of principal was scheduled to be paid in the
documentation governing such Indebtedness as of the date of this Indenture, and will not include
any contingent obligations to repay, redeem or repurchase any such principal prior to the date
originally scheduled for the payment thereof.
“
Subsidiary
” means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency and after giving effect to any voting agreement or stockholders’ agreement
that effectively transfers voting power) to vote in the election of directors, managers or
trustees of the corporation, association or other business entity is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general partners of
which are that Person or one or more Subsidiaries of that Person (or any combination
thereof).
“
TIA
” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-77bbbb).
“
Total Assets
” means the total consolidated assets of the Company and its Restricted
Subsidiaries, as shown on the most recent balance sheet of the Company.
“
Trade Payables
” means, with respect to any Person, any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such
Person or any of its Subsidiaries arising in the ordinary course of business in connection with the
acquisition of goods or services.
“
Transactions
” means, collectively, (1) the acquisition by First Reserve Fund X L.P. of all of
the equity interests in Chart Industries, Inc. and each of Chart Industries, Inc.’s
-31-
direct and indirect subsidiaries pursuant to the Merger Agreement, (2) the completion of and
borrowings under the Credit Agreement as described in the Offering Memorandum and (3) the offering
of the Notes and, with respect to each of (1), (2) and (3), the transactions contemplated thereby.
“
Treasury Rate
” means, as of any redemption date, the yield to maturity as of such redemption
date of United States Treasury securities with a constant maturity (as compiled and published in
the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available
at least two Business Days prior to the redemption date (or, if such Statistical Release is no
longer published, any publicly available source of similar market data)) most nearly equal to the
period from the redemption date to October 15, 2010;
provided
,
however
, that if the period from the
redemption date to October 15, 2010, is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one year will be used.
“
Trustee
” means The Bank of New York, a New York banking corporation, until a successor
replaces it in accordance with the applicable provisions of this Indenture and thereafter means the
successor serving hereunder.
“
Unlegended Regulation S Global Note
” means a permanent Global Note in the form of Exhibit A
bearing the Global Note Legend, deposited with or on behalf of and registered in the name of the
Depositary or its nominee and issued upon expiration of the Restricted Period.
“
Unrestricted Definitive Note
” means a Definitive Note that does not bear and is not required
to bear the Private Placement Legend.
“
Unrestricted Global Note
” means a Global Note that does not bear and is not required to bear
the Private Placement Legend.
“
Unrestricted Subsidiary
” means:
(1) any Subsidiary of the Company that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors of the Company in the manner provided
below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or
owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated;
provided
,
however
, that the Subsidiary
to be so designated and its Subsidiaries do not at the time of designation have and do not
thereafter incur any Non-recourse Debt (other than guarantees of performance of the Unrestricted
Subsidiary in the ordinary course of business, excluding guarantees of Indebtedness for borrowed
money);
provided further
,
however
, that either:
-32-
(a) the Subsidiary to be so designated has total consolidated assets of $1,000 or less;
or
(b) if such Subsidiary has consolidated assets greater than $1,000, then such
designation would be permitted under Section 4.07 hereof.
The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary;
provided
,
however
, that immediately after giving effect to such designation:
(x) (1) the Company could incur $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test described in Section 4.09 hereof or (2) the Fixed Charge Coverage
Ratio for the Company and its Restricted Subsidiaries would be greater than such ratio for
the Company and its Restricted Subsidiaries immediately prior to such designation, in each
case on a pro forma basis taking into account such designation, and
(y) no Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors of the Company shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors of
the Company giving effect to such designation and an Officers’ Certificate certifying that such
designation complied with the foregoing provisions.
“
U.S. Person
” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities
Act.
“
Voting Stock
” of any specified Person as of any date means the Capital Stock of such Person
that is at the time entitled to vote in the election of the Board of Directors of such Person.
“
Weighted Average Life to Maturity
” means, when applied to any Indebtedness at any date, the
number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect of the Indebtedness, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment;
by
(2) the then outstanding principal amount of such Indebtedness.
“
Wholly Owned Restricted Subsidiary
” of any specified Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which (other than directors’
qualifying shares) will at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person.
-33-
Section 1.02
Other Definitions
.
|
|
|
|
|
|
|
|
|
Defined
|
|
|
Term
|
|
in Section
|
|
|
“
Affiliate Transaction
”
|
|
|
4.11
|
|
|
“
Asset Sale Offer
”
|
|
|
4.10
|
|
|
“
Authentication Order
”
|
|
|
2.02
|
|
|
“
Change of Control Offer
”
|
|
|
4.15
|
|
|
“
Change of Control Payment
”
|
|
|
4.15
|
|
|
“
Change of Control Payment Date
”
|
|
|
4.15
|
|
|
“
Covenant Defeasance
”
|
|
|
8.03
|
|
|
“
DTC
”
|
|
|
2.01
|
|
|
“
Event of Default
”
|
|
|
6.01
|
|
|
“
Excess Proceeds
”
|
|
|
4.10
|
|
|
“
incur
”
|
|
|
4.09
|
|
|
“
Legal Defeasance
”
|
|
|
8.02
|
|
|
“
non-payment default
”
|
|
|
10.03
|
|
|
“
Offer Period
”
|
|
|
4.10
|
|
|
“
Paying Agent
”
|
|
|
2.03
|
|
|
“
Payment Blockage Notice
”
|
|
|
10.03
|
|
|
“
Payment Default
”
|
|
|
6.01
|
|
|
“
Permitted Debt
”
|
|
|
4.09
|
|
|
“
Registrar
”
|
|
|
2.03
|
|
|
“
Restricted Payments
”
|
|
|
4.07
|
|
Section 1.03
Incorporation by Reference of Trust Indenture Act
.
Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
“
indenture securities
” means the Notes and the Note Guarantees;
“
indenture security Holder
” means a Holder of a Note;
“
indenture to be qualified
” means this Indenture;
“
indenture trustee
” or “
institutional trustee
” means the Trustee; and
“
obligor
” on the indenture securities means the Company and the Guarantors, respectively, and
any successor obligor upon the indenture securities, respectively.
All other terms used in this Indenture that are defined by the TIA, defined by TIA reference
to another statute or defined by SEC rule under the TIA have the meanings so assigned to them by
such definitions.
-34-
Section 1.04
Rules of Construction
.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;
(iii) “or” is not exclusive;
(iv) words in the singular include the plural, and words in the plural include the
singular;
(v) “will” shall be interpreted to express a command;
(vi) provisions apply to successive events and transactions; and
(vii) references to sections of or rules under the Securities Act will be deemed to
include substitute, replacement of successor sections or rules adopted by the SEC from time
to time.
ARTICLE 2
THE NOTES
Section 2.01
Form and Dating
.
(a)
General
. The Notes and the Trustee’s certificate of authentication will be substantially
in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by
law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The
Notes shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes will constitute, and are hereby expressly
made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be controlling.
(b)
Global Notes
. Notes issued in global form will be substantially in the form of Exhibit A
hereto (including the Global Note Legend thereon and the “Schedule of
Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form
will be substantially in the form of Exhibit A
hereto (but without the Global Note
Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached
thereto). Each Global Note will represent such of the outstanding Notes as will be specified
therein and each shall provide that it represents the aggregate principal amount of outstanding
Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding
Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect
exchanges and
-35-
redemptions. Any endorsement of a Global Note to reflect the amount of any increase
or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made
by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c)
Regulation S Global Notes
. Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Legended Regulation S Global Note, which shall be deposited on
behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for The
Depository Trust Company (
“DTC”
) in New York, New York, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf
of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Following the termination of the Restricted Period, beneficial interests in
the Legended Regulation S Global Note shall be exchanged for beneficial interests in Unlegended
Regulation S Global Notes pursuant to Section 2.06 and the Applicable Procedures. Simultaneously
with the authentication of Unlegended Regulation S Global Notes, the Trustee shall cancel the
Legended Regulation S Global Note. The aggregate principal amount of the Regulation S Global Notes
may from time to time be increased or decreased by adjustments made on the records of the Trustee
and the Depositary or its nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d)
Euroclear and Clearstream Procedures Applicable.
The provisions of the “Operating
Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the
“General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream will
be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held
by Participants through Euroclear or Clearstream.
Section 2.02
Execution and Authentication
.
At least one Officer must sign the Notes for the Company by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at the time a Note is
authenticated, the Note will nevertheless be valid.
A Note will not be valid until authenticated by the manual signature of the Trustee. The
signature will be conclusive evidence that the Note has been authenticated under this Indenture.
The Trustee will, upon receipt of a written order of the Company signed by two Officers of the
Company (an “
Authentication Order
”), authenticate Notes for original issue that may be validly
issued under this Indenture, including any Additional Notes and any Exchange Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of
Notes authorized for issuance by the Company pursuant to one or more Authentication Orders, except
as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company to authenticate
Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes authentication
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by such agent.
An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of
the Company.
Section 2.03
Registrar and Paying Agent
.
The Company will maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (“
Registrar
”) and an office or agency where Notes may be presented for
payment (“
Paying Agent
”). The Registrar will keep a register of the Notes and of their transfer
and exchange. The Company may appoint one or more co-registrars and one or more additional paying
agents. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any
additional paying agent. The Company may change any Paying Agent or Registrar without notice to
any Holder. The Company will notify the Trustee in writing of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries
may act as Paying Agent or Registrar.
The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or
Paying Agent and to the Trustee;
provided
,
however
, that no such removal shall become effective
until (i) if applicable, acceptance of an appointment by a successor as evidenced by an appropriate
agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may
be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve
as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i)
above. The Registrar or Paying Agent may resign at any time upon written notice to the Company and
the Trustee;
provided
,
however
, that the Trustee may resign as Paying Agent or Registrar only if
the Trustee also resigns as Trustee in accordance with Section 7.08.
The Company initially appoints DTC to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act
as Custodian with respect to the Global Notes.
Section 2.04
Paying Agent to Hold Money in Trust
.
The Company will require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the
Paying Agent for the payment of principal, premium or Additional Interest, if any, or interest on
the Notes, and will notify the Trustee of any default by the Company in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay all money held by
it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee and to account for any funds disbursed by such Paying Agent. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further
liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate
and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying
Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will
serve as Paying Agent for the Notes.
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Section 2.05
Holder Lists
.
The Trustee will preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of all Holders and shall otherwise comply with TIA
§ 312(a). If the Trustee is not the Registrar, the Company will furnish or cause the Registrar to
furnish to the Trustee at least seven Business Days before each interest payment date and at such
other times as the Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company
shall otherwise comply with TIA § 312(a).
Section 2.06
Transfer and Exchange
.
(a)
Transfer and Exchange of Global Notes
. A Global Note may not be transferred except as a
whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if:
(1) the Company delivers to the Trustee notice from the Depositary that it is unwilling
or unable to continue to act as Depositary or that it is no longer a clearing agency
registered under the Exchange Act and in each case a successor Depositary is not appointed
by the Company within 120 days after the date of such notice from the Depositary;
(2) Subject to the procedures of the Depository, the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be exchanged for
Definitive Notes and delivers a written notice to such effect to the Trustee;
provided
that
in no event shall the Legended Regulation S Global Note be exchanged by the Company for
Definitive Notes prior to the expiration of the Restricted Period and the receipt by the
Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the
Securities Act; or
(3) there shall have occurred and be continuing an Event of Default with respect to the
Notes.
Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes
shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every
Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and
delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for
another Note other than as provided in this Section 2.06(a), however, beneficial interests in a
Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b)
Transfer and Exchange of Beneficial Interests in the Global Notes
. The transfer and
exchange of beneficial interests in the Global Notes will be effected through the Depositary, in
accordance with the provisions of this Indenture and the Applicable Procedures.
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Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Transfers of beneficial
interests in the Global Notes also will require compliance with either subparagraph (1) or (2)
below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(1)
Transfer of Beneficial Interests in the Same Global Note
. Beneficial interests in
any Restricted Global Note may be transferred to Persons who take delivery thereof in the
form of a beneficial interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided
,
however
, that
prior to the expiration of the Restricted Period, transfers of beneficial interests in the
Legended Regulation S Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than a Placement Agent). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note. No written orders or instructions
shall be required to be delivered to the Registrar to effect the transfers described in this
Section 2.06(b)(1).
(2)
All Other Transfers and Exchanges of Beneficial Interests in Global Notes.
In
connection with all transfers and exchanges of beneficial interests that are not subject to
Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the
Registrar either:
(A) both:
(i) a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged; and
(ii) instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited with
such increase; or
(B) both:
(i) a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged; and
(ii) instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note shall be
registered to effect the transfer or exchange referred to in (i) above;
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provided
that in no event shall Definitive Notes be issued upon the transfer
or exchange of beneficial interests in the Legended Regulation S Global Note
prior to the expiration of the Restricted Period and the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act.
Upon consummation of a Registered Exchange Offer by the Company in accordance with Section
2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial
interests in Global Notes contained in this Indenture and the Notes or otherwise applicable
under the Securities Act, the Trustee shall adjust the principal amount of the relevant
Global Note(s) pursuant to Section 2.06(h) hereof.
(3)
Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial
interest in any Restricted Global Note may be transferred to a Person who takes delivery
thereof in the form of a beneficial interest in another Restricted Global Note if the
transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a beneficial interest
in the 144A Global Note, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial interest
in the Legended Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications in item
(2) thereof; and
(C) if the transferee will take delivery in the form of a beneficial interest
in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3)(d) thereof, if applicable.
(4)
Transfer and Exchange of Beneficial Interests in a Restricted Global Note for
Beneficial Interests in an Unrestricted Global Note.
A beneficial interest in any
Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in
an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer
complies with the requirements of Section 2.06(b)(2) above and:
(A) such exchange or transfer is effected pursuant to the Registered Exchange
Offer in accordance with the Registration Rights Agreement and the holder of the
beneficial interest to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the
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distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined
in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(i) if the holder of such beneficial interest in a Restricted Global Note
proposes to exchange such beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(ii) if the holder of such beneficial interest in a Restricted Global Note
proposes to transfer such beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance with the Securities
Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an
Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to
the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or
(D) above.
(5)
Transfer and Exchange of Beneficial Interests in an Unrestricted Global Note for
Beneficial Interests in a Restricted Global Note.
Beneficial interests in an Unrestricted
Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in
the form of, a beneficial interest in a Restricted Global Note.
(c)
Transfer and Exchange of Beneficial Interests for Definitive Notes.
(1)
Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes.
If any
holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note or to transfer such beneficial interest to a
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Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Restricted Definitive Note, a certificate from such
holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in accordance with Rule
144A, a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S. Person in an
offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an exemption from the
registration requirements of the Securities Act in accordance with Rule 144, a certificate
to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred to an Institutional Accredited
Investor in reliance on an exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion
of Counsel required by item (3)(d) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or any of its
Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an effective
registration statement under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate upon receipt of an Authentication Order in accordance with Section 2.02 hereof and
deliver to the Person designated in the instructions a Definitive Note in the appropriate principal
amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global
Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial interest shall instruct
the Registrar through instructions from the Depositary and the Participant or Indirect Participant.
The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall
be subject to all restrictions on transfer contained therein.
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(2)
Beneficial Interests in Legended Regulation S Global Note to Definitive Notes
.
Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial interest in the Legended
Regulation S Global Note may not be exchanged for a Definitive Note or transferred to a Person who
takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the
Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to
Rule 903(b)(3)(ii)(B) under the Securities Act; except in the case of a transfer pursuant to an
exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.
(3)
Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes.
A
holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest
for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in
accordance with the Registration Rights Agreement and the holder of such beneficial
interest, in the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a
Person participating in the distribution of the Exchange Notes or (iii) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(i) if the holder of such beneficial interest in a Restricted Global Note
proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a
certificate from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(b) thereof; or
(ii) if the holder of such beneficial interest in a Restricted Global Note
proposes to transfer such beneficial interest to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance with the Securities
Act.
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(4)
Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes.
If
any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such
beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions
set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of
the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company will execute and the Trustee will authenticate upon receipt of an Authentication Order in
accordance with Section 2.02 hereof and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(4) will be registered in such name or names
and in such authorized denomination or denominations as the holder of such beneficial interest
requests through instructions to the Registrar from or through the Depositary and the Participant
or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(4) will not bear the Private Placement Legend.
(d)
Transfer and Exchange of Definitive Notes for Beneficial Interests.
(1)
Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes.
If any
Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in
a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for
a beneficial interest in a Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with
Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an
offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant to an exemption
from the registration requirements of the Securities Act in accordance with Rule 144, a
certificate to the effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an Institutional
Accredited Investor in reliance on an exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3)(d) thereof, if applicable;
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(F) if such Restricted Definitive Note is being transferred to the Company or any of
its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred pursuant to an effective
registration statement under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c) thereof,
the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the
aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global
Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(2)
Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes.
A
Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in
accordance with the Registration Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the
distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(i) if the Holder of such Definitive Notes proposes to exchange such Notes for
a beneficial interest in the Unrestricted Global Note, a certificate from such
Holder in the form of Exhibit C hereto, including the certifications in item (1)(c)
thereof; or
(ii) if the Holder of such Definitive Notes proposes to transfer such Notes to
a Person who shall take delivery thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and in the
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Private
Placement Legend are no longer required in order to maintain compliance with the Securities
Act.
Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2),
the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(3)
Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes.
A
Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof
in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of
a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the aggregate principal amount of one of the
Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial interest is effected
pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when an Unrestricted Global Note
has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global
Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so
transferred.
(e)
Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder
of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the
Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration
of transfer or exchange, the requesting Holder must present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in
writing. In addition, the requesting Holder must provide any additional certifications, documents
and information, as applicable, required pursuant to the following provisions of this Section
2.06(e).
(1)
Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted
Definitive Note may be transferred to and registered in the name of Persons who take
delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the
transferor must deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from the
registration requirements of the Securities Act, then the transferor must deliver
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a certificate in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if applicable.
(2)
Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted
Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note
or transferred to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Registered Exchange
Offer in accordance with the Registration Rights Agreement and the Holder, in the
case of an exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person
participating in the distribution of the Exchange Notes or (iii) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration Statement
in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange
Offer Registration Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(i) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications in
item (1)(d) thereof; or
(ii) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(3)
Unrestricted Definitive Notes to Unrestricted Definitive Notes.
A Holder of
Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof
in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such
a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
-47-
(f)
Registered Exchange Offer.
Upon the occurrence of the Registered Exchange Offer in
accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate:
(1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of the beneficial interests in the Restricted Global Notes accepted for
exchange in the Registered Exchange Offer by Persons that certify in the applicable Letters
of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a
distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144)
of the Company; and
(2) Unrestricted Definitive Notes in an aggregate principal amount equal to the
principal amount of the Restricted Definitive Notes accepted for exchange in the Registered
Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A)
they are not Broker-Dealers, (B) they are not participating in a distribution of the
Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company.
Concurrently with the issuance of such Notes, the Trustee will cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company will
execute and the Trustee will authenticate upon receipt of an Authentication Order in accordance
with Section 2.02 hereof and deliver to the Persons designated by the Holders of Definitive Notes
so accepted Unrestricted Definitive Notes in the appropriate principal amount.
(g)
Legends.
The following legends will appear on the face of all Global Notes and Definitive
Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions
of this Indenture.
(1)
Private Placement Legend
.
(A) Except as permitted by subparagraph (B) below, each Global Note and each
Definitive Note (and all Notes issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL
BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, PRIOR TO THE
-48-
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
(E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL “ACCREDITED INVESTOR” (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHED TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF WHICH CAN BE OBTAINED
FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE
PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS
NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL
-49-
BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE 2(F) ABOVE OR UPON
ANY TRANSFER OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,”
“UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.”
(B) Notwithstanding the foregoing, any Global Note or Definitive Note issued
pursuant to subparagraph (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or
(f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution
thereof) will not bear the Private Placement Legend.
(2)
Global Note Legend
. Each Global Note will bear a legend in substantially the
following form:
“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY
TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
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ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.”
(3)
Regulation S Global Note Legend
. The Regulation S Global Note shall bear a legend
in substantially the following form:
“THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS AND
PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE
INDENTURE (AS DEFINED HEREIN).”
(h)
Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests
in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note
has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be
returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any
time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or
transferred to a Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes represented by such
Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Note, such other Global Note will be
increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i)
General Provisions Relating to Transfers and Exchanges.
(1) To permit registrations of transfers and exchanges, the Company will execute and the
Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order
in accordance with Section 2.02 hereof or at the Registrar’s request.
(2) No service charge will be made to a Holder of a beneficial interest in a Global Note or to
a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.10, 4.15 and 9.05 hereof).
(3) The Registrar will not be required to register the transfer of or exchange of any Note
selected for redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part.
(4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange
of Global Notes or Definitive Notes will be the valid obligations of the
-51-
Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of transfer or exchange.
(5) Neither the Registrar nor the Company will be required:
(A) to issue, to register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on the day of
selection;
(B) to register the transfer of or to exchange any Note selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in part; or
(C) to register the transfer of or to exchange a Note between a record date and the
next succeeding interest payment date.
(6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any
Agent and the Company may deem and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be
affected by notice to the contrary.
(7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the
provisions of Section 2.02 hereof.
(8) All certifications, certificates and Opinions of Counsel required to be submitted to the
Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
Section 2.07
Replacement Notes
.
If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue
and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if
the Trustee’s requirements are met. If required by the Trustee or the Company, an indemnity bond
must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of
them may suffer if a Note is replaced. The Company may charge for their expenses in replacing a
Note.
Every replacement Note is an additional obligation of the Company and will be entitled to all
of the benefits of this Indenture equally and proportionately with all other Notes duly issued
hereunder.
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Section 2.08
Outstanding Notes
.
The Notes outstanding at any time are all the Notes authenticated by the Trustee except for
those canceled by it, those delivered to it for cancellation, those reductions in the interest in a
Global Note effected by the Trustee in accordance with the provisions hereof, and those described
in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does
not cease to be outstanding because the Company or an Affiliate of the Company holds the Note;
however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be
outstanding for purposes of Section 3.07(a) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the
Trustee and the Registrar receive proof satisfactory to it that the replaced Note is held by a
protected purchaser.
If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to
be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof)
holds, on a redemption date or maturity date, money sufficient to pay all principal, premium and
accrued interest with respect to the outstanding Notes payable on that date and is not prohibited
from paying such money to the Holders thereof pursuant to the terms of Section 10 hereof, then on
and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue
interest.
Section 2.09
Treasury Notes
.
In determining whether the Holders of the required principal amount of Notes have concurred in
any direction, request, waiver or consent in the exercise of any discretion, power or authority
(whether contained in this Indenture or vested by operation of law) which the Trustee is required,
expressly or impliedly, to exercise in or by reference to the interests of the Holders or any of
them, Notes owned by the Company or any Guarantor, or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the Company or any
Guarantor, will be considered as though not outstanding, except that for the purposes of
determining whether the Trustee will be protected in relying on any such direction, waiver or
consent, only Notes that a Responsible Officer of the Trustee knows are so owned will be so
disregarded.
Section 2.10
Temporary Notes
.
Until certificates representing Notes are ready for delivery, the Company may prepare and the
Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary
Notes will be substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as may be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate
definitive Notes in exchange for temporary Notes.
Holders of temporary Notes will be entitled to all of the benefits of this Indenture.
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Section 2.11
Cancellation
.
The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and
Paying Agent will forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and will dispose of such
canceled Notes in its customary manner (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes will be delivered to the Company.
The Company may not issue new Notes to replace Notes that it has redeemed, purchased or paid or
that have been delivered to the Trustee for cancellation.
Section 2.12
Defaulted Interest
.
If the Company defaults in a payment of interest on the Notes, it will pay the defaulted
interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent special record date, in each case at the
rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and the date of the
proposed payment. The Company will fix or cause to be fixed each such special record date and
payment date;
provided
that no such special record date may be less than 10 days
prior to the related payment date for such defaulted interest. At least 15 days before the
special record date, the Company (or, upon the written request of the Company, the Trustee in the
name and at the expense of the Company) will mail or cause to be mailed to Holders a notice
prepared by the Company that states the special record date, the related payment date and the
amount of such interest to be paid.
Section 2.13
CUSIP Numbers and ISIN Numbers
.
The Company in issuing the Notes may use “CUSIP” numbers and “ISINs” (if then generally in
use), and, if so, the Trustee shall use “CUSIP” numbers and “ISINs” in notices of redemption as a
convenience to Holders;
provided
that any such notice may state that no representation is made as
to the correctness of such numbers, either as printed on the Notes or as contained in any notice of
a redemption and that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or omission of such
numbers. The Company will promptly notify the Trustee in writing of any change in the “CUSIP”
numbers or “ISINs.”
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01
Notices to Trustee
.
If the Company elects to redeem Notes pursuant to the optional redemption provisions of
Section 3.07 hereof, it must furnish to the Trustee, at least 37 days but not more than 60 days
before a redemption date (unless a shorter time is acceptable to the Trustee), an Officers’
Certificate setting forth:
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(1) the clause of this Indenture pursuant to which the redemption shall occur;
(2) the redemption date;
(3) the principal amount of Notes to be redeemed;
(4) the redemption price;
(5) applicable CUSIP numbers; and
(6) a statement that the conditions precedent to such redemption have been satisfied.
Section 3.02
Selection of Notes to Be Redeemed
.
If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes
for redemption or purchase as follows:
(1) if the Notes are listed on any national securities exchange, in compliance with the
requirements of the principal national securities exchange on which the Notes are listed; or
(2) if the Notes are not listed on any national securities exchange, on a
pro rata
basis
,
by lot or by such method as the Trustee shall deem fair and appropriate.
In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or
purchased will be selected, unless otherwise provided herein, not less than 30 days nor more than
60 days prior to the redemption date by the Trustee from the outstanding Notes not previously
called for redemption.
The Trustee will promptly notify the Company in writing of the Notes selected for redemption
and, in the case of any Note selected for partial redemption or purchase, the principal amount
thereof to be redeemed. Notes and portions of Notes selected will be in amounts of $1,000 or whole
multiples of $1,000;
provided
that no Notes of $1,000 or less shall be redeemed in part. Except as
provided in the preceding sentence, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
Section 3.03
Notice of Redemption.
At least 30 days but not more than 60 days before a
redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of
redemption to the Trustee and each Holder whose Notes are to be redeemed at its registered address,
except that redemption notices may be mailed more than 60 days prior to a redemption date if the
notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of
this Indenture pursuant to Articles 8 or 12 hereof.
The notice will identify the Notes (including CUSIP numbers) to be redeemed and will state:
(1) the redemption date;
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(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the principal amount of such
Note to be redeemed and that, after the redemption date upon surrender of such Note, a new
Note or Notes in principal amount equal to the unredeemed portion will be issued upon
cancellation of the original Note or with respect to a Global Note a notation shall be made
on Schedule A thereto to reduce the principal amount of the Global Note to an amount equal
to the unredeemed portion of the Global Note surrendered;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying Agent to collect
the redemption price;
(6) that, unless the Company defaults in making such redemption payment, interest on
Notes (or portion thereof) called for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the
Notes called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy of the CUSIP
number, if any, listed in such notice or printed on the Notes.
At the Company’s request, the Trustee will give the notice of redemption in the Company’s name
and at their expense;
provided
,
however
, that the Company has delivered to the Trustee, at least 45
days prior to the redemption date, an Officers’ Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided in this Section
3.03.
Section 3.04
Effect of Notice of Redemption
.
Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for
redemption become irrevocably due and payable on the redemption date at the redemption price. A
notice of redemption may not be conditional, except as set forth in Section 3.07(a) hereof.
Section 3.05
Deposit of Redemption Price
.
Prior to 10:00 a.m., New York City time, on the redemption date, the Company will deposit with
the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued
interest and Additional Interest, if any, on all Notes to be redeemed on that date. The Trustee or
the Paying Agent will promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and
accrued interest and Additional Interest, if any, on, all Notes to be redeemed.
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If the Company complies with the provisions of the preceding paragraph, on and after the
redemption date, interest will cease to accrue on the Notes or the portions of Notes called for
redemption. If a Note is redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be paid to the Person in
whose name such Note was registered at the close of business on such record date. If any Note
called for redemption is not so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal,
from the redemption date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided in the Notes and
in Section 4.01 hereof.
Section 3.06
Notes Redeemed in Part
.
Upon surrender of a Note that is redeemed in part, the Company will issue and, upon receipt of
an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company
a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note
surrendered.
Section 3.07
Optional Redemption
.
(a) At any time prior to October 15, 2008, the Company may on any one or more occasions redeem
up to 35% of the aggregate principal amount of Notes issued under this Indenture (including any
Additional Notes issued after Issue Date) at a redemption price of 109.125% of the principal amount
thereof, plus accrued and unpaid interest and Additional Interest, if any, to, but not including,
the redemption date, with the net cash proceeds of one or more Equity Offerings;
provided
that:
(1) at least 65% of the aggregate principal amount of Notes issued under this Indenture
(excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately
after the occurrence of such redemption; and
(2) the redemption occurs within 180 days of the date of the closing of such Equity
Offering.
Notice of any redemption upon any Equity Offering may be given prior to the redemption
thereof, and any such redemption or notice may, at the Company’s discretion, be subject to one or
more conditions precedent, including, but not limited to, completion of the related Equity
Offering.
(b) Except pursuant to Section 3.07(a) or as otherwise set forth below, the Notes will not be
redeemable at the Company’s option prior to October 15, 2010;
provided
,
however
, the Company may
acquire the Notes by means other than a redemption, whether pursuant to a tender offer, open market
purchase or otherwise, so long as such acquisition does not violate the terms of this Indenture.
(c) On or after October 15, 2010, the Company may redeem all or a part of the Notes upon not
less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest
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and Additional Interest, if any,
on the Notes to be redeemed to, but not including, the applicable redemption date, if redeemed
during the twelve-month period beginning on October 15 of the years indicated below, subject to the
rights of Holders on the relevant record date to receive interest on the relevant interest payment
date:
|
|
|
|
|
|
|
Year
|
|
Percentage
|
|
2010
|
|
|
104.563
|
%
|
|
2011
|
|
|
103.042
|
%
|
|
2012
|
|
|
101.521
|
%
|
|
2013 and thereafter
|
|
|
100.000
|
%
|
(d) At any time prior to October 15, 2010, the Company may also redeem all or a part of the
Notes at a redemption price equal to 100% of the principal amount of Notes to be redeemed, plus the
Applicable Premium (as calculated by the Company) as of, and accrued and unpaid interest and
Additional Interest, if any, to, but not including, the redemption date, subject to the rights of
Holders on the relevant record date to receive interest due on the relevant interest payment date.
(e) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
Unless the Company defaults in the payment of the redemption price, interest will cease to
accrue on the Notes or portions thereof called for redemption on the applicable redemption date.
Section 3.08
Mandatory Redemption
.
The Company is not required to make mandatory redemption or sinking fund payments with respect
to the Notes.
Section 3.09
Intentionally Omitted
.
ARTICLE 4
COVENANTS
Section 4.01
Payment of Notes
.
The Company will pay or cause to be paid the principal of, premium, if any, and interest and
Additional Interest, if any, on, the Notes on the dates and in the manner provided in the Notes.
Principal, premium, if any, and interest and Additional Interest, if any will be considered paid on
the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of
10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available
funds and designated for and sufficient to pay all principal of, premium, if any, and interest and
Additional Interest, if any, then due. The Company will pay all
Additional Interest, if any, in the same manner on the dates and in the amounts set forth in
the Registration Rights Agreement.
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The Company will pay interest on overdue principal at the rate specified therefor in the
Notes, and it shall pay interest on overdue installments of interest at the same rate borne by the
Notes to the extent lawful.
Section 4.02
Maintenance of Office or Agency
.
The Company will maintain in the Borough of Manhattan, the City of New York, an office or
agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or
co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where
notices and demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company fails to maintain any such
required office or agency or fails to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office
of the Trustee.
The Company may also from time to time designate one or more other offices or agencies where
the Notes may be presented or surrendered for any or all such purposes and may from time to time
rescind such designations;
provided
,
however
, that no such designation or rescission will in any
manner relieve the Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the location of any such
other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as one such office or
agency of the Company in accordance with Section 2.03 hereof.
Section 4.03
Reports
.
(a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are
outstanding, the Company will, within 15 days after the date it would have been required to file
with the SEC, provide to the Trustee, if not filed electronically with the SEC, all quarterly and
annual financial information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such Forms, including a “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” that describes the
financial condition and results of operations of the Company and its consolidated Subsidiaries
(showing in reasonable detail, either on the face of the financial statements or in the footnotes
thereto and in Management’s Discussion and Analysis of Financial Condition and Results of
Operations, the financial condition and results of operations of the Company and its consolidated
Subsidiaries), and, with respect to the annual information only, a report thereon by the Company’s
certified independent accountants.
Delivery of such reports, information and documents to the Trustee is for informational
purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained therein, including the
Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to
rely exclusively on Officers’ Certificates). The Trustee is under no duty to
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examine such reports,
information or documents to ensure compliance with the provisions of this Indenture or to ascertain
the correctness or otherwise of the information or the statements contained therein. The Trustee is
entitled to assume such compliance and correctness unless a Responsible Officer of the Trustee is
informed otherwise.
All such reports will be prepared in all material respects in accordance with all of the rules
and regulations applicable to such reports.
Following the consummation of the Registered Exchange Offer contemplated by the Registration
Rights Agreement, whether or not required by the rules and regulations of the SEC, the Company will
file a copy of all such information and reports with the SEC for public availability within the
time periods specified in the SEC’s rules and regulations (unless the SEC will not accept such a
filing).
(b) For so long as any Notes remain outstanding, if at any time they are not required to file
with the SEC the reports required by paragraph (a) of this Section 4.03, the Company and the
Guarantors will furnish to the Holders and to prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Notwithstanding Sections 4.03(a) and (b) above, prior to the commencement of the
Registered Exchange Offer or the effectiveness of a Shelf Registration Statement, such requirements
will be deemed satisfied with respect to the relevant period to which the quarterly or annual
financial information relates by the filing with the SEC of the Exchange Offer Registration
Statement and/or Shelf Registration Statement, and any amendments thereto, with such financial
information that satisfies Regulation S-X of the Securities Act.
Section 4.04
Compliance Certificate
.
(a) The Company shall deliver to the Trustee within 120 days after the end of each fiscal year
of the Company an Officers’ Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have knowledge of any
Default and whether or not the signers know of any Default that occurred during such period. If
they do, the certificate shall describe the Default, its status and what action the Company is
taking or proposes to take with respect thereto. The Company also shall comply with Section
314(a)(4) of the TIA.
(b) So long as any of the Notes are outstanding, the Company will deliver to the Trustee,
forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers’
Certificate specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
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Section 4.05
Intentionally Omitted
.
Section 4.06
Limitation on Incurrence of Senior Subordinated Indebtedness
.
The Company will not, and will not permit any Guarantor to, incur any Indebtedness that is
subordinated in right of payment to any Senior Indebtedness unless such Indebtedness is
pari passu
with, or subordinated in right of payment to, the Notes or any Note Guarantee, as applicable;
provided
that the foregoing limitation shall not apply to distinctions between categories of Senior
Indebtedness that exist by reason of any Liens or guarantees arising or created in respect of some
but not all such Senior Indebtedness.
Section 4.07
Restricted Payments
.
(a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on account of
the Company’s or any of its Restricted Subsidiaries’ Equity Interests or to the direct or
indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in
their capacity as such (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company and other than dividends or distributions
payable to the Company or a Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of
the Company or any Parent;
(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value, any Indebtedness of the Company or any Guarantor that is
contractually subordinated to the Notes or to any Note Guarantee (excluding (x) any
intercompany Indebtedness between or among the Company and any of its Restricted
Subsidiaries or (y) the purchase, repurchase, or other acquisition of Indebtedness that is
contractually subordinated to the Notes or to any Note Guarantee, as the case may be,
purchased in anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of purchase, repurchase or
acquisition), except a payment of interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment
(all such payments and other actions set forth in these clauses (1) through (4) above being
collectively referred to as “
Restricted Payments
”), unless, at the time of and after giving effect
to such Restricted Payment:
(A) no Default or Event of Default has occurred and is continuing or would occur as a
consequence of such Restricted Payment;
(B) the Company would, after giving
pro forma
effect to such Restricted Payment as if
such Restricted Payment had been made at the beginning of the applicable
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four-quarter
period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in Section 4.09(a); and
(C) such Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Company and its Restricted Subsidiaries since the date of this
Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5) (only to
the extent of one-half of the amounts paid pursuant to such clause), (6), (8), (9), (10),
(11), (12), (14), (15), (16) and (17) of Section 4.07(b) hereof), is less than the sum,
without duplication, of:
(i) 50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter commencing
prior to the date of this Indenture to the end of the Company’s most recently ended
fiscal quarter for which internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit);
plus
(ii) 100% of the aggregate net proceeds, including cash and the Fair Market
Value of property other than cash, received by the Company since the date of this
Indenture (x) as a contribution to its common equity capital or (y) from the issue
or sale of Equity Interests of the Company or any Parent (other than Disqualified
Stock, Designated Preferred Stock, Excluded Contributions or Cash Contributions) or
from the issue or sale of convertible or exchangeable Disqualified Stock or
convertible or exchangeable debt securities that have been converted into or
exchanged for such Equity Interests (other than Equity Interests (or Disqualified
Stock or debt securities) sold to a Subsidiary of the Company);
plus
(iii) to the extent that any Restricted Investment that was made after the date
of this Indenture is sold for cash or otherwise liquidated or repaid for cash, 100%
of the aggregate amount received in cash and the Fair Market Value of property other
than cash received;
plus
(iv) to the extent that any Unrestricted Subsidiary of the Company designated
as such after the date of this Indenture is redesignated as a Restricted Subsidiary
after the date of this Indenture or has been merged into, consolidated or
amalgamated with or into, or transfers or conveys its assets to, the Company or
a Restricted Subsidiary of the Company, 100% of the Fair Market Value of the
Company’s Investment in such Subsidiary as of the date of such redesignation,
combination or transfer (or of the assets transferred or conveyed, as applicable)
after deducting any Indebtedness associated with the Unrestricted Subsidiary so
designated or combined or any Indebtedness associated with the assets so transferred
or conveyed);
plus
(v) 100% of any dividends or distributions received by the Company or a
Restricted Subsidiary of the Company after the date of this Indenture from an
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Unrestricted Subsidiary of the Company, to the extent that such dividends or
distributions were not otherwise included in the Consolidated Net Income of the
Company for such period.
(b) The provisions of Section 4.07(a) hereof will not prohibit:
(1) the payment of any dividend or distribution or the consummation of any redemption
within 60 days after the date of declaration of the dividend or distribution or giving of
the redemption notice, as the case may be, if, at the date of declaration or notice, the
dividend, distribution or redemption payment would have complied with the provisions of this
Indenture;
(2) the making of any Restricted Payment in exchange for, or out of the net cash
proceeds received by the Company of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, Equity Interests of the Company or any Parent (other than
Disqualified Stock) or from the substantially concurrent contribution of such proceeds to
the capital of the Company in any form other than Disqualified Stock or Indebtedness;
provided
that the amount of any such net cash proceeds that are utilized for any such
Restricted Payment will be excluded from clause (C)(ii) of Section 4.07(a) hereof;
(3) the repurchase, redemption, defeasance or other acquisition or retirement for value
of Indebtedness of the Company or any Restricted Subsidiary of the Company that is
contractually subordinated to the Notes or to any Note Guarantee with the net cash proceeds
from a substantially concurrent incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend (or, in the case of any partnership or limited
liability company, any similar distribution) by a Restricted Subsidiary of the Company to
the holders of its Equity Interests on a
pro rata
basis;
(5) the repurchase, redemption or other acquisition or retirement (or dividends or
distributions to any Parent to finance any such repurchase, redemption or other acquisition
or retirement) for value of any Equity Interests of the Company, any Parent or any
Restricted Subsidiary of the Company held by any current or former officer, director,
consultant or employee of the Company, any Parent or any Restricted Subsidiary of the
Company pursuant to any equity subscription agreement, stock option agreement, shareholders’
or members’ agreement or similar agreement, plan or arrangement;
provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests may not exceed $4.0 million in any calendar year (with unused
amounts in any calendar year being permitted to be carried over into succeeding calendar
years);
provided further
that the amount in any calendar year may be increased by an amount
not to exceed:
(a) the cash proceeds received by the Company or any of its Restricted
Subsidiaries from the sale of Equity Interests (other than Disqualified Stock) of
the Company or any Parent (to the extent contributed to the capital of the
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Company
or any Restricted Subsidiary in any form other than Disqualified Stock or
Indebtedness) to members of management, directors or consultants of the Company and
its Restricted Subsidiaries or any Parent that occurs after the date of this
Indenture (
provided
that the amount of such cash proceeds utilized for any such
repurchase, retirement, other acquisition, or dividend or distribution will not
increase the amount available for Restricted Payments under clause (C) of Section
4.07(a) and to the extent such cash proceeds have not otherwise been applied to the
payment of Restricted Payments);
plus
(b) the cash proceeds of key man life insurance policies received by the
Company or any Parent (to the extent such cash proceeds are contributed to the
capital of the Company in any form other than Disqualified Stock or Indebtedness)
and its Restricted Subsidiaries after the date of this Indenture, less any amounts
previously applied to the payment of Restricted Payments pursuant to this clause
(5);
(
provided
that the Company may elect to apply all or any portion of the aggregate increase
contemplated by clauses (a) and (b) above in any single calendar year;
provided further
,
however
, notwithstanding the foregoing, to the extent such repurchase, redemption or other
acquisition or retirement is effected through the issuance of Indebtedness to such officer,
director, consultant or employee the payment under this provision will be deemed to have
been made on the date of repayment of such Indebtedness);
(6) the repurchase of Equity Interests deemed to occur upon the exercise of stock
options to the extent such Equity Interests represent a portion of the exercise price of
those stock options;
(7) the declaration and payment of regularly scheduled or accrued dividends or
distributions to holders of any class or series of Disqualified Stock of the Company or any
Restricted Subsidiary of the Company issued on or after the date of this Indenture in
accordance with the Fixed Charge Coverage Ratio test described in Section 4.09 hereof;
(8) Permitted Payments to Parent;
(9) purchases of receivables pursuant to a Receivables Repurchase Obligation in
connection with a Qualified Receivables Financing;
(10) the declaration and payment of dividends or distributions to holders of any class
or series of Designated Preferred Stock (other than Disqualified Stock) issued after the
date of this Indenture and the declaration and payment of dividends to any Parent, the
proceeds of which will be used to fund the payment of dividends or
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distributions to holders
of any class or series of Designated Preferred Stock (other than Disqualified Stock) of any
Parent issued after the date of this Indenture;
provided
,
however
, that (A) for the most
recently ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date of issuance of such Designated Preferred Stock,
after giving effect to such issuance (and the payment of dividends or distributions) on a
pro forma basis, the Company could incur an additional $1.00 of Indebtedness pursuant to the
Fixed Charge Coverage Ratio, and (B) the aggregate amount of dividends declared and paid
pursuant to this clause (10) does not exceed the net cash proceeds actually received by the
Company (including any such proceeds contributed to the capital of the Company in any form
other than Disqualified Stock or Indebtedness by any Parent) from any such sale of
Designated Preferred Stock (other than Disqualified Stock) issued after the date of this
Indenture;
(11) any payments made in connection with the consummation of the Transactions (as such
term is described in the Offering Memorandum);
(12) Restricted Payments that are made with Excluded Contributions;
(13) other Restricted Payments in an aggregate amount not to exceed $15.0 million since
the date of this Indenture;
(14) the satisfaction of change of control obligations once the Company has fulfilled
its obligations under this Indenture with respect to a Change of Control;
(15) the repayment of intercompany debt that was permitted to be incurred under this
Indenture;
(16) cash dividends or other distributions on the Company’s Capital Stock used to, or
the making of loans to any Parent to, fund the payment of fees and expenses owed by the
Company or its Restricted Subsidiaries to Affiliates, to the extent permitted by Section
4.11 hereof;
(17) the payment of dividends or distributions on the Company’s common equity (or the
payment of dividends or distributions to any Parent to fund the payment by such Parent of
dividends or distributions on its common equity) of up to 5.0% per calendar year of the net
cash proceeds received by the Company from any public Equity Offering or contributed to the
capital of the Company in any form other than Disqualified Stock or Indebtedness by any
Parent from any public Equity Offering;
provided
that the amount of any such net cash
proceeds that are utilized for any such Restricted Payment will be excluded from clause
(C)(ii) of Section 4.07(a) hereof;
(18) any payments in connection with any merger or consolidation involving the Company
or any of its Restricted Subsidiaries that does not violate the provisions of Section 5.01
hereof;
(19) payments of principal of, and interest on, any Management Notes; and
(20) the distribution, as a dividend or otherwise, of shares of Capital Stock of, or
Indebtedness owed to the Company or a Restricted Subsidiary of the Company by, Unrestricted
Subsidiaries;
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provided
,
however
, that at the time of, and after giving effect to, any Restricted Payment
permitted under clause (10) or (17) of this Section 4.07(b), no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof.
(c) The amount of all Restricted Payments (other than cash) will be the Fair Market Value on
the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or
issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment.
Section 4.08
Dividend and Other Payment Restrictions Affecting Subsidiaries
.
(a) the Company will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, create or permit to exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to the Company
or any of its Restricted Subsidiaries, or with respect to any other interest or
participation in, or measured by, its profits, or pay any Indebtedness owed to the Company
or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted Subsidiaries; or
(3) sell, lease or transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
(b) The restrictions in Section 4.08(a) hereof will not apply to encumbrances or restrictions
existing under or by reason of:
(1) agreements governing Indebtedness outstanding on the Issue Date, the Credit
Agreement and Credit Facilities as in effect on the date of this Indenture and any
amendments, restatements, modifications, renewals, supplements, refundings, replacements or
refinancings of those agreements;
provided
that such amendments, restatements,
modifications, renewals, supplements, refundings, replacements or refinancings are not, in
the good faith judgment of the Company’s Board of Directors, materially more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions than those
contained in those agreements on the date of this Indenture;
(2) this Indenture, the Notes and the Note Guarantees;
(3) applicable law, rule, regulation, order, approval, license, permit or similar
restriction;
(4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness or Capital Stock was incurred or issued in
connection with or in contemplation of such acquisition), which encumbrance
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or restriction
is not applicable to any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired;
provided
that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred;
(5) non-assignment provisions or subletting restrictions in contracts, leases and
licenses entered into in the ordinary course of business;
(6) purchase money obligations for property (including Capital Stock) acquired in the
ordinary course of business and Capital Lease Obligations that impose restrictions on the
property purchased or leased of the nature described in clause (3) of Section 4.08(a)
hereof;
(7) any agreement for the sale or other disposition of the Capital Stock or assets of a
Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending
closing of the sale or other disposition;
(8) Permitted Refinancing Indebtedness;
provided
that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are not, in the good faith
judgment of the Company’s Board of Directors, materially more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness being refinanced;
(9) Liens permitted to be incurred under Section 4.12 hereof that limit the right of
the debtor to dispose of the assets securing such Indebtedness;
(10) provisions limiting the disposition or distribution of assets or property or
transfer of Capital Stock in joint venture agreements, asset sale agreements, sale-leaseback
agreements, stock sale agreements, limited liability company organizational documents, and
other similar agreements entered into (A) in the ordinary course of business, consistent
with past practice or (B) with the approval of the Company’s Board of Directors, which
limitation is applicable only to the assets, property or Capital Stock that are the subject
of such agreements;
(11) any encumbrance or restriction of a Receivables Subsidiary effected in connection
with a Qualified Receivables Financing;
provided
,
however
, that such restrictions apply only
to such Receivables Subsidiary;
(12) restrictions on cash, Cash Equivalents, Marketable Securities or other deposits or
net worth imposed by customers or lessors under contracts or leases entered into in the
ordinary course of business;
(13) other Indebtedness of Restricted Subsidiaries (i) that are Guarantors that is
incurred subsequent to the date of this Indenture pursuant to Section 4.09 hereof or (ii)
that is incurred subsequent to the date of this Indenture pursuant to clauses (4), (15) and
(17) of Section 4.09(b) hereof;
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(14) encumbrances on property that exist at the time the property was acquired by the
Company or a Restricted Subsidiary;
(15) contractual encumbrances or restrictions in effect on the Issue Date, and any
amendments, restatements, modifications, renewals, supplements, refundings, replacements or
refinancings of those agreements;
provided
that the amendments, restatements, modifications,
renewals, supplements, refundings, replacements or refinancings are not, in the good faith
judgment of the Company’s Board of Directors, materially more restrictive, taken as a whole,
with respect to such dividend and other payment restrictions than those contained in those
agreements on the date of this Indenture; or
(16) any encumbrances or restrictions imposed by any amendments or refinancings of the
contracts, instruments or obligations referred to above in clauses (1) through (15);
provided
that such amendments or refinancings are not, in the good faith judgment of the
Company’s Board of Directors, materially more restrictive, taken as a whole, than such
encumbrances and restrictions prior to such amendment or refinancing.
Section 4.09
Incurrence of Indebtedness and Issuance of Preferred Equity
.
(a) the Company will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively, “
incur
”) any Indebtedness
(including Acquired Debt), and the Company will not issue any Disqualified Stock and the Company
will not permit any of its Restricted Subsidiaries to issue any Disqualified Stock or preferred
equity;
provided
,
however
, that the Company may incur Indebtedness (including Acquired Debt) or
issue Disqualified Stock, and the Company or any Restricted Subsidiary of the Company may incur
Indebtedness (including Acquired Debt) or issue Disqualified Stock or preferred equity, if the
Fixed Charge Coverage Ratio for the Company’s most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or such preferred equity is issued,
as the case may be, would have been at least 2.0 to 1.0, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been
incurred or the Disqualified Stock or the preferred equity had been issued, as the case may be, at
the beginning of such four-quarter period.
(b) The provisions of Section 4.09(a) hereof will not prohibit the incurrence of any of the
following items of Indebtedness (collectively, “
Permitted Debt
”):
(1) the incurrence by the Company, the Guarantors or any of the Company’s Restricted
Subsidiaries of additional Indebtedness and letters of credit and bankers’ acceptances
thereunder under Credit Facilities in an aggregate principal amount at any one time
outstanding under this clause (1) (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and any Guarantors and any
Restricted Subsidiaries thereunder) not to exceed $340.0 million;
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(2) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness to
the extent outstanding on the date of this Indenture;
(3) the incurrence by the Company and the Guarantors (including any future Guarantor)
of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the
date of this Indenture and the Exchange Notes and the related Note Guarantees to be issued
pursuant to the Registration Rights Agreement;
(4) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
represented by Capital Lease Obligations, mortgage financings, industrial revenue bonds,
purchase money obligations or other Indebtedness or preferred stock, or synthetic lease
obligations, in each case, incurred for the purpose of financing all or any part of the
purchase price or cost of design, development, construction, installation or improvement of
property (real or personal and including Capital Stock), plant or equipment used in the
business of the Company or any of its Restricted Subsidiaries (in each case, whether through
the direct purchase of such assets or the Equity Interests of any Person owning such
assets), in an aggregate principal amount not to exceed, immediately after giving effect to
any such incurrence, the greater of (x) $35.0 million and (y) 5.0% of Total Assets;
(5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew,
refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany
Indebtedness) that was permitted by this Indenture to be incurred under Section 4.09(a)
hereof or clause (2), (3), (4), (5), (12), (15) or (16) of this Section 4.09(b);
(6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany
Indebtedness between or among the Company and any of its Restricted Subsidiaries;
provided
,
however
, that:
(A) if the Company or any Guarantor is the obligor on such Indebtedness and the
payee is not the Company or a Guarantor, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of all Obligations then due with
respect to the Notes, in the case of the Company, or the Note Guarantee, in the case
of a Guarantor; and
(B) (i) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary of the Company, and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted Subsidiary
of the Company, shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that
was not permitted by this clause (6);
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(7) the issuance by any of the Company’s Restricted Subsidiaries to the Company or to
another Restricted Subsidiary of shares of preferred equity or Disqualified Stock;
provided
,
however
, that:
(A) any subsequent issuance or transfer of Equity Interests that results in any
such preferred equity or Disqualified Stock being held by a Person other than the
Company or a Restricted Subsidiary of the Company, and
(B) any sale or other transfer of any such preferred equity or Disqualified
Stock to a Person that is not either the Company or a Restricted Subsidiary of the
Company,
will be deemed, in each case, to constitute an issuance of such preferred equity or
Disqualified Stock by such Restricted Subsidiary that was not permitted by this clause (7);
(8) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging
Obligations other than for speculative purposes;
(9) the guarantee by any Restricted Subsidiary of the Company of Indebtedness of the
Company or a Restricted Subsidiary of the Company that was permitted to be incurred by
another provision of this Section 4.09 (including Section 4.09(a) hereof);
provided
that if
the Indebtedness being guaranteed is subordinated to or
pari passu
with the Notes, then the
guarantee thereof shall be subordinated or
pari passu
, as applicable, to the same extent as
the Indebtedness so guaranteed;
(10) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness in respect of workers’ compensation claims, payment obligations in connection
with health or other types of social security benefits, unemployment or other insurance or
self-insurance obligations, reclamation, statutory obligations, bankers’ acceptances,
performance, surety or similar bonds and letters of credit or completion or performance
guarantees or equipment leases (including, without limitation, performance guarantees and
reimbursement obligations arising under or in accordance with the terms of the Merger
Agreement), or other similar obligations in the ordinary course of business or consistent
with past practice;
(11) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently drawn against insufficient funds;
(12) Indebtedness, Disqualified Stock or preferred equity of Persons that are acquired
by the Company or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary
in accordance with the terms of this Indenture;
provided
,
however
, that such Indebtedness,
or Disqualified Stock or preferred equity is not incurred or issued in contemplation of such
acquisition or merger or to provide all or a portion of the funds or credit support required
to consummate such acquisition or merger;
provided further
,
however
, that, for any such
Indebtedness, Disqualified Stock or preferred equity outstanding under this clause (12) in
excess of $10.0 million on the date such Person is
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acquired by the Company or a Restricted
Subsidiary, after giving effect to such acquisition and the incurrence or issuance of such
Indebtedness, Disqualified Stock or preferred equity either:
(A) the Company would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first
sentence of Section 4.09(a); or
(B) the Fixed Charge Coverage Ratio, on the date of and after giving pro forma
effect to such acquisition and such incurrence or issuance, would not be reduced as
a result of such acquisition;
(13) Indebtedness incurred by a Receivables Subsidiary in a Qualified Receivables
Financing that is Non-Recourse Debt to the Company or any Restricted Subsidiary of the
Company other than such Receivables Subsidiary (except for Standard Securitization
Undertakings);
(14) the incurrence of Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase price, earn
outs, or similar obligations, in each case, incurred or assumed in connection with the
disposition or acquisition of any business, assets or a Subsidiary in accordance with the
terms of this Indenture, other than guarantees of Indebtedness incurred or assumed by any
Person acquiring all or any portion of such business, assets or Subsidiary for the purpose
of financing such acquisition;
(15) the incurrence by the Company or any of its Restricted Subsidiaries of additional
Indebtedness or the issuance of Disqualified Stock or preferred equity in an aggregate
principal amount (or accreted value, as applicable) or having an aggregate liquidation
preference at any time outstanding not to exceed $45.0 million (it being understood that any
Indebtedness, Disqualified Stock or preferred equity incurred pursuant to this clause (15)
shall cease to be deemed incurred or outstanding for purposes of this Section 4.09 from and
after the date on which the Company could have incurred such Indebtedness or Disqualified
Stock or preferred equity under Section 4.09(a) hereof without reliance upon this clause
(15));
(16) the incurrence by the Company or any of its Restricted Subsidiaries of additional
Indebtedness arising out of advances on exports, advances on imports, advances on trade
receivables, factoring of receivables, customer prepayments and similar transactions in the
ordinary course of business and consistent with past practice;
(17) the incurrence of additional Indebtedness by a Foreign Subsidiary in an aggregate
principal amount which does not exceed the greater of (a) $30.0 million or (b) 3.5% of the
Total Assets at any one time outstanding (which amount may, but need not, be incurred in
whole or in part under a Credit Facility);
(18) Indebtedness of the Company or any of its Restricted Subsidiaries in respect of
the Management Notes; and
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(19) Contribution Indebtedness.
For purposes of determining compliance with this Section 4.09, in the event that an item of
proposed Indebtedness, Disqualified Stock or preferred equity meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through (19) above or is entitled to
be incurred pursuant to Section 4.09(a) hereof, the Company will be permitted to classify such item
of Indebtedness, Disqualified Stock or preferred equity on the date of its incurrence and will only
be required to include the amount and type of such Indebtedness, Disqualified Stock or preferred
equity in one of the above clauses, although the Company may divide and classify an item of
Indebtedness, Disqualified Stock or preferred equity in one or more of the types of Indebtedness,
Disqualified Stock or preferred equity and may later reclassify all or a portion of such item of
Indebtedness, Disqualified Stock or preferred equity, in any manner that complies with this Section
4.09. The accrual of interest or dividends, the accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with
the same terms, the reclassification of preferred equity as Indebtedness due to a change in
accounting principles, and the payment of dividends on Disqualified Stock or preferred equity in
the form of additional shares of the same class of Disqualified Stock or preferred equity will not
be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or preferred
equity for purposes of this Section 4.09;
provided
, in each such case (other than preferred stock
that is not Disqualified Stock), that the amount of any such accrual, accretion or payment is
included in Fixed Charges of the Company as accrued. Notwithstanding any other provision of this
Section 4.09, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may
incur pursuant to this Section 4.09 shall not be deemed to be exceeded solely as a result of
fluctuations in exchange rates or currency values.
The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with
original issue discount;
(2) the principal amount of the Indebtedness, in the case of any other Indebtedness;
and
(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the
specified Person, the lesser of:
(A) the Fair Market Value of such assets at the date of determination; and
(B) the amount of the Indebtedness of the other Person.
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Section 4.10
Asset Sales
.
The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an
Asset Sale unless:
(1) The Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Sale at least equal to the Fair Market Value of the
assets or Equity Interests issued or sold or otherwise disposed of; and
(2) at least 75% of the consideration received in the Asset Sale by the Company or such
Restricted Subsidiary is in the form of cash, Cash Equivalents or Marketable Securities.
For purposes of this provision, each of the following shall be deemed to be cash:
(A) any liabilities of the Company or any Restricted Subsidiary of the Company
(other than contingent liabilities and liabilities that are by their terms
subordinated to the Notes or any Note Guarantee) that are assumed by the transferee
of any such assets and as a result of which, the Company or such Restricted
Subsidiary of the Company are released from any further liability in connection
therewith;
(B) any securities, notes, other obligations or assets received by the Company
or any such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash or Cash Equivalents within 180 days
of the receipt thereof, to the extent of the cash or Cash Equivalents received in
that conversion;
(C) any Designated Non-cash Consideration received by the Company or any of its
Restricted Subsidiaries in such Asset Sale;
provided
that the aggregate Fair Market
Value of such Designated Non-cash Consideration, taken together with the Fair Market
Value at the time of receipt of all other Designated Non-cash Consideration received
pursuant to this clause (C), less the amount of Net Proceeds previously realized in
cash from prior Designated Non-cash Consideration is less than the greater of (x)
2.5% of Total Assets at the time of the receipt of such Designated Non-cash
Consideration (with the Fair Market Value of each item of Designated Non-cash
Consideration being measured at the time received and without giving effect to
subsequent changes in value) and (y) $17.5 million; and
(D) any Capital Stock or assets of the kind referred to in clause (2) or (4) of
the next paragraph of this Section 4.10.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the
applicable Restricted Subsidiary, as the case may be) may:
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(a) apply such Net Proceeds, at its option:
(1) to repay (w) Indebtedness and other Obligations constituting Senior
Indebtedness, (x) any Indebtedness that was secured by the assets sold in such Asset
Sale, (y) other
pari passu
Indebtedness (
provided
that the Company shall also
equally and ratably reduce Indebtedness under the Notes by making an offer (in
accordance with the procedures set forth below for an Asset Sale) to all Holders to
purchase at a purchase price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and Additional Interest, if any, the
pro rata
principal
amount of Notes), or (z) Indebtedness of a Restricted Subsidiary that is not a
Guarantor, in each case other than Indebtedness owed to any Parent, the Company or
any of their respective Affiliates;
(2) to acquire all or substantially all of the assets of, or any Capital Stock
of, another Permitted Business;
provided
that in the case of any such acquisition of
Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of the
Company;
(3) to make a capital expenditure; or
(4) to acquire other assets that are not classified as current assets under
GAAP and that are used or useful in a Permitted Business; or
(b) enter into a binding commitment to apply the Net Proceeds pursuant to clause (a)
(2), (3) or (4) above,
provided
that such binding commitment shall be treated as a permitted
application of the Net Proceeds from the date of such commitment until the earlier of (x)
the date on which such acquisition or expenditure is consummated, and (y) the 180th day
following the expiration of the aforementioned 365 day period.
Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving
credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this
Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided in the second
paragraph of this Section 4.10 will constitute “
Excess Proceeds.
” When the aggregate amount of
Excess Proceeds exceeds $15.0 million, within ten Business Days thereof, the Company will make an
offer to all Holders (an “
Asset Sale Offer
”) and all holders of other Indebtedness that is
pari
passu
with the Notes containing provisions similar to those set forth in this Indenture with
respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the
maximum principal amount of Notes and such other
pari passu
Indebtedness that may be purchased out
of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the
principal amount of the Notes and such other
pari passu
Indebtedness plus accrued and unpaid
interest and Additional Interest, if any, on the Notes and such other
pari passu
Indebtedness, to,
but excluding, the date of purchase and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any
purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and
other
pari passu
Indebtedness tendered into such Asset Sale Offer
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exceeds the amount of Excess Proceeds, the Notes and such other
pari passu
Indebtedness to be
purchased shall be purchased on a pro rata basis based on the principal amount of Notes and such
other
pari passu
Indebtedness tendered. In such event, the Trustee shall select the Notes to be
purchased as provided in this Section 4.10. Upon completion of each Asset Sale Offer, the amount
of Excess Proceeds will be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent those laws and regulations are
applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations conflict with the Asset Sale
provisions of this Indenture, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the Asset Sale provisions
of this Indenture by virtue of such compliance.
Not later than the date upon which written notice of an Asset Sale Offer is delivered to the
Trustee as provided above, the Company shall deliver to the Trustee an Officers’ Certificate as to
(i) the amount of the Excess Proceeds, (ii) the allocation of the Net Proceeds from the Asset Sales
pursuant to which such Asset Sale Offer is being made and (iii) the compliance of such allocation
with the provisions of Section 4.10. Upon the expiration of the period for which the Asset Sale
Offer remains open (the “
Offer Period
”), the Company shall deliver to the Trustee for cancellation
the Notes or portions thereof that have been properly tendered to and are to be accepted by the
Company. Upon receipt from the Company of the purchase price for the Notes accepted for payment,
the Trustee shall promptly (but in any case not later than the Business Day after the Trustee
receives such amounts) mail or deliver to each tendering Holder an amount equal to the purchase
price of the Notes tendered by such Holder and accepted by the Company for purchase. In the event
that the Excess Proceeds delivered by the Company to the Trustee is greater than the purchase price
of the Notes tendered, the Trustee shall deliver the excess to the Company immediately after the
expiration of the Offer Period for application in accordance with this Section 4.10.
Holders electing to have a Note purchased shall be required to surrender the Note, with the
form entitled “Option of Holder to Elect Purchase” attached to the Note duly completed, to the
Company at the address specified in the notice at least three Business Days prior to the purchase
date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives
not later than one Business Day prior to the purchase date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal amount of the Note which
was delivered by the Holder for purchase and a statement that such Holder is withdrawing his
election to have such Note purchased. If at the end of the Offer Period more Notes are tendered
pursuant to an Asset Sale Offer than the Company is required to purchase, selection of such Notes
for purchase shall be made by the Trustee in accordance with Section 3.02 hereof;
provided
that no
Notes of $1,000 or less shall be purchased in part.
Notices of an Asset Sale Offer shall be mailed by first class mail, postage prepaid, at least
30 but not more than 60 days before the purchase date to each Holder at such Holder’s registered
address. If any Note is to be purchased in part only, any notice of purchase that relates to such
Security shall state the portion of the principal amount thereof that is to be purchased.
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A new Note in principal amount equal to the unpurchased portion of any Note purchased in part
shall be issued in the name of the Holder thereof upon cancellation of the original Note in
accordance with Section 2.02 hereof. On and after the purchase date, unless the Company defaults
in payment of the purchase price, interest shall cease to accrue on Notes or portions thereof
purchased.
Section 4.11
Transactions with Affiliates
.
(a) the Company will not, and will not permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of
the Company (each, an “
Affiliate Transaction
”), involving aggregate consideration in excess of $1.0
million, unless:
(1) the Affiliate Transaction is on terms that are not materially less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an unrelated
Person; and
(2) the Company delivers to the Trustee:
(A) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, a
resolution of the Board of Directors of the Company certifying that such Affiliate
Transaction complies with this Section 4.11 and that such Affiliate Transaction has
been approved by a majority of the disinterested members, if any, of the Board of
Directors of the Company; and
(B) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $25.0 million, an
opinion as to the fairness to the Company or such Restricted Subsidiary of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
(b) The following items will not be deemed to be Affiliate Transactions and, therefore, will
not be subject to the provisions of Section 4.11(a) hereof:
(1) any employment agreement, employee benefit plan, officer or director
indemnification agreement or any similar arrangement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business or consistent with past
practice and payments pursuant thereto;
(2) transactions (including a merger) between or among the Company and/or any of its
Restricted Subsidiaries;
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(3) transactions with a Person (other than an Unrestricted Subsidiary of the Company)
that is an Affiliate of the Company solely because the Company owns, directly or through a
Restricted Subsidiary, an Equity Interest in, or controls, such Person;
(4) payment of reasonable fees to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any of its Restricted Subsidiaries or
any Parent;
(5) any issuance of Equity Interests (other than Disqualified Stock) of the Company to
Affiliates of the Company or to any director, officer, employee or consultant of the Company
or any Parent, and the granting and performance of registration rights;
(6) Restricted Payments and Investments that do not violate Section 4.07 hereof;
(7) the entering into any agreement to pay, and the payment of, customary annual
management, consulting, monitoring and advisory fees to the Equity Investors in an amount
not to exceed in any four quarter period the greater of (x) $2.5 million and (y) 2.0% of
Consolidated Cash Flow of the Company and its Restricted Subsidiaries for such period;
(8) loans or advances to employees or consultants in the ordinary course of business or
consistent with past practice not to exceed $2.5 million in the aggregate at any one time
outstanding;
(9) any transaction effected as part of a Qualified Receivables Financing;
(10) any transaction in which the Company or any of its Restricted Subsidiaries, as the
case may be, delivers to the Trustee a letter from an accounting, appraisal or investment
banking firm of national standing stating that such transaction is fair to the Company or
such Restricted Subsidiary from a financial point of view or that such transaction meets the
requirements of clause (1) of Section 4.11(a);
(11) the existence of, or the performance by the Company or any of its Restricted
Subsidiaries of its obligations under the terms of, any acquisition agreements or members’
or stockholders agreement or related documents to which it is a party as of the date of this
Indenture and any amendment thereto or similar agreements which it may enter into
thereafter;
provided
,
however
, that the existence of, or the performance by the Company or
any of its Restricted Subsidiaries of its obligations under, any future amendment to any
such existing agreement or under any similar agreement entered into after the date of this
Indenture shall only be permitted by this clause (11) to the extent that the terms of any
such existing agreement, together with all amendments thereto, taken as a whole, or such new
agreement are not, in the good faith judgment of the Company’s Board of Directors, otherwise
more disadvantageous to the Holders of the Notes taken as a whole than the original
agreement as in effect on the date of this Indenture;
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(12) transactions with Unrestricted Subsidiaries, customers, clients, suppliers, joint
venture partners or purchasers or sellers of goods or services, or lessors or lessees of
property, in each case in the ordinary course of business and otherwise in compliance with
the terms of this Indenture which are, in the aggregate (taking into account all the costs
and benefits associated with such transactions), materially no less favorable to the Company
or its Restricted Subsidiaries than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated Person, in the
good faith judgment of the Company’s Board of Directors or senior management thereof, or are
on terms at least as favorable as might reasonably have been obtained at such time from an
unaffiliated party;
(13) (x) guarantees of performance by the Company and its Restricted Subsidiaries of
Unrestricted Subsidiaries of the Company in the ordinary course of business, except for
guarantees of Indebtedness in respect of borrowed money, and (y) pledges of Equity Interests
of Unrestricted Subsidiaries of the Company for the benefit of lenders of Unrestricted
Subsidiaries of the Company;
(14) if such Affiliate Transaction is with a Person in its capacity as a holder of
Indebtedness or Capital Stock of the Company or any Restricted Subsidiary where such Person
is treated no more favorably than the holders of Indebtedness or Capital Stock of the
Company or any Restricted Subsidiary;
(15) transactions effected pursuant to agreements in effect on the Issue Date and any
amendment, modification or replacement of such agreement (so long as such amendment or
replacement is not, in the good faith judgment of the Company’s Board of Directors,
materially more disadvantageous to the Holders of the Notes, taken as a whole, than the
original agreement as in effect on the Issue Date);
(16) payments to the Equity Investors made for any financial advisory, financing or
other investment banking activities, including without limitation, in connection with
acquisitions or divestitures, which payments are approved by a majority of the Company’s
Board of Directors; and
(17) the issuance of Management Notes.
Section 4.12
Liens
.
The Company will not, and will not permit any of its Restricted Subsidiaries to, create,
incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind
securing Indebtedness (other than Permitted Liens) that ranks
pari passu
with or is subordinated to
the Notes or the Note Guarantees upon any of their property or assets, now owned or hereafter
acquired, unless all payments due under this Indenture and the Notes are secured on an equal and
ratable basis with the obligations so secured (or, in the case of subordinated Indebtedness,
contractually prior or senior thereto, with the same relative priority as the Notes shall have with
respect to such subordinated Indebtedness) until such time as such obligations are no longer
secured by a Lien.
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Section 4.13
Business Activities
.
The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any
business other than Permitted Businesses, except to such extent as would not be material to the
Company and its Restricted Subsidiaries taken as a whole.
Section 4.14
Intentionally Omitted
.
Section 4.15
Offer to Repurchase upon Change of Control
.
(a) Upon the occurrence of a Change of Control, the Company will make an offer (a “
Change of
Control Offer
”) to each Holder of the Notes to repurchase all or any part (equal to $1,000 or an
integral multiple of $1,000) of that Holder’s Notes at a purchase price in cash equal to 101% of
the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional
Interest, if any, on the Notes repurchased to, but not including, the date of purchase, subject to
the rights of Holders on the relevant record date to receive interest due on the relevant interest
payment date (the “
Change of Control Payment
”). Within 30 days following any Change of Control,
except to the extent that the Company has exercised its right to redeem the Notes in accordance
with Article 3 of this Indenture, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and stating:
(1) that the Change of Control Offer is being made pursuant to this Section 4.15 and
that all Notes properly tendered pursuant to such Change of Control Offer will be accepted
for payment;
(2) the purchase price and the purchase date, which shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the “
Change of Control
Payment Date
”);
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of Control Payment,
all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue
interest after the Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Notes, with the form entitled “Option of Holder to
Elect Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the
Trustee at the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the Trustee receives,
not later than the close of business on the second Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes delivered for purchase, and a statement
that such Holder is withdrawing his election to have the Notes purchased; and
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(7) that Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral multiple
thereof.
The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent those laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a Change in Control. To
the extent that the provisions of any securities laws or regulations conflict with the provisions
of this Section 4.15 hereof, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached their obligations under this Section 4.15 by
virtue of such compliance.
(b) On the Change of Control Payment Date, the Company will, to the extent lawful:
(1) accept for payment all Notes or portions of Notes properly tendered pursuant to the
Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions of Notes properly tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes properly accepted
together with an Officers’ Certificate stating the aggregate principal amount of Notes or
portions of Notes being purchased by the Company.
The Paying Agent will promptly mail or wire transfer to each Holder properly tendered and so
accepted the Change of Control Payment for such Notes. The Company will execute and, upon receipt
of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered, if any;
provided
, that each
new Note will be in a principal amount of $1,000 or an integral multiple of $1,000. Any Note so
accepted for payment will cease to accrue interest on and after the Change of Control Payment Date.
The Company will publicly announce the results of the Change of Control Offer on or as soon as
reasonably practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the Company will not be
required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.15 and purchases all Notes properly
tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has
been given pursuant to Section 3.07 hereof, unless and until there is a default in payment of the
applicable redemption price.
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Section 4.16
Payments for Consent
.
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder or as an
inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Notes unless such consideration is offered to be paid and is paid to all Holders that
consent, waive or agree to amend in the time frame set forth in the solicitation documents relating
to such consent, waiver or agreement.
Section 4.17
Additional Note Guarantees
.
If the Company or any of its Restricted Subsidiaries acquires or creates another wholly owned
Domestic Subsidiary on or after the date of this Indenture, then that newly acquired or created
Domestic Subsidiary, if such Subsidiary guarantees any Indebtedness of the Company (unless such
Subsidiary is a Receivables Subsidiary), shall become a Guarantor (which Note Guarantee shall be
senior to or
pari passu
with such Restricted Subsidiary’s guarantee of such other Indebtedness
unless such other Indebtedness is Senior Indebtedness, in which case the Note Guarantee may be
subordinated to the guarantee of such Senior Indebtedness to the same extent as the Notes are
subordinated to such Senior Indebtedness) and execute a supplemental indenture and deliver an
Opinion of Counsel satisfactory to the Trustee within 30 days of the date on which it guaranteed
such other Indebtedness;
provided
that any Domestic Subsidiary that constitutes an Immaterial
Subsidiary need not become a Guarantor until such time as it (i) ceases to be an Immaterial
Subsidiary or (ii) guarantees the Credit Agreement. The form of such supplemental indenture is
attached hereto as Exhibit E hereto.
Section 4.18
Designation of Restricted and Unrestricted Subsidiaries
.
The Board of Directors of the Company may designate any Restricted Subsidiary, other than the
Company, to be an Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value
of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the
Subsidiary designated as Unrestricted shall be deemed to be an Investment made as of the time of
the designation and will reduce the amount available for Restricted Payments under Section 4.07
hereof or under one or more clauses of such definition of Permitted Investments, as determined by
the Company. That designation will only be permitted if such Investment would be permitted at that
time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not
cause a Default.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced
to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of
Directors of the Company giving effect to such designation and an Officers’ Certificate certifying
that such designation complied with the preceding conditions and was permitted by Section 4.07
hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements
as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary
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will be deemed to be incurred by
a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted
to be incurred as of such date under Section 4.09 hereof, the Company will be in Default of such
covenant. The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company;
provided
that such designation will be
deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be
permitted if (1) (x) the Company could incur such Indebtedness pursuant to the Fixed Charge
Coverage Ratio test, described in Section 4.09(a) hereof, or (y) the Fixed Charge Coverage Ratio
for the Company and its Restricted Subsidiaries would be greater than such ratio for the Company
and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma
basis taking into account such designation; and (2) no Default or Event of Default would be in
existence following such designation.
Section 4.19
Changes in Covenants upon Notes Being Rated Investment Grade
.
If on any date following the Issue Date: (i) the Notes are assigned an Investment Grade
Rating from both of the Rating Agencies and (ii) no Default or Event of Default shall have occurred
and be continuing, then the Company shall provide written notice to such effect to the Trustee and,
beginning on that day, the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.13, 4.15
and 4.18 hereof, and clause (4) of Section 5.01 shall terminate (
provided that
failure to provide
such notice shall not result in a Default or Event of Default or the Company having to comply with
such provisions).
ARTICLE 5
SUCCESSORS
Section 5.01
Merger
,
Consolidation
,
or Sale of Assets
.
The Company will not, directly or indirectly, consolidate or merge with or into another Person
or sell, assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries), in one or more related transactions to another Person, unless:
(1) either:
(A) the Company is the surviving entity; or
(B) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment, transfer, conveyance or
other disposition has been made is a corporation, partnership or limited liability
company organized or existing under the laws of the United States, any state of the
United States or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if other than
the Company) or the Person to which such sale, assignment, transfer, conveyance or other
disposition has been made assumes all the obligations of the
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Company under the Notes, this
Indenture and the Registration Rights Agreement, in each case, pursuant to agreements
reasonably satisfactory to the Trustee;
(3) immediately after such transaction, no Default or Event of Default exists; and
(4) (a) the Company or the Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer, conveyance
or other disposition has been made would, on the date of such transaction after giving pro
forma effect thereto and to any related financing transactions as if the same had occurred
at the beginning of the applicable four-quarter period be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
Section 4.09(a) hereof; or
(b) the Fixed Charge Coverage Ratio for the successor entity and its Restricted
Subsidiaries, on the date of and after giving pro forma effect to such acquisition and such
incurrence or issuance, would not be less than such ratio for the Company and its Restricted
Subsidiaries immediately prior to such transaction.
In addition, the Company may not, directly or indirectly, lease all or substantially all of
the properties and assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries), in one or more related transactions, to any other Person.
This Section 5.01 will not apply to:
(1) a merger of the Company with an Affiliate solely for the purpose of reincorporating
the Company in another jurisdiction; or
(2) any consolidation or merger, or any sale, assignment, transfer, conveyance, lease
or other disposition of assets between or among the Company and any of its Restricted
Subsidiaries.
Section 5.02
Successor Substituted
.
Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the properties or assets of the Company in a
transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the
successor Person formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed
to, and be substituted for (so that from and after the date of such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture
referring to the “Company” shall refer instead to the successor Person and not to the Company), and
may exercise every right and power of the Company under this Indenture with the same effect as if
such successor Person had been named as the Company herein;
provided
,
however
, that the predecessor
shall not be relieved from the obligation to pay the principal of and interest on the Notes except
in the case of a sale of all or substantially all of the Company’s properties or assets in a
transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01
Events of Default
.
Each of the following is an “
Event of Default
”:
(1) default for 30 days in the payment when due of interest on, or Additional Interest,
if any, with respect to the Notes, whether or not such payment is prohibited by the
provisions described in Article 10 hereof;
(2) default in the payment when due (at maturity, upon redemption or otherwise) of the
principal of, or premium, if any, on the Notes, whether or not such payment is prohibited by
the provisions described in Article 10 hereof;
(3) failure by the Company or any of its Restricted Subsidiaries to comply with the
provisions of Sections 4.15 or 5.01 hereof;
(4) failure by the Company or any of its Restricted Subsidiaries for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding voting as a single class to comply with any of the
other agreements in this Indenture;
(5) default under any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Significant Subsidiaries or group of Restricted Subsidiaries that
taken as a whole would constitute a Significant Subsidiary (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness
or guarantee now exists, or is created after the
date of this Indenture (but excluding Indebtedness owing to the Company or a Restricted
Subsidiary), if that default:
(A) is caused by a failure to pay principal on such Indebtedness after the
expiration of the grace period provided in such Indebtedness upon the Stated
Maturity of such Indebtedness (a “
Payment Default
”); or
(B) results in the acceleration of such Indebtedness prior to its Stated
Maturity,
and, in each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a Payment Default
or the maturity of which has been so accelerated, aggregates $15.0 million or more;
(6) failure by the Company or any of its Significant Subsidiaries, or group of
Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary, to
pay final and non-appealable judgments entered by a court or courts of competent
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jurisdiction aggregating in excess of $15.0 million (net of any amounts which are covered by
insurance or bonded), which judgments are not paid, waived, satisfied, discharged or stayed
for a period of 60 days;
(7) the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary
or any group of Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an involuntary
case,
(C) consents to the appointment of a custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors.
(8) a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that:
(A) is for relief against the Company or any of its Restricted Subsidiaries
that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary in an involuntary case;
(B) appoints a custodian of the Company or any of its Restricted Subsidiaries
that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary or for all or substantially all
of the property of the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary; or
(C) orders the liquidation of the Company or any of its Restricted Subsidiaries
that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days; and
(9) except as permitted by this Indenture, any Note Guarantee of any Significant
Subsidiary or group of Restricted Subsidiaries that taken as a whole would constitute a
Significant Subsidiary is held in any judicial proceeding to be unenforceable or invalid or
ceases for any reason to be in full force and effect (other than in accordance with the
terms of such Note Guarantee and this Indenture), or any Guarantor, or any Person acting on
behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee and
such Default continues for 10 days.
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Section 6.02
Acceleration
.
In the case of an Event of Default specified in clause (7) or (8) of Section 6.01 hereof, with
respect to the Company, any Restricted Subsidiary of the Company that is a Significant Subsidiary
or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable immediately without
further action or notice. If any other Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately;
provided
that any such declaration of acceleration
shall not become effective until the earlier of (x) five Business Days after receipt of the
acceleration notice by the Bank Agent and the Company or (y) acceleration of the Indebtedness under
the Credit Agreement;
provided further
that such acceleration shall be automatically rescinded and
annulled without any further action required on the part of the Trustee or the Holders in the event
that any and all Events of Default specified in the acceleration notice under this Indenture shall
have been cured, waived or otherwise remedied as provided in this Indenture prior to the expiration
of the period referred to in the preceding clauses (x) and (y).
Upon any such declaration, the Notes shall become due and payable immediately.
The Holders of a majority in aggregate principal amount of the then outstanding Notes by
written notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration and its
consequences, if the rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium or Additional Interest, if
any, that has become due solely because of the acceleration) have been cured or waived.
In the event of any Event of Default specified in clause (5) of Section 6.01, such Event of
Default and all consequences thereof (excluding, however, any resulting payment default) will be
annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders
of the Notes, if within 30 days after such Event of Default arose the Company delivers an Officers’
Certificate to the Trustee stating that (x) the Indebtedness or guarantee that is the basis for
such Event of Default has been discharged or (y) the holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such Event of Default or (z) the
default that is the basis for such Event of Default has been cured, it being understood that in no
event shall an acceleration of the principal amount of the Notes as described above be annulled,
waived or rescinded upon the happening of any such events.
Section 6.03
Other Remedies
.
If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy
to collect the payment of principal, premium and Additional Interest, if any, and interest on the
Notes or to enforce the performance of any provision of the Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not
produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note
in exercising any right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04
Waiver of Past Defaults
.
Holders of not less than a majority in aggregate principal amount of the then outstanding
Notes by notice to the Trustee may on behalf of the Holders of all of the Notes rescind an
acceleration or waive an existing Default or Event of Default and its consequences hereunder,
except a continuing Default or Event of Default in the payment of the principal of, premium and
Additional Interest, if any, or interest on, the Notes (including in connection with an offer to
purchase). Upon any such rescission or waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture;
but no such waiver shall extend to any subsequent or other Default or impair any right consequent
thereon.
Section 6.05
Control by Majority
.
Holders of a majority in aggregate principal amount of the then outstanding Notes may direct
the time, method and place of conducting any proceeding for exercising any remedy available to the
Trustee or exercising any trust or power conferred on it. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture that the Trustee
determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability.
Section 6.06
Limitation on Suits
.
A Holder may pursue a remedy with respect to this Indenture or the Notes only if:
(1) such Holder has previously given the Trustee written notice that an Event of
Default is continuing;
(2) Holders of at least 25% in aggregate principal amount of the then outstanding Notes
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to the Trustee security or
indemnity satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after receipt of the
request and the offer of such security or indemnity; and
(5) during such 60-day period, Holders of a majority in aggregate principal amount of
the then outstanding Notes do not give the Trustee a direction inconsistent with such
request.
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A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a
Note or to obtain a preference or priority over another Holder of a Note.
Section 6.07
Rights of Holders of Notes to Receive Payment
.
Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to
receive payment of principal, premium and Additional Interest, if any, and interest on the Note, on
or after the respective due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08
Collection Suit by Trustee
.
If an Event of Default specified in Section 6.01(1) or (2) hereof occurs and is continuing,
the Trustee is authorized to recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount of principal of, premium and Additional Interest, if any,
and interest remaining unpaid on, the Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09
Trustee May File Proofs of Claim
.
The Trustee is authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property, shall be entitled to
participate as a member, voting or otherwise, of any official committee of creditors appointed in
such matter and shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the
event that the Trustee shall consent to the making of such payments directly to the Holders, to pay
to the Trustee any amount due to it for the reasonable and documented compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts
due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan of reorganization
or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
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Section 6.10
Priorities
.
If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the
money or property in the following order:
First
: to the Trustee, its agents and attorneys for amounts due under Section 7.07
hereof, including payment of all compensation, expenses, disbursements and liabilities
incurred by the Trustee, its counsel and agents and the costs and expenses of collection;
Second
: to Holders of Notes for amounts due and unpaid on the Notes for principal,
premium and Additional Interest, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for principal,
premium and Additional Interest, if any and interest, respectively; and
Third
: to the Company or, to the extent the Trustee collects any amounts for any
Guarantor, to such Guarantor or to such party as a court of competent jurisdiction shall
direct in writing.
The Trustee may fix a record date and payment date for any payment to Holders of Notes
pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to
each Holder and the Company a notice that states the record date, the payment date and amount to be
paid.
Section 6.11
Undertaking for Costs
.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including reasonable and
documented attorneys’ fees and expenses against any party litigant in the suit, having due regard
to the merits and good faith of the claims or defenses made by the party litigant. This Section
6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07
hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding
Notes.
ARTICLE 7
TRUSTEE
Section 7.01
Duties of Trustee
.
(a) The Trustee, prior to the occurrence of an Event of Default of which a Responsible Officer
of the Trustee shall have actual knowledge and after the curing of all such Events of Defaults
which may have occurred, undertakes to perform such duties and only such duties as are specifically
set forth in this Indenture. If an Event of Default of which a Responsible Officer of the Trustee
shall have actual knowledge has occurred and is continuing, the Trustee will exercise such of the
rights and powers vested in it by this Indenture, and use the
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same degree of care and skill in its
exercise, as a prudent person would exercise or use under the circumstances in the conduct of such
person’s own affairs.
(b) Except during the continuance of an Event of Default:
(1) the duties of the Trustee will be determined solely by the express provisions of
this Indenture and the Trustee need perform only those duties that are specifically set
forth in this Indenture and no others, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the requirements of this
Indenture. However, with respect to certificates or opinions specifically required by any
provision hereof to be furnished to it, the Trustee will examine the certificates and
opinions to determine whether or not they conform to the requirements of this Indenture;
provided, however
, that the Trustee shall not be responsible for the accuracy or content of
any resolution, certificate, statement, opinion, report, document, order or other instrument
furnished to it hereunder.
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;
(2) the Trustee will not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee will not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.
(d) No provision of this Indenture will require the Trustee to expend or risk its own funds or
incur any liability for the performance of any of its duties hereunder or the exercise of any of
its rights or powers. The Trustee will be under no obligation to exercise any of its rights and
powers under this Indenture at the request of any Holders, unless such Holder has offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or expense.
(e) The Trustee will not be liable for interest on any money received by it except as the
Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
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Section 7.02
Rights of Trustee
.
(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate
or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits
to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel. The Trustee
may consult with counsel of its own selection and the advice of such counsel or any Opinion of
Counsel will be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Trustee may execute any of the trusts or powers hereunder and perform any duties
hereunder either directly or through its attorneys and agents and will not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee will not be liable for any action it takes or omits to take in good faith that
it believes to be authorized or within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction
or notice from the Company will be sufficient if signed by an Officer of the Company.
(f) The Trustee will be under no obligation to exercise any of the rights or powers vested in
it by this Indenture at the request or direction of any of the Holders unless such Holders have
offered to the Trustee indemnity or security satisfactory to it against the losses, liabilities and
expenses that might be incurred by it in compliance with such request or direction.
(g) in no event shall the Trustee be responsible or liable for special, indirect, or
consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit)
irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and
regardless of the form of action;
(h) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a
Responsible Officer of the Trustee has knowledge thereof or unless written notice of any event
which is in fact such a default is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Notes and this Indenture;
(i) the rights, privileges, protections, immunities and benefits given to the Trustee,
including, without limitation, its right to be indemnified, are extended to, and shall be
enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and
other Person employed to act hereunder;
(j) the Trustee may request that the Company deliver an Officers’ Certificate setting forth
the names of individuals and/or titles of officers authorized at such time to take
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specified
actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person
authorized to sign an Officers’ Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded;
(k) The right of the Trustee to perform any discretionary act enumerated in this Indenture
shall not be construed as a duty, and the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of such act; and
(l) In the event the Company is required to pay Additional Interest, the Company will provide
written notice to the Trustee of the Company’s obligation to pay Additional Interest no later than
15 days prior to the next Interest Payment Date, which notice
shall set forth the amount of Additional Interest to be paid by the Company. The Trustee
shall not at any time be under any duty or responsibility to any Holders to determine whether the
Additional Interest is payable and the amount thereof.
Section 7.03
Individual Rights of Trustee
.
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Company or any Affiliate of the Company with the same rights it
would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee (if this Indenture has been qualified under the TIA) or resign. Any Agent may
do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
Section 7.04
Trustee’s Disclaimer
.
The Trustee will not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the
proceeds from the Notes or any money paid to the Company or upon the Company’s direction under any
provision of this Indenture, it will not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it will not be responsible for any
statement or recital herein or any statement in the Notes or any other document in connection with
the sale of the Notes or pursuant to this Indenture or the legality or validity of the Notes or
this Indenture other than its certificate of authentication.
Section 7.05
Notice of Defaults
.
If a Default or Event of Default occurs and is continuing and if it is known to the Trustee,
the Trustee will mail to Holders of Notes a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in payment of principal
of, premium or Additional Interest, if any, or interest on, any Note, the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
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Section 7.06
Reports by Trustee to Holders of the Notes
.
(a) Within 60 days after each May 15 beginning with the May 15 following the date of this
Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the
Notes a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no
event described in TIA § 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also will comply
with TIA § 313(b)(2). The Trustee will also transmit by mail all reports as required by TIA §
313(c).
(b) A copy of each report at the time of its mailing to the Holders of Notes will be mailed by
the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which
the Notes are listed in accordance with TIA § 313(d). The Company will promptly notify the Trustee
when the Notes are listed on any stock exchange or delisted therefrom.
Section 7.07
Compensation and Indemnity
.
(a) The Company will pay to the Trustee from time to time reasonable compensation for its
acceptance of this Indenture and services hereunder. The Trustee’s compensation will not be
limited by any law on compensation of a trustee of an express trust. The Company will reimburse
the Trustee promptly upon request for all reasonable and documented disbursements, advances and
expenses incurred or made by it in addition to the compensation for its services. Such expenses
will include the reasonable and documented compensation, disbursements and expenses of the
Trustee’s agents and counsel.
(b) The Company and each Guarantor, jointly and severally, will indemnify the Trustee and any
director, officer, employee or agent of the Trustee against any and all losses, liabilities,
claims, damages or expenses incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including, without limitation, the reasonable
and documented costs and expenses of enforcing this Indenture against the Company and the
Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted
by the Company, the Guarantors, any Holder or any other Person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to the extent any such
loss, liability or expense may be attributable to its own negligence, bad faith or willful
misconduct. The Trustee will notify the Company promptly of any claim of which a Responsible
Officer has received written notice for which it may seek indemnity. Failure by the Trustee to so
notify the Company will not relieve the Company or any of the Guarantors of their obligations
hereunder. The Company or such Guarantor will defend the claim and the Trustee will cooperate in
the defense. The Trustee may have separate counsel and the Company and the Guarantors, as
applicable, will pay the reasonable and documented fees and expenses of such counsel
provided
,
however
that the Company and any Guarantor shall not be required to pay such fees and expenses if
it assumes such indemnified parties’ defense and, in such indemnified parties’ reasonable judgment,
there is no conflict of interest between the Company and the Guarantors, as applicable, and such
parties in connection with such defense. Neither the Company nor any Guarantor need pay for any
settlement made without its consent, which consent will not be unreasonably withheld.
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(c) The obligations of the Company and the Guarantors under this Section 7.07 will survive the
satisfaction and discharge of this Indenture.
(d) To secure the Company’s and the Guarantors’ payment obligations in this Section 7.07, the
Trustee will have a Lien prior to the Notes on all money or property held or collected by the
Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien
will survive the satisfaction and discharge of this Indenture.
(e) When the Trustee incurs expenses or renders services after an Event of Default specified
in Section 6.01(7) or (8) hereof occurs, the expenses and the compensation for the services
(including the fees and expenses of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
(f) The Trustee will comply with the provisions of TIA § 313(b)(2) to the extent applicable.
Section 7.08
Replacement of Trustee
.
(a) A resignation or removal of the Trustee and appointment of a successor Trustee will become
effective only upon the successor Trustee’s acceptance of appointment as provided in this Section
7.08.
(b) The Trustee may resign in writing at any time and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in aggregate principal amount of
the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged bankrupt or insolvent or an order for relief is entered
with respect to the Trustee under any Bankruptcy Law;
(3) a custodian, receiver or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for
any reason, the Company will promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then
outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
(d) If a successor Trustee does not take office within 60 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in
aggregate principal amount of the then outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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(e) If the Trustee, after written request by any Holder who has been a Holder for at least six
months, fails to comply with Section 7.10 hereof, such Holder may petition at the expense of the
Company any court of competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(f) A successor Trustee will deliver a written acceptance of its appointment to the retiring
Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will
become effective, and the successor Trustee will have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee will mail a notice of its succession to
Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the
successor Trustee;
provided
all sums owing to the Trustee hereunder have been paid and subject to
the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company’s obligations under Section 7.07 hereof will continue for the
benefit of the retiring Trustee.
Section 7.09
Successor Trustee by Merger, Etc
.
If the Trustee consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation without any further
act will be the successor Trustee.
Section 7.10
Eligibility; Disqualification
.
There will at all times be a Trustee hereunder that is a corporation organized and doing
business under the laws of the United States of America or of any state thereof that is authorized
under such laws to exercise corporate trustee power, that is subject to supervision or examination
by federal or state authorities and that has a combined capital and surplus of at least $50.0
million as set forth in its most recent published annual report of condition.
This Indenture will always have a Trustee who satisfies the requirements of TIA § 310(a)(1),
(2) and (5). The Trustee is subject to TIA § 310(b).
Section 7.11
Preferential Collection of Claims Against the Company
.
The Trustee is subject to TIA § 311(a), excluding any creditor relationship listed in TIA §
311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent
indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01
Option to Effect Legal Defeasance or Covenant Defeasance
.
The Company may at any time, at the option of its Board of Directors evidenced by a resolution
set forth in an Officers’ Certificate, elect to have either Section 8.02 or 8.03 hereof be applied
to all outstanding Notes and Note Guarantees upon compliance with the conditions set forth below in
this Article 8.
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Section 8.02
Legal Defeasance and Discharge
.
Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section
8.02, the Company and each of the Guarantors will, subject to the satisfaction of the conditions
set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with
respect to all outstanding Notes (including the Note Guarantees) on the date the conditions set
forth below are satisfied (hereinafter, “
Legal Defeasance
”). For this purpose, Legal Defeasance
means that the Company and the Guarantors will be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes (including the Note Guarantees), which will
thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all
their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee,
on demand of and at the expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which will survive until otherwise terminated or
discharged hereunder:
(1) the rights of Holders of outstanding Notes to receive payments in respect of the
principal of, or interest or premium and Additional Interest, if any, on, such Notes when
such payments are due from the trust referred to in Section 8.04 hereof;
(2) the Company’s obligations with respect to such Notes under Article 2 and Section
4.02 hereof;
(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company’s and the Guarantors’ obligations in connection therewith; and
(4) this Article 8.
Subject to compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.
Section 8.03
Covenant Defeasance
.
Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section
8.03, the Company and each of the Guarantors will, subject to the satisfaction of the conditions
set forth in Section 8.04 hereof, be released from each of their obligations under the covenants
contained in Sections 4.03, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18
and 4.19 and clauses (3) and (4) of Section 5.01 hereof with respect to the outstanding Notes on
and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter,
“
Covenant Defeasance
”), and the Notes will thereafter be deemed not “outstanding” for the purposes
of any direction, waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but will continue to be deemed “outstanding” for all
other purposes hereunder (it being understood that such Notes will not be deemed outstanding for
accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes and Note Guarantees, the Company and the Guarantors may omit to comply with and
will have no liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any
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reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other provision herein or in any
other document and such omission to comply will not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such
Notes and Note Guarantees will be unaffected thereby. In addition, upon the Company’s exercise
under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(6)
hereof will not constitute Events of Default.
Section 8.04
Conditions to Legal or Covenant Defeasance
.
In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02
or 8.03 hereof:
(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized
investment bank, appraisal firm, or firm of independent public accountants, to pay the
principal of, premium and Additional Interest, if any, and interest on, the outstanding
Notes on the stated date for payment thereof or on the applicable redemption date, as the
case may be, and the Company must specify whether the Notes are being defeased to such
stated date for payment or to a particular redemption date;
(2) in the case of an election under Section 8.02 hereof, the Company must deliver to
the Trustee an Opinion of Counsel (subject to customary exceptions and exclusions)
confirming that:
(A) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling; or
(B) since the date of this Indenture, there has been a change in the applicable
federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred;
(3) in the case of an election under Section 8.03 hereof, the Company must deliver to
the Trustee an Opinion of Counsel (subject to customary exceptions and exclusions)
confirming that the Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
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(4) no Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from, or arising in
connection with, the borrowing of funds to be applied to such deposit and the grant of any
Lien securing such borrowing);
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under, any material agreement or instrument (other
than this Indenture) to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries is bound, including the Credit Agreement;
(6) the Company is not prohibited from making payments in respect of the Notes by the
provisions described in Article 10 hereof;
(7) the Company must deliver to the Trustee an Officers’ Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders over the other
creditors of the Company with the intent of defeating, hindering, delaying or defrauding any
creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
Upon satisfaction of the conditions set forth herein and upon the request of the Company, the
Trustee shall acknowledge in writing the discharge of those obligations that the Company
terminates.
Section 8.05
Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous
Provisions
.
Subject to Section 8.06 hereof, all money and non-callable Government Securities (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 8.05, the “
Trustee
”) pursuant to Section 8.04 hereof in respect of the
outstanding Notes will be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of principal, premium and
Additional Interest, if any, and interest, but such money need not be segregated from other funds
except to the extent required by law.
The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against the cash or non-callable Government Securities deposited pursuant to Section
8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the outstanding Notes.
Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to
the Company from time to time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the
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opinion of a nationally
recognized firm of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in
excess of the amount thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
Section 8.06
Repayment to Company
.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of, premium or Additional Interest, if any, or interest on,
any Note and remaining unclaimed for two years after such principal, premium or Additional
Interest, if any, or interest has become due and payable shall be paid to the Company on its
request or (if then held by the Company) will be discharged from such trust; and the Holder of such
Note will thereafter be permitted to look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, will thereupon cease;
provided
,
however
, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the expense of the
Company causes to be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which will not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining will be repaid to the Company.
Section 8.07
Reinstatement
.
If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government
Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any
order or judgment of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company’s and the Guarantors’ obligations under this
Indenture and the Notes and the Note Guarantees will be revived and reinstated as though no deposit
had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case
may be;
provided
,
however
, that, if the Company makes any payment of principal of, premium or
Additional Interest, if any, or interest on, any Note following the reinstatement of its
obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive
such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01
Without Consent of Holders of Notes
.
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee
may amend or supplement this Indenture or the Notes or the Note Guarantees without the consent of
any Holder:
(1) to cure any ambiguity, defect or inconsistency;
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(2) to provide for uncertificated Notes in addition to or in place of certificated
Notes;
(3) to provide for the assumption of the Company’s or a Guarantor’s obligations to the
Holders of the Notes and Note Guarantees by a successor to the Company or such Guarantor
pursuant to Article 5 or Article 11 hereof;
(4) to make any change that would provide any additional rights or benefits to the
Holders or that does not adversely affect the legal rights hereunder of any Holder;
(5) to comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the TIA;
(6) to conform the text of this Indenture or the Notes to any provision of the
“Description of the Notes” section of the Offering Memorandum, to the extent that such
provision in that “Description of the Notes” was intended to be a verbatim recitation of a
provision of this Indenture, the Note Guarantees or the Notes;
(7) to provide for the issuance of Additional Notes in accordance with the limitations
set forth in this Indenture as of the date hereof;
(8) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee
with respect to the Notes and to release Guarantors from the Note Guarantee in accordance
with the terms of this Indenture;
(9) to comply with the rules of any applicable securities depositary; or
(10) to provide for a successor Trustee in accordance with the terms of this Indenture
or to otherwise comply with any requirement of this Indenture.
Upon the request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental indenture, and upon receipt by the
Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company
and the Guarantors in the execution of any amended or supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee will not be obligated to enter into
such amended or supplemental indenture that affects its own rights, duties or immunities under this
Indenture or otherwise.
Section 9.02
With Consent of Holders of Notes
.
Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may
amend or supplement this Indenture (including, without limitation, Sections 4.10 and 4.15 hereof)
and the Notes or the Note Guarantee with the consent of the Company and Holders of at least a
majority in aggregate principal amount of the then outstanding Notes voting as a single class
(including, without limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
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payment of the
principal of, premium or Additional Interest, if any, or interest on, the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance with any provision of
this Indenture or the Notes or the Note Guarantee may be waived with the consent of the Company and
Holders of a majority in aggregate principal amount of the then outstanding Notes (including,
without limitation, Additional Notes, if any) voting as a single class (including, without
limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase
of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be “outstanding”
for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its Board of Directors
authorizing the execution of any such amended or supplemental indenture, and upon
the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the
Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of
such amended or supplemental indenture unless such amended or supplemental indenture directly
affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but will not be obligated to, enter into such amended or
supplemental Indenture.
It is not necessary for the consent of the Holders under this Section 9.02 to approve the
particular form of any proposed amendment, supplement, waiver or consent, but it is sufficient if
such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes effective, the
Company will mail to the Holders of Notes affected thereby a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect
therein, will not, however, in any way impair or affect the validity of any such amendment,
supplement or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in
aggregate principal amount of the Notes then outstanding voting as a single class may waive
compliance in a particular instance by the Company with any provision of this Indenture or the
Notes or the Note Guarantees. However, without the consent of the Company and each Holder
affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any
Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption of the Notes (other than provisions relating to
Sections 4.10 and 4.15 hereof);
(3) reduce the rate of or change the time for payment of interest, including default
interest, on any Note;
(4) waive a Default or Event of Default in the payment of principal of, or premium or
Additional Interest, if any, or interest on, the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal
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amount of the then
outstanding Notes and a waiver of the payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of this Indenture relating to waivers of past
Defaults or impair the rights of Holders to receive payments of principal of, or interest or
premium or Additional Interest, if any, on, the Notes;
(7) waive a redemption payment with respect to any Note (other than a payment required
by Sections 4.10 or 4.15 hereof);
(8) release any Guarantor that is a Significant Subsidiary from any of its obligations
under its Note Guarantee or this Indenture, except in accordance with the terms of this
Indenture;
(9) impair the right to institute suit for the enforcement of any payment on or with
respect to the Notes or any Note Guarantees;
(10) modify the subordination provisions of this Indenture in any manner adverse to the
Holders; or
(11) make any change in the preceding amendment and waiver provisions.
Section 9.03
Compliance with Trust Indenture Act
.
Every amendment, supplement or waiver to this Indenture or the Notes will be set forth in an
amended or supplemental indenture that complies with the TIA as then in effect.
Section 9.04
Revocation and Effect of Consents
.
Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a
Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of
the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written notice of revocation
before the date the amendment, supplement or waiver becomes effective. After an amendment,
supplement or waiver becomes effective in accordance with its terms, it thereafter binds every
Holder.
Section 9.05
Notation on or Exchange of Notes
.
The Trustee may place an appropriate notation about an amendment, supplement or waiver on any
Note and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.
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Failure to make the appropriate notation or issue a new Note will not affect the validity and
effect of such amendment, supplement or waiver.
Section 9.06
Trustee to Sign Amendments, Etc
.
The Trustee will sign any amended or supplemental indenture authorized pursuant to this
Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. The Company may not sign an amended or supplemental indenture until
the Board of Directors of the Company approves it. In executing any amended or supplemental
indenture, the Trustee will be provided with and (subject to Section 7.01 hereof) will be fully
protected in relying upon, in addition to the documents required by Section 13.04 hereof, an
Officers’ Certificate and an Opinion of Counsel stating that the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture and that such amendment or
supplement is the legal, valid and binding obligation of the Company and the Guarantors,
enforceable against them in accordance with the its terms, subject to customary exceptions, and
complies with the provisions hereof (including Section 9.03).
ARTICLE 10
SUBORDINATION
Section 10.01
Agreement to Subordinate
.
The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness
evidenced by the Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article 10, to the prior payment in full in cash or Cash Equivalents of all
Obligations due in respect of existing and future Senior Indebtedness. In addition, until all
Obligations due with respect to Senior Indebtedness are paid in full in cash or Cash Equivalents
(including, with respect to Senior Indebtedness, any interest accruing after the commencement of
any proceeding described in Section 10.02 at the rate specified in the applicable Designated Senior
Indebtedness, whether or not interest is an allowed claim enforceable against the Company in such
proceeding), any such distribution to which Holders would be entitled shall be made to the holders
of Senior Indebtedness (except that Holders may receive and retain Permitted Junior Securities and
payments made from any trust described under Articles 8 or 12 hereof).
Section 10.02
Liquidation; Dissolution; Bankruptcy
.
The holders of Senior Indebtedness shall be entitled to receive payment in full in cash or
Cash Equivalents of all Obligations due in respect of Senior Indebtedness (including with respect
to Designated Senior Indebtedness, any interest accruing after the commencement of any proceeding
described in this Section 10.02 at the rate specified in the applicable Designated Senior
Indebtedness whether or not interest is an allowed claim enforceable against the Company in such
proceeding) before the Holders shall be entitled to receive any payment on account of Senior
Subordinated Obligations or any payment to acquire any of the Notes for cash, properties or
securities, or any distribution with respect to the Notes of any cash, property, or securities
(except that Holders may receive and retain Permitted Junior Securities and payments made from
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any trust described under Articles 8 and 12 hereof), in the event of any distribution to
creditors of the Company in (a) any liquidation or dissolution of the Company; (b) a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the Company or its
property; (c) an assignment for the benefit of its creditors; or (d) any marshaling of the
Company’s assets and liabilities.
Section 10.03
Default on Designated Senior Indebtedness.
(a) The Company shall not make any payment in respect of any Senior Subordinated Obligations
(except in Permitted Junior Securities or from any trust described under Articles 8 and 12 hereof)
if:
(i) a payment default on Designated Senior Indebtedness occurs and is continuing; or
(ii) any other default (a “
non-payment default
”) occurs and is continuing on any series
of Designated Senior Indebtedness that permits holders of that series of Designated Senior
Indebtedness to accelerate its maturity and a Responsible Officer of the Trustee receives
actual notice of such default (a “
Payment Blockage Notice
”) from the trustee or other
representative for the holders of any Designated Senior Indebtedness, or the holders of at
least a majority of the outstanding principal amount of such Designated Senior Indebtedness.
(b) Payments on the Notes may and shall be resumed:
(i) in the case of a payment default in respect of Designated Senior Indebtedness, upon
the date on which such default is cured or waived; and
(ii) in the case of a non-payment default in respect of Designated Senior Indebtedness,
upon the earlier of (x) the date on which such non-payment default is cured or waived or (y)
179 days after the date on which the applicable Payment Blockage Notice is received.
No new Payment Blockage Notice may be delivered unless and until 360 days have elapsed since the
delivery of the immediately prior Payment Blockage Notice and all scheduled payments of principal,
interest and premium and Additional Interest, if any, on the Notes that have come due have been
paid in full in cash.
(c) No non-payment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice.
(d) If the Trustee or any Holder receives a payment in respect of the Notes (except in
Permitted Junior Securities or from the trust described under Articles 8 or 12 hereof) when (i) the
payment is prohibited by this Article 10 and (ii) the Trustee or the Holder has actual knowledge
that the payment is prohibited, the Trustee or the Holder, as the case may be, shall
hold the payment in trust for the benefit of the holders of Senior Indebtedness. Upon the
proper written request of the holders of Senior Indebtedness, the Trustee or the Holder, as the
case may
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be, shall deliver the amounts in trust to the holders of Senior Indebtedness or their
proper representative.
Section 10.04
Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default, the Company shall
promptly notify holders of Senior Indebtedness and the Trustee shall promptly notify the Bank Agent
of the acceleration.
Section 10.05
When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment in respect of the Notes
(except in Permitted Junior Securities or from any trust described under Articles 8 or 12 hereof)
when (x) the payment is prohibited by this Article 10 and (y) a Responsible Officer of the Trustee
or such Holder, as applicable, has actual knowledge that such payment is prohibited by this Article
10, such payment shall be held by the Trustee or such Holder, as applicable, in trust for the
benefit of, and shall be paid forthwith over and delivered, upon written request, to the holders of
Senior Indebtedness as their interests may appear or their representative.
With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only
such obligations on the part of the Trustee as are specifically set forth in this Article 10, and
no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person
money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this
Article 10, except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
Section 10.06
Notice by the Company.
The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts
known to the Company that would cause a payment of any Obligations with respect to the Notes to
violate this Article 10, but failure to give such notice shall not affect the subordination of the
Notes to the Senior Indebtedness as provided in this Article 10.
Section 10.07
Subrogation.
After all Senior Indebtedness is paid in full and until the Notes are paid in full, Holders
shall be subrogated (equally and ratably with all other Indebtedness
pari passu
with the Notes) to
the rights of holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to
the payment of Senior Indebtedness. A distribution made under this Article 10 to holders of Senior
Indebtedness that otherwise would have been made to Holders is not, as between the Company and
Holders, a payment by the Company on the Notes.
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Section 10.08
Relative Rights.
This Article 10 defines the relative rights of Holders and holders of Senior Indebtedness.
Nothing in this Indenture shall:
(i) impair, as between the Company and Holders, the obligation of the Company, which is
absolute and unconditional, to pay principal of and interest on the Notes in accordance with
their terms;
(ii) affect the relative rights of Holders of Notes and creditors of the Company other
than their rights in relation to holders of Senior Indebtedness; or
(iii) prevent the Trustee or any Holder of Notes from exercising its available remedies
upon a Default or Event of Default, subject to the rights of holders and owners of Senior
Indebtedness to receive distributions and payments otherwise payable to Holders.
If the Company fails because of this Article 10 to pay principal of or interest on a Note on
the due date, the failure is still a Default or Event of Default.
Section 10.09
Subordination May Not Be Impaired by the Company.
No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness
evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder
or by the failure of the Company or any Holder to comply with this Indenture.
Section 10.10
Rights of Trustee and Paying Agent.
Notwithstanding this Article 10 or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts that would prohibit the making of any
payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make
payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at
least two Business Days prior to the date of such payment written notice of facts
that would cause the payment of any Obligations with respect to the Notes to violate this
Article 10. Only the Company may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same
rights it would have if it were not Trustee. Any Agent may do the same with like rights.
Section 10.11
Authorization to Effect Subordination
.
Each Holder, by the Holder’s acceptance of the Notes, authorizes and directs the Trustee on
such Holder’s behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Article 10, and appoints the Trustee to act as such Holder’s
attorney-in-fact for any and all such purposes. If the Trustee does not file a proper
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proof of
claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at
least 30 days before the expiration of the time to file such claim, the lenders under the Credit
Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders.
ARTICLE 11
NOTE GUARANTEES
Section 11.01
Guarantee
.
(a) Subject to this Article 11, each of the Guarantors hereby, jointly and severally,
unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns, irrespective of the validity and enforceability of
this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that:
(1) the principal of, premium and Additional Interest, if any, and interest on, the
Notes will be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and interest on the Notes,
if any, if lawful, and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and
(2) in case of any extension of time of payment or renewal of any Notes or any of such
other obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Guarantors will be jointly and severally obligated to pay the same
immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
(b) The Guarantors hereby agree that their obligations hereunder are unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with
respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenant that this Note Guarantee will not be discharged
except by complete performance of the obligations contained in the Notes and this Indenture.
(c) If any Holder or the Trustee is required by any court or otherwise to return to the
Company, the Guarantors or any custodian, trustee, liquidator or other similar official
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acting in
relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such
Holder, this Note Guarantee, to the extent theretofore discharged, will be reinstated in full force
and effect.
(d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation
to the Holders in respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on
the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes
of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any
declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations
(whether or not due and payable) will forthwith become due and payable by the Guarantors for the
purpose of this Note Guarantee. The Guarantors will have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the rights of the
Holders under the Note Guarantee.
Section 11.02
Limitation on Guarantor Liability
.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the
intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent
transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors
hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum
amount that will, after giving effect to such maximum amount and all
other contingent and fixed liabilities of such Guarantor that are relevant under such laws,
and after giving effect to any collections from, rights to receive contribution from or payments
made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor
under this Article 11, result in the obligations of such Guarantor under its Note Guarantee not
constituting a fraudulent transfer or conveyance.
Section 11.03
Intentionally Omitted
.
Section 11.04
Guarantors May Consolidate, Etc., on Certain Terms
.
Except as otherwise provided in this Section 11.04, no Guarantor may sell or otherwise dispose
of all or substantially all of its assets to, or consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person) another Person, other than the Company or another
Guarantor, unless:
(1) immediately after giving effect to such transaction, no Default or Event of Default
exists; and
(2) either:
(a) the Person acquiring the property in any such sale or disposition or the
Person formed by or surviving any such consolidation or merger assumes all
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the
obligations of that Guarantor under this Indenture, its Note Guarantee and the
Registration Rights Agreement on the terms set forth herein or therein, pursuant to
a supplemental indenture in the form attached hereto as Exhibit E; or
(b) in the case of any such sale or disposition (including by way of any such
consolidation or merger), the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of this Indenture.
In case of any such consolidation, merger, sale or conveyance and upon the assumption by the
successor Person, by supplemental indenture, executed and delivered to the Trustee, of the Note
Guarantee and the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Guarantor, such successor Person will succeed to and be
substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor.
All the Note Guarantees so issued will in all respects have the same legal rank and benefit under
this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Note Guarantees had been issued at the date of the
execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses 2(a) and (b)
above, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor, or will
prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially
as an entirety to the Company or another Guarantor.
Section 11.05
Releases
.
The Note Guarantee of a Guarantor will be released:
(1) in connection with any sale, disposition or transfer of all or substantially all of
the assets of that Guarantor (including by way of merger or consolidation) to a Person that
is not (either before or after giving effect to such transaction) the Company or a
Restricted Subsidiary of the Company, if the sale, disposition or transfer does not violate
the first paragraph of Section 4.10 hereof;
(2) in connection with any sale, disposition or transfer of the Capital Stock of that
Guarantor to a Person that is not (either before or after giving effect to such transaction)
the Company or a Restricted Subsidiary of the Company, if (x) after giving effect to such
sale, disposition or transfer, such Person is no longer a Subsidiary of the Company and (y)
the sale, disposition or transfer does not violate the first paragraph of Section 4.10
hereof;
(3) if the Company designates any Restricted Subsidiary that is a Guarantor to be an
Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture;
(4) upon Legal Defeasance in accordance with Article 8 hereof or satisfaction and
discharge of this Indenture in accordance with Article 12 hereof; or
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(5) upon the release of such Guarantor’s guarantee under the Credit Agreement or such
other Indebtedness requiring such Guarantor to provide a Note Guarantee as provided in
Section 4.17 hereof.
Any Guarantor not released from its obligations under its Note Guarantee as provided in this
Section 11.05 will remain liable for the full amount of principal of and interest and premium and
Additional Interest, if any, on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
Section 11.06
Subordination of Note Guarantee
Payments under the Note Guarantees shall be subordinated to the prior payment in full of all
Senior Indebtedness of such Guarantor, including Senior Indebtedness incurred after the date of
this Indenture, on the same basis as the payments by the Company on the Notes are subordinated to
the prior payment in full of Senior Indebtedness of the Company. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any
of the Guarantors only at such times as they may receive and/or retain payments in respect of the
Notes pursuant to this Indenture, including Article 10.
ARTICLE 12
SATISFACTION AND DISCHARGE
Section 12.01
Satisfaction and Discharge
.
This Indenture will be discharged and will cease to be of further effect as to all Notes
issued hereunder, when:
(1) either:
(a) all Notes that have been authenticated, except lost, stolen or destroyed
Notes that have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company, have been delivered to the Trustee for
cancellation; or
(b) all Notes that have not been delivered to the Trustee for cancellation have
become due and payable by reason of the mailing of a notice of redemption or
otherwise or will become due and payable within one year by the mailing of a notice
of redemption or otherwise, and the Company or any Guarantor has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust solely
for the benefit of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, without
consideration of any reinvestment of interest, to pay and discharge the entire
Indebtedness (including all principal, premium and
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Additional Interest, if any, and
accrued interest to the date of maturity or redemption) on the Notes not delivered
to the Trustee for cancellation;
(2) no Default or Event of Default shall have occurred and be continuing on the date of
such deposit or shall occur as a result of such deposit and such deposit will not result in
a breach or violation of, or constitute a default under, any other instrument to which the
Company or any Guarantor is a party or by which the Company or any Guarantor is bound (other
than due to the borrowing of funds to effect such deposit);
(3) the Company or any Guarantor has paid or caused to be paid all sums payable by it
under this Indenture; and
(4) the Company has delivered irrevocable instructions to the Trustee under this
Indenture to apply the deposited money toward the payment of the Notes at maturity or on the
redemption date, as the case may be.
In addition, the Company must deliver an Officers’ Certificate and an Opinion of Counsel to the
Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited
with the Trustee pursuant to subclause (b) of clause (1) of this Section 12.01, the provisions of
Sections 12.02 and 8.06 hereof will survive such satisfaction and discharge. In addition, nothing
in this Section 12.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by
their terms, survive the satisfaction and discharge of this Indenture.
Section 12.02
Application of Trust Money
.
Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee
pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the principal (and premium and Additional Interest, if any) and
interest for whose payment such money has been deposited with the Trustee; but such money need not
be segregated from other funds except to the extent required by law.
If the Trustee or Paying Agent is unable to apply any money or Government Securities in
accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company’s and any Guarantor’s obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01 hereof;
provided
that if the Company has made any payment of principal of, premium or Additional Interest,
if any, or interest on, any Notes because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such payment from the
money or Government Securities held by the Trustee or Paying Agent.
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ARTICLE 13
MISCELLANEOUS
Section 13.01
Trust Indenture Act Controls
.
If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by,
or with another provision (an “
incorporated provision
”) included in this Indenture by operation of,
Sections 310 to 318 of the TIA, inclusive, such imposed duties or incorporated provision shall
control.
Section 13.02
Notices
.
Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly
given if in writing and delivered in Person or by first class mail (registered or
certified, return receipt requested), facsimile transmission or overnight air courier
guaranteeing next day delivery, to the others’ address:
If to the Company and/or any Guarantor:
Chart Industries, Inc.
One Infinity Corporate Centre Drive
Suite 300
Garfield Heights, OH 44125
Facsimile No.: (440) 753-1491
Attention: Chief Financial Officer
With a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10071-3954
Facsimile No.: (212) 455-2502
Attention: Edward P. Tolley III
If to the Trustee:
The Bank of New York
Corporate Trust Division
101 Barclay Street, 8th Floor West
New York, NY 10286
Facsimile No.: (212) 815-5707
Attention: Corporate Trust Division
The Company, any Guarantor or the Trustee, by notice to the others, may designate additional
or different addresses for subsequent notices or communications.
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All notices and communications (other than those sent to Holders) will be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by
facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder will be mailed by first class mail, certified or
registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to
its address shown on the register kept by the Registrar. Any notice or communication will also be
so mailed to any Person described in TIA § 313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with
respect to other Holders.
If a notice or communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee
and each Agent at the same time.
Section 13.03
Communication by Holders of Notes with Other Holders of Notes
.
Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their
rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else
shall have the protection of TIA § 312(c).
Section 13.04
Certificate and Opinion as to Conditions Precedent
.
Upon any request or application by the Company to the Trustee to take or refrain from taking
any action under this Indenture (other than in connection with the Authentication Order, dated the
date hereof, and delivered to the Trustee in connection with the issuance of the Initial Notes),
the Company shall furnish to the Trustee:
(1) an Officers’ Certificate in form and substance reasonably satisfactory to the
Trustee (which must include the statements set forth in Section 13.05 hereof) stating that,
in the opinion of the signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
(which must include the statements set forth in Section 13.05 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants have been satisfied.
Section 13.05
Statements Required in Certificate or Opinion
.
Each certificate or opinion with respect to compliance with a condition or covenant provided
for in this Indenture (other than a certificate provided pursuant to TIA § 314(a)(4)) must comply
with the provisions of TIA § 314(e) and must include:
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(1) a statement that the Person making such certificate or opinion has read such
covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he or she has made such
examination or investigation as is necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has been satisfied; and
(4) a statement as to whether or not, in the opinion of such Person, such condition or
covenant has been satisfied;
provided
,
however
, that with respect to matters of fact, an
Opinion of Counsel may rely on an Officers’ Certificate or certificates of public officials.
Section 13.06
Rules by Trustee and Agents
.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar
or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
Section 13.07
No Personal Liability of Directors
,
Officers
,
Employees and Stockholders
.
No past, present or future director, manager, officer, employee, incorporator, stockholder or
member of the Company, any Parent or any Subsidiary, as such, will have any liability for any
obligations of the Company or the Guarantors under the Notes, this Indenture, the Note Guarantees
or for any claim based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Notes. The waiver may not be effective to waive
liabilities under the federal securities laws.
Section 13.08
Governing Law
.
THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 13.09
Successors
.
All agreements of the Company in this Indenture and the Notes will bind its successors. All
agreements of the Trustee in this Indenture will bind its successors. All agreements of each
Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 11.04
hereof.
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Section 13.10
Severability
.
In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable,
then (to the extent permitted by applicable law) the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
Section 13.11
Counterpart Originals
.
The parties may sign any number of copies of this Indenture. Each signed copy will be an
original, but all of them together represent the same agreement.
Section 13.12
Table of Contents, Headings, Etc
.
The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be considered a part of
this Indenture and will in no way modify or restrict any of the terms or provisions hereof.
[
Signatures on following page
]
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Dated as of October 17, 2005
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SIGNATURES
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CHART INDUSTRIES, INC.
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By:
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/s/ Michael F. Biehl
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Name:
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Michael F. Biehl
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Title:
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Chief Financial Officer
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CHART INC.
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CAIRE INC.
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CHART ENERGY & CHEMICALS, INC.
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COOLTEL, INC.
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CHART INTERNATIONAL HOLDINGS, INC.
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CHART ASIA, INC.
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CHART INTERNATIONAL, INC.
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By:
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/s/ Michael F. Biehl
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Name:
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Michael F. Biehl
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Title:
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Chief Financial Officer
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THE BANK OF NEW YORK, as Trustee
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By:
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/s/ Patricia Gallagher
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Name:
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Patricia Gallagher
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Title:
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Vice President
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S-1
EXHIBIT A
[Face of Note]
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE
REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE
BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED
TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS
NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE
A-1
COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL “ACCREDITED INVESTOR” (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHED TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND IF
SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE EXPIRATION
OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S.
PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON
THE EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE 2(F) ABOVE OR UPON ANY TRANSFER OF THIS
NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE
TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
[
Additional language for Regulation S Note to be inserted after paragraph 1
]
THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING
ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
A-2
CUSIP No. [144A: 16115Q AA 8][REG S: U16134 AA 3]
ISIN No. [144A: US16115QAA85][REG S: USU16134AA30]
9
1
/
8
% Senior Subordinated Notes due 2015
CHART INDUSTRIES, INC.
promise to pay to CEDE & CO. or registered assigns,
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the principal sum of
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DOLLARS on October 15, 2015.
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Interest Payment Dates: April 15 and October 15, commencing April 15, 2006
Additional provisions of this Note are set forth on the other side of this Note.
Record Dates: April 1 and October 1
Dated: October 17, 2005
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CHART INDUSTRIES, INC.
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By:
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Name:
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Title:
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A-3
Dated: October 17, 2005
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee
A-4
[Reverse of Note]
9
1
/
8
% Senior Subordinated Notes due 2015
Capitalized terms used herein have the meanings assigned to them in the Indenture referred to
below unless otherwise indicated.
(1)
INTEREST
. Chart Industries, Inc., a Delaware corporation (the “
Company
”), promises to pay
interest on the principal amount of this Note at 9
1
/
8
% per annum from October 17, 2005 until maturity
and shall pay the Additional Interest, if any, payable pursuant to Section 8 of the Registration
Rights Agreement referred to below. The Company will pay interest and Additional Interest, if any,
semi-annually in arrears on April 15 and October 15 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each, an “
Interest Payment Date
”). Interest on
the Notes will accrue from the most recent date to which interest has been paid or, if no interest
has been paid, from October 17, 2005 until the principal hereof is due. The first Interest Payment
Date shall be April 15, 2006. The Company will pay interest on overdue principal at the rate borne
by the Notes, and it shall pay interest on overdue installments of interest at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
(2)
METHOD OF PAYMENT
. The Company will pay interest on the Notes (except defaulted interest)
and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of
business on the April 1 or October 1 next preceding the Interest Payment Date, even if such Notes
are canceled after such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. If a Holder has given wire
transfer instructions to the Paying Agent on behalf of the Company, the Paying Agent will remit all
principal, interest and premium and Additional Interest, if any, on that Holder’s Notes in
accordance with these instructions. All other payments on the Notes will be made by mailing a
check to the registered address of each Holder thereof. Such payment will be in such coin or
currency of the United States of America as at the time of payment is legal tender for payment of
public and private debts.
(3)
PAYING AGENT AND REGISTRAR
. Initially, The Bank of New York, as the Trustee, will act as
Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to
any Holder. The Company or any of its Subsidiaries may act in any such capacity.
(4)
INDENTURE
. The Company issued the Notes under an Indenture dated as of October 17, 2005
(the “
Indenture
”) among the Company, the Guarantors and the Trustee. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by reference to the TIA.
Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Notes are subject to all the terms and provisions of the Indenture, and Holders are
referred to the Indenture and the TIA for a statement of such terms. To the extent any provision
of this Note conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling.
A-5
The Notes are unsecured senior subordinated obligations of the Company. This Note is one of
the Initial Notes referred to in the Indenture. The Notes include the Initial Notes, any
Additional Notes and any Exchange Notes issued in exchange for Initial Notes or Additional Notes
pursuant to the Indenture. The Initial Notes, any Additional Notes and any Exchange Notes are
treated as a single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to, among other things,
make certain Investments and other Restricted Payments, pay dividends and other distributions,
incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and
distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of the Company
and such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create
or incur Liens and make asset sales. The Indenture also imposes limitations on the ability of the
Company and each Guarantor to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of its property.
To guarantee the due and punctual payment of the principal and interest on the Notes and all
other amounts payable by the Company under the Indenture and the Notes when and as the same shall
be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of
the Notes and the Indenture, the Guarantors have, jointly and severally, unconditionally guaranteed
the Obligations of the Company under the Notes on an unsecured senior subordinated basis pursuant
to the terms of the Indenture.
(5)
SUBORDINATION
. The Notes and the Note Guarantees are general senior subordinated
unsecured obligations of the Company and the Guarantors, subordinated in right of payment to the
prior payment in full, in cash or Cash Equivalents, of all Obligations due in respect of existing
or future Senior Indebtedness of the Company or a Guarantor, as applicable, as set forth in
Articles 10 and 11, respectively, of the Indenture. Each Holder by its acceptance hereof agrees to
be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to
take such action as may be necessary or appropriate to effectuate the subordination provided for in
the Indenture and appoints the Trustee its attorney-in-fact for such purposes.
(6)
OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraphs (b) and (c) of this Paragraph 6, the Company will not
have the option to redeem the Notes prior to October 15, 2010. On or after October 15, 2010, the
Company may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ notice,
at the redemption prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Additional Interest, if any, on the Notes to be redeemed to, but
not including, the applicable redemption date, if redeemed during the twelve-month period beginning
on October 15 of the years indicated below, subject to the rights of Holders on the relevant record
date to receive interest on the relevant interest payment date:
A-6
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Year
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Percentage
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2010
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104.563
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%
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2011
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103.042
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%
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2012
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101.521
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%
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2013 and thereafter
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100.000
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%
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Unless the Company defaults in the payment of the redemption price, interest will cease to
accrue on the Notes or portions thereof called for redemption on the applicable redemption date.
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 6, at any time prior
to October 15, 2008, the Company may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Notes issued under the Indenture (including any Additional Notes issued after
the Issue Date) at a redemption price of 109.125% of the principal amount thereof, plus accrued and
unpaid interest and Additional Interest, if any, to, but not including the redemption date, with
the net cash proceeds of one or more Equity Offerings;
provided
that (1) at least 65% in aggregate
principal amount of the Notes issued under the Indenture (excluding Notes held by the Company and
its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and (2)
that such redemption occurs within 180 days of the date of the closing of such Equity Offering.
(c) At any time prior to October 15, 2010, the Company may also redeem all or a part of the
Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first class mail to each
Holder’s registered address, at a redemption price equal to 100% of the principal amount of Notes
to be redeemed, plus the Applicable Premium as of, and accrued and unpaid interest and Additional
Interest, if any, to, but not including, the date of redemption, subject to the rights of Holders
on the relevant record date to receive interest due on the relevant interest payment date.
(7)
MANDATORY REDEMPTION
. The Company is not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
(8)
NOTICE OF REDEMPTION
. Notice of redemption will be mailed by first class mail at least 30
days but not more than 60 days before the redemption date to each Holder whose Notes are to be
redeemed at its registered address, except that redemption notices may be mailed more than 60 days
prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or
a satisfaction or discharge of the Indenture. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. Unless the Company defaults in the payment
of the redemption price, interest will cease to accrue on the Notes or portions thereof called for
redemption on the applicable redemption date.
(9)
REPURCHASE AT THE OPTION OF HOLDER
.
(a) If there is a Change of Control, the Company will make an offer (a “
Change of Control
Offer
”) to each Holder to repurchase all or any part (equal to $1,000 or an
A-7
integral multiple of $1,000) of that Holder’s Notes at a purchase price in cash equal to 101%
of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and
Additional Interest, if any, on the Notes repurchased to, but not including, the date of purchase,
subject to the rights of Holders on the relevant record date to receive interest due on the
relevant interest payment date. Within 30 days following any Change of Control, the Company will
mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
(b) If the Company or a Restricted Subsidiary of the Company consummates any Asset Sales,
within ten Business Days of each date on which the aggregate amount of Excess Proceeds exceeds
$15.0 million, the Company will make an offer to all Holders of Notes and all holders of other
Indebtedness that is
pari passu
with the Notes containing provisions similar to those set forth in
the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an
"
Asset Sale Offer
”) pursuant to Section 4.10 of the Indenture to purchase the maximum principal
amount of Notes and such other
pari passu
Indebtedness that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Additional Interest, if any, thereon to, but excluding, the date of
purchase, in accordance with the procedures set forth in the Indenture. To the extent that, any
Excess Proceeds remain after the consummation of an Asset Sale Offer, the Company may use those
Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and other
pari passu
Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other
pari passu
Indebtedness to be purchased on a
pro rata
basis. Holders of Notes that are the subject of an
offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled “
Option of Holder
to Elect Purchase
” attached to the Notes.
(10)
DENOMINATIONS, TRANSFER, EXCHANGE
. The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered
and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require
a Holder, among other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note
selected for redemption, except for the unredeemed portion of any Note being redeemed in part.
Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
(11)
PERSONS DEEMED OWNERS
. The registered Holder of a Note shall be treated as its owner for
all purposes.
(12)
AMENDMENT, SUPPLEMENT AND WAIVER
. Subject to certain exceptions, the Indenture or the
Notes or the Note Guarantees may be amended or supplemented with the consent of the Company and
Holders of at least a majority in aggregate principal amount of the then outstanding Notes,
including Additional Notes, if any, voting as a single
A-8
class, and any existing Default or Event or Default or compliance with any provision of the
Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Notes, including Additional Notes,
if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture or
the Notes or the Note Guarantees may be amended or supplemented (i) to cure any ambiguity, defect
or inconsistency, (ii) to provide for uncertificated Notes in addition to or in place of
certificated Notes, (iii) to provide for the assumption of the Company’s or a Guarantor’s
obligations to Holders of the Notes and Note Guarantees in case of a merger or consolidation or
sale of all or substantially all of the Company’s or such Guarantor’s assets, as applicable, (iv)
to make any change that would provide any additional rights or benefits to the Holders or that does
not adversely affect the legal rights under the Indenture of any such Holder, (v) to comply with
the requirements of the SEC in order to effect or maintain the qualification of the Indenture under
the TIA, (vi) to conform the text of the Indenture, the Note Guarantees or the Notes to any
provision of the “Description of the Notes” section of the Company’s Offering Memorandum dated
September 30, 2005, to the extent that such provision in that “Description of the Notes” was
intended to be a verbatim recitation of a provision of the Indenture, the Note Guarantees or the
Notes, (vii) to provide for the issuance of Additional Notes in accordance with the limitations set
forth in the Indenture; (viii) to allow any Guarantor to execute a supplemental indenture to the
Indenture and/or a Note Guarantee with respect to the Notes and to release Guarantors from the Note
Guarantee in accordance with the terms of the Indenture; (ix) to comply with the rules of any
applicable securities depositary; or (x) to provide for a successor Trustee in accordance with the
terms of the Indenture or to otherwise comply with any requirement of the Indenture.
(13)
DEFAULTS AND REMEDIES
. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency with respect to the
Company, any Restricted Subsidiary of the Company that is a Significant Subsidiary or any group of
Restricted Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable immediately without further action or
notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may,
on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default
or Event of Default and its consequences under the Indenture except a continuing Default or Event
of Default in the payment of interest or premium or Additional Interest, if any, on, or the
principal of, the Notes. The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event
of Default.
(14)
DISCHARGE AND DEFEASANCE
. Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Notes, the Note Guarantees and the Indenture if
the Company deposits with the Trustee money or Government Securities for the payment of principal
of and interest on the Notes to redemption or maturity, as the case may be.
A-9
(15)
TRUSTEE DEALINGS WITH COMPANY
. The Trustee, in its individual or any other capacity, may
make loans to, accept deposits from, and perform services for the Company or its Affiliates, and
may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.
(16)
NO RECOURSE AGAINST OTHERS
. No past, present or future director, manager, officer,
employee, incorporator, stockholder or member of the Company, any Parent or any Subsidiary, as
such, will have any liability for any obligations of the Company or the Guarantors under the Notes,
the Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of the Notes.
(17)
AUTHENTICATION
. This Note will not be valid until authenticated by the manual signature
of the Trustee or an authenticating agent.
(18)
ABBREVIATIONS
. Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
(19)
ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES
.
In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted
Global Notes and Restricted Definitive Notes will have all the rights set forth in the Registration
Rights Agreement dated as of October 17, 2005, among the Company, the Guarantors and the Placement
Agents named therein or, in the case of Additional Notes, Holders of Restricted Global Notes and
Restricted Definitive Notes will have the rights set forth in one or more registration rights
agreements, if any, among the Company, the Guarantors and the other parties thereto, relating to
rights given by the Company and the Guarantors to the purchasers of any Additional Notes
(collectively, the “
Registration Rights Agreement
”).
(20)
CUSIP NUMBERS, ISINS
. The Company has caused CUSIP numbers and ISINs to be printed on
the Notes, and the Trustee may use CUSIP numbers and ISINs in notices of redemption as a
convenience to Holders. No representation is made as to the accuracy of such numbers either as
printed on the Notes or as contained in any notice of redemption, and reliance may be placed only
on the other identification numbers placed thereon.
(21)
GOVERNING LAW.
THE LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE
INDENTURE, THIS NOTE AND THE NOTE GUARANTEES.
The Company will furnish to any Holder upon written request and without charge a copy of the
Indenture and/or the Registration Rights Agreement. Requests may be made to:
Chart Industries, Inc.
One Infinity Corporate Centre Drive
Suite 300
A-10
Garfield Heights, OH 44125
Facsimile No.: (440) 753-1491
Attention: Chief Financial Officer
A-11
ASSIGNMENT FORM
To assign this Note, fill in the form below:
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(I)
or (we) assign and transfer this Note to:
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(Insert assignee’s legal name)
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(Insert assignee’s soc. sec. or tax I.D. no.)
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(Print or type assignee’s name, address and zip code)
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and
irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute another to act for
him.
Date:
Your Signature:
(Sign exactly as your name
appears on the face of this Note)
Signature Guarantee*:
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*
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Participant in a recognized Signature Guarantee Medallion Program (or other signature
guarantor acceptable to the Trustee).
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A-12
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or
4.15 of the Indenture, check the appropriate box below:
o
Section 4.10
o
Section 4.15
If you want to elect to have only part of the Note purchased by the Company pursuant to
Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased:
$
Date:
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Your Signature:
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(Sign exactly as your name
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appears on the face of this Note)
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Signature Guarantee*:
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*
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Participant in a recognized Signature Guarantee Medallion Program (or other signature
guarantor acceptable to the Trustee).
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A-13
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
[
To be inserted for Rule 144A Global Note
]
The following exchanges of a part of this Rule 144A Global Note for an interest in another
Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive
Note for an interest in this Rule 144A Global Note, have been made:
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Amount of
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Amount of
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Principal Amount
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decrease in
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increase in
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at Maturity
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Principal Amount
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Principal Amount
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of this Global Note
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Signature of
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at Maturity
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at Maturity
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following such
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authorized officer
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of
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of
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decrease
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of Trustee or
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Date of Exchange
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this Global Note
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this Global Note
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(or increase)
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Custodian
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[
To be inserted for Regulation S Global Note
]
The following exchanges of a part of this Regulation S Global Note for an interest in another
Global Note or of other Restricted Global Notes for an interest in this Regulation S Global Note,
have been made:
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Amount of
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Amount of
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Principal Amount
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decrease in
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increase in
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at Maturity
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Principal Amount
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Principal Amount
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of this Global Note
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Signature of
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at Maturity
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at Maturity
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following such
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authorized officer
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of
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of
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decrease
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of Trustee or
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Date of Exchange
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this Global Note
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this Global Note
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(or increase)
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Custodian
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A-14
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Chart Industries, Inc.
One Infinity Corporate Centre Drive
Suite 300
Garfield Heights, OH 44125
Facsimile No.: (440) 753-1491
The Bank of New York
Corporate Trust Division
101 Barclay Street, 8th Floor West
New York, NY 10286
Facsimile No.: (212) 815-5707
Attention: Corporate Trust Division
Re:
9
1
/
8
%
Senior Subordinated Notes due 2015
Reference is hereby made to the Indenture, dated as of October 17, 2005 (the “
Indenture
”),
among Chart Industries, Inc., as issuer (the “
Company
”), the Guarantors party thereto and The Bank
of New York, a New York banking corporation, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
, (the “
Transferor
”) owns and proposes to transfer the Note[s] or interest
in such Note[s] specified in Annex A hereto, in the principal amount of $
in such
Note[s] or interests (the “
Transfer
”), to
(the “
Transferee
”), as
further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
1.
o
Check if Transferee will take delivery of a beneficial interest in the 144A Global Note
or a Restricted Definitive Note pursuant to Rule 144A
. The Transfer is being effected pursuant
to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the “
Securities
Act
”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or
Definitive Note is being transferred to a Person that the Transferor reasonably believes is
purchasing the beneficial interest or Definitive Note for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion, and such Person
and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and
in the Indenture and the Securities Act.
B-1
2.
o
Check if Transferee will take delivery of a beneficial interest in a Legended
Regulation S Global Note or a Restricted Definitive Note pursuant to Regulation S
. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is
not being made to a Person in the United States and (x) at the time the buy order was originated,
the Transferee was outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United States or (y) the
transaction was executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows that the transaction
was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the
Private Placement Legend printed on the Legended Regulation S Global Note and/or the Restricted
Definitive Note and in the Indenture and the Securities Act.
3.
o
Check and complete if Transferee will take delivery of a beneficial interest in the IAI
Global Note or a Restricted Definitive Note pursuant to any provision of the Securities Act other
than Rule 144A or Regulation S
. The Transfer is being effected in compliance with the transfer
restrictions applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the Transferor hereby
further certifies that (check one):
(a)
o
such Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act;
or
(b)
o
such Transfer is being effected to the Company or a subsidiary thereof;
or
(c)
o
such Transfer is being effected pursuant to an effective registration statement
under the Securities Act and in compliance with the prospectus delivery requirements of
the Securities Act;
or
(d)
o
such Transfer is being effected to an Institutional Accredited Investor and
pursuant to an exemption from the registration requirements of the Securities Act other
than Rule 144A, Rule 144, Rule 903 or Rule 904, and the Transferor hereby further
certifies that it has not engaged in any general solicitation
B-2
within the meaning of Regulation D under the Securities Act and the Transfer complies
with the transfer restrictions applicable to beneficial interests in a Restricted Global
Note or Restricted Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in the form of
Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of
Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached to this
certification), to the effect that such Transfer is in compliance with the Securities Act.
Upon consummation of the proposed transfer in accordance with the terms of the Indenture,
the transferred beneficial interest or Definitive Note will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the IAI Global Note
and/or the Restricted Definitive Notes and in the Indenture and the Securities Act.
4.
o
Check if Transferee will take delivery of a beneficial interest in an Unrestricted
Global Note or of an Unrestricted Definitive Note
.
(a)
o
Check if Transfer is pursuant to Rule 144
. (i) The Transfer is being effected pursuant to
and in accordance with Rule 144 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on
Restricted Definitive Notes and in the Indenture.
(b)
o
Check if Transfer is Pursuant to Regulation S
. (i) The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance
with the transfer restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c)
o
Check if Transfer is Pursuant to Other Exemption
. (i) The Transfer is being effected
pursuant to and in compliance with an exemption from the registration requirements of the
Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities laws of any State of
the United States and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will not be subject to
B-3
the restrictions on transfer enumerated in the Private Placement Legend printed on the
Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your benefit and the benefit
of the Company.
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[Insert Name of Transferor]
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By:
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Name:
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Title:
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Dated:
B-4
ANNEX A TO CERTIFICATE OF TRANSFER
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1.
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The Transferor owns and proposes to transfer the following:
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[CHECK ONE OF (a) OR (b)]
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(a)
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o
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a beneficial interest in the:
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(i)
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o
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144A Global Note (CUSIP
), or
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(ii)
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o
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Regulation S Global Note (CUSIP
), or
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(iii)
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o
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IAI Global Note (CUSIP
); or
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(b)
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o
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a Restricted Definitive Note.
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2.
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After the Transfer the Transferee will hold:
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[CHECK ONE]
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(a)
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o
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a beneficial interest in the:
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(i)
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o
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144A Global Note (CUSIP
), or
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(ii)
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o
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Regulation S Global Note (CUSIP
), or
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(iii)
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o
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IAI Global Note (CUSIP
); or
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(iv)
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o
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Unrestricted Global Note (CUSIP
); or
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(b)
|
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o
|
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a Restricted Definitive Note; or
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(c)
|
|
o
|
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an Unrestricted Definitive Note,
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in accordance with the terms of the Indenture.
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B-5
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Chart Industries, Inc.
One Infinity Corporate Centre Drive
Suite 300
Garfield Heights, OH 44125
Facsimile No.: (440) 753-1491
The Bank of New York
Corporate Trust Division
101 Barclay Street, 8th Floor West
New York, NY 10286
Facsimile No.: (212) 815-5707
Attention: Corporate Trust Division
Re:
9
1
/
8
%
Senior Subordinated Notes due 2015
(CUSIP
)
Reference is hereby made to the Indenture, dated as of October 17, 2005 (the “
Indenture
”),
among Chart Industries, Inc., as issuer (the “
Company
”), the Guarantors party thereto and The Bank
of New York, a New York banking corporation, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
, (the “
Owner
”) owns and proposes to exchange the Note[s] or
interest in such Note[s] specified herein, in the principal amount of $
in such Note[s]
or interests (the “
Exchange
”). In connection with the Exchange, the Owner hereby certifies that:
1.
Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global
Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note
(a)
o
Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial
interest in an Unrestricted Global Note
. In connection with the Exchange of the Owner’s beneficial
interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an
equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance
with the Securities Act of 1933, as amended (the “
Securities Act
”), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted
Global Note is being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
C-1
(b)
o
Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted
Definitive Note
. In connection with the Exchange of the Owner’s beneficial interest in a
Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the Restricted Global
Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c)
o
Check if Exchange is from Restricted Definitive Note to beneficial interest in an
Unrestricted Global Note
. In connection with the Owner’s Exchange of a Restricted Definitive Note
for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions applicable to Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are not required in order
to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired
in compliance with any applicable blue sky securities laws of any state of the United States.
(d)
o
Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note
. In
connection with the Owner’s Exchange of a Restricted Definitive Note for an Unrestricted Definitive
Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue
sky securities laws of any state of the United States.
2.
Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global
Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes
(a)
o
Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted
Definitive Note.
In connection with the Exchange of the Owner’s beneficial interest in a
Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account
without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.
C-2
(b)
o
Check if Exchange is from Restricted Definitive Note to beneficial interest in a
Restricted Global Note
. In connection with the Exchange of the Owner’s Restricted Definitive Note
for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, IAI
Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner’s own account without transfer and (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and
pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue
sky securities laws of any state of the United States. Upon consummation of the proposed Exchange
in accordance with the terms of the Indenture, the beneficial interest issued will be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit
of the Company.
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[Insert Name of Transferor]
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By:
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Name:
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Title:
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Dated:
C-3
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Chart Industries, Inc.
One Infinity Corporate Centre Drive
Suite 300
Garfield Heights, OH 44125
Facsimile No.: (440) 753-1491
The Bank of New York
Corporate Trust Division
101 Barclay Street, 8th Floor West
New York, NY 10286
Facsimile No.: (212) 815-5707
Attention: Corporate Trust Division
Re:
9 1/8% Senior Subordinated Notes due 2015
Reference is hereby made to the Indenture, dated as of October 17, 2005 (the “
Indenture
”),
among Chart Industries, Inc., as issuer (the “
Company
”), the guarantors party thereto and The Bank
of New York, a New York banking corporation, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $
aggregate principal amount of:
(a)
o
a beneficial interest in a Global Note, or
(b)
o
a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest therein is subject
to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be
bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except
in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended
(the “
Securities Act
”).
2. We understand that the offer and sale of the Notes have not been registered under the
Securities Act, and that the Notes and any interest therein may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for
which we are acting as hereinafter stated, that if we should sell the Notes or any interest
therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with
Rule 144A under the Securities Act to a “qualified institutional buyer” (as defined therein), (C)
to an institutional “accredited investor” (as defined below) that, prior to
D-1
such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and
to the Company a signed letter substantially in the form of this letter and, if such transfer is in
respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion
of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the
Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and
we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in
a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this
paragraph a notice advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we
will be required to furnish to you and the Company such certifications, legal opinions and other
information as you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act) and have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by us for our own
account or for one or more accounts (each of which is an institutional “accredited investor”) as to
each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby.
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[Insert Name of Accredited Investor]
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By:
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Name:
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Title:
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Dated:
D-2
EXHIBIT E
[FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS]
SUPPLEMENTAL INDENTURE (this “
Supplemental Indenture
”), dated as of
, 200___,
among
(the “
New Guarantor
”), a subsidiary of Chart Industries, Inc., a Delaware
corporation (
the
“
Company
”), and The Bank of New York, a New York banking corporation, as trustee
under the Indenture referred to below (the “
Trustee
”).
WITNESSETH
WHEREAS, the Company and the existing Guarantors have heretofore executed and delivered to the
Trustee an indenture (as amended, supplemented or otherwise modified, the “
Indenture
”), dated as of
October 17, 2005 providing for the issuance of
9
1
/
8
% Senior Subordinated Notes due 2015 (the
“
Notes
”);
WHEREAS, Section 4.17 of the Indenture provides that under certain circumstances the New
Guarantor shall execute and deliver to the Trustee a supplemental indenture pursuant to which the
New Guarantor shall unconditionally guarantee all of the Company’s Obligations under the Notes and
the Indenture on the terms and conditions set forth herein (the “
Note Guarantee
”); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the existing
Guarantors are authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company and the
Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes
as follows:
1. DEFINED TERMS. Defined terms used herein without definition shall have the meanings
assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The New Guarantor hereby agrees, jointly and severally with all
existing Guarantors (if any), to provide an unconditional guarantee on the terms and subject to the
conditions set forth in Article 11 of the Indenture and to be bound by all other applicable
provisions of the Indenture, including the provisions relating the subordination of such guarantee
set forth in Article 10, and the Notes and to perform all of the obligations and agreements of a
Guarantor under the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director, manager, officer,
employee, incorporator, stockholder or member of the Company, any parent entity of the Company or
any Subsidiary, as such, will have any liability for any obligations of the Company or the
Guarantors under the Notes, this Indenture, the Note Guarantees or for any claim based on, in
respect of, or by reason of, such obligations or their
E-1
creation. Each Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
4. NOTICES. All notices or other communications to the New Guarantor shall be given as
provided in Section 13.02 of the Indenture.
5. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF INDENTURE. Except as expressly
amended hereby, the Indenture is in all respects ratified and confirmed and all the terms,
conditions and provisions thereof shall remain in full force and effect. This Supplemental
Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore
or hereafter authenticated and delivered shall be bound hereby.
6. GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
7. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture.
Each signed copy shall be an original, but all of them together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not
affect the construction hereof.
9. TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no representation as to the validity or
sufficiency of this Supplemental Indenture.
E-2
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed and attested, all as of the date first above written.
Dated:
, 20___
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[NEW GUARANTOR]
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By:
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Name:
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Title:
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CHART INDUSTRIES, INC.
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By:
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Name:
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Title:
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THE BANK OF NEW YORK
as Trustee
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By:
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Authorized Signatory
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E-3
Exhibit 10.1
U.S.$240,000,000
CREDIT AGREEMENT
Dated as of October 17, 2005
Among
FR X CHART HOLDINGS LLC,
as Holdings,
CI ACQUISITION, INC.,
as Borrower,
THE LENDERS PARTY HERETO,
CITICORP NORTH AMERICA, INC.,
as Administrative Agent,
MORGAN STANLEY SENIOR FUNDING, INC.
as Syndication Agent
CITIGROUP GLOBAL MARKETS INC.
and
MORGAN STANLEY SENIOR FUNDING, INC.
as Joint Lead Arrangers and Joint Book Managers
and
NATEXIS BANQUES POPULAIRES
and
SOVEREIGN BANK
as Co-Documentation Agents
TABLE OF CONTENTS
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Page
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ARTICLE I
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DEFINITIONS
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SECTION 1.01. Defined Terms
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2
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SECTION 1.02. Terms Generally
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43
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SECTION 1.03. Effectuation of Transfers
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44
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ARTICLE II
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THE CREDITS
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SECTION 2.01. Commitments
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44
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SECTION 2.02. Loans and Borrowings
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44
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SECTION 2.03. Requests for Borrowings
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45
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SECTION 2.04. Swingline Loans
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46
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SECTION 2.05. Letters of Credit
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47
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SECTION 2.06. Funding of Borrowings
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52
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SECTION 2.07. Interest Elections
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53
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SECTION 2.08. Termination and Reduction of Commitments
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54
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SECTION 2.09. Repayment of Loans; Evidence of Debt
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55
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SECTION 2.10. Repayment of Term B Loans and Revolving Facility Loans
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56
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SECTION 2.11. Prepayment of Loans
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57
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SECTION 2.12. Fees
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58
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SECTION 2.13. Interest
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59
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SECTION 2.14. Alternate Rate of Interest
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60
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SECTION 2.15. Increased Costs
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61
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SECTION 2.16. Break Funding Payments
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62
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SECTION 2.17. Taxes
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62
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SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
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64
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SECTION 2.19. Mitigation Obligations; Replacement of Lenders
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66
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SECTION 2.20. Increase in Revolving Facility Commitments and/or Term B Loan Commitments
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67
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SECTION 2.21. Illegality
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68
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ARTICLE III
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REPRESENTATIONS AND WARRANTIES
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SECTION 3.01. Organization; Powers
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68
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SECTION 3.02. Authorization
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69
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SECTION 3.03. Enforceability
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69
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SECTION 3.04. Governmental Approvals
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69
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SECTION 3.05. Financial Statements
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70
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SECTION 3.06. No Material Adverse Effect
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70
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SECTION 3.07. Title to Properties; Possession Under Leases
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70
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i
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CI Acquisition Credit Agreement
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Page
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SECTION 3.08. Litigation; Compliance with Laws
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72
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SECTION 3.09. Federal Reserve Regulations
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72
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SECTION 3.10. Investment Company Act; Public Utility Holding Company Act
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72
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SECTION 3.11. Use of Proceeds
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72
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SECTION 3.12. Tax Returns
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73
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SECTION 3.13. No Material Misstatements
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73
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SECTION 3.14. Employee Benefit Plans
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74
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SECTION 3.15. Environmental Matters
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74
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SECTION 3.16. Mortgages
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75
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SECTION 3.17. Location of Real Property
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75
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SECTION 3.18. Solvency
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75
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SECTION 3.19. Labor Matters
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76
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SECTION 3.20. Insurance
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76
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SECTION 3.21. Representations and Warranties in Acquisition Agreement
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76
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ARTICLE IV
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CONDITIONS OF LENDING
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SECTION 4.01. All Credit Events
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77
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SECTION 4.02. First Credit Event
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77
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ARTICLE V
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AFFIRMATIVE COVENANTS
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SECTION 5.01. Existence; Businesses and Properties
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81
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SECTION 5.02. Insurance
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81
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SECTION 5.03. Taxes
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83
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SECTION 5.04. Financial Statements, Reports, etc.
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83
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SECTION 5.05. Litigation and Other Notices
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85
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SECTION 5.06. Compliance with Laws
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85
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SECTION 5.07. Maintaining Records; Access to Properties and Inspections
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85
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SECTION 5.08. Use of Proceeds
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86
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SECTION 5.09. Compliance with Environmental Laws
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86
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SECTION 5.10. Further Assurances
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86
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SECTION 5.11. Fiscal Year
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87
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SECTION 5.12. Interest Rate Protection Agreements
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87
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SECTION 5.13. Proceeds of Certain Dispositions
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88
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SECTION 5.14. Post-Closing Matters
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88
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ARTICLE VI
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NEGATIVE COVENANTS
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SECTION 6.01. Indebtedness
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88
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SECTION 6.02. Liens
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91
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SECTION 6.03. Sale and Lease-Back Transactions
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94
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SECTION 6.04. Investments, Loans and Advances
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94
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SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions
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97
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ii
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CI Acquisition Credit Agreement
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Page
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SECTION 6.06. Dividends and Distributions
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99
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SECTION 6.07. Transactions with Affiliates
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100
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SECTION 6.08. Business of the Borrower and the Subsidiaries
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102
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SECTION 6.09. Limitation on Modifications of Indebtedness; Modifications of Certificate
of Incorporation, By-Laws and Certain Other Agreements; etc.
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102
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SECTION 6.10. Capital Expenditures
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104
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SECTION 6.11. Interest Coverage Ratio
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104
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SECTION 6.12. Leverage Ratio
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105
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SECTION 6.13. Swap Agreements
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106
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SECTION 6.14. Designated Senior Debt
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106
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ARTICLE VII
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EVENTS OF DEFAULT
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SECTION 7.01. Events of Default
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106
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SECTION 7.02. Exclusion of Immaterial Subsidiaries
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109
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SECTION 7.03. The Borrower’s Right to Cure
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109
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ARTICLE VIII
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THE AGENTS
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SECTION 8.01. Appointment
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110
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SECTION 8.02. Nature of Duties
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111
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SECTION 8.03. Resignation by the Agents
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111
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SECTION 8.04. Each Agent in Its Individual Capacity
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112
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SECTION 8.05. Indemnification
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112
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SECTION 8.06. Lack of Reliance on Agents
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112
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SECTION 8.07. Appointment of Supplemental Collateral Agents
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112
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ARTICLE IX
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MISCELLANEOUS
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SECTION 9.01. Notices
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113
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SECTION 9.02. Survival of Agreement
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114
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SECTION 9.03. Binding Effect
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114
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SECTION 9.04. Successors and Assigns
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115
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SECTION 9.05. Expenses; Indemnity
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118
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SECTION 9.06. Right of Set-off
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119
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SECTION 9.07. Applicable Law
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120
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SECTION 9.08. Waivers; Amendment
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120
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SECTION 9.09. Interest Rate Limitation
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122
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SECTION 9.10. Entire Agreement
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122
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SECTION 9.11. WAIVER OF JURY TRIAL
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123
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SECTION 9.12. Severability
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123
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SECTION 9.13. Counterparts
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123
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SECTION 9.14. Headings
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123
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iii
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CI Acquisition Credit Agreement
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Page
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SECTION 9.15. Jurisdiction; Consent to Service of Process
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123
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SECTION 9.16. Confidentiality
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124
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SECTION 9.17. Citigroup Direct Website Communications
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124
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SECTION 9.18. Release of Liens and Guarantees
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126
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SECTION 9.19. U.S. Patriot Act
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126
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SECTION 9.20. Judgment
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126
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SECTION 9.21. Termination or Release
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126
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SECTION 9.22. Pledge and Guarantee Restrictions
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126
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Exhibits and Schedules
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Exhibit A
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Form of Assignment and Acceptance
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Exhibit B
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Form of Administrative Questionnaire
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Exhibit C-1
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Form of Borrowing Request
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Exhibit C-2
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Form of Swingline Borrowing Request
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Exhibit D
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Form of Mortgage
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Exhibit E
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Form of Collateral Agreement
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Exhibit F
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Form of Solvency Certificate of CI Acquisition, Inc.
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Exhibit H-1
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Form of Revolving Note
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Exhibit H-2
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Form of Term B Note
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Schedule 1.01(b)
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Pro Forma Adjusted EBITDA
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Schedule 1.01(c)
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Excluded Acquisition Agreement Payments
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Schedule 1.01(d)
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Certain Subsidiaries
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Schedule 2.01
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Commitments
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Schedule 3.01
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Organization and Good Standing
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Schedule 3.04
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Governmental Approvals
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Schedule 3.07(e)
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Condemnation Proceedings
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Schedule 3.07(g)
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Subsidiaries
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Schedule 3.07(h)
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Subscriptions
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Schedule 3.08(a)
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Litigation
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Schedule 3.08(b)
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Violations
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Schedule 3.12
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Taxes
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Schedule 3.15(g)
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Environmental Matters
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Schedule 3.17(a)
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Owned Real Property
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Schedule 3.17(b)
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Leased Real Property
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Schedule 3.19
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Labor Matters
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Schedule 3.20
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Insurance
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Schedule 4.02(k)
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Governmental Approvals
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Schedule 6.01
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Indebtedness
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Schedule 6.02(a)
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Liens
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Schedule 6.04
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Investments
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Schedule 6.07
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Transactions with Affiliates
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iv
CI Acquisition Credit Agreement
CREDIT AGREEMENT dated as of October 17, 2005 (this “
Agreement
”), among FR X CHART
HOLDINGS LLC, a Delaware limited liability company (“
Holdings
”), CI ACQUISITION, INC., a
Delaware corporation (“
Acquisition Corp.
” or the “
Borrower
”), the LENDERS party
hereto from time to time, CITICORP NORTH AMERICA, INC., as administrative agent (in such capacity,
together with any successor administrative agent appointed pursuant to the provisions of Article
VIII, the “
Administrative Agent
”) and as collateral agent (in such capacity, together with
any successor collateral agent appointed pursuant to the provisions of Article VIII, the
“
Collateral Agent
”) for the Lenders, MORGAN STANLEY SENIOR FUNDING, INC. (“
MS
”), as
syndication agent (in such capacity, the “
Syndication Agent
”), CITIGROUP GLOBAL MARKETS
INC. and MS, as joint lead arrangers and joint book managers (in such capacity, the “
Joint Lead
Arrangers
”) and NATEXIS BANQUES POPULAIRES and SOVEREIGN BANK, as co-documentation agents, (in
such capacity, the “
Co-Documentation Agents
”).
W
I T N E S S E T H :
WHEREAS, First Reserve Fund X L.P. and certain of its Affiliates (with such term and each
other capitalized term used but not defined in this preamble having the meaning assigned thereto in
Article I) (collectively, the “
Funds
”) have formed Holdings, and Holdings has formed the
Borrower;
WHEREAS, pursuant to that Agreement and Plan of Merger, dated August 2, 2005 (the
“
Acquisition Agreement
”) among the Borrower, Chart Industries Inc., a Delaware corporation
(the “
Acquired Business
”) and certain of the shareholders of the Acquired Business (such
shareholders being the “
Sellers
”), (i) the Borrower will acquire, directly or indirectly,
all of the issued and outstanding equity interests of the Sellers in the Acquired Business and (ii)
the Borrower will merge with and into the Acquired Business and thereby acquire the remaining
issued and outstanding equity interests of the Acquired Business;
WHEREAS, in connection with the consummation of the Acquisition, certain of the holders of
equity interests in the Acquired Business (“
Rollover Shareholders
”) will reinvest up to $7
million (the “
Rollover Equity
”) in the Borrower and the Funds and their Affiliates will
contribute cash common equity to Holdings in an aggregate amount, together with the Rollover
Equity, of not less 25% of an amount equal to the purchase price of the Acquired Business,
plus
without duplication, the existing indebtedness of the Acquired Business refinanced in connection
with the Acquisition
plus
the transaction fees and expenses incurred in connection with the
Acquisition
plus
$5.0 million to finance working capital needs (collectively, the “
Equity
Financing
”);
WHEREAS, the aggregate amount of the Equity Financing will be contributed by Holdings to the
common equity of Acquisition Corp. to be used by Acquisition Corp. to fund the Acquisition;
WHEREAS, in connection with the consummation of the Acquisition, the Borrower will
simultaneously herewith issue a total of up to U.S.$170.0 million in aggregate principal amount of
its Senior Subordinated Notes in a public offering or in a Rule 144A or other private placement;
and
[CI Acquisition Credit Agreement]
WHEREAS, the Borrower has requested the Lenders to extend credit in the form of (a) Term B
Loans on the Closing Date, in an aggregate principal amount not in excess of U.S.$180.0 million and
(b) Revolving Facility Loans and Letters of Credit at any time and from time to time prior to the
Revolving Facility Maturity Date, in an aggregate principal amount at any time outstanding not in
excess of U.S.$60.0 million.
NOW, THEREFORE, the Lenders are willing to extend such credit to the Borrower on the terms and
subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01.
Defined Terms
. As used in this Agreement, the following terms shall
have the meanings specified below:
“
ABR Borrowing
” shall mean a Borrowing comprised of ABR Loans.
“
ABR Loan
” shall mean any ABR Term B Loan, ABR Revolving Loan or Swingline Loan.
“
ABR Revolving Facility Borrowing
” shall mean a Borrowing comprised of ABR Revolving
Loans.
“
ABR Revolving Loan
” shall mean any Revolving Facility Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the provisions of Article II.
“
ABR Term B Loan
” shall mean any Term B Loan bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions of Article II.
“
Acquired Business
” shall have the meaning assigned to such term in the second recital
hereto.
“
Acquisition
” shall mean the transactions described in the second recital hereto.
“
Acquisition Agreement
” shall have the meaning assigned to such term in the second
recital hereto.
“
Acquisition Agreement Payments
” shall mean cash amounts received by the Borrower or
any of its Affiliates in respect of any claim under the Acquisition Agreement or as a direct or
indirect result of any breach of any term or provision of the Acquisition Agreement or otherwise in
respect of any claim by the Borrower or any of its Affiliates arising out of the
Acquisition (other than any working capital or capital expenditure adjustments under the
Acquisition Agreement), in an aggregate amount in excess of U.S.$5.0 million;
provided
,
CI Acquisition Credit Agreement
however
, that Acquisition Agreement Payments shall not include any amounts described on
Schedule 1.01(c)
.
“
Acquisition Corp
.” shall have the meaning assigned to such term in the introductory
paragraph to this Agreement.
“
Acquisition Documents
” shall mean the collective reference to the Acquisition
Agreement, and all exhibits and schedules thereto.
“
Adjusted LIBO Rate
” shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory
Reserves applicable to such Eurodollar Borrowing, if any.
“
Administrative Agent
” shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
“
Administrative Agent Fees
” shall have the meaning assigned to such term in Section
2.12(c).
“
Administrative Questionnaire
” shall mean an Administrative Questionnaire in the form
of
Exhibit B
.
“
Affiliate
” shall mean, when used with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is
under common Control with the Person specified.
“
Agent Parties
” shall have the meaning assigned to such term in Section 9.17(c).
“
Agents
” shall mean the Administrative Agent and the Collateral Agent.
“
Agreed Security Principles
” shall mean any grant of a Lien or provision of a
guarantee by any Person that could:
(a) result in any breach of corporate benefit, financial assistance, capital
preservation, fraudulent preference, thin capitalization rules, retention of title claims or
any other law or regulation (or analogous restriction) of the jurisdiction of organization
of such Person;
(b) result in any risk to the officers of such Person of contravention of their
fiduciary duties and/or of civil or criminal liability;
(c) result in costs (tax, administrative or otherwise) that are materially
disproportionate to the benefit obtained by the beneficiaries of such Lien and/or guarantee;
CI Acquisition Credit Agreement
(d) result in a breach of a material agreement binding on such Person that may not be
amended or otherwise modified using commercially reasonable efforts to avoid such breach; or
(e) result in a Lien being granted over assets, the acquisition of which was financed
from a subsidy or payments, the terms of which prohibit any assets acquired with such
subsidy or payment being used as collateral.
“
Agreement
” shall have the meaning assigned to such term in the introductory paragraph
of this Agreement.
“
Alternate Base Rate
” shall mean, for any day, a rate per annum equal to the greater
of (a) Citibank, N.A.’s Base Rate, (b) the three-month certificate of deposit plus 1/2 of 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate, including the failure of
the Federal Reserve Bank of New York to publish rates or the inability of the Administrative Agent
to obtain quotations in accordance with the terms thereof, the Alternate Base Rate shall be
determined without regard to clause (c) of the preceding sentence until the circumstances giving
rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in
the Base Rate or the Federal Funds Effective Rate shall be effective on the effective date of such
change in the Base Rate or the Federal Funds Effective Rate, respectively.
“
Applicable Margin
” shall mean (i) for any day with respect to any Eurodollar Loan
that is a Revolving Facility Loan and any ABR Loan that is a Revolving Facility Loan, (x) prior to
the Trigger Date, 2.50% and 1.50%, respectively and (y) thereafter, the applicable margin per annum
set forth below under the caption “Revolving Facility Loan Eurodollar Spread,” and “Revolving
Facility Loan ABR Spread,” as applicable, based upon the Leverage Ratio as of the last date of the
most recent fiscal quarter of the Borrower and (ii) for any day with respect to any Eurodollar Loan
that is a Term B Loan and any ABR Loan that is a Term B Loan, 2.00% and 1.00%, respectively.
CI Acquisition Credit Agreement
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Revolving Facility Loan
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Revolving Facility Loan
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Leverage Ratio:
|
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ABR Spread
|
|
Eurodollar Spread
|
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Category 1 Equal to
or greater than 5.0
to 1.00
|
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1.50
|
%
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2.50
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%
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Category 2 Less than
5.0 to 1.00 but equal
to or greater than
4.0 to 1.00
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1.25
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%
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2.25
|
%
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Category 3 Less than
4.0 to 1.00
|
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1.00
|
%
|
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2.00
|
%
|
For purposes of the foregoing, (1) the Leverage Ratio shall be determined as of the end
of each fiscal quarter of the Borrower’s fiscal year based upon the consolidated financial
information of the Borrower and its Subsidiaries delivered pursuant to Section 5.04(a) or (b) and
(2) each change in the Applicable Margin resulting from a change in the Leverage Ratio shall be
effective on the first Business Day after the date of delivery to the Administrative Agent of such
consolidated financial information indicating such change and ending on the date immediately
preceding the effective date of the next such change;
provided
that until the Trigger Date,
the Leverage Ratio shall be deemed to be in Category 1;
provided
further
that the
Leverage Ratio shall be deemed to be in Category 1 at the option of the Administrative Agent or the
Required Lenders, at any time during which the Borrower fails to deliver the consolidated financial
information when required to be delivered pursuant to Section 5.04(a) or (b), during the period
from the expiration of the time for delivery thereof until such consolidated financial information
is delivered.
“
Approved Fund
” shall have the meaning assigned to such term in Section 9.04(b).
“
Asset Acquisition
” shall mean any Permitted Business Acquisition, the aggregate
consideration for which exceeds U.S.$5.0 million.
“
Asset Disposition
” shall mean any sale, transfer or other disposition by the Borrower
or any Subsidiary to any Person other than the Borrower or any Subsidiary to the extent otherwise
permitted hereunder of any asset or group of related assets (other than inventory or other assets
sold, transferred or otherwise disposed of in the ordinary course of business) in one or a series
of related transactions, the Net Proceeds from which exceed $5.0 million.
CI Acquisition Credit Agreement
“
Assignment and Acceptance
” shall mean an assignment and acceptance entered into by a
Lender and an assignee, and accepted by the Administrative Agent and the Borrower (if required by
such assignment and acceptance), in the form of
Exhibit A
or such other form as shall be
approved by the Administrative Agent.
“
Availability Period
” shall mean the period from the Closing Date to but excluding the
earlier of the Revolving Facility Maturity Date and in the case of each of the Revolving Facility
Loans, Revolving Facility Borrowings, Swingline Loans, Swingline Borrowings, and Letters of Credit,
the date of termination of the Revolving Facility Commitments.
“
Available Investment Basket Amount
” shall mean, on any date of determination, an
amount equal to (a) the Cumulative Retained Excess Cash Flow Amount on such date plus the aggregate
amount of proceeds received after the Closing Date and prior to such date that would have
constituted Net Proceeds pursuant to clause (a) of the definition thereof except for the operation
of clause (x) or (y) of the second proviso thereof,
minus
(b) any amounts thereof used to
make Investments pursuant to Section 6.04(a), clause (ii) of Section 6.04(i) and/or clause (i)(y)
of Section 6.04(j) and/or clause (iii) of Section 6.04(j) after the Closing Date and on or prior to
such date,
minus
(c) the aggregate amount of Capital Expenditures made after the Closing
Date and on or prior to such date pursuant to Section 6.10(c).
“
Available Unused Commitment
” shall mean, with respect to a Revolving Facility Lender,
at any time of determination, an amount equal to the amount by which (a) the Revolving Facility
Commitment of such Revolving Facility Lender at such time exceeds (b) the Revolving Facility Credit
Exposure of such Revolving Facility Lender at such time.
“
Base Rate
” shall mean the sum (adjusted to the nearest 0.25% or, if there is no
nearest 0.25% to the next higher 0.25%) of (i) 0.5% per annum, (ii) the rate per annum obtained by
dividing (A) the latest three-week moving average of secondary market morning offering rates in the
United States for three-month certificates of deposit of major United States money market banks,
such three-week moving average being determined weekly on each Monday (or, if any such day is not a
Business Day, on the next succeeding Business Day) for the three-week period ending on the previous
Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to
and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New
York certificate of deposit dealers of recognized standing selected by Citibank, N.A., by (B) a
percentage equal to 100% minus the average of the daily percentages specified during such
three-week period by the Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve requirement) for Citibank, N.A. in
respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar
nonpersonal time deposits in the United States and (iii) the average during such three-week period
of the maximum annual assessment rates estimated by Citibank, N.A. for determining the then current
annual assessment payable by Citibank, N.A. to the Federal Deposit Insurance Corporation (or any
successor) for insuring U.S. Dollar deposits in the United States.
CI Acquisition Credit Agreement
“
Board
” shall mean the Board of Governors of the Federal Reserve System of the United
States of America.
“
Borrower
” shall have the meaning assigned to such term in the introductory paragraph
to this Agreement.
“
Borrowing
” shall mean a group of Loans of a single Type under a single Facility and
made on a single date and, in the case of Eurodollar Loans, as to which a single Interest Period is
in effect.
“
Borrowing Minimum
” shall mean (a) in the case of an ABR Revolving Facility Borrowing,
U.S.$2.0 million, (b) in the case of a Eurodollar Revolving Facility Borrowing, U.S.$2.0 million,
and (c) in the case of a Swingline Borrowing, U.S.$250,000.
“
Borrowing Multiple
” shall mean (a) in the case of a Revolving Facility Borrowing,
U.S.$1.0 million and (b) in the case of a Swingline Borrowing, U.S.$250,000.
“
Borrowing Request
” shall mean a request by the Borrower in accordance with the terms
of Section 2.03 and substantially in the form of
Exhibit C-1
.
“
Business Day
” shall mean any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain closed;
provided
that when used in connection with a Eurodollar Loan, the term “Business Day” shall
also exclude any day on which banks are not open for dealings in deposits in the applicable
currency in the London interbank market.
“
Calculation Period
” means, as of any date of determination, the period of four
consecutive fiscal quarters ending on such date or, if such date is not the last day of a fiscal
quarter, ending on the last day of the fiscal quarter of the Borrower most recently ended prior to
such date.
“
Capital Expenditures
” shall mean, for any Person in respect of any period, the
aggregate of all expenditures incurred by such Person during such period that, in accordance with
GAAP, are or should be included in “additions to property, plant or equipment” or similar items
reflected in the statement of cash flows of such Person;
provided
,
however
, that
Capital Expenditures for the Borrower and its Subsidiaries shall not include:
(a) expenditures to the extent they are made with proceeds of the issuance of Equity
Interests of the Borrower after the Closing Date to Holdings, any Fund or Fund Affiliate or
with funds that would have constituted Net Proceeds under clause (a) of the definition of
the term “Net Proceeds” (but that will not constitute Net Proceeds as a result of the first
proviso to such clause (a)),
(b) expenditures of proceeds of insurance settlements, condemnation awards and other
settlements in respect of lost, destroyed, damaged or condemned assets, equipment or other
property to the extent such expenditures are made to replace or repair such lost, destroyed,
damaged or condemned assets, equipment or other property or otherwise to acquire, maintain,
develop, construct, improve, upgrade or repair assets or
CI Acquisition Credit Agreement
properties useful in the business of the Borrower and the Subsidiaries within 12 months
of receipt of such proceeds,
(c) interest capitalized in accordance with GAAP during such period,
(d) expenditures that are accounted for as capital expenditures of such Person and that
actually are paid for by a third party (excluding the Borrower or any Subsidiary) and for
which neither the Borrower nor any Subsidiary has provided or is required to provide or
incur, directly or indirectly, any consideration or obligation to such third party or any
other Person (whether before, during or after such period),
(e) the book value of any asset owned by such Person prior to or during such period to
the extent that such book value is included as a capital expenditure during such period as a
result of such Person reusing or beginning to reuse such asset during such period without a
corresponding expenditure actually having been made in such period,
provided
that
(i) any expenditure necessary in order to permit such asset to be reused shall be included
as a Capital Expenditure during the period that such expenditure actually is made and (ii)
such book value shall have been included in Capital Expenditures when such asset was
originally acquired,
(f) the purchase price of equipment purchased during such period to the extent the
consideration therefor consists of any combination of (i) used or surplus equipment traded
in at the time of such purchase and (ii) the proceeds of a concurrent sale of used or
surplus equipment, in each case, in the ordinary course of business,
(g) Investments in respect of a Permitted Business Acquisition, or
(h) the purchase price of equipment that is purchased substantially contemporaneously
with the trade-in of existing equipment to the extent that the gross amount of such purchase
price is reduced by the credit granted by the seller of such equipment for the equipment
being traded in at such time.
“
Capital Lease Obligations
” of any Person shall mean the obligations of such Person to
pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real
or personal property, or a combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP and, for purposes
hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
“
Cash Interest Expense
” shall mean, with respect to the Borrower and its Subsidiaries
on a consolidated basis for any period, Interest Expense for such period, less the sum of (a)
pay-in-kind Interest Expense or other noncash Interest Expense (including as a result of the
effects of purchase accounting), (b) to the extent included in Interest Expense, the amortization
of any financing fees paid by, or on behalf of, the Borrower or any Subsidiary, including such fees
paid in connection with the Transactions, (c) the amortization of debt discounts, if any, or fees
in respect of Swap Agreements and (d) cash interest income of the Borrower and its Subsidiaries for
such period;
provided
that (i) Cash Interest Expense shall exclude any one-time financing
fees paid in connection with the Transactions or any amendment
CI Acquisition Credit Agreement
of this Agreement or upon entering into a Permitted Receivables Financing and (ii) historical
Cash Interest Expense shall be deemed to be (w) for the fiscal quarter ended March 31, 2005, U.S.
$6,756,750, (x) for the fiscal quarter ended June 30, 2005, U.S. $6,756,750, (y) for the fiscal
quarter ended September 30, 2005, U.S. $6,756,750, and (z) for the period beginning October 1, 2005
through to and excluding the Closing Date, U.S. $1,276,000 multiplied by a fraction the numerator
of which equals the number of days elapsed during such period and the denominator of which equals
90.
A “
Change in Control
” shall be deemed to occur if:
(a) at any time prior to an initial public offering of Equity Interests of Holdings or
the Borrower, (i) Holdings shall fail to own, directly or indirectly, beneficially and of
record 80% of the Borrower, (ii) a majority of the seats (other than vacant seats) on the
board of directors of Holdings shall at any time be occupied by Persons who were neither (A)
nominated by the board of directors of Holdings or a Permitted Holder, (B) appointed by
directors so nominated nor (C) appointed by a Permitted Holder or (iii) a “Change in
Control” shall occur under the Senior Subordinated Note Indenture or under any Permitted
Senior Debt Securities or Permitted Subordinated Debt Securities;
(b) at any time prior to an initial public offering of Equity Interests of Holdings or
the Borrower, any combination of Permitted Holders shall fail to own beneficially (within
the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or
indirectly, in the aggregate Equity Interests representing at least 51% of (i) the aggregate
ordinary voting power represented by the issued and outstanding Equity Interests of the
Borrower or (ii) the common economic interest represented by the issued and outstanding
Equity Interests of the Borrower; or
(c) at any time from and after an initial public offering of Equity Interests of (x)
the Borrower or (y) Holdings or any other Person who, directly or indirectly, owns 80% of
the issued and outstanding Equity Interests of the Borrower (a “
Parent Company
”),
any Person or group (within the meaning of Rule 13d-5 of the Exchange Act as in effect on
the Closing Date), other than any combination of the Permitted Holders, shall own
beneficially (as defined above), directly or indirectly, in the aggregate Equity Interests
representing 35% or more of the aggregate ordinary voting power represented by the issued
and outstanding Equity Interests of the Borrower or such Parent Company, as applicable, and
the Permitted Holders own beneficially (as defined above), directly or indirectly, a smaller
percentage of such ordinary voting power at such time than the Equity Interests owned by
such other Person or group.
“
Change in Law
” shall mean (a) the adoption of any law, rule or regulation after the
Closing Date, (b) any change in law, rule or regulation or in the interpretation or application
thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender or
Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such
Lender’s or Issuing Bank’s holding company, if any) with any written request, guideline or
directive (whether or not having the force of law but if not having the force of law, then being
CI Acquisition Credit Agreement
one with which the relevant party would customarily comply) of any Governmental Authority made
or issued after the Closing Date.
“
Charges
” shall have the meaning assigned to such term in Section 9.09.
“
Closing Date
” shall mean October 17, 2005, and “
Closing
” shall mean the
making of the initial Loans on the Closing Date hereunder.
“
Code
” shall mean the Internal Revenue Code of 1986, as amended from time to time.
“
Collateral
” shall mean all the “Collateral” as defined in any Security Document and
shall also include the Mortgaged Properties.
“
Collateral Agent
” shall have the meaning given such term in the introductory
paragraph of this Agreement.
“
Collateral Agreement
” shall mean the Guarantee and Collateral Agreement, as amended,
supplemented or otherwise modified from time to time, substantially in the form of
Exhibit
E
, among the Borrower, each Subsidiary Loan Party and the Collateral Agent.
“
Collateral and Guarantee Requirement
” shall mean the requirement that:
(a) on the Closing Date, the Collateral Agent shall have received from the
Borrower and each Subsidiary Loan Party a counterpart of the Collateral Agreement duly
executed and delivered on behalf of such Person;
(b) on the Closing Date, the Collateral Agent shall have received or shall
otherwise have received a pledge over all the issued and outstanding Equity Interests of (i)
the Borrower, (ii) each Subsidiary Loan Party directly owned on the Closing Date by any Loan
Party and (iii) any other Material Subsidiary directly owned on the Closing Date by any Loan
Party, except, in each case, to the extent that a pledge of such Equity Interests is not
permitted under Section 9.22; and the Collateral Agent shall have received all certificates
or other instruments (if any) representing such Equity Interests, together with stock powers
or other instruments of transfer with respect thereto endorsed in blank;
(c) in the case of any Person that becomes a Subsidiary Loan Party after the
Closing Date, the Collateral Agent shall have received a supplement to the Collateral
Agreement, in the form specified therein, duly executed and delivered on behalf of such
Subsidiary Loan Party;
(d) after the Closing Date and within the time period set forth in Section
5.10(c), all the outstanding Equity Interests directly owned by a Loan Party of any Person
that becomes (i) a Subsidiary Loan Party or (ii) a Material Subsidiary after the Closing
Date, shall have been pledged pursuant to the applicable Collateral Agreement, as applicable
to the extent permitted under Section 9.22, and the Collateral Agent shall have received all
certificates or other instruments (if any) representing such Equity Interests,
CI Acquisition Credit Agreement
together with stock powers or other instruments of transfer with respect thereto
endorsed in blank or shall have otherwise received a pledge over such Equity Interests;
(e) all Indebtedness of the Borrower and each Subsidiary having an aggregate
principal amount in excess of U.S.$5.0 million (other than intercompany current liabilities
incurred in the ordinary course of business in connection with the cash management
operations of the Borrower and the Subsidiaries) that is owing to any Loan Party shall be
evidenced by a promissory note or an instrument and shall have been pledged pursuant to the
applicable Collateral Agreement, and the Collateral Agent shall have received all such
promissory notes or instruments, together with note powers or other instruments of transfer
with respect thereto endorsed in blank;
(f) all documents and instruments, including UCC financing statements,
required by law or reasonably requested by the Collateral Agent to be filed, registered or
recorded to create the Liens intended to be created by the Security Documents (in each case,
including any supplements thereto) and perfect such Liens to the extent required by, and
with the priority required by, the Security Documents, shall have been filed, registered or
recorded or delivered to the Collateral Agent for filing, registration or the recording
concurrently with, or promptly following, the execution and delivery of each such Security
Document;
(g) each Loan Party shall have obtained all consents and approvals required
to be obtained by it in connection with the execution and delivery of all Security Documents
(or supplements thereto) to which it is a party and the granting by it of the Liens
thereunder and the performance of its obligations thereunder; and
(h) the Collateral Agent shall receive from the applicable Loan Parties the
following documents and instruments relating to Material Real Property located in the United
States that constitutes Collateral on the dates specified below:
(i) with respect to each Material Real Property located in the United States,
within 90 days following the Closing Date, in the case of such Material Real
Property, and on the date specified in Section 5.10, in the case of such
after-acquired Material Real Property, a Mortgage duly authorized and executed, in
form for recording in the recording office of each jurisdiction where such Material
Real Property or such after-acquired Material Real Property to be encumbered thereby
is situated, in favor of the Collateral Agent, for its benefit and the benefit of
the Secured Parties, together with such other instruments as shall be necessary or
appropriate (in the reasonable judgment of the Collateral Agent) to create a Lien
under applicable law, all of which shall be in form and substance reasonably
satisfactory to Collateral Agent, which Mortgage and other instruments shall be
effective to create and/or maintain a first priority Lien on such Material Real
Property or such after-acquired Material Real Property, as the case may be, subject
to no Liens other than Prior Liens and Permitted Encumbrances applicable to such
Material Real Property or such after-acquired Material Real Property, as the case
may be;
CI Acquisition Credit Agreement
(ii) within 90 days following the Closing Date, with respect to each Material
Real Property located in the United States, policies or certificates of insurance of
the type required by Section 5.02;
(iii) within 90 days following the Closing Date, with respect to each Material
Real Property located in the United States, UCC, judgment and tax Lien searches (in
each case to the extent the same exists in the relevant jurisdiction) in form and
substance satisfactory to Administrative Agent;
(iv) within 90 days following the Closing Date, evidence acceptable to
Administrative Agent of payment by Borrower of all title insurance premiums, search
and examination charges, mortgage, filing and recording taxes, fees and related
charges required for the recording of the Mortgages and issuance of the title
insurance policies referred to in clause (vi) below;
(v) within 90 days following the Closing Date, with respect to (a) each
Material Real Property located in the United States, a fully paid policy of title
insurance (or marked up commitment having the same effect of a title insurance
policy) or a binding commitment from the Title Company to issue such title insurance
each in the form approved by the Administrative Agent insuring the Lien of the
Mortgage encumbering such Material Real Property as a valid first priority Lien
(subject to this paragraph (v)) on the Material Real Property and fixtures described
therein. Each policy of title insurance (or marked up commitment having the same
effect of a title insurance policy) shall be in an amount reasonably satisfactory to
the Administrative Agent and shall (a) be issued by the Title Company, (b) include
such coinsurance and reinsurance arrangements (with provisions for direct access) as
shall be reasonably acceptable to Administrative Agent, (c) have been supplemented
by such endorsements or affirmative insurance (or, where such endorsements are not
available, opinions of special counsel or other professionals reasonably acceptable
to Administrative Agent) as shall be reasonably requested by Administrative Agent
and shall be available in the applicable jurisdiction at commercially reasonable
rates (including, without limitation, endorsements on matters relating to usury,
first loss, last dollar, zoning (or PZR report), revolving credit, doing business,
variable rate, address, separate tax lot, subdivision, tie in or cluster, deletion
of the creditors’ rights exclusion, contiguity, road access and so-called
comprehensive coverage over covenants and restrictions), (d) include such affidavits
and instruments of indemnifications by Borrower and the applicable Subsidiary as
shall be reasonably required to induce the Title Company to issue the policy or
policies (or commitment) and endorsements contemplated in this paragraph and (e)
contain no exceptions to title other than exceptions for Prior Liens, Permitted
Encumbrances and other exceptions reasonably acceptable to Administrative Agent.
With respect to the legal descriptions attached to the Mortgages encumbering the
Material Real Properties insured by the policies of title insurance described by
this clause (v), in the event the Administrative Agent determines that any Mortgage
does not include all of the real property which is owned by Borrower or a Material
Subsidiary at that particular site, then upon written notice
CI Acquisition Credit Agreement
of the Administrative Agent, Borrower or its Material Subsidiary shall execute
and deliver (at the sole cost and expense of Borrower) all necessary documentation,
including without limitation an amendment to the applicable Mortgage, to cause the
unencumbered portion of said real property to be included in such Mortgage;
(vi) within 90 days following the Closing Date, American Land Title
Association/American Congress of Surveying and Mapping form surveys for each
Material Real Property for which all necessary fees (where applicable) have been
paid, and dated a date reasonably acceptable to the Administrative Agent, certified
to the Collateral Agent and the issuer of the title insurance policies in a manner
satisfactory to the Administrative Agent by a land surveyor duly registered and
licensed in the states in which the property described in such surveys is located
and acceptable to the Administrative Agent, showing all buildings and other
improvements, any off-site improvements, the location of any easements, parking
spaces, rights of way, building set-back lines and other dimensional regulations and
the absence of encroachments, either by such improvements or on to such property,
and other defects, other than encroachments and other defects acceptable to the
Administrative Agent; and
(vii) within 90 days following the Closing Date, with respect to each Material
Real Property located in the United States, all such other items as shall be
reasonably necessary in the opinion of counsel to the Lenders to create a valid and
perfected first priority mortgage Lien on such Material Real Property subject only
to Permitted Encumbrances and Prior Liens. Without limiting the generality of the
foregoing, the Administrative Agent shall have received, on behalf of itself, the
Collateral Agent, the Lenders and each Issuing Bank within 90 days following the
Closing Date, opinions of local counsel for the Loan Parties in states in which the
Real Properties are located, with respect to the enforceability and validity of the
Mortgages and any related fixture filings in form and substance reasonably
satisfactory to the Administrative Agent.
(i) the Borrower shall use commercially reasonable efforts to deliver to the
Collateral Agent, within 90 days following the Closing Date, mortgage release instruments in
form and substance reasonably satisfactory to the Collateral Agent evidencing the release as
of the Closing Date of all Liens in favor of JPMorgan Chase Bank, N.A. on Real Property of
the Borrower and its Subsidiaries in respect of Indebtedness being repaid on the Closing
Date; and
(j) with respect to each of the items identified in this definition of
“Collateral and Guarantee Requirement” that are required to be delivered on a date after the
Closing Date, the Administrative Agent, in each case, may (in its sole discretion) extend
such date on two separate occasions by up to 30 days on each such occasion.
“
Commitment Fee
” shall have the meaning assigned to such term in Section 2.12(a).
CI Acquisition Credit Agreement
“
Commitments
” shall mean (a) with respect to any Lender, such Lender’s Revolving
Facility Commitment and Term B Loan Commitment and (b) with respect to any Swingline Lender, its
Swingline Commitment, as applicable.
“
Communications
” shall have the meaning assigned to such term in Section 9.17.
“
Consolidated Debt
” at any date shall mean (without duplication) all Indebtedness
consisting of Capital Lease Obligations, Indebtedness for borrowed money (other than letters of
credit to the extent undrawn) and Indebtedness in respect of the deferred purchase price of
property or services of the Borrower and its Subsidiaries determined on a consolidated basis on
such date plus any Receivables Net Investment.
“
Consolidated Net Debt
” at any date shall mean Consolidated Debt of the Borrower and
its Subsidiaries determined on a consolidated basis on such date minus cash and Permitted
Investments of the Borrower and its Subsidiaries on such date.
“
Consolidated Net Income
” shall mean, with respect to any Person for any period, the
aggregate of the Net Income of such Person and its subsidiaries for such period, on a consolidated
basis;
provided
,
however
, that
(i) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all
fees and expenses related thereto) or income or expenses or charges (including, without
limitation, any pension expense, casualty losses, severance expenses, facility closure
expenses, system establishment costs, relocation expenses and other restructuring expenses,
benefit plan curtailment expenses, bankruptcy reorganization claims, settlement and related
expenses and fees, expenses or charges related to any offering of Equity Interests of such
Person, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in
each case, whether or not successful), including all fees, expenses, charges and change of
control payments related to the Transaction), in each case, shall be excluded;
provided
, that with respect to each nonrecurring item, the Borrower shall have
delivered to the Administrative Agent an officers’ certificate specifying and quantifying
such item and stating that such item is a nonrecurring item,
(ii) any net after-tax income or loss from discontinued operations and any net
after-tax gain or loss on disposal of discontinued operations shall be excluded,
(iii) any net after-tax gain or loss (including the effect of all fees and expenses or
charges relating thereto) attributable to business dispositions or asset dispositions other
than in the ordinary course of business (as determined in good faith by the Board of
Directors of the Borrower) shall be excluded,
(iv) any net after-tax income or loss (including the effect of all fees and expenses or
charges relating thereto) attributable to the early extinguishment of indebtedness
(including obligations under Swap Agreements) shall be excluded,
(v) (A) the Net Income for such period of any Person that is not a subsidiary of such
Person, or that is accounted for by the equity method of accounting, shall be included only
to the extent of the amount of dividends or distributions or other payments
CI Acquisition Credit Agreement
paid in cash (or to the extent converted into cash) to the referent Person or a
subsidiary thereof in respect of such period and (B) the Net Income for such period shall
include any dividend, distribution or other payment in respect of equity paid in cash by
such Person in excess of the amounts included in clause (A),
(vi) the Net Income for such period of any subsidiary (that is not a Loan Party) of
such Person shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by such subsidiary of its Net Income is not at the date of
determination permitted without any prior governmental approval (which has not been
obtained) or, directly or indirectly, by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation
applicable to that subsidiary or its stockholders or members, unless such restriction with
respect to the payment of dividends or in similar distributions has been legally waived
(
provided
that the net loss of any such subsidiary shall be included to the extent
funds are disbursed by such Person or any other subsidiary of such Person in respect of such
loss and that Consolidated Net Income of such Person shall be increased by the amount of
dividends or distributions or other payments that are actually paid in cash (or to the
extent converted into cash) by such subsidiary to the Borrower or another Subsidiary in
respect of such period to the extent not already included therein),
(vii) Consolidated Net Income for such period shall not include the cumulative effect
of a change in accounting principles during such period,
(viii) any noncash charges from the application of the purchase method of accounting in
connection with the Transactions or any future acquisition, to the extent such charges are
deducted in computing such Consolidated Net Income shall be excluded,
(ix) accruals and reserves that are established within twelve months after the Closing
Date and that are so required to be established in accordance with GAAP shall be excluded,
(x) any non-cash expenses (including, without limitation, write-downs and impairment of
property, plant, equipment and intangibles and other long-lived assets), and
(xi) any long-term incentive plan accruals and any non-cash compensation expense
realized from grants of stock appreciation or similar rights, stock options or other rights
to officers, directors and employees of such Person or any of its subsidiaries shall be
excluded.
“
Consolidated Total Assets
” shall mean, as of any date, the total assets of the
Borrower and the consolidated Subsidiaries, determined in accordance with GAAP, in each case as set
forth on the consolidated balance sheet of the Borrower as of such date.
“
Control
” shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ownership
CI Acquisition Credit Agreement
of voting securities, by contract or otherwise, and “
Controlling
” and
“
Controlled
” shall have meanings correlative thereto.
“
Credit Event
” shall have the meaning assigned to such term in Article IV.
“
Cumulative Retained Excess Cash Flow Amount
” shall mean, at any date, an amount, not
less than zero, determined on a cumulative basis equal to the amount of Excess Cash Flow for all
Excess Cash Flow Periods ending after the Closing Date that is not (and, in the case of any Excess
Cash Flow Period where the respective required date of prepayment has not yet occurred pursuant to
Section 2.11(d), will not on such date of required prepayment be) required to be applied in
accordance with Section 2.11(d).
“
Cure Amount
” shall have the meaning assigned to such term in Section 7.03(a).
“
Cure Right
” shall have the meaning assigned to such term in Section 7.03(a).
“
Current Assets
” shall mean, with respect to the Borrower and its Subsidiaries on a
consolidated basis at any date of determination, the sum of (a) all assets (other than cash and
Permitted Investments or other cash equivalents) that would, in accordance with GAAP, be classified
on a consolidated balance sheet of the Borrower and its Subsidiaries as current assets at such date
of determination, other than amounts related to current or deferred Taxes based on income or
profits, and (b) in the event that a Permitted Receivables Financing is accounted for off-balance
sheet, (x) gross accounts receivable comprising part of the Receivables Assets subject to such
Permitted Receivables Financing less (y) collections against the amounts sold pursuant to clause
(x).
“
Current Liabilities
” shall mean, with respect to the Borrower and its Subsidiaries on
a consolidated basis at any date of determination, all liabilities that would, in accordance with
GAAP, be classified on a consolidated balance sheet of the Borrower and its Subsidiaries as current
liabilities at such date of determination, other than (a) the current portion of any debt or
Capital Lease Obligations, (b) accruals of Interest Expense (excluding Interest Expense that is due
and unpaid), (c) accruals for current or deferred Taxes based on income or profits, (d) accruals,
if any, of transaction costs resulting from the Transactions, (e) accruals of any costs or expenses
related to (i) severance or termination of employees prior to the Closing Date or (ii) bonuses,
pension and other post-retirement benefit obligations, and (f) accruals for add-backs to EBITDA
included in clauses (a)(iv) through (a)(ix) of the definition of such term.
“
Debt Service
” shall mean, with respect to the Borrower and its Subsidiaries on a
consolidated basis for any period, Cash Interest Expense for such period plus scheduled principal
amortization of Consolidated Debt for such period.
“
Default
” shall mean any event or condition that upon notice, lapse of time or both
would constitute an Event of Default.
“
Defaulting Lender
” shall mean any Lender with respect to which a Lender Default is in
effect.
“
Dollars
” or “
$
” shall mean lawful money of the United States of America.
CI Acquisition Credit Agreement
“
Domestic Subsidiary
” shall mean each Subsidiary that is not a Foreign
Subsidiary.
“
EBITDA
” shall mean, with respect to the Borrower and its Subsidiaries on a
consolidated basis for any period, the Consolidated Net Income of the Borrower and its Subsidiaries
for such period
plus
(a) the sum of (in each case without duplication and to the extent the
respective amounts described in subclauses (i) through (viii) of this clause (a) reduced such
Consolidated Net Income for the respective period for which EBITDA is being determined):
(i) provision for Taxes based on income, profits, losses or capital of the Borrower and
its Subsidiaries for such period to the extent that such provision for taxes was deducted in
calculating Consolidated Net Income; adjusted for the tax effect of all adjustments made to
Consolidated Net Income),
(ii) Interest Expense of the Borrower and its Subsidiaries for such period (net of
interest income of the Borrower and its Subsidiaries for such period),
(iii) depreciation, amortization (including, without limitation, amortization of
intangibles and deferred financing fees) and other non-cash expenses (including, without
limitation write-downs and impairment of property, plant, equipment and intangibles and
other long-lived assets and the impact of purchase accounting on the Borrower and its
Subsidiaries for such period,
(iv) the amount of any restructuring charges (which, for the avoidance of doubt, shall
include retention, severance, systems establishment cost or excess pension, other
post-employment benefits, curtailment or other excess charges);
provided
that with
respect to each such restructuring charge, the Borrower shall have delivered to the
Administrative Agent an officers’ certificate specifying and quantifying such expense or
charge and stating that such expense or charge is a restructuring charge,
(v) any other non-cash charges,
(vi) equity earnings losses in Affiliates unless funds have been disbursed to such
Affiliates by the Borrower or any Subsidiary of the Borrower,
(vii) other non-operating expenses,
(viii) the minority interest expense consisting of subsidiary income attributable to
minority equity interests of third parties in any non-Wholly Owned Subsidiary in such period
or any prior period, except to the extent of dividends declared or paid on Equity Interests
held by third parties, and
(ix) accretion of asset retirement obligations in accordance with SFAS No. 143,
Accounting for Asset Retirement Obligations, and any similar accounting in prior periods;
CI Acquisition Credit Agreement
minus
(b) the sum of (in each case without duplication and to the extent the respective
amounts described in subclause (i) of this clause (b) increased such Consolidated Net Income for
the respective period for which EBITDA is being determined):
(i) noncash items increasing Consolidated Net Income of the Borrower and its
Subsidiaries for such period (but excluding any such items which represent the reversal in
such period of any accrual of, or cash reserve for, anticipated cash charges in any prior
period where such accrual or reserve is no longer required).
For purposes of determining EBITDA under this Agreement, EBITDA may include additional
adjustments appropriate, in the reasonable determination of the Borrower as set forth in an
officers’ certificate of the chief financial officer of the Borrower, to reflect the adjustments as
set forth in
Schedule 1.01(b)
.
For purposes of determining EBITDA under this Agreement, EBITDA will be deemed to be U.S.
$12,998,000 for the three months ended March 31, 2005, U.S. $31,252,000 for the six months ended
June 30, 2005, and U.S. $48,577,000 for the nine months ended September 30, 2005.
“
Environment
” shall mean ambient and indoor air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or subsurface strata or
sediment, natural resources such as flora and fauna, the workplace or as otherwise defined in any
Environmental Law.
“
Environmental Claim
” shall mean any and all actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, consent orders or consent agreements relating in any way to any
Environmental Law or any Hazardous Material.
“
Environmental Law
” shall mean, collectively, all federal, state, local or foreign
laws, including common law, ordinances, regulations, rules, codes, orders, judgments or other
requirements or rules of law that relate to (a) the prevention, abatement or elimination of
pollution, or the protection of the Environment, natural resources or human health, or natural
resource damages, and (b) the use, generation, handling, treatment, storage, disposal, Release,
transportation or regulation of or exposure to Hazardous Materials, including the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. §§ 9601
et seq.
, the
Endangered Species Act, 16 U.S.C. §§ 1531
et seq.
, the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901
et seq.
, the Clean Air
Act, 42 U.S.C. §§ 7401
et seq.
, the Clean Water Act, 33 U.S.C. §§ 1251
et seq.
, the
Toxic Substances Control Act, 15 U.S.C. §§ 2601
et seq.
, the Emergency Planning and
Community Right to Know Act, 42 U.S.C. §§ 11001
et seq.
, each as amended, and their
foreign, state or local counterparts or equivalents.
“
Equity Financing
” shall have the meaning assigned to such term in the third recital
hereto.
“
Equity Interests
” of any Person shall mean any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests in (however
CI Acquisition Credit Agreement
designated) equity of such Person, including any preferred stock, any limited or general
partnership interest and any limited liability company membership interest.
“
ERISA
” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time.
“
ERISA Affiliate
” shall mean any trade or business (whether or not incorporated) that,
together with the Borrower or any Subsidiary, is treated as a single employer under Section 414(b)
or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code.
“
ERISA Event
” shall mean (a) any Reportable Event; (b) the existence with respect to
any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section
302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect
to any Plan, the failure to make by its due date a required installment under Section 412(m) of the
Code with respect to any Plan or the failure to make any required contribution to a Multiemployer
Plan; (d) the incurrence by the Borrower, any Subsidiary or any ERISA Affiliate of any liability
under Title IV of ERISA; (e) the receipt by the Borrower, any Subsidiary or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan
or to appoint a trustee to administer any Plan under Section 4042 of ERISA, or the occurrence of
any event or condition which could be reasonably be expected to constitute grounds under ERISA for
the termination of, or the appointment of a trustee to administer, any Plan; (f) the incurrence by
the Borrower, any Subsidiary or any ERISA Affiliate of any liability with respect to the withdrawal
or partial withdrawal from any Plan or Multiemployer Plan; (g) the receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Borrower, a Subsidiary or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be,
insolvent or in reorganization, within the meaning of Title IV of ERISA; or (h) the occurrence of a
nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of
ERISA) which could reasonably be expected to result in liability to the Borrower or Subsidiary.
“
Eurodollar Borrowing
” shall mean a Borrowing comprised of Eurodollar Loans.
“
Eurodollar Loan
” shall mean any Eurodollar Term B Loan or Eurodollar Revolving Loan.
“
Eurodollar Revolving Facility Borrowing
” shall mean a Borrowing comprised of
Eurodollar Revolving Loans.
“
Eurodollar Revolving Loan
” shall mean any Revolving Facility Loan bearing interest at
a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of
Article II.
“
Eurodollar Term B Loan
” shall mean any Term B Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II.
CI Acquisition Credit Agreement
“
Event of Default
” shall have the meaning assigned to such term in Section 7.01.
“
Excess Cash Flow
” shall mean, with respect to the Borrower and its Subsidiaries on a
consolidated basis for any Excess Cash Flow Period, EBITDA of the Borrower and its Subsidiaries on
a consolidated basis for such Excess Cash Flow Period,
minus
, without duplication,
(a) Debt Service for such Excess Cash Flow Period,
(b) (i) any voluntary prepayments of Term B Loans during such Excess Cash
Flow Period, (ii) any permanent voluntary reductions during such Excess Cash Flow Period of
Revolving Facility Commitments to the extent that an equal amount of Revolving Facility
Loans was simultaneously repaid and (iii) any voluntary prepayment permitted hereunder of
term Indebtedness during such Excess Cash Flow Period to the extent not financed, or
intended to be financed, using the proceeds of the incurrence of Indebtedness or the
issuance of Equity Interests, so long as the amount of such prepayment is not already
reflected in Debt Service,
(c) (i) Capital Expenditures by the Borrower and its Subsidiaries on a
consolidated basis during such Excess Cash Flow Period (excluding Capital Expenditures made
in such Excess Cash Flow Period where a certificate in the form contemplated by the
following clause (d) was previously delivered) that are paid in cash, and (ii) the aggregate
consideration paid in cash during such Excess Cash Flow Period in respect of Permitted
Business Acquisitions and other Investments permitted hereunder (less any amounts received
in respect thereof as a return of capital),
(d) Capital Expenditures that the Borrower or any Subsidiary shall, during
such Excess Cash Flow Period, become obligated to make but that are not made during such
Excess Cash Flow Period,
provided
that the Borrower shall deliver a certificate to
the Administrative Agent not later than 90 days after the end of such Excess Cash Flow
Period, signed by a Responsible Officer of the Borrower and certifying that such Capital
Expenditures and the delivery of the related equipment will be made in the following Excess
Cash Flow Period,
(e) Taxes paid in cash by the Borrower and its Subsidiaries on a consolidated
basis during such Excess Cash Flow Period or that will be paid within six months after the
close of such Excess Cash Flow Period (
provided
that any amount so deducted that
will be paid after the close of such Excess Cash Flow Period shall not be deducted again in
a subsequent Excess Cash Flow Period) and for which reserves have been established,
including income tax expense and withholding tax expense incurred in connection with
cross-border transactions involving the Foreign Subsidiaries,
(f) an amount equal to any increase in Working Capital of the Borrower and
its Subsidiaries for such Excess Cash Flow Period,
(g) cash expenditures made in respect of Swap Agreements during such Excess
Cash Flow Period, to the extent not reflected in the computation of EBITDA or Interest
Expense,
CI Acquisition Credit Agreement
(h) permitted dividends or distributions or repurchases of its Equity
Interests paid in cash by the Borrower during such Excess Cash Flow Period and permitted
dividends paid by the Borrower or by any Subsidiary to any Person other than the Borrower or
any of the Subsidiaries during such Excess Cash Flow Period, in each case in accordance with
Section 6.06,
(i) amounts paid in cash during such Excess Cash Flow Period on account of
(x) items that were accounted for as noncash reductions of Net Income in determining
Consolidated Net Income or as noncash reductions of Consolidated Net Income in determining
EBITDA of the Borrower and its Subsidiaries in a prior Excess Cash Flow Period and (y)
reserves or accruals established in purchase accounting,
(j) to the extent not deducted in the computation of Net Proceeds in respect
of any asset disposition or condemnation giving rise thereto, the amount of any mandatory
prepayment of Indebtedness (other than Indebtedness created hereunder or under any other
Loan Document), together with any interest, premium or penalties required to be paid (and
actually paid) in connection therewith,
(k) the amount related to items that were added to or not deducted from Net
Income in calculating Consolidated Net Income or were added to or not deducted from
Consolidated Net Income in calculating EBITDA to the extent such items represented a cash
payment (which had not reduced Excess Cash Flow upon the accrual thereof in a prior Excess
Cash Flow Period), or an accrual for a cash payment, by the Borrower and its Subsidiaries or
did not represent cash received by the Borrower and its Subsidiaries, in each case on a
consolidated basis during such Excess Cash Flow Period,
plus
, without duplication,
(l) an amount equal to any decrease in Working Capital for such Excess Cash
Flow Period,
(m) all proceeds received during such Excess Cash Flow Period of Capital
Lease Obligations, purchase money Indebtedness, Sale and Lease-Back Transactions pursuant to
Section 6.03 and any other Indebtedness, in each case to the extent used to finance any
Capital Expenditure (other than Indebtedness under this Agreement to the extent there is no
corresponding deduction to Excess Cash Flow above in respect of the use of such Borrowings),
(n) all amounts referred to in clause (c) above to the extent funded with the
proceeds of the issuance of Equity Interests of, or capital contributions to, the Borrower
after the Closing Date (to the extent not previously used to prepay Indebtedness (other than
Revolving Facility Loans or Swingline Loans), made in any investment or capital expenditure
or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any prior
Excess Cash Flow Period) or any amount that would have constituted Net Proceeds under clause
(a) of the definition of the term “Net Proceeds” if not so spent, in each case to the extent
there is a corresponding deduction from Excess Cash Flow above,
CI Acquisition Credit Agreement
(o) to the extent any permitted Capital Expenditures and the corresponding
delivery of equipment referred to in clause (d) above do not occur in the Excess Cash Flow
Period of the Borrower specified in the certificate of the Borrower provided pursuant to
clause (d) above, the amount of such Capital Expenditures that were not so made in the
Excess Cash Flow Period of the Borrower specified in such certificates,
(p) cash payments received in respect of Swap Agreements during such Excess
Cash Flow Period to the extent (i) not included in the computation of EBITDA or (ii) such
payments do not reduce Cash Interest Expense,
(q) any extraordinary or nonrecurring gain realized in cash during such
Excess Cash Flow Period (except to the extent such gain consists of Net Proceeds subject to
Section 2.11(c)),
(r) to the extent deducted in the computation of EBITDA, cash interest
income, and
(s) the amount related to items that were deducted from or not added to Net
Income in connection with calculating Consolidated Net Income or were deducted from or not
added to Consolidated Net Income in calculating EBITDA to the extent either (x) such items
represented cash received by the Borrower or any Subsidiary thereof or (y) does not
represent cash paid by the Borrower or any Subsidiary thereof, in each case on a
consolidated basis during such Excess Cash Flow Period.
“
Excess Cash Flow Period
” shall mean (i) the period taken as one accounting period
beginning on January 1, 2006 and ending on December 31, 2006, and (ii) each fiscal year of the
Borrower ended thereafter.
“
Exchange Act
” shall mean the Securities Exchange Act of 1934, as amended.
“
Excluded Indebtedness
” shall mean all Indebtedness permitted to be incurred under
Section 6.01 (other than Sections 6.01(o) and (r)).
“
Excluded Taxes
” shall mean, with respect to any Agent, any Lender, any Issuing Bank
or any other recipient of any payment to be made by or on account of any obligation of any Loan
Party hereunder, (a) income or franchise taxes imposed on (or measured by) its net income or net
profits by the United States of America or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office (or other fixed place of business) is
located or, in the case of any Lender or Issuing Bank, in which its applicable lending office is
located or any jurisdiction in which such recipient is otherwise engaged in a trade or business as a
result of transactions unrelated to the Loan Documents (except to the extent such tax is imposed
because of a connection between a Loan Party and the jurisdiction imposing the tax), (b) any branch
profits tax or any similar tax that is imposed by any jurisdiction described in clause (a) above
and (c) other than in the case of an assignee pursuant to a request by such Loan Party under
Section 2.19(b), any withholding tax imposed by the United States or by the jurisdiction under the
laws of which such Loan Party is organized or in which its principal office (or other fixed place
of business) is located that is in effect and would apply to amounts payable hereunder to such
Lender or Issuing Bank or other recipient at the time such Lender or Issuing Bank or other
CI Acquisition Credit Agreement
recipient becomes a party to any Loan Document (or designates a new lending office), except to the
extent that such Lender or Issuing Bank or other recipient (or its assignor, if any) was entitled,
at the time of designation of a new lending office (or assignment), to receive additional amounts
from a Loan Party with respect to such withholding tax pursuant to Section 2.17(a) or Section
2.17(c), and (d) any withholding taxes attributable to such Lender’s or such other recipient’s
failure (other than as a result of a Change in Law) to comply with Section 2.17(e);
provided
,
however
, that the term “Excluded Taxes” shall not include any taxes that
are imposed or otherwise due as a result of any action undertaken by one or more of such Agent,
Lender or Issuing Bank to collect funds due hereunder or under any other Loan Document or enforce
or exercise its rights or pursue any remedy provided hereunder or under any other Loan Document.
“
Facility
” shall mean the respective facility and commitments utilized in making Loans
and credit extensions hereunder, it being understood that as of the date of this Agreement there
are two Facilities,
i.e.
, the Tranche B Facility and the Revolving Facility.
“
Federal Funds Effective Rate
” shall mean, for any day, the weighted average (rounded
upward, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average (rounded upward, if necessary, to the
next 1/100 of 1%) of the quotations for the day of such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
“
Fee Letter
” shall mean that certain Fee Letter dated August 2, 2005 by and among
Holdings, the Administrative Agent and the Joint Lead Arrangers.
“
Fees
” shall mean the Commitment Fees, the L/C Participation Fees, the Issuing Bank
Fees and the Administrative Agent Fees.
“
Financial Officer
” of any Person shall mean the Chief Financial Officer, principal
accounting officer, Treasurer, Assistant Treasurer or Controller of such Person.
“
Financial Performance Covenants
” shall mean the covenants of the Borrower set forth
in Sections 6.11 and 6.12.
“
Foreign Lender
” shall mean any Lender that is organized under the laws of a
jurisdiction other than the United States of America. For purposes of this definition, the United
States of America, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.
“
Foreign Subsidiary
” shall mean any Subsidiary that is incorporated or organized under
the laws of any jurisdiction other than the United States of America, any State thereof or the
District of Columbia and any Subsidiary of a Foreign Subsidiary.
“
Fund Affiliate
” shall mean (i) each Affiliate of the Funds that is neither a
portfolio company nor a company controlled by a portfolio company and (ii) each general
CI Acquisition Credit Agreement
partner of the Funds or any Fund Affiliate who is a partner or employee of First Reserve Corporation.
“
Funds
” shall have the meaning assigned to such term in the first recital hereto.
“
GAAP
” shall mean generally accepted accounting principles in effect from time to time
in the United States, applied on a consistent basis, subject to the provisions of Section 1.02.
“
Governmental Authority
” shall mean any federal, state, local or foreign court or
governmental agency, authority, instrumentality or regulatory or legislative body.
“
Guarantee
” of or by any Person (the “
guarantor
”) shall mean (a) any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the “
primary obligor
”) in any manner,
whether directly or indirectly, and including any obligation of the guarantor, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep well, to
purchase assets, goods, securities or services, to take-or-pay or otherwise) or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of such Indebtedness,
(ii) to purchase or lease property, securities or services for the purpose of assuring the owner of
such Indebtedness of the payment thereof, (iii) to maintain working capital, equity capital or any
other financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness, (iv) entered into for the purpose of assuring in any other manner
the holders of such Indebtedness of the payment thereof or to protect such holders against loss in
respect thereof (in whole or in part) or (v) as an account party in respect of any letter of credit
or letter of guaranty issued to support such Indebtedness, or (b) any Lien on any assets of the
guarantor securing any Indebtedness (or any existing right, contingent or otherwise, of the holder
of Indebtedness to be secured by such a Lien) of any other Person, whether or not such Indebtedness
is assumed by the guarantor;
provided
,
however
, that the term “Guarantee” shall not
include endorsements for collection or deposit, in either case in the ordinary course of business,
or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in
connection with any acquisition or disposition of assets permitted under this Agreement.
“
Hazardous Materials
” shall mean all pollutants, contaminants, wastes, chemicals,
materials, substances and constituents, including, without limitation, explosive or radioactive
substances or petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls or radon gas, of any nature, in each case subject to regulation or
which can give rise to liability under any Environmental Law.
“
Holdings
” shall have the meaning assigned to such term in the introductory paragraph
of this Agreement.
“
Holdings LLC Agreement
” shall mean the operating agreement entered into by Holdings
dated as of August 1, 2005
“
Improvements
” shall have the meaning assigned to such term in the Mortgages.
CI Acquisition Credit Agreement
“
Increased Amount Date
” shall have the meaning assigned to such term in Section 2.20.
“
Indebtedness
” of any Person shall mean, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (c) all obligations of such Person under conditional sale or other
title retention agreements relating to property or assets purchased by such Person, (d) all
obligations of such Person issued or assumed as the deferred purchase price of property or services
(other than trade liabilities and intercompany liabilities incurred in the ordinary course of
business and maturing within 365 days after the incurrence thereof), (e) all Guarantees by such
Person of Indebtedness of others, (f) all Capital Lease Obligations of such Person, (g) all
payments that such Person would have to make in the event of an early termination, on the date
Indebtedness of such Person is being determined in respect of outstanding Swap Agreements (such
payments in respect of any Swap Agreement with a counterparty being calculated net of amounts owing
to such Person by such counterparty in respect of other Swap Agreements), (h) the principal
component of all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit (other than any letters of credit, bank guarantees or similar
instrument in respect of which a back-to-back letter of credit has been issued under or permitted
by this Credit Agreement) and (i) the principal component of all obligations of such Person in
respect of bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of
any partnership in which such Person is a general partner, other than to the extent that the
instrument or agreement evidencing such Indebtedness expressly limits the liability of such Person
in respect thereof. To the extent not otherwise included, Indebtedness shall include the amount of
any Permitted Receivables Financing.
“
Indemnified Taxes
” shall mean all Taxes other than Excluded Taxes.
“
Indemnitee
” shall have the meaning assigned to such term in Section 9.05(b).
“
Information Memorandum
” shall mean (a) the Confidential Information Memorandum dated
September 21, 2005, as modified or supplemented prior to the Closing Date, and (b) the Offering
Memorandum.
“
Initial Lenders
” means the banks, financial institutions and other institutional
lenders listed on the signature pages hereof as the Initial Lenders.
“
Interest Coverage Ratio
” shall have the meaning assigned to such term in Section
6.11.
“
Interest Election Request
” shall mean a request by the Borrower to convert or
continue a Term B Borrowing or a Revolving Facility Borrowing in accordance with Section 2.07.
“
Interest Expense
” shall mean, with respect to any Person for any period, the sum of
(a) gross interest expense of such Person for such period on a consolidated basis, including (i)
the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect
to Swap Agreements) payable in connection with the incurrence of Indebtedness to the extent
included in interest expense, (iii) the portion of any payments or accruals with respect to Capital
CI Acquisition Credit Agreement
Lease Obligations allocable to interest expense and (iv) commissions, discounts, yield and other
fees and charges incurred in connection with any Permitted Receivables Financing which are payable
to any Person other than the Borrower or a Subsidiary Loan Party, and (b) capitalized interest of
such Person. For purposes of the foregoing, gross interest expense shall be determined after
giving effect to any net payments made or received and costs incurred by the Borrower and its
Subsidiaries with respect to Swap Agreements.
“
Interest Payment Date
” shall mean (a) with respect to any Eurodollar Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the
case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each
day that would have been an Interest Payment Date had successive Interest Periods of three months’
duration been applicable to such Borrowing and, in addition, the date of any refinancing or
conversion of such Borrowing with or to a Borrowing of a different Type, (b) with respect to any
ABR Loan, the last day of each calendar quarter and (c) with respect to any Swingline Loan, the day
that such Swingline Loan is required to be repaid pursuant to Section 2.09(a).
“
Interest Period
” shall mean, as to any Eurodollar Borrowing, the period commencing on
the date of such Borrowing or on the last day of the immediately preceding Interest Period
applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or,
if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2,
3 or 6 months thereafter (or 9 or 12 months, if at the time of the relevant Borrowing, all Lenders
make interest periods of such length available), as the Borrower may elect, or the date any
Eurodollar Borrowing is converted to an ABR Borrowing in accordance with Section 2.07 or repaid or
prepaid in accordance with Section 2.09, 2.10 or 2.11,
provided
, unless the Administrative
Agent shall otherwise agree, that prior to the earlier of the 31st day after the Closing Date and
the date on which the Administrative Agent has notified the Borrower that the primary syndication
of the Facilities has been completed, the Borrower shall only be permitted to request Interest
Periods of seven days (it being understood that notwithstanding anything else in this Agreement to
the contrary, if on the last day of any such seven day Interest Period the primary syndication of
the Facilities shall not have been completed, a new seven day Interest Period will begin on such
day with respect to each such Borrowing and no notice by the Borrower shall be required with
respect thereto);
provided
further
,
however
, that if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest Period.
“
Issuing Bank
” shall mean Citibank, N.A. and each other Issuing Bank designated
pursuant to Section 2.05(k), in each case in its capacity as an issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.05(i). An Issuing Bank
may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of
such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with
respect to Letters of Credit issued by such Affiliate.
“
Issuing Bank Fees
” shall have the meaning assigned to such term in Section 2.12(b).
CI Acquisition Credit Agreement
“
Joint Lead Arrangers
” shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
“
L/C Disbursement
” shall mean a payment or disbursement made by an Issuing Bank
pursuant to a Letter of Credit, including, for the avoidance of doubt, a payment or disbursement
made by an Issuing Bank pursuant to a Letter of Credit upon or following the reinstatement of such
Letter of Credit.
“
L/C Participation Fee
” shall have the meaning assigned such term in Section 2.12(b).
“
Lender
” shall mean each financial institution listed on
Schedule 2.01
, as
well as any Person that becomes a “Lender” hereunder pursuant to Section 9.04.
“
Lender Default
” shall mean (i) the refusal (which has not been retracted) of a Lender
to make available its portion of any Borrowing, to acquire participations in a Swingline Loan
pursuant to Section 2.04 or to fund its portion of any unreimbursed payment under Section 2.05(e),
or (ii) a Lender having notified in writing the Borrower and/or the Administrative Agent that it
does not intend to comply with its obligations under Section 2.04, 2.05 or 2.06.
“
Letter of Credit
” shall mean any letter of credit issued pursuant to Section 2.05.
“
Leverage Ratio
” shall mean, on any date, the ratio of (a) Consolidated Net Debt as of
such date to (b) EBITDA for the period of four consecutive fiscal quarters of the Borrower most
recently ended as of such date, all determined on a consolidated basis in accordance with GAAP;
provided
that to the extent any Asset Disposition or any Asset Acquisition (or any similar
transaction or transactions that require a waiver or a consent of the Required Lenders pursuant to
Section 6.04 or Section 6.05) or incurrence or repayment of Indebtedness (excluding normal
fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during
the relevant Test Period, EBITDA shall be determined for the respective Test Period on a Pro Forma
Basis for such occurrences.
“
LIBO Rate
” means in relation to any Eurodollar Borrowing:
(a) the applicable Screen Rate; or
(b) (if no Screen Rate is available for the currency or Interest Period of that
Eurodollar Borrowing) the arithmetic mean of the rates (rounded upwards to four decimal
places) as supplied to the Administrative Agent at its request quoted by Citicorp North
America, Inc. to leading banks in the London interbank market,
as of 11:00 am London time on the Quotation Day for the offering of deposits in the currency of
that Eurodollar Borrowing and for a period comparable to the Interest Period for that Eurodollar
Borrowing.
“
Lien
” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien,
hypothecation, pledge, encumbrance, charge or security interest in or on such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital lease or title
CI Acquisition Credit Agreement
retention agreement (or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities (other than securities
representing an interest in a joint venture that is not a Subsidiary), any purchase option, call or
similar right of a third party with respect to such securities.
“
Loan Documents
” shall mean this Agreement, the Letters of Credit, the Security
Documents and any promissory note issued under Section 2.09(e).
“
Loan Parties
” shall mean Holdings, the Borrower and each Subsidiary Loan Party.
“
Loans
” shall mean the Term B Loans, the Revolving Facility Loans and the Swingline
Loans (and shall include any Replacement Term B Loans and any Loans under the New Revolving
Facility Commitments or New Term B Commitments).
“
Majority Lenders
” of any Facility shall mean, at any time, Lenders under such
Facility having Loans and unused Commitments representing more than 50% of the sum of all Loans
outstanding under such Facility and unused Commitments under such Facility at such time. The Loans
and Commitment of any Defaulting Lender shall be disregarded in determining Majority Lenders at any
time.
“
Management Group
” shall mean the group consisting of the directors, executive
officers and other management personnel of Holdings or the Borrower, as the case may be, on the
Closing Date together with (1) any new directors whose election by such boards of directors or
whose nomination for election by the shareholders of Holdings or the Borrower, as the case may be,
was approved by a vote of a majority of the directors of Holdings or the Borrower, as the case may
be, then still in office who were either directors on the Closing Date or whose election or
nomination was previously so approved and (2) executive officers and other management personnel of
Holdings or the Borrower, as the case may be, hired at a time when the directors on the Closing
Date together with the directors so approved constituted a majority of the directors of Holdings or
the Borrower, as the case may be.
“
Management Notes
” shall mean the subordinated notes issued by the Borrower, any
Subsidiary or any Parent Company to existing or former employees, officers, consultants or
directors of the Borrower, any Subsidiary or any Parent Company in consideration for such Person’s
Equity Interests in the Borrower, any Subsidiary or any Parent Company, in each case
subordinated to the Obligations on terms and conditions reasonably satisfactory to the
Administrative Agent.
“
Margin Stock
” shall have the meaning assigned to such term in Regulation U.
“
Material Adverse Effect
” shall mean the existence events, conditions and/or
contingencies that have had or are reasonably likely to have (a) a materially adverse effect on the
business, operations, properties, assets or financial condition of the Borrower and the
Subsidiaries, taken as a whole, or (b) a material impairment of the validity or enforceability of,
or a material impairment of the material rights, remedies or benefits available to the Lenders, any
Issuing Bank, the Administrative Agent or the Collateral Agent under, any Loan Document;
provided
that, solely for purposes of determining whether or not there has been a Material
CI Acquisition Credit Agreement
Adverse Effect on the Closing Date, “
Material Adverse Effect
” shall mean any change,
condition, circumstance or effect that is, or is reasonably likely to be, materially adverse to the
assets and liabilities (taken together), business, financial condition or results of operations of
the Borrower and its Subsidiaries, taken as a whole, other than any changes, conditions,
circumstances or effects (i) that are the result of (A) economic factors affecting the economy or
financial markets as a whole or generally affecting any of the industries and markets in which
Holdings or any of its subsidiaries operates, (B) natural disasters, acts of war, sabotage or
terrorism, military actions or the escalation thereof, (C) any change in applicable laws, rules or
regulations or accounting rules or (D) actions contemplated by the parties in connection with the
Acquisition Agreement or the announcement or performance of the Acquisition Agreement, except that
the exclusions set forth in clauses (A), (B) and (C) shall only be effective if Holdings and its
subsidiaries, taken as a whole, are not substantially disproportionately impacted in financial
terms by such events when compared to other companies in the industries in which Holdings and its
subsidiaries operate or (ii) expressly disclosed in the Company SEC Reports (as defined in the
Acquisition Agreement) filed prior to August 2, 2005 and/or the Company Disclosure Schedule (as
defined in the Acquisition Agreement) as of August 2, 2005 or of which the Initial Lenders have
actual knowledge as of August 2, 2005.
“
Material Indebtedness
” shall mean Indebtedness (other than Loans and Letters of
Credit) of any one or more of the Borrower or any Subsidiary in an aggregate principal amount
exceeding U.S.$12.5 million.
“
Material Real Property
” shall mean any Real Property owned by a Loan Party on the
Closing Date having a fair market value exceeding U.S.$5.0 million and any after-acquired Real
Property owned by a Loan Party having a gross purchase price exceeding U.S.$5.0 million at the time
of acquisition.
“
Material Subsidiary
” shall mean each Subsidiary of the Borrower now existing or
hereafter acquired or formed by the Borrower which, on a consolidated basis for such Subsidiary and
its Subsidiaries, (a) for the applicable Calculation Period accounted for more than 1.5% of the
consolidated revenues of the Borrower and its Subsidiaries or (b) as of the last day of such
Calculation Period, was the owner of more than 1.5% of the Consolidated Total Assets of the
Borrower and its Subsidiaries;
provided
that at no time shall the total assets of all
Subsidiaries that are not Material Subsidiaries exceed, for the applicable Calculation Period, 5.0%
of the Consolidated Total Assets of the Borrower and its Subsidiaries.
“
Maximum Rate
” shall have the meaning assigned to such term in Section 9.09.
“
Moody’s
” shall mean Moody’s Investors Service, Inc.
“
Mortgaged Properties
” shall mean all Material Real Property that shall be subject to
a Mortgage that is delivered pursuant to the terms of this Agreement.
“
Mortgages
” shall mean the mortgages, deeds of trust, assignments of leases and rents
and other security documents delivered on the Closing Date pursuant to Section 4.02(e) or after the
Closing Date pursuant to Section 5.10, as amended, supplemented or otherwise modified from time to
time, with respect to Mortgaged Properties, each substantially in the form
CI Acquisition Credit Agreement
of
Exhibit D
, with such changes thereto as shall be acceptable to the Collateral Agent, including all such
changes as may be required to account for local law matters.
“
Multiemployer Plan
” shall mean a multiemployer plan as defined in Section 4001(a)(3)
of ERISA subject to the provisions of Title IV of ERISA and in respect of which the Borrower, any
Subsidiary or any ERISA Affiliate is an “employer” as defined in Section 3(5) of ERISA.
“
Net Income
” shall mean, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect of preferred stock
dividends.
“
Net Proceeds
” shall mean:
(a) 100% of the cash proceeds actually received by the Borrower or any
Wholly-Owned Subsidiary (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise and including casualty insurance settlements and condemnation
awards, but only as and when received) from any loss, damage, destruction or condemnation
of, or any sale, transfer or other disposition (including any sale and leaseback of assets)
to any Person of any asset or assets of the Borrower or any Subsidiary (other than those
pursuant to Section 6.05(a), (b), (c), (e), (f), (g), (i), (j) or (l)), net of (i)
attorneys’ fees, accountants’ fees, investment banking fees, sales commissions, survey
costs, title insurance premiums, and related search and recording charges, transfer taxes,
deed or mortgage recording taxes, required debt payments and required payments of other
obligations relating to the applicable asset (other than pursuant hereto or pursuant to the
Senior Subordinated Notes or any Permitted Senior Debt Securities or Permitted Subordinated
Debt Securities) and any cash reserve for adjustment in respect of the sale price of such
asset established in accordance with GAAP, including without limitation, pension and
post-employment benefit liabilities and liabilities related to environmental matters or
against any indemnification obligations associated with such transaction, other customary
expenses and brokerage, consultant and other customary fees actually incurred in connection
therewith and (ii) Taxes paid or payable as a result thereof,
provided
that, except
in the case of the sale, transfer or other disposition of an asset or group of related
assets resulting in Net Proceeds in excess of U.S.$25.0 million, if no Event of Default
exists and the Borrower shall deliver a certificate of a Responsible Officer of the Borrower to the Administrative Agent
promptly following receipt of any such proceeds setting forth the Borrower’s intention to
use any portion of such proceeds, to acquire, maintain, develop, construct, improve, upgrade
or repair assets useful in the business or otherwise invest in the business of the Borrower
and the Subsidiaries, or make investments pursuant to Section 6.04(j), in each case within
12 months of such receipt, such portion of such proceeds shall not constitute Net Proceeds
except to the extent (1) not so used within such 12-month period and (2) not contracted to
be used within such 12-month period and not used within 18 months of such receipt, and
provided
further
that (x) no proceeds realized in a single transaction or
series of related transactions shall constitute Net Proceeds unless such proceeds shall
exceed U.S.$2.5 million and (y) no proceeds shall constitute Net Proceeds in any fiscal
CI Acquisition Credit Agreement
year until the aggregate amount of all such proceeds in such fiscal year shall exceed U.S.$5.0
million, and
(b) 100% of the cash proceeds from the incurrence, issuance or sale by the
Borrower or any Subsidiary of any Indebtedness (other than Excluded Indebtedness), net of
all taxes and fees (including investment banking fees), commissions, costs and other
expenses, in each case incurred in connection with such issuance or sale.
For purposes of calculating the amount of Net Proceeds, fees, commissions and other costs and
expenses payable to the Borrower or any of its Affiliates shall be disregarded, except for
financial advisory fees customary in type and amount paid to Affiliates of the Funds.
“
New Commitments
” shall have the meaning assigned to such term in Section 2.20.
“
New Lender
” shall have the meaning assigned to such term in Section 2.21.
“
New Revolving Facility Commitments
” shall have the meaning assigned to such term in
Section 2.20.
“
New Revolving Facility Lender
” shall have the meaning assigned to such term in
Section 2.20.
“
New Term B Commitments
” shall have the meaning assigned to such term in Section 2.20.
“
New Term B Lender
” shall have the meaning assigned to such term in Section 2.20.
“
New Term B Loan
” shall have the meaning assigned to such term in Section 2.20.
“
Non-Consenting Lender
” shall have the meaning assigned to such term in Section
2.19(c).
“
Obligations
” shall mean all amounts owing to any of the Agents or any Lender pursuant
to the terms of this Agreement or any other Loan Document.
“
Offering Memorandum
” shall mean the Offering Memorandum, dated September 30, 2005, in
respect of the Senior Subordinated Notes.
“
Other Taxes
” shall mean any and all present or future stamp or documentary taxes or
any other excise or property, intangible or mortgage recording taxes, charges or similar levies
arising from any payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, the Loan Documents.
“
Parent Company
” shall have the meaning assigned to such term in clause (c) of the
definition of “
Change in Control
” in Section 1.01.
CI Acquisition Credit Agreement
“
Participant
” shall have the meaning assigned to such term in Section 9.04(c).
“
PBGC
” shall mean the Pension Benefit Guaranty Corporation referred to and defined in
ERISA.
“
Perfection Certificate
” shall mean a certificate in the form of Annex I to the
Collateral Agreement or any other form approved by the Collateral Agent.
“
Permitted Business Acquisition
” shall mean any acquisition of all or substantially
all the assets of, or all the Equity Interests (other than directors’ qualifying shares) in, a
Person or division or line of business of a Person (or any subsequent investment made in a Person,
division or line of business previously acquired in a Permitted Business Acquisition) if (a) such
acquisition was not preceded by, or effected pursuant to, an unsolicited or hostile offer and (b)
immediately after giving effect thereto: (i) no Event of Default shall have occurred and be
continuing or would result therefrom; (ii) all transactions related thereto shall be consummated in
accordance with applicable laws; and (iii) (A) the Borrower and its Subsidiaries shall be in
compliance, on a Pro Forma Basis after giving effect to such acquisition or formation, with the
covenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently
ended fiscal quarter of the Borrower and its Subsidiaries, and the Borrower shall have delivered to
the Administrative Agent a certificate of a Responsible Officer of the Borrower to such effect,
together with all relevant financial information for such Subsidiary or assets, and (B) any
acquired or newly formed Subsidiary shall not be liable for any Indebtedness (except for
Indebtedness permitted by Section 6.01).
“
Permitted Business Acquisition Step-Up Period
” shall mean (a) any period commencing
on the first day on which the Leverage Ratio on a Pro Forma Basis is less than 4.25 to 1.00 (but
greater than or equal to 3.25 to 1.00) and ending on the first day thereafter on which the Leverage
Ratio on a Pro Forma Basis is either (i) greater than or equal to 4.25 to 1.00 or (ii) less than
3.25 to 1.00 or (b) any period commencing on the first day on which the Leverage Ratio on a Pro
Forma Basis is less than 3.25 to 1.00 and ending on the first day thereafter on which the Leverage
Ratio on a Pro Forma Basis is greater than or equal to 3.25 to 1.00.
“
Permitted Cure Security
” shall mean (i) a common equity security of the Borrower or,
if the proceeds of such security are contributed to the Borrower, a Parent Company or (ii) any
other equity security of the Borrower or, if the proceeds of such security are contributed to the
Borrower, a Parent Company, having no mandatory redemption, repurchase or similar requirements
prior to 91 days after the Term B Maturity Date, and upon which all
dividends or distributions (if any) shall be payable solely in additional shares of such
equity security.
“
Permitted Encumbrances
” shall mean (i) with respect to each Real Property, those
Liens and other encumbrances permitted by paragraphs (b), (d), (e), (h), (k), (m) and (o) of
Section 6.02 and (ii) with respect to each Real Property acquired after the Closing Date, those
Liens and other encumbrances permitted by paragraphs (b), (d), (e), (h), (k), (m) and (o) of
Section 6.02,
provided
,
however
, that in the case of those Liens and other
encumbrances permitted by clause (o) of Section 6.02 and as described in clauses (i) and (ii) of
this definition, in the event any Loan Party shall constitute the lessor under any such lease or
sublease, no Lien
CI Acquisition Credit Agreement
created or permitted to be incurred thereby shall be permitted hereunder except
to the extent such Lien would otherwise constitute a Permitted Encumbrance.
“
Permitted Holder
” shall mean each of (i) the Funds and the Fund Affiliates and (ii)
with respect to not more than 15% of the total voting power of the Equity Interests of the
Borrower, the Management Group.
“
Permitted Investments
” shall mean:
(a) direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof, in each case
with maturities not exceeding two years;
(b) time deposit accounts, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof issued by a bank or trust company that is
organized under the laws of the United States of America, or any state thereof having
capital, surplus and undivided profits in excess of U.S.$500.0 million and whose long-term
debt, or whose parent holding company’s long-term debt, is rated A (or such similar
equivalent rating or higher) by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act);
(c) repurchase obligations with a term of not more than 180 days for underlying
securities of the types described in clause (a) above entered into with a bank meeting the
qualifications described in clause (b) above;
(d) commercial paper, maturing not more than one year after the date of acquisition,
issued by a corporation (other than an Affiliate of the Borrower) organized and in existence
under the laws of the United States of America or any foreign country recognized by the
United States of America with a rating at the time as of which any investment therein is
made of P-1 (or higher) according to Moody’s, or A-1 (or higher) according to S&P;
(e) securities with maturities of two years or less from the date of acquisition issued
or fully guaranteed by any State, commonwealth or territory of the United States of America,
or by any political subdivision or taxing authority thereof, and rated at least A by S&P or
A-2 by Moody’s;
(f) shares of mutual funds whose investment guidelines restrict 95% of such funds’
investments to those satisfying the provisions of clauses (a) through (e) above;
(g) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under
the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii)
have portfolio assets of at least U.S.$500.0 million; and
(h) time deposit accounts, certificates of deposit and money market deposits in an
aggregate face amount not in excess of 1/2 of 1% of the total assets of the Borrower and the
Subsidiaries, on a consolidated basis, as of the end of the Borrower’s most recently
completed fiscal year.
CI Acquisition Credit Agreement
“
Permitted Receivables Documents
” shall mean all documents and agreements evidencing,
relating to or otherwise governing a Permitted Receivables Financing.
“
Permitted Receivables Financing
” shall mean one or more transactions pursuant to
which (i) Receivables Assets or interests therein are sold to or financed by one or more Special
Purpose Receivables Subsidiaries, and (ii) such Special Purpose Receivables Subsidiaries finance
their acquisition of such Receivables Assets or interests therein, or the financing thereof, by
selling or borrowing against such Receivables Assets;
provided
that (A) recourse to the
Borrower or any Subsidiary (other than the Special Purpose Receivables Subsidiaries) and any
obligations or agreements of the Borrower or any Subsidiary (other than the Special Purpose
Receivables Subsidiaries) in connection with such transactions shall be limited to the extent
customary for similar transactions in the applicable jurisdictions (including, to the extent
applicable, in a manner consistent with the delivery of a “true sale”/”absolute transfer” opinion
with respect to any transfer by the Borrower or any Subsidiary (other than a Special Purpose
Receivables Subsidiary), (B) the aggregate Receivables Net Investment since the Closing Date shall
not exceed U.S.$50.0 million at any time, (C) the Board of Directors of the Borrower shall have
determined in good faith that each such Permitted Receivables Financing (including financing terms,
covenants, termination events and other provisions) is in the aggregate economically fair and
reasonable to the Borrower and the applicable Special Purpose Receivables Subsidiary, (D) all sales
of Receivables Assets or interests therein to any Special Purpose Receivables Subsidiary are made
at fair market value (as determined in good faith by the Borrower), and (E) the financing terms,
covenants, termination events and other provisions thereof will be market terms (as determined in
good faith by the Borrower) and may include representations, warranties, covenants, indemnities and
guarantees of performance which the Borrower has determined in good faith to be customary in a
receivables financing including, without limitation, those relating to the servicing of the assets
of a Special Purpose Receivables Subsidiary, it being understood and agreed that any obligation of
a seller of receivables to repurchase receivables arising as a result of a breach of a
representation, warranty or covenant or otherwise, including as a result of a receivable or portion
thereof becoming subject to any asserted defense, dispute, off-set or counterclaim of any kind as a
result of any action taken by, any failure to take action by or by other event relating to the
seller, shall be deemed customary.
“
Permitted Refinancing Indebtedness
” shall mean any Indebtedness issued in exchange
for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund
(collectively, to “
Refinance
”), the Indebtedness being Refinanced (or previous
refinancings thereof constituting Permitted Refinancing Indebtedness);
provided
that
(a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so Refinanced (plus unpaid accrued interest and premium thereon), (b) the average life
to maturity of such Permitted Refinancing Indebtedness is greater than or equal to that of the
Indebtedness being Refinanced, (c) if the Indebtedness being Refinanced is subordinated in right of
payment to the Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be
subordinated in right of payment to such Obligations on terms at least as favorable to the Lenders
as those contained in the documentation governing the Indebtedness being Refinanced, (d) no
Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or
security, than the Indebtedness being Refinanced and (e) if the Indebtedness being Refinanced is
secured by any collateral (whether equally and ratably with, or junior to, the Secured Parties or
CI Acquisition Credit Agreement
otherwise), such Permitted Refinancing Indebtedness may be secured by such collateral (including in
respect of working capital facilities of Foreign Subsidiaries otherwise permitted under this
Agreement only, any collateral pursuant to after-acquired property clauses to the extent any such
collateral secured the Indebtedness being Refinanced) on terms no less favorable to the Secured
Parties than those contained in the documentation governing the Indebtedness being Refinanced.
“
Permitted Senior Debt Securities
” shall mean unsecured senior notes issued by the
Borrower, (i) the terms of which do not provide for any scheduled repayment, mandatory redemption
or sinking fund obligation prior to the Term B Maturity Date, (ii) the covenants (other than the
lien covenant and the subsidiary debt covenant), events of default, subsidiary guarantees and other
terms of which (other than interest rate and redemption premiums), taken as a whole, are not more
restrictive to the Borrower and its Subsidiaries than those in the Senior Subordinated Notes, (iii)
the lien covenant and the subsidiary debt covenant are on market terms for similar issuers at the
time of issuance and (iv) of which no subsidiary of the Domestic Subsidiary (other than a
Subsidiary Loan Party) is an obligor under such notes that is not an obligor under the Senior
Subordinated Notes.
“
Permitted Subordinated Debt Securities
” shall mean unsecured subordinated notes
issued by the Borrower, (i) the terms of which do not provide for any scheduled repayment,
mandatory redemption or sinking fund obligation prior to the date on which the final maturity of
the Senior Subordinated Notes occurs (as in effect on the Closing Date), (ii) the covenants, events
of default, Subsidiary guarantees and other terms of which (other than interest rate and redemption
premiums), taken as a whole, are not more restrictive to the Borrower and its Subsidiaries than
those in the Senior Subordinated Notes and (iii) of which no Subsidiary of the Domestic Subsidiary
(other than a Subsidiary Loan Party) is an obligor under such notes that is not an obligor under
the Senior Subordinated Notes.
“
Person
” shall mean any natural person, corporation, business trust, joint venture,
association, company, partnership, limited liability company or government, individual or family
trusts, or any agency or political subdivision thereof.
“
Plan
” shall mean any employee pension benefit plan subject to the provisions of Title
IV of ERISA or Section 412 of the Code or Section 302 of ERISA and in respect of which the
Borrower, any Subsidiary or any ERISA Affiliate is (or if such plan were terminated would
under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.
“
Platform
” shall have the meaning assigned to such term in Section 9.17(b).
“
Pledged Collateral
” shall have the meaning assigned to such term in the applicable
Collateral Agreement.
“
primary obligor
” shall have the meaning given such term in the definition of the term
“Guarantee.”
“
Prior Liens
” shall mean Liens that, pursuant to the provisions of any Security
Document, are or may be superior to the Lien of such Security Document.
CI Acquisition Credit Agreement
“
Pro Forma Adjusted EBITDA
” shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, the EBITDA for such period adjusted (a) as
required or permitted by Regulation S-X of the Securities Act, (b) to reflect Holdings’ good faith
estimate of the additional costs that would have been incurred by the Borrower (i) as a stand-alone
entity and/or (ii) to implement the Borrower’s business plan previously described to the Joint Lead
Arrangers (in each case such adjustments shall be in form and substance reasonably satisfactory to
the Joint Lead Arrangers) and (c) as shall be reasonably acceptable to the Joint Lead Arrangers;
provided
that Pro Forma Adjusted EBITDA shall be calculated in a manner consistent with Schedule
1.01(b) and such manner of calculation is acceptable to the Joint Lead Arrangers.
“
Pro Forma Basis
” shall mean, as to any Person, for any events as described in clauses
(i) and (ii) below that occur subsequent to the commencement of a period for which the financial
effect of such events is being calculated, and giving effect to the events for which such
calculation is being made, such calculation as will give
pro
forma
effect to such
events as if such events occurred on the first day of the four consecutive fiscal quarter period
ended on or before the occurrence of such event (the “
Reference Period
”):
(i) in making any determination of EBITDA,
pro
forma
effect shall be
given to any Asset Disposition and to any Asset Acquisition (or any similar transaction or
transactions that require a waiver or consent of the Required Lenders pursuant to Section
6.04 or 6.05), in each case that occurred during the Reference Period (or, in the case of
determinations made pursuant to the definition of the term “Asset Acquisition,” occurring
during the Reference Period or thereafter and through and including the date upon which the
respective Asset Acquisition is consummated); and
(ii) in making any determination on a Pro Forma Basis, (x) all Indebtedness (including
Indebtedness incurred or assumed and for which the financial effect is being calculated,
whether incurred under this Agreement or otherwise, but excluding normal fluctuations in
revolving Indebtedness incurred for working capital purposes and amounts outstanding under
any Permitted Receivables Financing, in each case, not to finance any acquisition) incurred
or permanently repaid during the Reference Period (or, in the case of determinations made
pursuant to the definition of the term “Asset Acquisition,” occurring during the Reference
Period or thereafter and through and including the date upon which the respective Asset Acquisition is consummated) shall be deemed to have
been incurred or repaid at the beginning of such period and (y) Interest Expense of such
Person attributable to interest on any Indebtedness, for which
pro
forma
effect is being given as provided in preceding clause (x), bearing floating interest rates
shall be computed on a
pro
forma
basis as if the rates that would have been
in effect during the period for which
pro
forma
effect is being given had
been actually in effect during such periods.
Pro
forma
calculations made pursuant to the definition of the term “Pro Forma
Basis” shall be determined in good faith by a Responsible Officer of the Borrower and, for any
fiscal period ending on or prior to the first anniversary of an Asset Acquisition or Asset
Disposition (or any similar transaction or transactions that require a waiver or consent of the
Required Lenders pursuant to Section 6.04 or 6.05), may include adjustments to reflect operating
expense
CI Acquisition Credit Agreement
reductions and other operating improvements or synergies reasonably expected to result from
such Asset Acquisition, Asset Disposition or other similar transaction, to the extent that the
Borrower delivers to the Administrative Agent (i) a certificate of a Financial Officer of the
Borrower setting forth such operating expense reductions and other operating improvements or
synergies and (ii) information and calculations supporting in reasonable detail such estimated
operating expense reductions and other operating improvements or synergies.
“
Projections
” shall mean the projections of the Borrower and its Subsidiaries included
in the Information Memorandum and any other projections and any forward-looking statements
(including statements with respect to booked business) of such entities furnished to the Lenders or
the Administrative Agent by or on behalf of the Borrower or any of its Subsidiaries prior to the
Closing Date.
“
Quotation Day
” means, in relation to any period for which an interest rate is to be
determined, two Business Days before the first day of that period.
“
Real Property
” shall mean, collectively, all right, title and interest of the
Borrower or any other Subsidiary in and to any and all parcels of real property owned or operated
by the Borrower or any other Subsidiary together with all Improvements and appurtenant fixtures,
equipment, personal property, easements and other property and rights incidental to the ownership,
lease or operation thereof.
“
Receivables Assets
” shall mean accounts receivable (including any bills of exchange)
and related assets and property from time to time originated, acquired or otherwise owned by the
Borrower or any Subsidiary.
“
Receivables Net Investment
” shall mean the aggregate cash amount paid by the lenders
or purchasers under any Permitted Receivables Financing in connection with their purchase of, or
the making of loans secured by, Receivables Assets or interests therein, as the same may be reduced
from time to time by collections with respect to such Receivables Assets or otherwise in accordance
with the terms of the Permitted Receivables Documents;
provided
,
however
, that if
all or any part of such Receivables Net Investment shall have been reduced by application of any
distribution and thereafter such distribution is rescinded or must otherwise be returned for any
reason, such Receivables Net Investment shall be increased by the amount of such distribution, all
as though such distribution had not been made.
“
Reference Period
” shall have the meaning assigned to such term in the definition of
the term “Pro Forma Basis.”
“
Refinance
” shall have the meaning assigned to such term in the definition of the term
“Permitted Refinancing Indebtedness,” and “
Refinanced
” shall have a meaning correlative
thereto.
“
Refinanced Term B Loans
” shall have the meaning assigned to such term in Section
9.08(e).
“
Register
” shall have the meaning assigned to such term in Section 9.04(b).
CI Acquisition Credit Agreement
“
Regulation U
” shall mean Regulation U of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof.
“
Regulation X
” shall mean Regulation X of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof.
“
Related Parties
” shall mean, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.
“
Release
” shall mean any placing, spilling, leaking, seepage, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or depositing
in, into or onto the Environment.
“
Remaining Present Value
” shall mean, as of any date with respect to any lease, the
present value as of such date of the scheduled future lease payments with respect to such lease,
determined with a discount rate equal to a market rate of interest for such lease reasonably
determined at the time such lease was entered into.
“
Replacement Term B Loans
” shall have the meaning assigned to such term in Section
9.08(e).
“
Reportable Event
” shall mean any reportable event as defined in Section 4043(c) of
ERISA or the regulations issued thereunder, other than those events as to which the 30-day notice
period has been waived, with respect to a Plan.
“
Required Lenders
” shall mean, at any time, Lenders having (a) Loans (other than
Swingline Loans) outstanding, (b) Revolving L/C Exposures, (c) Swingline Exposures, and (d)
Available Unused Commitments, that taken together, represent more than 50% of the sum of (w) all
Loans (other than Swingline Loans) outstanding, (x) Revolving L/C Exposures, (y) Swingline
Exposures, and (z) the total Available Unused Commitments at such time. The Loans, Revolving L/C
Exposures, Swingline Exposures and Available Unused Commitment of any Defaulting Lender shall be
disregarded in determining Required Lenders at any time.
“
Required Percentage
” shall mean, with respect to an Excess Cash Flow Period, (i) 75%,
if the Leverage Ratio at the end of such Excess Cash Flow Period is greater than 4.75 to 1.00, (ii)
50%, if the Leverage Ratio at the end of such Excess Cash Flow Period is greater than 3.75 to 1.00
but less than or equal to 4.75 to 1.00, (iii) 25%, if the Leverage Ratio at the end of such Excess
Cash Flow Period is greater than 2.75 to 1.00 and equal to or less than 3.75 to 1.00, and (iv) 0%,
if the Leverage Ratio at the end of such Excess Cash Flow Period is equal to or less than 2.75 to
1.00.
“
Responsible Officer
” of any Person shall mean any executive officer or Financial
Officer of such Person and any other officer or similar official thereof responsible for the
administration of the obligations of such Person in respect of this Agreement.
“
Revolving Facility
” shall mean the Revolving Facility Commitments and the extensions
of credit made hereunder by the Revolving Facility Lenders.
CI Acquisition Credit Agreement
“
Revolving Facility Borrowing
” shall mean a Borrowing comprised of Revolving Facility
Loans.
“
Revolving Facility Commitment
” shall mean, with respect to each Revolving Facility
Lender, the commitment of such Revolving Facility Lender to make Revolving Facility Loans pursuant
to Section 2.01, expressed as a Dollar amount representing the maximum aggregate permitted amount
of such Revolving Facility Lender’s Revolving Facility Credit Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender under Section 9.04. The
initial Dollar amount of each Revolving Facility Lender’s Revolving Facility Commitment is set
forth on
Schedule 2.01
, or in the Assignment and Acceptance pursuant to which such
Revolving Facility Lender shall have assumed its Revolving Facility Commitment, as applicable. The
aggregate amount of the Revolving Facility Commitments on the date hereof is U.S.$60.0 million.
“
Revolving Facility Credit Exposure
” shall mean, at any time, the sum of (a) the
aggregate principal amount of the Revolving Facility Loans outstanding at such time, (b) the
Swingline Exposure at such time and (c) the Revolving L/C Exposure at such time. The Revolving
Facility Credit Exposure of any Revolving Facility Lender at any time shall be the sum of (a) the
aggregate principal amount of such Revolving Facility Lender’s Revolving Facility Loans outstanding
at such time and (b) such Revolving Facility Lender’s Revolving Facility Percentage of the
Swingline Exposure and Revolving L/C Exposure at such time.
“
Revolving Facility Lender
” shall mean a Lender with a Revolving Facility Commitment
or with outstanding Revolving Facility Loans (including any New Revolving Facility Lenders).
“
Revolving Facility Loan
” shall mean a Loan made by a Revolving Facility Lender
pursuant to Section 2.01(b) or a New Revolving Facility Lender pursuant to Section 2.20. Each
Revolving Facility Revolving Loan shall be a Eurodollar Loan or an ABR Revolving Loan.
“
Revolving Facility Maturity Date
” shall mean October 17, 2010.
“
Revolving Facility Percentage
” shall mean, with respect to any Revolving Facility
Lender, the percentage of the total Revolving Facility Commitments represented by such Lender’s
Revolving Facility Commitment. If the Revolving Facility Commitments have terminated or expired,
the Revolving Facility Percentages shall be determined based upon the Revolving Facility
Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04.
“
Revolving L/C Exposure
” shall mean at any time the sum of (a) the aggregate undrawn
amount of all Letters of Credit outstanding at such time and (b) the aggregate principal amount of
all L/C Disbursements that have not yet been reimbursed at such time. The Revolving L/C Exposure
of any Revolving Facility Lender at any time shall mean its Revolving Facility Percentage of the
aggregate Revolving L/C Exposure at such time.
“
Rollover Equity
” shall have the meaning assigned to such term in the third recital
hereto.
CI Acquisition Credit Agreement
“
Rollover Shareholder
” shall have the meaning assigned to such term in the third
recital hereto.
“
S&P
” shall mean Standard & Poor’s Ratings Group, Inc.
“
Sale and Lease-Back Transaction
” shall have the meaning assigned to such term in
Section 6.03.
“
Screen Rate
” means, in relation to the LIBO Rate, the British Bankers’ Association
Interest Settlement Rate for the relevant currency and period, displayed on the appropriate page of
the Telerate screen. If the agreed page is replaced or service ceases to be available, the
Administrative Agent may specify another page or service displaying the appropriate rate after
consultation with the Borrower and the Lenders.
“
SEC
” shall mean the Securities and Exchange Commission or any successor thereto.
“
Secured Parties
” shall mean the “Secured Parties” as defined in the Collateral
Agreements.
“
Securities Act
” shall mean the Securities Act of 1933, as amended.
“
Security Documents
” shall mean the Mortgages, the Collateral Agreement and each of
the security agreements and other instruments and documents executed and delivered pursuant to any
of the foregoing or pursuant to Section 5.10.
“
Seller
” shall have the meaning assigned to such term in the second recital hereto.
“
Senior Subordinated Note Documents
” shall mean the Senior Subordinated Notes and the
Senior Subordinated Note Indenture.
“
Senior Subordinated Note Indenture
” shall mean the Indenture dated as of October 17,
2005 under which the Senior Subordinated Notes were issued, among the Borrower and The Bank of New
York, as trustee, as in effect on the Closing Date and as amended, restated, supplemented or
otherwise modified from time to time in accordance with the requirements thereof and of this
Agreement.
“
Senior Subordinated Notes
” shall mean the Borrower’s 9 1/8% Senior Subordinated Notes
due 2015 issued pursuant to the Senior Subordinated Note Indenture and any notes issued by the
Borrower in exchange for, and as contemplated by, the Senior Subordinated Notes and the related
registration rights agreement with substantially identical terms as the Senior Subordinated Notes.
“
Special Purpose Receivables Subsidiary
” shall mean a direct or indirect Subsidiary of
the Borrower established in connection with a Permitted Receivables Financing for the acquisition
of Receivables Assets or interests therein, and which is organized in a manner intended to reduce
the likelihood that it would be substantively consolidated with the Borrower or any of the
Subsidiaries (other than Special Purpose Receivables Subsidiaries) in the event the
CI Acquisition Credit Agreement
Borrower or any such Subsidiary becomes subject to a proceeding under the U.S. Bankruptcy Code
(or other insolvency law).
“
Statutory Reserves
” shall mean, with respect to any currency, any reserve, liquid
asset or similar requirements established by any Governmental Authority of the United States of
America or of the jurisdiction of such currency or any jurisdiction in which Loans in such currency
are made to which banks in such jurisdiction are subject for any category of deposits or
liabilities customarily used to fund loans in such currency or by reference to which interest rates
applicable to Loans in such currency are determined.
“
Subordinated Intercompany Debt
” shall have the meaning assigned to such term in
Section 6.01(e).
“
subsidiary
” shall mean, with respect to any Person (herein referred to as the
“
parent
”), any corporation, partnership, association or other business entity of which
securities or other ownership interests representing more than 50% of the equity or more than 50%
of the ordinary voting power or more than 50% of the general partnership interests are, at the time
any determination is being made, directly or indirectly, owned, Controlled or held by such Person.
“
Subsidiary”
shall mean a subsidiary;
provided
that unless the context
otherwise requires, “Subsidiary” shall mean a subsidiary of the Borrower;
provided
,
further
, that Chart Heat Exchangers Limited shall not be considered a subsidiary of the
Borrower for purposes of the Loan Documents unless and until it is no longer subject to voluntary
administration proceedings under the U.K. Insolvency Act of 1986.
“
Subsidiary Loan Party
” shall mean each direct Wholly Owned Subsidiary of the Borrower
that (a) is (i) a Domestic Subsidiary and (ii) a Material Subsidiary, and (b) is not (i) a Special
Purpose Receivables Subsidiary, (ii) a Subsidiary listed on Schedule 1.01(d) or (iii) a Subsidiary
whose guarantee of the Obligations is prohibited under Section 9.22.
“
Swap Agreement
” shall mean any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any
similar transaction or any combination of these transactions,
provided
that no phantom
stock or similar plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries
shall be a Swap Agreement.
“
Swingline Borrowing
” shall mean a Borrowing comprised of Swingline Loans.
“
Swingline Borrowing Request
” shall mean a request by the Borrower substantially in
the form of
Exhibit C-2
.
“
Swingline Commitment
” shall mean, with respect to each Swingline Lender, the
commitment of such Swingline Lender to make Swingline Loans pursuant to Section 2.04. The
aggregate amount of the Swingline Commitments on the Closing Date is U.S.$15 million.
CI Acquisition Credit Agreement
“
Swingline Exposure
” shall mean at any time the aggregate principal amount of all
outstanding Swingline Borrowings at such time. The Swingline Exposure of any Revolving Facility
Lender at any time shall mean its Revolving Facility Percentage of the aggregate Swingline Exposure
at such time.
“
Swingline Lender
” shall mean Citicorp North America, Inc., in its capacity as a
lender of Swingline Loans, and/or any other Revolving Facility Lender designated as such by the
Borrower after the Closing Date that is reasonably satisfactory to the Borrower and the
Administrative Agent and executes a counterpart to this Agreement as a Swingline Lender.
“
Swingline Loans
” shall mean the swingline loans made to the Borrower pursuant to
Section 2.04.
“
Syndication Agent
” shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.
“
Taxes
” shall mean any and all present or future taxes, levies, imposts, duties
(including stamp duties), deductions, charges (including
ad
valorem
charges) or
withholdings imposed by any Governmental Authority and any and all interest and penalties related
thereto.
“
Term B Borrowing
” shall mean a Borrowing comprised of Term B Loans.
“
Term B Lender
” shall mean a Lender with a Term B Loan Commitment or with outstanding
Term B Loans (including any New Term B Lender).
“
Term B Loan Commitment
” shall mean with respect to each Lender, the amount set forth
on
Schedule 2.01
. The aggregate amount of the Term B Loan Commitments on the Closing Date
is U.S.$180.0 million.
“
Term B Loan Facility
” shall mean the Term B Loan Commitments and the Term B Loans
made hereunder.
“
Term B Loan Installment Date
” shall have the meaning assigned to such term in Section
2.10(a)(i).
“
Term B Loans
” shall mean the term loans made by the Lenders to the Borrower pursuant
to Section 2.01(a) or 2.20 (including New Term B Loans).
“
Term B Maturity Date
” shall mean October 17, 2012.
“
Test Period
” shall mean, on any date of determination, the period of four consecutive
fiscal quarters of the Borrower then most recently ended (taken as one accounting period).
“
Title Company
” shall mean Title Associates Inc., as agent for Stewart Title Insurance
Company, or such other nationally recognized title company as shall be selected by the
Administrative Agent.
CI Acquisition Credit Agreement
“
Transaction Documents
” shall mean the Acquisition Documents, the Senior Subordinated
Note Documents and the Loan Documents.
“
Transactions
” shall mean, collectively, the transactions to occur on or prior to the
Closing Date pursuant to the Transaction Documents, including (a) the consummation of the
Acquisition; (b) the execution and delivery of the Loan Documents and the initial borrowings
hereunder; (c) the Equity Financing; (d) the issuance of the Senior Subordinated Notes; and (e) the
payment of all fees and expenses owing in connection with the foregoing.
“
Trigger Date
” shall mean the date of delivery of financial statements for the first
fiscal quarter ending at least six months after the Closing Date.
“
Type
,” when used in respect of any Loan or Borrowing, shall refer to the Rate by
reference to which interest on such Loan or on the Loans comprising such Borrowing is determined.
For purposes hereof, the term “
Rate
” shall include the Adjusted LIBO Rate and the Alternate
Base Rate.
“
UCC
” shall mean (i) the Uniform Commercial Code as in effect in the applicable state
of jurisdiction and (ii) certificate of title or other similar statutes relating to “rolling stock”
or barges as in effect in the applicable jurisdiction.
“
U.S. Bankruptcy Code
” shall mean Title 11 of the United States Code, as amended, or
any similar federal or state law for the relief of debtors.
“
U.S. Patriot Act
” shall have the meaning assigned to such term in Section 3.08(a).
“
Wholly Owned Subsidiary
” of any Person shall mean a subsidiary of such Person, all of
the Equity Interests of which (other than directors’ qualifying shares or nominee or other similar
shares required pursuant to applicable law) are owned by such Person or another Wholly Owned
Subsidiary of such Person.
“
Withdrawal Liability
” shall mean liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.
“
Working Capital
” shall mean, with respect to the Borrower and its Subsidiaries on a
consolidated basis at any date of determination, Current Assets at such date of determination
minus
Current Liabilities at such date of determination;
provided
that, for
purposes of calculating Excess Cash Flow, increases or decreases in Working Capital shall be
calculated without regard to any changes in Current Assets or Current Liabilities as a result of
(a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between
current and noncurrent or (b) the effects of purchase accounting.
SECTION 1.02.
Terms Generally
. The definitions set forth or referred to in Section
1.01 shall apply equally to both 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
CI Acquisition Credit Agreement
be followed by the phrase “without
limitation.” All references herein to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the
context shall otherwise require. Except as otherwise expressly provided herein, any reference in
this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time. Except as otherwise expressly provided herein, all terms of
an accounting or financial nature shall be construed in accordance with GAAP, as in effect from
time to time;
provided
that, if the Borrower notifies the Administrative Agent that the
Borrower requests an amendment to any provision hereof to eliminate the effect of any change
occurring after the Closing Date in GAAP or in the application thereof on the operation of such
provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request
an amendment to any provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then such provision shall
be interpreted on the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such provision amended in
accordance herewith.
SECTION 1.03.
Effectuation of Transfers
. Each of the representations and warranties
of the Borrower contained in this Agreement (and all corresponding definitions) are made after
giving effect to the Transactions (other than those referred in clause (b) of the definition
thereof which are indicated to be concluded after the Closing Date), unless the context otherwise
requires.
ARTICLE II
THE CREDITS
SECTION 2.01.
Commitments
. (a) Subject to the terms and conditions set forth herein,
each Term B Lender agrees (i) to make Term B Loans to the Borrower on the Closing Date in Dollars
in a principal amount that will not result in the aggregate amount of such Lender’s Term B Loans
exceeding such Lender’s Term B Loan Commitment;
(b) Subject to the terms and conditions set forth herein, each Revolving Facility Lender
agrees to make Revolving Facility Loans to the Borrower, in each case from time to time during the
Availability Period in an aggregate principal amount that will not result in (i) such Lender’s
Revolving Facility Credit Exposure exceeding such Lender’s Revolving Facility Commitment and (ii)
the Revolving Facility Credit Exposure exceeding the total Revolving Facility Commitments. Within
the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may
borrow, prepay and reborrow Revolving Facility Loans.
(c) Amounts repaid or prepaid in respect of Term B Loans may not be reborrowed.
SECTION 2.02.
Loans and Borrowings
. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans under the same Facility and of the same Type and in the same currency
made by the Lenders ratably in accordance with their respective Commitments under the applicable
Facility (or, in the case of Swingline Loans, in accordance with their respective
CI Acquisition Credit Agreement
Swingline Commitments);
provided
,
however
, that Revolving Facility Loans shall be made by the
Revolving Facility Lenders ratably in accordance with their respective Revolving Facility
Percentages on the date such Loans are made hereunder. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations hereunder;
provided
that the Commitments of the Lenders are several and no Lender shall be responsible
for any other Lender’s failure to make Loans as required.
(b) Subject to Section 2.14, each Borrowing shall be comprised entirely of ABR Loans or
Eurodollar Loans as the Borrower may request in accordance herewith.
(c) At the commencement of each Interest Period for any Eurodollar Revolving Facility
Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the
Borrowing Multiple and not less than the Borrowing Minimum;
provided
that a Eurodollar
Revolving Facility Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the Revolving Facility Commitments or that is required to finance the reimbursement of
an L/C Disbursement as contemplated by Section 2.05(e). At the time that each ABR Revolving
Facility Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral
multiple of the Borrowing Multiple and not less than the Borrowing Minimum;
provided
that
an ABR Revolving Facility Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the Revolving Facility Commitments or that is required to finance the
reimbursement of an L/C Disbursement as contemplated by Section 2.05(e). Each Swingline Borrowing
shall be in an amount that is an integral multiple of the Borrowing Multiple and not less than the
Borrowing Minimum. Borrowings of more than one Type and under more than one Facility may be
outstanding at the same time;
provided
that there shall not at any time be more than a
total of (i) six (6) Eurodollar Borrowings outstanding under each of the Term B Loan Facility and
(ii) twenty (20) Eurodollar Borrowings outstanding under the Revolving Facility.
(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled
to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with
respect thereto would end after the Revolving Facility Maturity Date, the Term B Maturity Date, as
applicable.
SECTION 2.03.
Requests for Borrowings
. To request a Revolving Facility Borrowing
and/or a Term B Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time,
three (3) Business Days before the date of the proposed Borrowing or (b) in the case of an ABR
Borrowing, not later than 12:00 noon, New York City time, one (1) Business Day before the date of
the proposed Borrowing;
provided
that any such notice of an ABR Revolving Facility
Borrowing to finance
the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e) may be given not
later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery
or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Borrower making such Borrowing Request. Each such
telephonic and written Borrowing Request shall specify the following information in compliance with
Section 2.02:
CI Acquisition Credit Agreement
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(i)
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whether the requested Borrowing is to be a Revolving Facility Borrowing;
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(ii)
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the aggregate amount of the requested Borrowing;
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(iii)
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the date of such Borrowing, which shall be a Business Day;
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(iv)
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whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
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(v)
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in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable
thereto; and
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(vi)
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the location and number of the Borrower’s account to which funds are to be
disbursed.
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If no election as to the Type of Revolving Facility Borrowing is specified, then the requested
Revolving Facility Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower requesting such Eurodollar
Borrowing shall be deemed to have selected an Interest Period of one month’s duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent
shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made
as part of the requested Borrowing.
SECTION 2.04.
Swingline Loans
. (a) Subject to the terms and conditions set forth
herein, each Swingline Lender agrees to make Swingline Loans to the Borrower from time to time
during the Availability Period, in an aggregate principal amount at any time outstanding that will
not result in (x) the aggregate principal amount of outstanding Swingline Loans exceeding the
Swingline Commitment or (y) the Revolving Facility Credit Exposure exceeding the total Revolving
Facility Commitments;
provided
that no Swingline Lender shall be required to make a
Swingline Loan to refinance an outstanding Swingline Borrowing. Within the foregoing limits and
subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow
Swingline Loans.
(b) To request a Swingline Borrowing, the Borrower shall notify the Administrative Agent and
the Swingline Lenders of such request by telephone (confirmed by a Swingline Borrowing Request by
telecopy) not later than 11:00 a.m., New York City time on the day of the proposed Swingline
Borrowing. Each such notice and Swingline Borrowing Request shall be irrevocable and shall specify
(i) the requested date (which shall be a Business Day), (ii)
the amount of the requested Swingline Borrowing, (iii) the term of such Swingline Loan and
(iv) the location and number of the Borrower’s account to which funds are to be disbursed. Each
Swingline Lender shall make each Swingline Loan to be made by it hereunder in accordance with
Section 2.02(a) on the proposed date thereof by wire transfer of immediately available funds by
3:00 p.m., New York City time, to the account of the Borrower (or, in the case of a Swingline
Borrowing made to finance the reimbursement of an L/C Disbursement as provided in Section 2.05(e),
by remittance to the applicable Issuing Bank).
(c) A Swingline Lender may by written notice given to the Administrative Agent (and to the
other Swingline Lenders) not later than 10:00 a.m., New York City time on
CI Acquisition Credit Agreement
any Business Day, require
the Revolving Facility Lenders to acquire participations on such Business Day in all or a portion
of the outstanding Swingline Loans made by it. Such notice shall specify the aggregate amount of
such Swingline Loans in which the Revolving Facility Lenders will participate. Promptly upon
receipt of such notice, the Administrative Agent will give notice thereof to each such Lender,
specifying in such notice such Lender’s Revolving Facility Percentage of such Swingline Loan or
Loans. Each Revolving Facility Lender hereby absolutely and unconditionally agrees, upon receipt
of notice as provided above, to pay to the Administrative Agent for the account of the applicable
Swingline Lender, such Revolving Facility Lender’s Revolving Facility Percentage of such Swingline
Loan or Loans. Each Revolving Facility Lender acknowledges and agrees that its respective
obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each
Revolving Facility Lender shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans
made by such Revolving Facility Lender (and Section 2.06 shall apply,
mutatis
mutandis
, to the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the applicable Swingline Lender the amounts so received by it from the Revolving
Facility Lenders. The Administrative Agent shall notify the Borrower of any participations in any
Swingline Loan acquired pursuant to this paragraph (c), and thereafter payments in respect of such
Swingline Loan shall be made to the Administrative Agent and not to the applicable Swingline
Lender. Any amounts received by a Swingline Lender from the Borrower (or other party on behalf of
the Borrower) in respect of a Swingline Loan after receipt by such Swingline Lender of the proceeds
of a sale of participations therein shall be promptly remitted to the Administrative Agent; any
such amounts received by the Administrative Agent shall be promptly remitted by the Administrative
Agent to the Revolving Facility Lenders that shall have made their payments pursuant to this
paragraph and to such Swingline Lender, as their interests may appear;
provided
that any
such payment so remitted shall be repaid to such Swingline Lender or to the Administrative Agent,
as applicable, if and to the extent such payment is required to be refunded to the Borrower for any
reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not
relieve the Borrower of any default in the payment thereof.
SECTION 2.05.
Letters of Credit
. (a)
General
. Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own
account in a form reasonably acceptable
to the applicable Issuing Bank, at any time and from time to time during the Availability
Period and prior to the date that is five (5) Business Days prior to the Revolving Facility
Maturity Date. In the event of any inconsistency between the terms and conditions of this
Agreement and the terms and conditions of any form of letter of credit application or other
agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Bank
relating to any Letter of Credit, the terms and conditions of this Agreement shall control.
(b)
Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions
. To request
the issuance of a Letter of Credit (or the amendment, renewal (other than an automatic renewal in
accordance with paragraph (c) of this Section) or extension of an outstanding Letter of Credit),
the Borrower shall hand deliver or telecopy (or transmit by
CI Acquisition Credit Agreement
electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable
Issuing Bank and the Administrative Agent (two (2) Business Days in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the
date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section),
the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to issue, amend, renew or extend such Letter of Credit. If
requested by the applicable Issuing Bank, the Borrower also shall submit a letter of credit
application on such Issuing Bank’s standard form in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment, renewal or extension,
(i) the Revolving L/C Exposure shall not exceed U.S.$60 million and (ii) the Revolving Facility
Credit Exposure shall not exceed the total Revolving Facility Commitments.
(c)
Expiration Date
. (i) Each Letter of Credit shall expire at or prior to the close
of business on the earlier of (A) the date one (1) year after the date of the issuance of such
Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal
or extension) and (B) the date that is five (5) Business Days prior to the Revolving Facility
Maturity Date;
provided
that any Letter of Credit with a one-year tenor may provide for the
automatic renewal thereof for additional one-year periods (which, in no event, shall extend beyond
the date referred to in clause (B) of this paragraph (c)).
(ii) Notwithstanding the foregoing, the Borrower may request the issuance of one or more
Letters of Credit that expire at or prior to the close of business on the date that is five (5)
Business Days prior to the Revolving Facility Maturity Date;
provided
that the Revolving
L/C Exposure in respect of Letters of Credit issued pursuant to this Section 2.05(c)(ii) shall not
exceed U.S.$35 million at any one time outstanding.
(d)
Participations
. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action on the part of the
applicable Issuing Bank or the Revolving Facility Lenders, such Issuing Bank hereby grants to each
Revolving Facility Lender, and each Revolving Facility Lender hereby acquires from such Issuing
Bank, a participation in such Letter of Credit equal to such Revolving Facility Lender’s
Revolving Facility Percentage of the aggregate amount available to be drawn under such Letter
of Credit. In consideration and in furtherance of the foregoing, each Revolving Facility Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent in Dollars, for the
account of the applicable Issuing Bank, such Revolving Facility Lender’s Revolving Facility
Percentage of each L/C Disbursement made by such Issuing Bank not reimbursed by the Borrower on the
date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to
be refunded to the Borrower for any reason. Each Revolving Facility Lender acknowledges and agrees
that its obligation to acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the
CI Acquisition Credit Agreement
Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(e)
Reimbursement
. If the applicable Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower for which such Letter of Credit was issued shall
reimburse such L/C Disbursement by paying to the Administrative Agent an amount equal to such L/C
Disbursement in Dollars, not later than 5:00 p.m., New York City time, on the Business Day
immediately following the date the Borrower receives notice under paragraph (g) of this Section of
such L/C Disbursement,
provided
that the Borrower may, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be
financed with an ABR Revolving Facility Borrowing or a Swingline Borrowing or an Eurodollar
Revolving Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to
make such payment shall be discharged and replaced by the resulting ABR Revolving Facility
Borrowing or Swingline Borrowing or Eurodollar Revolving Loan. If the Borrower fails to reimburse
any L/C Disbursement when due, then the Administrative Agent shall promptly notify the applicable
Issuing Bank and each other Revolving Facility Lender of the applicable L/C Disbursement, the
payment then due from the Borrower and, in the case of a Revolving Facility Lender, such Lender’s
Revolving Facility Percentage thereof. Promptly following receipt of such notice, each Revolving
Facility Lender shall pay to the Administrative Agent in Dollars, its Revolving Facility Percentage
of the payment then due from the Borrower, in the same manner as provided in Section 2.06 with
respect to Loans made by such Lender (and Section 2.06 shall apply,
mutatis
mutandis
, to the payment obligations of the Revolving Facility Lenders), and the
Administrative Agent shall promptly pay to the applicable Issuing Bank in Dollars, the amounts so
received by it from the Revolving Facility Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this paragraph, the
Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent
that Revolving Facility Lenders have made payments pursuant to this paragraph to reimburse such
Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any
payment made by a Revolving Facility Lender pursuant to this paragraph to reimburse an Issuing Bank
for any L/C Disbursement (other than the funding of an ABR Revolving Loan or a Swingline Borrowing
or an Eurodollar Revolving Loan as contemplated above) shall not constitute a Loan and shall not
relieve the Borrower of its obligation to reimburse such L/C Disbursement.
(f)
Obligations Absolute
. The obligation of the Borrower to reimburse L/C
Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of this Agreement
under any and all circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii)
payment by the applicable Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit or (iv) any other event
or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the
provisions of this Section, constitute a legal or equitable discharge of, or provide a right of
setoff against, the Borrower’s obligations hereunder;
provided
that, in each case, payment
by the Issuing Bank shall not have constituted gross negligence or willful misconduct. Neither the
CI Acquisition Credit Agreement
Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties, shall
have any liability or responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any
of the circumstances referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from causes beyond the
control of such Issuing Bank;
provided
that the foregoing shall not be construed to excuse
the applicable Issuing Bank from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to
the extent permitted by applicable law) suffered by the Borrower that are determined by a court
having jurisdiction to have been caused by (i) such Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of Credit comply with the
terms thereof or (ii) such Issuing Bank’s refusal to issue a Letter of Credit in accordance with
the terms of this Agreement. The parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of the applicable Issuing Bank, such Issuing Bank
shall be deemed to have exercised care in each such determination and each refusal to issue a
Letter of Credit. In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in
its sole discretion, either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary, or refuse to accept
and make payment upon such documents if such documents are not in strict compliance with the terms
of such Letter of Credit.
(g)
Disbursement Procedures
. The applicable Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for payment under a
Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the
Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing
Bank has made or will make a L/C Disbursement thereunder;
provided
that any failure to give
or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such
Issuing Bank and the Revolving Facility Lenders with respect to any such L/C Disbursement.
(h)
Interim Interest
. If an Issuing Bank shall make any L/C Disbursement, then,
unless the Borrower shall reimburse such L/C Disbursement in full on the date such L/C
Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and
including the date such L/C Disbursement is made to but excluding the date that the Borrower
reimburses such L/C Disbursement, at the rate per annum then applicable to ABR Revolving Loans or
Eurodollar Revolving Loans;
provided
that, if such L/C Disbursement is not reimbursed by
the Borrower when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply;
provided
further
that any L/C Disbursement that is reimbursed after the date such
L/C Disbursement is required to be reimbursed under paragraph (e) of this Section, (A) be payable
in Dollars, (B) bear interest at the rate per annum then applicable to ABR Revolving Loans or
Eurodollar Revolving Loans, and (C) Section 2.13(c) shall apply. Interest accrued pursuant to this
paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on
and after the date of payment by any Revolving Facility Lender pursuant to
CI Acquisition Credit Agreement
paragraph (e) of this
Section to reimburse such Issuing Bank shall be for the account of such Revolving Facility Lender
to the extent of such payment.
(i)
Replacement of an Issuing Bank
. An Issuing Bank may be replaced at any time by
written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the
successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement
of an Issuing Bank. At the time any such replacement shall become effective, the Borrower shall
pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12.
From and after the effective date of any such replacement, (i) the successor Issuing Bank shall
have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect
to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank”
shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing
Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have
all the rights and obligations of such Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such replacement but shall not be required to issue additional Letters
of Credit.
(j)
Cash Collateralization
. If any Event of Default shall occur and be continuing,
(i) in the case of an Event of Default described in Section 7.01(h) or (i), on the Business Day or
(ii) in the case of any other Event of Default, on the third Business Day, in each case, following
the date on which the Borrower receives notice from the Administrative Agent (or, if the maturity
of the Loans has been accelerated, Revolving Facility Lenders with Revolving L/C Exposure
representing greater than 50% of the total Revolving L/C Exposure) demanding the deposit of cash
collateral pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders,
an amount in Dollars in cash equal to the Revolving L/C Exposure as of such date plus any accrued
and unpaid interest thereon;
provided
that, upon the occurrence of any Event of Default
with respect to the Borrower described in clause (h) or (i) of Section 7.01, the obligation to
deposit such cash collateral shall become effective immediately, and such deposit shall become
immediately due and payable in Dollars, without demand or other notice of any kind. The Borrower
also shall deposit cash collateral pursuant to this paragraph as and to the extent required by
Section 2.11(b). Each such deposit pursuant to this paragraph or pursuant to Section 2.11(b) shall
be held by the Administrative Agent as collateral for the payment and performance of the
obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such account.
Other than any interest earned on the investment of such deposits, which investments shall be
made at the option and sole discretion of (i) for so long as an Event of Default shall be
continuing, the Administrative Agent and (ii) at any other time, the Borrower, in each case, in
Permitted Investments and at the risk and expense of the Borrower, such deposits shall not bear
interest. Interest or profits, if any, on such investments shall accumulate in such account.
Moneys in such account shall be applied by the Administrative Agent to reimburse each Issuing Bank
for L/C Disbursements for which such Issuing Bank has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for
the Revolving L/C Exposure at such time or, if the maturity of the Loans has been accelerated (but
subject to the consent of Revolving Facility Lenders with Revolving L/C Exposure representing
greater than 50% of the total Revolving L/C Exposure), be applied to
CI Acquisition Credit Agreement
satisfy other obligations of
the Borrower under this Agreement. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the
extent not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days
after all Events of Default have been cured or waived. If the Borrower is required to provide an
amount of cash collateral hereunder pursuant to Section 2.11(b), such amount (to the extent not
applied as aforesaid) shall be returned to the Borrower as and to the extent that, after giving
effect to such return, the Borrower would remain in compliance with Section 2.11(b) and no Event of
Default shall have occurred and be continuing.
(k)
Additional Issuing Banks
. From time to time, the Borrower may by notice to the
Administrative Agent designate up to three Lenders (in addition to Citibank, N.A.) that agree (in
their sole discretion) to act in such capacity and are reasonably satisfactory to the
Administrative Agent as Issuing Banks. Each such additional Issuing Bank shall execute a
counterpart of this Agreement upon the approval of the Administrative Agent (which approval shall
not be unreasonably withheld) and shall thereafter be an Issuing Bank hereunder for all purposes.
(l)
Reporting
. Unless otherwise requested by the Administrative Agent, each Issuing
Bank shall (i) provide to the Administrative Agent copies of any notice received from the Borrower
pursuant to Section 2.05(b) no later than the next Business Day after receipt thereof and (ii)
report in writing to the Administrative Agent (A) on or prior to each Business Day on which such
Issuing Bank expects to issue, amend, renew or extend any Letter of Credit, the date of such
issuance, amendment, renewal or extension, and the aggregate face amount of the Letters of Credit
to be issued, amended, renewed or extended by it and outstanding after giving effect to such
issuance, amendment, renewal or extension occurred (and whether the amount thereof changed), and
the Issuing Bank shall be permitted to issue, amend, renew or extend such Letter of Credit if the
Administrative Agent shall not have advised the Issuing Bank that such issuance, amendment renewal
or extension would not be in conformity with the requirements of this Agreement, (B) on each
Business Day on which such Issuing Bank makes any L/C Disbursement, the date of such L/C
Disbursement and the amount of such L/C Disbursement and (C) on any other Business Day, such other
information as the Administrative Agent shall reasonably request, including but not limited to
prompt verification of such information as may be requested by the Administrative Agent. If
requested by any Lender, the Administrative Agent shall provide copies to such Lender of the
reports referred to in clause (ii) of the preceding sentence and a summary of such reports on a
monthly basis.
SECTION 2.06.
Funding of Borrowings
. (a) Each Lender shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately available funds, in
Dollars, by 12:00 noon, New York City time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders
provided
that Swingline
Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like funds, to an
account of the Borrower maintained with the Administrative Agent in New York City or as otherwise
agreed between the Borrower and the Administrative Agent, and designated by the Borrower in the
Borrowing Request;
provided
that ABR Revolving Loans, Swingline Borrowings and Eurodollar
Revolving Loans made to finance the reimbursement of a
CI Acquisition Credit Agreement
L/C Disbursement and reimbursements as
provided in Section 2.05(e) shall be remitted by the Administrative Agent to the applicable Issuing
Bank.
(b) Unless the Agent shall have received notice from a Lender prior to the proposed date of
any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s
share of such Borrowing, the Administrative Agent may assume that such Lender has made such share
available on such date in accordance with paragraph (a) of this Section and may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender
has not in fact made its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand (without duplication) such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to but excluding the
date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such
amount shall constitute such Lender’s Loan included in such Borrowing.
SECTION 2.07.
Interest Elections
. (a) Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower
may elect, in the case of a Borrowing to convert such Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all
as provided in this Section. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be allocated ratably
among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply to Swingline
Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative
Agent of such election by telephone by the time that a Borrowing Request would be required under
Section 2.03 if the Borrower were requesting a Borrowing of the Type
resulting from such election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form
approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
CI Acquisition Credit Agreement
(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
applicable thereto after giving effect to such election.
If any such Interest Election Request made by the Borrower requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest
Period of one month’s duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall
advise each Lender to which such Interest Election Request relates of the details thereof and of
such Lender’s portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a
Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such
Borrowing is repaid as provided herein, at the end of such Interest Period, the Borrower shall be
deemed to have converted such Borrowing to an ABR Borrowing. Notwithstanding any contrary
provision hereof, if an Event of Default has occurred and is continuing and the Administrative
Agent, at the written request (including a request through electronic means) of the Required
Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless
repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.08.
Termination and Reduction of Commitments
. (a) Unless previously
terminated, the Revolving Facility Commitments shall terminate on the Revolving Facility Maturity
Date. The parties hereto acknowledge that the Term B Loan Commitments will terminate at 5 p.m. New
York City time on the Closing Date.
(b) The Borrower may at any time terminate, or from time to time reduce, the Commitments under
any Facility;
provided
that (i) each reduction of the Commitments under any Facility shall
be in an amount that is an integral multiple of U.S.$1.0 million and not less than U.S.$2.0 million
(or, if less, the remaining amount of the Revolving Facility Commitments) and (ii) the Borrower
shall not terminate or reduce the Revolving Facility Commitments if, after giving effect to any
concurrent prepayment of the Revolving Facility Loans in accordance with Section 2.11, the
Revolving Facility Credit Exposure would exceed the total Revolving Facility Commitments.
(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce
the Revolving Facility Commitments under paragraph (b) of this Section at least three (3) Business
Days prior to the effective date of such termination or reduction, specifying such election and the
effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall
advise the applicable Lenders of the contents thereof. Each notice delivered by the Borrower
pursuant to this Section shall be irrevocable;
provided
that a
CI Acquisition Credit Agreement
notice of termination of the Revolving Facility Commitments delivered by the Borrower may state that such notice is conditioned
upon the effectiveness of other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if
such condition is not satisfied. Any termination or reduction of the Commitments shall be
permanent. Each reduction of the Commitments under any Facility shall be made ratably among the
Lenders in accordance with their respective Commitments under such Facility.
SECTION 2.09.
Repayment of Loans; Evidence of Debt
. (a) The Borrower hereby
unconditionally promises to pay (i) to the Administrative Agent for the account of each Revolving
Facility Lender the then unpaid principal amount of each Revolving Facility Loan to the Borrower on
the Revolving Facility Maturity Date, (ii) to the Administrative Agent for the account of each Term
B Lender the then unpaid principal amount of each Term B Loan of such Lender to the Borrower on
such dates and in such amounts as provided in Section 2.10 and (iii) to the Swingline Lender the
then unpaid principal amount of each Swingline Loan made to the Borrower on the earlier of the
Revolving Facility Maturity Date and the first date after such Swingline Loan is made that is the
15th or last day of a calendar month and is at least seven Business Days after such Swingline Loan
is made;
provided
that on each date that a Revolving Facility Borrowing (other than a
Borrowing that is required to finance the reimbursement of an L/C Disbursement as contemplated by
Section 2.05(e)) is made by the Borrower, the Borrower shall repay all Swingline Loans then
outstanding.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount
of each Loan made hereunder, the Facility and Type thereof and the Interest Period (if any)
applicable thereto, (ii) the amount of any principal or interest due and payable or
to become due and payable from the Borrower to each Lender hereunder and (iii) any amount
received by such Administrative Agent hereunder for the account of the Lenders and each Lender’s
share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this
Section shall be prima facie evidence of the existence and amounts of the obligations recorded
therein;
provided
that the failure of any Lender or the Administrative Agent to maintain
such accounts or any error therein shall not in any manner affect the obligation of the Borrower to
repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it to the Borrower be evidenced by a promissory
note substantially in the form of
Exhibit H-1
or
Exhibit H-2
, as applicable. In
such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note
payable to the order of such Lender (or, if requested by such Lender, to such Lender and its
registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
CI Acquisition Credit Agreement
notes in such form
payable to the order of the payee named therein (or, if such promissory note is a registered note,
to such payee and its registered assigns).
SECTION 2.10.
Repayment of Term B Loans and Revolving Facility Loans
. (a) (i) Subject
to adjustment pursuant to paragraph (c) of this Section, the Borrower shall repay Term B Borrowings
on each date set forth below in the aggregate principal amount set forth opposite such date (each
such date being referred to as a “
Term B Loan Installment Date
”):
|
|
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|
|
|
|
Date
|
|
Borrower Amount
|
|
|
March 31, 2006
|
|
|
U.S.$450,000
|
|
|
June 30, 2006
|
|
|
U.S.$450,000
|
|
|
September 30, 2006
|
|
|
U.S.$450,000
|
|
|
December 31, 2006
|
|
|
U.S.$450,000
|
|
|
March 31, 2007
|
|
|
U.S.$450,000
|
|
|
June 30, 2007
|
|
|
U.S.$450,000
|
|
|
September 30, 2007
|
|
|
U.S.$450,000
|
|
|
December 31, 2007
|
|
|
U.S.$450,000
|
|
|
March 31, 2008
|
|
|
U.S.$450,000
|
|
|
June 30, 2008
|
|
|
U.S.$450,000
|
|
|
September 30, 2008
|
|
|
U.S.$450,000
|
|
|
December 31, 2008
|
|
|
U.S.$450,000
|
|
|
March 31, 2009
|
|
|
U.S.$450,000
|
|
|
June 30, 2009
|
|
|
U.S.$450,000
|
|
|
September 30, 2009
|
|
|
U.S.$450,000
|
|
|
December 31, 2009
|
|
|
U.S.$450,000
|
|
|
March 31, 2010
|
|
|
U.S.$450,000
|
|
|
June 30, 2010
|
|
|
U.S.$450,000
|
|
|
September 30, 2010
|
|
|
U.S.$450,000
|
|
|
December 31, 2010
|
|
|
U.S.$450,000
|
|
|
March 31, 2011
|
|
|
U.S.$450,000
|
|
|
June 30, 2011
|
|
|
U.S.$450,000
|
|
|
September 30, 2011
|
|
|
U.S.$450,000
|
|
|
December 31, 2011
|
|
|
U.S.$450,000
|
|
|
March 31, 2012
|
|
|
U.S.$450,000
|
|
|
June 30, 2012
|
|
|
U.S.$450,000
|
|
|
September 30, 2012
|
|
|
U.S.$450,000
|
|
|
Term B Maturity Date
|
|
|
U.S.$167,850,000
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In the event that any New Term B Loans are made on an Increased Amount Date, the amount due on
each Term B Loan Installment Date (other than the Term B Maturity Date) occurring after the
Increased Amount Date shall increase by an amount equal to 1/4 of 1% per annum of the principal
amount of such New Term B Loans, with the remaining principal amount of such New Term B Loans being
repaid on the Term B Maturity Date.
(b) To the extent not previously paid, all Term B Loans shall be due and payable on the Term B
Maturity Date.
CI Acquisition Credit Agreement
(c) Prepayment of the Term B Borrowings from:
(i) all Net Proceeds or Acquisition Agreement Payments pursuant to Section 2.11(c) or
2.11(e), respectively, shall be applied ratably among the Lenders
first
, to the installments
due on the 8 next succeeding Term Loan B Installment Dates in the order directed by the
Borrower and
second
on a
pro
rata
basis (based on the amount of such
amortization payments) to the remaining scheduled amortization payments in respect of such
Term B Borrowings; and
(ii) Excess Cash Flow pursuant to Section 2.11(d) and any optional prepayments pursuant
to Section 2.11(a) shall be applied to the Term B Loan Facility as directed by the Borrower.
(d) Any Lender holding Term B Loans may elect, on not less than two Business Days’ prior
written notice to the Administrative Agent with respect to any mandatory prepayment made pursuant
to Section 2.11(c), Section 2.11(d) or Section 2.11(e), not to have such prepayment applied to such
Lender’s Term B Loans, in which case, the full amount not so applied shall be retained by the
Borrower.
(e) Prior to any repayment of any Borrowing under any Facility hereunder, the Borrower shall
select the Borrowing or Borrowings under the applicable Facility to be repaid and shall notify the
Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 2:00
p.m., New York City time, (i) in the case of an ABR Borrowing, one Business Day before the
scheduled date of such repayment and (ii) in the case of a Eurodollar Borrowing, three Business
Days before the scheduled date of such repayment. Each repayment of a Borrowing (x) in the case of
the Revolving Facility, shall be applied to the Revolving Facility Loans included in the repaid
Borrowing such that each Revolving Facility Lender receives its
ratable share of such repayment (based upon the respective Revolving Facility Credit Exposures
of the Revolving Facility Lenders at the time of such repayment) and (y) in all other cases, shall
be applied ratably to the Loans included in the repaid Borrowing. Notwithstanding anything to the
contrary in the immediately preceding sentence, prior to any repayment of a Swingline Borrowing
hereunder, the Borrower shall select the Borrowing or Borrowings to be repaid and shall notify the
Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 1:00
p.m., New York City time, on the scheduled date of such repayment. Repayments of Borrowings shall
be accompanied by accrued interest on the amount repaid.
SECTION 2.11.
Prepayment of Loans
. (a) The Borrower shall have the right at any time
and from time to time to prepay any Borrowing in whole or in part, without premium or penalty (but
subject to Section 2.16), in an aggregate principal amount that is an integral multiple of the
Borrowing Multiple and not less than the Borrowing Minimum or, if less, the amount outstanding,
subject to prior notice in accordance with Section 2.10(e).
(b) If on any date, the Administrative Agent notifies the Borrower that, on the last day of
any month, the sum of aggregate principal amount of all Revolving Facility Loans plus the aggregate
principal amount of all Letters of Credit then outstanding exceeds 105% of the aggregate Revolving
Facility Commitments of the Lenders on such date, the Borrower and each other Borrower shall, as
soon as practicable and in any event within two Business Days
CI Acquisition Credit Agreement
following such date, prepay the
outstanding principal amount of any Revolving Facility Loans owing by the Borrower in an aggregate
amount (or deposit cash collateral in an account with the Administrative Agent pursuant to Section
2.05(j)) sufficient to reduce such sum to an amount not to exceed 100% of the aggregate Revolving
Facility Commitments of the Lenders on such date together with any interest accrued to the date of
such prepayment on the aggregate principal amount of Revolving Facility Loans prepaid. The
Administrative Agent shall give prompt notice of any prepayment required under this Section 2.11(b)
to the Borrower and the Lenders.
(c) The Borrower shall apply all Net Proceeds upon receipt thereof to prepay Term B Borrowings
in accordance with paragraphs (c) and (d) of Section 2.10.
(d) Not later than 90 days after the end of each Excess Cash Flow Period, the Borrower shall
calculate Excess Cash Flow for such Excess Cash Flow Period and the Borrower shall apply an
aggregate amount equal to the Required Percentage of such Excess Cash Flow to prepay Term B
Borrowings in accordance with paragraphs (c) and (d) of Section 2.10. Not later than the date on
which the Borrower is required to deliver financial statements with respect to the end of each
Excess Cash Flow Period under Section 5.04(a), the Borrower will deliver to the Administrative
Agent a certificate signed by a Financial Officer of the Borrower setting forth the amount, if any,
of Excess Cash Flow for such fiscal year and the calculation thereof in reasonable detail.
(e) Following the receipt of any Acquisition Agreement Payments, the Borrower shall prepay, or
cause to be prepaid, Term B Borrowings in accordance with paragraphs (c) and (d) of Section 2.10.
SECTION 2.12.
Fees
. (a) The Borrower agrees to pay to each Lender (other than any
Defaulting Lender), through the Administrative Agent, 10 Business Days after the last day of March,
June, September and December in each year, and three Business Days after the date on which the
Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a
commitment fee (a “
Commitment Fee
”) on the daily amount of the Available Unused Commitment
of such Lender during the preceding quarter (or other period commencing with the Closing Date and
ending with the date on which the last of the Commitments of such Lender shall be terminated) at
the rate per annum set forth under the caption “Commitment Fee” below based upon the Leverage Ratio
as of the most recent determination date;
provided
that until the Trigger Date, the
Leverage Ratio shall be deemed to be Category 1.
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|
Leverage Ratio
|
|
Commitment Fee
|
|
|
Category 1
|
|
|
|
|
|
Equal to or greater than 4.00 to 1.00
|
|
|
0.50
|
%
|
|
|
|
Category 2
|
|
|
|
|
|
Less than 4.00 to 1.00
|
|
|
0.375
|
%
|
All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a
year of 360 days. For the purpose of calculating any Lender’s Commitment Fee, the outstanding
Swingline Loans during the period for which such Lender’s Commitment
CI Acquisition Credit Agreement
Fee is calculated shall be
deemed to be zero. The Commitment Fee due to each Lender shall begin to accrue on the Closing Date
and shall cease to accrue on the date on which the last of the Commitments of such Lender shall be
terminated as provided herein.
(b) The Borrower from time to time agrees to pay to each Revolving Facility Lender (other than
any Defaulting Lender), through the Administrative Agent, 10 Business Days after the last day of
March, June, September and December of each year and three Business Days after the date on which
the Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a fee
(an “
L/C Participation Fee
”) on such Lender’s Revolving Facility Percentage of the daily
aggregate Revolving L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C
Disbursements), during the preceding quarter (or shorter period commencing with the Closing Date
and ending with the Revolving Facility Maturity Date or the date on which the Revolving Facility
Commitments shall be terminated) at the rate per annum equal to the Applicable Margin for
Eurodollar Revolving Facility Borrowings effective for each day in such period. The Borrower from
time to time agrees to pay to each Issuing Bank, for its own account, (x) 10 Business Days after
the last day of March, June, September and December of each year and three Business Days after the
date on which the Revolving Facility Commitments of all the Lenders shall be terminated as provided
herein, a fronting fee in respect of each Letter of Credit issued by such Issuing Bank at the
request of the Borrower for the period from and including the date of issuance of such Letter of
Credit to and including the termination of such Letter of Credit (computed at a rate equal to 1/4
of 1% per annum of the daily average stated amount of such Letter of Credit), plus (y) in
connection with the issuance, amendment or transfer of any such Letter of Credit or any L/C
Disbursement
thereunder, such Issuing Bank’s customary documentary and processing charges (collectively,
“
Issuing Bank Fees
”). All L/C Participation Fees and Issuing Bank Fees that are payable on
a per annum basis shall be computed on the basis of the actual number of days elapsed in a year of
360 days.
(c) The Borrower agrees to pay to the Administrative Agent, for the account of the
Administrative Agent, the fees set forth in the Fee Letter, dated as of August 2, 2004, as amended,
restated, supplemented or otherwise modified from time to time, at the times specified therein (the
“
Administrative Agent Fees
”).
(d) All Fees shall be paid on the dates due, in immediately available funds, to the
Administrative Agent for distribution, if and as appropriate, among the Lenders, except that
Issuing Bank Fees shall be paid directly to the applicable Issuing Banks. Once paid, none of the
Fees shall be refundable under any circumstances.
SECTION
2.13.
Interest
.(a) The Borrower shall pay interest on the unpaid principal amount of
each ABR Loan made to the Borrower at the Alternate Base Rate plus the Applicable Margin.
(b) The Borrower shall pay interest on the unpaid principal amount of each Eurodollar Loan
made to the Borrower at the Adjusted LIBO Rate for the Interest Period in effect for such
Eurodollar Loan plus the Applicable Margin.
CI Acquisition Credit Agreement
(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any
Fees or other amount payable by the Borrower hereunder is not paid when due, whether at stated
maturity, upon acceleration or otherwise, the Borrower shall pay interest on such overdue amount,
after as well as before judgment, at a rate per annum equal to (x) in the case of overdue principal
of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding
paragraphs of this Section or (y) in the case of any other amount, 2% plus the rate applicable to
ABR Loans as provided in paragraph (a) of this Section;
provided
that this paragraph (c)
shall not apply to any Event of Default that has been waived by the Lenders pursuant to Section
9.08.
(d) Accrued interest on each Loan shall be payable by the Borrower in arrears (i) on each
Interest Payment Date for such Loan, (ii) in the case of Revolving Facility Loans, upon termination
of the Revolving Facility Commitments and (iii) in the case of the Term B Loans, on the Term B
Maturity Date;
provided
that (i) interest accrued pursuant to paragraph (c) of this Section
shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date of such repayment
or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of
the current Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that
interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO
Rate shall be determined by the Administrative Agent, and such determination shall be conclusive
absent manifest error.
SECTION 2.14.
Alternate Rate of Interest
. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining the
Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders or the Majority Lenders
under the Revolving Facility that the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period will not adequately and fairly reflect the cost to such Lenders of
making or maintaining their Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or
CI Acquisition Credit Agreement
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and such Borrowing
shall be converted to an ABR Borrowing on the last day of the Interest Period applicable thereto,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as
an ABR Borrowing or shall be made as a Borrowing bearing interest at such rate as the Majority
Lenders under the Revolving Facility shall agree adequately reflects the costs to the Revolving
Facility Lenders of making the Loans comprising such Borrowing.
SECTION 2.15.
Increased Costs
. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit extended by,
any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or
Issuing Bank; or
(ii) impose on any Lender or Issuing Bank or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of
Credit or participation therein (except (A) for Indemnified Taxes covered by Section 2.17
and (B) for changes in the rate of tax on the overall net income of such Lender);
and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) to the
Borrower or to increase the cost to such Lender or Issuing Bank of participating in, issuing or
maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such
Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower
will pay to such Lender or Issuing Bank, as applicable, such additional amount or amounts as will
compensate such Lender or Issuing Bank, as applicable, for such additional costs incurred or
reduction suffered.
(b) If any Lender or Issuing Bank determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such Lender’s or
Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if
any, as a consequence of this Agreement or any of the Loans made by, or participations in Letters
of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level
below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding
company could have achieved but for such Change in Law (taking into consideration such Lender’s or
such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding
company with respect to capital adequacy), then from time to time the Borrower shall pay to such
Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate
such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any
such reduction suffered.
(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary
to compensate such Lender or Issuing Bank or its holding company, as applicable, as specified in
paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender or Issuing
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Bank, as applicable, the
amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Promptly after any Lender or any Issuing Bank has determined that it will make a request
for increased compensation pursuant to this Section 2.15, such Lender or Issuing Bank shall notify
the Borrower thereof. Failure or delay on the part of any Lender or Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such Lender’s or Issuing
Bank’s right to demand such compensation;
provided
that Borrower shall not be required to
compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender or Issuing Bank, as
applicable, notifies the Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor;
provided
further
that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the 180-day period referred to above shall be extended to include
the period of retroactive effect thereof.
SECTION 2.16.
Break Funding Payments
. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan
other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto or (d) the assignment of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section
2.19, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense
to any Lender shall be deemed to be the amount determined by such Lender to be the excess, if any,
of (i) the amount of interest which would have accrued on the principal amount of such Loan had
such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan,
for the period from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue a Eurodollar Loan, for the
period that would have been the Interest Period for such Loan), over (ii) the amount of interest
which would accrue on such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for deposits in Dollars of a
comparable amount and period from other banks in the Eurodollar market. A certificate of any
Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
SECTION 2.17.
Taxes
. (a) Any and all payments by or on account of any obligation of any Loan Party under any
Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or
Other Taxes;
provided
that if a Loan Party shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to additional sums
payable under this Section) any Agent, Lender or Issuing Bank, as applicable, receives an amount
equal to the sum it would have received had no such deductions for Indemnified Taxes and Other
Taxes been made, (ii) such
CI Acquisition Credit Agreement
Loan Party shall make such deductions and (iii) such Loan Party shall
timely pay the full amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, each Loan Party shall pay any Other Taxes payable on account of any
obligation of such Loan Party and upon the execution, delivery or enforcement of, or otherwise with
respect to, the Loan Documents, to the relevant Governmental Authority in accordance with
applicable law.
(c) Each Loan Party shall indemnify each Agent, each Lender and each Issuing Bank, within 20
days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
(other than Indemnified Taxes or Other Taxes resulting from gross negligence or willful misconduct
of such Agent, Lender or Issuing Bank and without duplication of any amounts indemnified under
Section 2.17(a)) paid by such Agent, Lender or Issuing Bank, as applicable, on or with respect to
any payment by or on account of any obligation of such Loan Party under any Loan Document
(including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts
payable under this Section) and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such payment or
liability and setting forth in reasonable detail the calculation for such payment or liability
delivered to such Loan Party by a Lender or an Issuing Bank, or by the Administrative Agent on its
own behalf, on behalf of another Agent or on behalf of a Lender or an Issuing Bank, shall be
conclusive absent manifest error of the Lender, the Issuing Bank or the Administrative Agent.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan
Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the
original or a certified copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Lender, Agent or Issuing Bank that is entitled to an exemption from or reduction of
withholding Tax otherwise indemnified against by a Loan Party pursuant to this Section 2.17 with
respect to payments under any Loan Document shall deliver to the Borrower or the relevant
Governmental Authority (with a copy to the Administrative Agent), to the extent such Lender, Agent
or Issuing Bank is legally entitled to do so, at the time or times prescribed by applicable law
such properly completed and executed documentation prescribed by applicable law as may reasonably
be requested by the Borrower to permit such payments to be made without such withholding tax or at
a reduced rate;
provided
that in such Lender’s judgment such completion, execution or
submission would not materially prejudice such Lender.
(f) If an Agent, Lender or Issuing Bank determines, in good faith and in its sole discretion,
that it has received a refund of any taxes in respect of or calculated with reference to
Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with
respect to which a Loan Party has paid additional amounts pursuant to this Section 2.17, it shall
pay over such refund to such Loan Party (but only to the extent of indemnity payments made, or
additional amounts paid, by such Loan Party under this Section 2.17 with respect to the Indemnified
Taxes or Other Taxes giving rise to such refund), net of all out-of-
CI Acquisition Credit Agreement
pocket expenses of such Agent,
Lender or Issuing Bank (including any Taxes imposed with respect to such refund) as is determined
by the Agent, Lender or Issuing Bank in good faith and in its sole discretion, and without interest
(other than any interest paid by the relevant Governmental Authority with respect to such refund);
provided
that such Loan Party, upon the request of such Agent, Lender or Issuing Bank,
agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party (plus any
penalties, interest or other charges imposed by the relevant Governmental Authority) to such Agent,
Lender or Issuing Bank in the event such Agent, Lender or Issuing Bank is required to repay such
refund to such Governmental Authority. This Section shall not be construed to require any Agent,
Lender or Issuing Bank to make available its tax returns (or any other information relating to its
Taxes which it deems confidential) to the Loan Parties or any other Person.
SECTION 2.18.
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
. (a)
Unless otherwise specified, the Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of L/C Disbursements, or of
amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 2:00 p.m., New York City
time, on the date when due, in immediately available funds, without condition or deduction for any
defense, recoupment, set-off or counterclaim. Any amounts received after such time on any date
may, in the discretion of the Administrative Agent, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon. All such payments shall be
made to the Administrative Agent to the applicable account designated to the Borrower by the
Administrative Agent, except payments to be made directly to the applicable Issuing Bank or the
applicable Swingline Lender as expressly provided herein and except that payments pursuant to
Sections 2.15, 2.16, 2.17 and 9.05 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the account of any other
Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder
shall be due on a day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon
shall be payable for the period of such extension. All payments hereunder of (i) principal or
interest in respect of any Loan, (ii) reimbursement obligations with respect to any Letter of
Credit or (iii) any other amount due hereunder or under any other Loan Document shall be made in
Dollars. Any payment required to be made by the Administrative Agent hereunder shall be deemed to
have been made by the time required if such Administrative Agent shall, at or before such time,
have taken the necessary steps to make such payment in accordance with the regulations or operating
procedures of the clearing or settlement system used by such Administrative Agent to make such
payment.
(b) If at any time insufficient funds are received by and available to the Administrative
Agent from the Borrower to pay fully all amounts of principal, unreimbursed L/C Disbursements,
interest and fees then due from the Borrower hereunder, such funds shall be applied (i)
first
, towards payment of interest and fees then due from the Borrower hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest and fees then due to
such parties, and (ii)
second
, towards payment of principal and unreimbursed L/C
Disbursements then due from the Borrower hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed L/C Disbursements then due to such
parties.
CI Acquisition Credit Agreement
(c) If any Lender shall, by exercising any right of set-off or counterclaim, through the
application of any proceeds of Collateral or otherwise, obtain payment in respect of any principal
of or interest on any of its Term B Loans, Revolving Facility Loans or participations in L/C
Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Term B Loans, Revolving Facility Loans and participations in L/C
Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any
other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Term B Loans, Revolving Facility Loans and participations in L/C
Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of
all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Term B Loans, Revolving Facility Loans and
participations in L/C Disbursements and Swingline Loans;
provided
that (i) if any such
participations are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price restored to the extent of
such recovery, without interest, and (ii) the provisions of this paragraph (c) shall not be
construed to apply to any payment made by the Borrower pursuant to and in accordance with the
express terms of this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations in L/C Disbursements
to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph (c) shall apply). The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower
rights of set-off and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of the Lenders or the
applicable Issuing Bank hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as
applicable, the amount due. In such event, if the Borrower has not in fact made such payment, then
each of the Lenders or the applicable Issuing Bank, as applicable, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank
with interest thereon, for each day from and including the date such amount is distributed to it to
but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section
2.04(c), 2.05(d) or (e), 2.06(b) or 2.18(d), then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such
Sections until all such unsatisfied obligations are fully paid.
CI Acquisition Credit Agreement
SECTION 2.19.
Mitigation Obligations; Replacement of Lenders
. (a) If any Lender
requests compensation under Section 2.15, or if any Loan Party is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office
for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or
2.17, as applicable, in the future and (ii) would not subject such Lender to any material
unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any
material respect. The relevant Loan Party hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if any Loan Party is required
to pay any additional amount to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.17, or is a Defaulting Lender, then such Loan Party may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the restrictions contained
in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee
that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such
assignment);
provided
that (i) such Loan Party shall have received the prior written
consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such
Lender shall have received payment of an amount equal to the outstanding principal of its Loans and
participations in L/C Disbursements and Swingline Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or such Loan Party (in the case of all other amounts) and
(iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15
or payments required to be made pursuant to Section 2.17, such assignment will result in a
reduction in such compensation or payments. Nothing in this Section 2.19 shall be deemed to
prejudice any rights that any Loan Party may have against any Lender that is a Defaulting Lender.
(c) If any Lender (such Lender, a “
Non-Consenting Lender
”) has failed to consent to a
proposed amendment, waiver, discharge or termination which pursuant to the terms of Section 9.08
requires the consent of all of the Lenders affected and with respect to which the Required Lenders
shall have granted their consent, then provided no Event of Default then exists, the Borrower shall
have the right (unless such Non-Consenting Lender grants such consent) to
replace such Non-Consenting Lender by requiring such Non-Consenting Lender to assign its
Loans, and its Commitments hereunder to one or more assignees reasonably acceptable to the
Administrative Agent,
provided
that: (a) all Obligations of The Borrower owing to such
Non-Consenting Lender being replaced shall be paid in full to such Non-Consenting Lender
concurrently with such assignment, and (b) the replacement Lender shall purchase the foregoing by
paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and
unpaid interest thereon. In connection with any such assignment the Borrower, Administrative
Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section
9.04.
CI Acquisition Credit Agreement
SECTION 2.20.
Increase in Revolving Facility Commitments and/or Term B Loan
Commitments
. (a)
New Commitments
. At any time following the completion of the
syndication of the Facilities (as reasonably determined by the Administrative Agent), the Borrower
may by written notice to the Administrative Agent elect to request an increase to the existing
Revolving Facility Commitments (any such increase, the “
New Revolving Facility
Commitments
”) and/or the Term B Loan Commitments (any such increase, the “
New Term B
Commitments
” and together with the New Revolving Facility Commitments, if any, the “
New
Commitments
”), by an amount not in excess of U.S.$50.0 million in the aggregate or a lesser
amount in integral multiples of U.S.$10.0 million. Such notice shall (A) specify the date (an
“
Increased Amount Date
”) on which the Borrower proposes that the New Commitments and, in
the case of New Term B Commitments, the date for borrowing, as applicable, be made available, which
shall be a date not less than 5 Business Days after the date on which such notice is delivered to
the Administrative Agent, and (B) offer each Revolving Facility Lender (in the case of New
Revolving Facility Commitments) and/or Term B Lender (in the case of New Term B Commitments) the
right to increase its Revolving Facility Commitment and/or Term B Loan Commitment, as applicable,
on a pro rata basis. The Borrower shall notify the Administrative Agent in writing of the identity
of each Revolving Facility Lender, Term B Lender or other financial institution reasonably
acceptable to the Administrative Agent (each, a “
New Revolving Facility Lender
,” a “
New
Term B Lender
” or generally, a “
New Lender
”) to whom the New Commitments have been (in
accordance with the prior sentence) allocated and the amounts of such allocations;
provided
that any Lender approached to provide all or a portion of the New Commitments may elect or decline,
in its sole discretion, to provide a New Commitment. Such New Commitments shall become effective
as of such Increased Amount Date, and in the case of New Term B Commitments, such new Term B Loans
in respect hereof (“
New Term B Loans
”) shall be made on such Increased Amount Date;
provided
that (1) no Default or Event of Default shall exist on such Increased Amount Date
before or after giving effect to such New Commitments and Loans; (2) such increase in the Revolving
Facility Commitments and/or the Term B Loan Commitments shall be evidenced by one or more joinder
agreements executed and delivered to Administrative Agent by each New Lender, as applicable, and
each shall be recorded in the register, each of which shall be reasonably satisfactory to the
Administrative Agent and subject to the requirements set forth in Section 2.17(e); and (3) the
Borrower shall make any payments required pursuant to Section 2.16 in connection with the
provisions of the New Commitments.
(b) On any Increased Amount Date on which New Revolving Facility Commitments are effected,
subject to the satisfaction of the foregoing terms and conditions, (i) each of the existing
Revolving Facility Lenders shall assign to each of the New Revolving Facility Lenders, and each of
the New Revolving Facility Lenders shall purchase from each of the existing Revolving Facility
Lenders, at the principal amount thereof, such interests in the outstanding Revolving Facility
Loans and participations in Letters of Credit and Swingline Loans outstanding on such Increased
Amount Date that will result in, after giving effect to all such assignments and purchases, such
Revolving Facility Loans and participations in Letters of Credit and Swingline Loans being held by
existing Revolving Facility Lenders and New Revolving Facility Lenders ratably in accordance with
their Revolving Facility Commitments after giving effect to the addition of such New Revolving
Facility Commitments to the Revolving Facility Commitments, (ii) each New Revolving Facility
Commitment shall be deemed for all purposes a Revolving Facility Commitment and each Loan made
thereunder shall
CI Acquisition Credit Agreement
be deemed, for all purposes, a Revolving Facility Loan and have the same terms as
any existing Revolving Facility Loan and (iii) each New Revolving Facility Lender shall become a
Lender with respect to the Revolving Facility Commitments and all matters relating thereto.
(c) On any Increased Amount Date on which New Term B Loan Commitments are effected and
borrowed, subject to the satisfaction of the foregoing terms and conditions, (i) each New Term B
Loan Commitment shall be deemed for all purposes a Term B Loan Commitment and each Loan made
thereunder shall be deemed, for all purposes, a Term B Loan, (ii) each New Term B Lender shall
become a Lender with respect to the Term B Loan Commitments and all matters relating thereto and
(iii) the New Term B Loans shall have the same terms as the existing Term B Loans and be made by
each New Term B Lender on the Increased Amount Date. All New Term B Loans made on any Increased
Amount Date will be made in accordance with the procedures set forth in Section 2.03.
(d) The Administrative Agent shall notify the Lenders promptly upon receipt of the Borrower’s
notice of an Increased Amount Date and, in respect thereof, the New Commitments and the New
Lenders.
SECTION 2.21.
Illegality
. If any Lender reasonably determines that any change in law
has made it unlawful, or that any Governmental Authority has asserted after the Closing Date that
it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurodollar
Loans, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any
obligations of such Lender to make or continue Eurodollar Loans or to convert ABR Borrowings to
Eurodollar Borrowings, as the case may be, shall be suspended until such Lender notifies the
Administrative Agent and the Borrower that the circumstances giving rise to such determination no
longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with
a copy to the Administrative Agent), convert all such Eurodollar Borrowings of such Lender to ABR
Borrowings, on the last day of the Interest Period therefor, if such Lender may lawfully continue
to maintain such Eurodollar Borrowings to such day, or immediately, if such Lender may not lawfully
continue to maintain such Loans. Upon any such prepayment or conversion, the Borrower shall also
pay accrued interest on the amount so prepaid or converted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of Holdings and the Borrower represents and warrants to each of the Lenders with respect
to itself and each of its respective Subsidiaries that:
SECTION 3.01.
Organization; Powers
. Except as set forth on
Schedule 3.01
,
the Borrower and each of the Subsidiaries (a) is duly organized, validly existing and (if
applicable) in good standing under the laws of the jurisdiction of its organization except for such
failures to be in good standing which could not reasonably be expected to have a Material Adverse
Effect, (b) has all requisite power and authority to own its property and assets and to carry on
its business as now conducted, (c) is qualified to do business in each jurisdiction where such
CI Acquisition Credit Agreement
qualification is required, except where the failure to so qualify could not reasonably be expected
to have a Material Adverse Effect, and (d) has the power and authority to execute, deliver and
perform its obligations under each of the Loan Documents and each other agreement or instrument
contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow
and otherwise obtain credit hereunder.
SECTION 3.02.
Authorization
. The execution, delivery and performance by the Borrower
and each of the Subsidiaries of each of the Loan Documents to which it is a party, and the
borrowings hereunder and the Transactions (a) have been duly authorized by all corporate,
stockholder, limited liability company or partnership action required to be obtained by the
Borrower and such Subsidiaries and (b) will not (i) violate (A) any provision of law, statute, rule
or regulation, or of the certificate or articles of incorporation or other constitutive documents
or by-laws of the Borrower or any such Subsidiary, (B) any applicable order of any court or any
rule, regulation or order of any Governmental Authority or (C) any provision of any indenture,
lease, agreement or other instrument to which the Borrower or any such Subsidiary is a party or by
which any of them or any of their respective property is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or both) a default
under, give rise to a right of or result in any cancellation or acceleration of any right or
obligation (including any payment) or to a loss of a material benefit under any such indenture,
lease, agreement or other instrument, where any such conflict, violation, breach or default
referred to in clause (i) or (ii) of this Section 3.02, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, or (iii) result in the creation or
imposition of any Lien upon or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any such Subsidiary, other than the Liens created by the Loan
Documents.
SECTION 3.03.
Enforceability
. This Agreement has been duly executed and delivered by
the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan
Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan
Party enforceable against each such Loan Party in accordance with its terms, subject to (i) the
effects
of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar
laws affecting creditors’ rights generally, (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied
covenants of good faith and fair dealing.
SECTION 3.04.
Governmental Approvals
. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is or will be
required in connection with the Transactions except for (a) the filing of UCC financing statements,
(b) filings with the United States Patent and Trademark Office and the United States Copyright
Office or, with respect to intellectual property which is the subject of registration or
application for registration outside the United States, such applicable patent, trademark or
copyright office or other intellectual property authority, (c) recordation of the Mortgages, (d)
such consents, authorizations, filings or other actions that have either (i) been made or obtained
and are in full force and effect or (ii) are listed on
Schedule 3.04
, and (e) such actions,
consents and approvals the failure to be obtained or made which could not reasonably be expected to
have a Material Adverse Effect.
CI Acquisition Credit Agreement
SECTION 3.05.
Financial Statements
. (a) There has heretofore been furnished to the
Lenders:
(i) The audited consolidated balance sheets as of December 31, 2004 and the related
audited combined statements of income and cash flows for the years ended December 31, 2004
of the Acquired Business, were prepared in accordance with GAAP consistently applied not
only during such periods but also as compared to the periods covered by the financial
statements of Acquired Business referred to in paragraph (ii) of this Section 3.05 (except
as may be indicated in the notes thereto) and fairly present the consolidated financial
position of the Acquired Business as of the dates thereof and its consolidated results of
operations and cash flows for the period then ended; and
(ii) The unaudited interim consolidated balance sheet as of June 30, 2005, and the
related unaudited interim combined statements of income and cash flows for the six months
ended June 30, 2005 of the Acquired Business, were prepared in accordance with GAAP
consistently applied not only during such periods but also as compared to the periods
covered by the financial statements of the Acquired Business referred to in paragraph (i) of
this Section 3.05 (except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Acquired Business as of the dates thereof and its
consolidated results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments).
(b) There has heretofore been furnished to the Lenders the
pro
forma
consolidated balance sheet of Holdings as of June 30, 2005, prepared giving effect to the
Transactions as if the Transactions had occurred on such date. Such
pro
forma
consolidated balance sheet (i) has been prepared in good faith based on the same assumptions used
to prepare the
pro
forma
financial statements included in the Offering Memorandum
(which assumptions are believed by Holdings and the Borrower to have been reasonable at the time
made and to be
reasonable as of the Closing Date (it being understood that such assumptions are based on good
faith estimates with respect to certain items and that the actual amounts of such items on the
Closing Date is subject to variation)) and calculated in the manner set forth in
Schedule
1.01(b)
, (ii) subject to the assumptions and qualifications described in the Offering
Memorandum, accurately reflects all adjustments necessary to give effect to the Transactions and
(iii) subject to the assumptions and qualifications described in the Offering Memorandum presents
fairly, in all material respects, the
pro
forma
financial position of Holdings and
its Subsidiaries as of June 30, 2005, as if the Transactions had occurred on such date.
SECTION 3.06.
No Material Adverse Effect
. Since December 31, 2004, there has been no
event or occurrence which has resulted in or would reasonably be expected to result in,
individually or in the aggregate, any Material Adverse Effect.
SECTION 3.07.
Title to Properties; Possession Under Leases
. (a) The Borrower and
the Subsidiaries has good and valid record fee simple title to, all Mortgaged Properties, subject
solely to Permitted Encumbrances and except where the failure to have such title could not
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The
Borrower and the other Subsidiaries have maintained, in all material respects and in accordance
with normal industry practice, all of the machinery, equipment, vehicles, facilities
CI Acquisition Credit Agreement
and other
tangible personal property now owned or leased by the Borrower and the other Subsidiaries that is
necessary to conduct their business as it is now conducted. All such Mortgaged Properties are free
and clear of Liens, other than Liens expressly permitted by Section 6.02 or arising by operation of
law.
(b) The Borrower and the Subsidiaries has complied with all obligations under all leases to
which it is a party, except where the failure to comply would not have a Material Adverse Effect,
and all such leases are in full force and effect, except leases in respect of which the failure to
be in full force and effect could not reasonably be expected to have a Material Adverse Effect.
The Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under all such leases,
other than leases in respect of which the failure to enjoy peaceful and undisturbed possession
could not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect.
(c) As of the Closing Date, the Borrower and the Subsidiaries have good title to or valid
leasehold interests (subject to Permitted Encumbrances) in all real property set forth on
Schedules 3.17(a) and (b)
, except as could not reasonably be expected to have a Material
Adverse Effect, and all such real property is reasonably necessary for the conduct of the business
and operations of Borrower and the Subsidiaries as currently conducted.
(d) The Borrower and the Subsidiaries owns or possesses, or could obtain ownership or
possession of, on terms not materially adverse to it, all patents, trademarks, service marks, trade
names, copyrights, licenses and rights with respect thereto necessary for the present conduct of
its business, without any known conflict with the rights of others, and free from any
burdensome restrictions, except where such conflicts and restrictions could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(e) As of the Closing Date, none of the Borrower and its Subsidiaries has received any notice
of any pending or contemplated condemnation proceeding affecting any of the Mortgaged Properties or
any sale or disposition thereof in lieu of condemnation that remains unresolved as of the Closing
Date, except as set forth on
Schedule 3.07(e)
.
(f) None of the Borrower and its Subsidiaries is obligated on the Closing Date under any right
of first refusal, option or other contractual right to sell, assign or otherwise dispose of any
Mortgaged Property or any interest therein, except as permitted under Section 6.02 or 6.05.
(g)
Schedule 3.07(g)
sets forth as of the Closing Date the name and jurisdiction of
incorporation, formation or organization of each Subsidiary of the Borrower and, as to each such
Subsidiary, the percentage of each class of Equity Interests owned by the Borrower or by any such
Subsidiary, indicating the ownership thereof.
(h) As of the Closing Date, there are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to employees or
directors and directors’ qualifying shares) of any nature relating to any Equity Interests of the
Borrower, or any of the Subsidiaries, except rights of employees to purchase
CI Acquisition Credit Agreement
Equity Interests of
the Borrower in connection with the Transactions or as set forth on
Schedule 3.07(h)
.
SECTION 3.08.
Litigation; Compliance with Laws
. (a) Except as set forth on
Schedule 3.08(a)
, there are no actions, suits, investigations or proceedings at law or in
equity or by or on behalf of any Governmental Authority or in arbitration now pending against, or,
to the knowledge of the Borrower, threatened in writing against or affecting, the Borrower or any
of the Subsidiaries or any business, property or rights of any such Person (i) as of the Closing
Date, that involve any Loan Document or the Transactions or (ii) which individually could
reasonably be expected to have a Material Adverse Effect or which could reasonably be expected,
individually or in the aggregate, to materially adversely affect the Transactions. Neither the
Borrower nor, to the knowledge of any of the Loan Parties, any of its Affiliates is in violation of
any laws relating to terrorism or money laundering, including Executive Order No. 13224 on
Terrorist Financing, effective September 23, 2001, and the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law
107-56 (signed into law on October 26, 2001) (the “
U.S. Patriot Act
”).
(b) Except as set forth in
Schedule 3.08(b)
, none of the Borrower, the Subsidiaries
and their respective properties or assets is in violation of (nor will the continued operation of
their material properties and assets as currently conducted violate) any currently applicable law,
rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval
or any building permit) or any restriction of record or agreement affecting any Mortgaged Property,
or is in default with respect to any judgment, writ, injunction
or decree of any Governmental Authority, where such violation or default could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.09.
Federal Reserve Regulations
. (a) None of the Borrower and the
Subsidiaries is engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend
credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness
originally incurred for such purpose, or (ii) for any purpose that entails a violation of, or that
is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or
Regulation X.
SECTION 3.10.
Investment Company Act; Public Utility Holding Company Act
. None of
the Borrower or any Subsidiary is (a) an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended, or (b) a “holding company” as
defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as
amended.
SECTION 3.11.
Use of Proceeds
. The Borrower will use the proceeds of the Revolving
Facility Loans and Swingline Loans, and may request the issuance of Letters of Credit, solely for
general corporate purposes (including, without limitation, the consummation of
CI Acquisition Credit Agreement
the Acquisition and
the Transactions). The Borrower may use proceeds of Term B Loans solely to consummate the
Acquisition and the Transactions.
SECTION 3.12.
Tax Returns
. Except as set forth on
Schedule 3.12
:
(a) The Borrower and its subsidiaries (i) has timely filed or caused to be timely filed all
federal, state, local and non-U.S. Tax returns required to have been filed by it that are material
to such companies taken as a whole and each such Tax return is complete and accurate in all
material respects and (ii) has timely paid or caused to be timely paid all material Taxes shown
thereon to be due and payable by it and all other material Taxes or assessments, except Taxes or
assessments that are being contested in good faith by appropriate proceedings in accordance with
Section 5.03 and for which the Borrower or any of its Subsidiaries (as the case may be) has set
aside on its books adequate reserves;
(b) The Borrower and its subsidiaries has paid in full or made adequate provision (in
accordance with GAAP) for the payment of all Taxes due with respect to all periods or portions
thereof ending on or before the Closing Date, which Taxes, if not paid or
adequately provided for, could individually or in the aggregate reasonably be expected to have
a Material Adverse Effect; and
(c) Other than as could not be, individually or in the aggregate, reasonably expected to have
a Material Adverse Effect: as of the Closing Date, with respect to the Borrower and its
subsidiaries, (i) there are no claims being asserted in writing with respect to any Taxes, (ii) no
presently effective waivers or extensions of statutes of limitation with respect to Taxes have been
given or requested and (iii) no Tax returns are being examined by, and no written notification of
intention to examine has been received from, the Internal Revenue Service or any other Taxing
authority.
SECTION 3.13.
No Material Misstatements
. (a) All written information (other than
the Projections, estimates and information of a general economic nature) (the
“
Information
”) concerning the Borrower, its Subsidiaries, the Transactions and any other
transactions contemplated hereby included in the Information Memorandum or otherwise prepared by or
on behalf of the foregoing or their representatives and made available to any Lenders or the
Administrative Agent in connection with the Transactions or the other transactions contemplated
hereby, when taken as a whole, were true and correct in all material respects, as of the date such
Information was furnished to the Lenders and as of the Closing Date and did not contain any untrue
statement of a material fact as of any such date or omit to state a material fact necessary in
order to make the statements contained therein not materially misleading in light of the
circumstances under which such statements were made.
(b) The Projections and estimates and information of a general economic nature prepared by or
on behalf of the Borrower or any of its representatives and that have been made available to any
Lenders or the Administrative Agent in connection with the Transactions or the other transactions
contemplated hereby (i) have been prepared in good faith based upon assumptions believed by the
Borrower to be reasonable as of the date thereof, as of the date such Projections and estimates
were furnished to the Initial Lenders and as of the Closing Date, and (ii) as of the Closing Date,
have not been modified in any material respect by the Borrower.
CI Acquisition Credit Agreement
SECTION 3.14.
Employee Benefit Plans
. (a) Each Plan has been administered in
compliance with the applicable provisions of ERISA and the Code (and the regulations and published
interpretations thereunder), except for such noncompliance that could not reasonably be expected to
have a Material Adverse Effect. As of the Closing Date, the excess of the present value of all
benefit liabilities under each Plan of the Borrower, and each Subsidiary and the ERISA Affiliates
(based on those assumptions used to fund such Plan), as of the last annual valuation date
applicable thereto for which a valuation is available, over the value of the assets of such Plan
could not reasonably be expected to have a Material Adverse Effect, and the excess of the present
value of all benefit liabilities of all underfunded Plans (based on those assumptions used to fund
each such Plan) as of the last annual valuation dates applicable thereto for which valuations are
available, over the value of the assets of all such underfunded Plans could not reasonably be
expected to have a Material Adverse Effect. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other ERISA Events which have occurred or
for which liability is reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect.
(b) All foreign pension schemes sponsored or maintained by the Borrower and each of its
Subsidiaries is maintained in accordance with the requirements of applicable foreign law, except
where noncompliance could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.15.
Environmental Matters
. Except as to matters that could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect (a) no written
notice, request for information, order, complaint, Environmental Claim or penalty has been received
by the Borrower or any of the Subsidiaries, and there are no judicial, administrative or other
actions, suits or proceedings pending or threatened against the Borrower or any of the Subsidiaries
which allege a violation of or liability under any Environmental Laws, in each case relating to the
Borrower or any of its Subsidiaries, (b) the Borrower and the other Subsidiaries has all
environmental, health and safety permits necessary for its operations as currently conducted to
comply with all applicable Environmental Laws and is, and has been, in compliance with the terms of
such permits and with all other applicable Environmental Laws except for non-compliances which have
been resolved and the costs of such resolution have been paid, (c) the Borrower and the other
Subsidiaries have made available to the Administrative Agent prior to the date hereof the most
recent environmental assessment with respect to the operations of the Borrower and the
Subsidiaries, (d) to the knowledge of the Borrower and the Subsidiaries, no Hazardous Material is
located at any property currently owned, operated or leased by the Borrower or any of the other
Subsidiaries that would reasonably be expected to give rise to any liability or Environmental Claim
of the Borrower or any of its Subsidiaries under any Environmental Laws, and no Hazardous Material
has been generated, owned or controlled by the Borrower or any of the other Subsidiaries and
transported to or Released at any location in a manner that would reasonably be expected to give
rise to any liability or Environmental Claim of the Borrower or any of its Subsidiaries under any
Environmental Laws, (e) to the knowledge of the Borrower and the Subsidiaries, there are no
acquisition agreements pursuant to which the Borrower or any of its Subsidiaries has expressly
assumed or undertaken responsibility for any liability or obligation of any other Person arising
under or relating to Environmental Laws, which in any such case has not been made available to the
Administrative Agent prior to the date hereof, (f) to the knowledge of the Borrower and the
Subsidiaries, there are no landfills or
CI Acquisition Credit Agreement
disposal areas located at, on, in or under the assets of
the Borrower or any Subsidiary, and (g) to the knowledge of the Borrower and the Subsidiaries,
except as listed on
Schedule 3.15(g)
, there are not currently and there have not been any
underground storage tanks “owned” or “operated” (as defined by applicable Environmental Law) by the
Borrower or any Subsidiary or present or located on the Borrower’s or any Subsidiary’s Real
Property. For purpose of Section 7.01(a), each of the representations and warranties contained in
parts (d), (e), (f) and (g) of this Section 3.15 that are qualified by the knowledge of the
Borrower and the Subsidiaries shall be deemed not to be so qualified.
SECTION 3.16.
Mortgages
. The Mortgages executed and delivered after the Closing Date pursuant to clause (h) of the
Collateral and Guarantee Requirement and Section 5.10 shall be effective to create in favor of the
Collateral Agent (for the benefit of the Secured Parties) a legal, valid and enforceable security
interest on all of the Loan Parties’ right, title and interest in and to the Mortgaged Property
thereunder and the proceeds thereof, and when such Mortgages are filed or recorded in the proper
real estate filing or recording offices, the Collateral Agent (for the benefit of the Secured
Parties) shall have a fully perfected first priority Lien on, and security interest in, all right,
title and interest of the Loan Parties in such Mortgaged Property and, to the extent applicable,
subject to Section 9-315 of the UCC, the proceeds thereof, in each case prior and superior in right
to any other Person, other than with respect to Permitted Encumbrances.
SECTION 3.17.
Location of Real Property
. (a)
Schedule 3.17(a)
lists
completely and correctly as of the Closing Date each Real Property owned by the Borrower and the
Subsidiary Loan Parties, the address or location thereof and the state in which such property is
located.
(b)
Schedule 3.17(b)
lists completely and correctly as of the Closing Date each Real
Property leased by the Borrower and the Subsidiary Loan Parties, the address or location thereof.
SECTION 3.18.
Solvency
. (a) Immediately after giving effect to the Transactions (i)
the fair value of the assets of the Borrower (individually) and the Borrower and its Subsidiaries
on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct,
subordinated, contingent or otherwise, of the Borrower (individually) and the Borrower and its
Subsidiaries on a consolidated basis, respectively; (ii) the present fair saleable value of the
property of the Borrower (individually) and the Borrower and its Subsidiaries on a consolidated
basis will be greater than the amount that will be required to pay the probable liability of the
Borrower (individually) and the Borrower and its Subsidiaries on a consolidated basis,
respectively, on their debts and other liabilities, direct, subordinated, contingent or otherwise,
as such debts and other liabilities become absolute and matured; (iii) the Borrower (individually)
and the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and
liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) the Borrower (individually) and the Borrower and its Subsidiaries on
a consolidated basis will not have unreasonably small capital with which to conduct the businesses
in which they are engaged as such businesses are now conducted and are proposed to be conducted
following the Closing Date.
CI Acquisition Credit Agreement
(b) The Borrower does not intend to, and does not believe that it or any of its Subsidiaries
will, incur debts beyond its ability to pay such debts as they mature, taking into account the
timing and amounts of cash to be received by it or any such subsidiary and the timing and amounts
of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such
subsidiary.
SECTION 3.19.
Labor Matters
. There are no strikes pending or threatened against the Borrower or any of its Subsidiaries
that, individually or in the aggregate, could reasonably be expected to have a Material Adverse
Effect. The hours worked and payments made to employees of the Borrower and its Subsidiaries have
not been in violation in any material respect of the Fair Labor Standards Act or any other
applicable law dealing with such matters. All material payments due from the Borrower or any of
its Subsidiaries or for which any claim may be made against the Borrower or any of its
Subsidiaries, on account of wages and employee health and welfare insurance and other benefits have
been paid or accrued as a liability on the books of the Borrower or such Subsidiary to the extent
required by GAAP. Except as set forth on
Schedule 3.19
, consummation of the Transactions
will not give rise to a right of termination or right of renegotiation on the part of any union
under any collective bargaining agreement to which the Borrower or any of its Subsidiaries (or any
predecessor) is a party or by which the Borrower or any of its Subsidiaries (or any predecessor) is
bound, other than collective bargaining agreements that, individually or in the aggregate, are not
material to the Borrower and its Subsidiaries, taken as a whole.
SECTION 3.20.
Insurance
.
Schedule 3.20
sets forth a true, complete and
correct description of all material insurance maintained by or on behalf of the Borrower or its
Subsidiaries as of the Closing Date. As of such date, such insurance is in full force and effect.
The Borrower believes that the insurance maintained by or on behalf of it and its Subsidiaries is
adequate.
SECTION 3.21.
Representations and Warranties in Acquisition Agreement
. All
representations and warranties of each of the Loan Parties set forth in the Acquisition Agreement
were true and correct in all material respects as of the time such representations and warranties
were made and, to the extent required to be made on the Closing Date under the Acquisition
Agreement, shall be true and correct in all material respects as of the Closing Date as if such
representations and warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations and warranties shall be true and correct
in all material respects as of such earlier date.
ARTICLE IV
CONDITIONS OF LENDING
The obligations of (a) the Lenders (including the Swingline Lenders) to make Loans and (b) any
Issuing Bank to issue Letters of Credit or increase the stated amounts of Letters of Credit
hereunder (each, a “
Credit Event
”) are subject to the satisfaction of the following
conditions:
CI Acquisition Credit Agreement
SECTION 4.01.
All Credit Events
. On the date of each Borrowing (other than a
Borrowing on the Closing Date (except with respect to clause (a) below)) and on the date of each
issuance, amendment, extension or renewal of a Letter of Credit:
(a) The Administrative Agent shall have received, in the case of a Borrowing, a Borrowing
Request as required by Section 2.03 (or a Borrowing Request shall have been deemed given in
accordance with the last paragraph of Section 2.03) or, in the case of the issuance of a Letter of
Credit, the applicable Issuing Bank and the Administrative Agent shall have received a notice
requesting the issuance of such Letter of Credit as required by Section 2.05(b).
(b) The representations and warranties set forth in Article III hereof shall be true and
correct in all material respects on and as of the date of such Borrowing or issuance, amendment,
extension or renewal of a Letter of Credit (other than an amendment, extension or renewal of a
Letter of Credit without any increase in the stated amount of such Letter of Credit), as
applicable, with the same effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all material respects as of such
earlier date).
(c) At the time of and immediately after such Borrowing or issuance, amendment, extension or
renewal of a Letter of Credit (other than an amendment, extension or renewal of a Letter of Credit
without any increase in the stated amount of such Letter of Credit), as applicable, no Event of
Default or Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, extension or renewal of a Letter of Credit (other
than an amendment, extension or renewal of a Letter of Credit without any increase in the stated
amount of such Letter of Credit) made by the Borrower shall be deemed to constitute a
representation and warranty by the Borrower on the date of such Borrowing, issuance, amendment,
extension or renewal as applicable, as to the matters specified in paragraphs (b) and (c) of this
Section 4.01.
SECTION 4.02.
First Credit Event
. On the Closing Date:
(a) The Administrative Agent (or its counsel) shall have received from each party hereto
either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received, on behalf of itself, the Collateral Agent,
the Lenders and each Issuing Bank on the Closing Date, favorable written opinions of (i) Simpson
Thacher & Bartlett LLP, special counsel for the Loan Parties, in form and substance reasonably
satisfactory to the Administrative Agent and (ii) local counsel to the Loan Parties in Ohio, in
each case, (A) dated the Closing Date, (B) addressed to each Issuing Bank on the Closing Date, the
Administrative Agent, the Collateral Agent and the Lenders and (C) in form and substance reasonably
satisfactory to the Administrative Agent and covering such
CI Acquisition Credit Agreement
other matters relating to the Loan
Documents as the Administrative Agent shall reasonably request, and each Loan Party hereby
instructs its counsel to deliver such opinions.
(c) All legal matters incident to this Agreement, the borrowings and extensions of credit
hereunder and the other Loan Documents shall be reasonably satisfactory to the Administrative
Agent, to the Lenders and to each Issuing Bank on the Closing Date.
(d) The Administrative Agent shall have received in the case of each Loan Party each of the
items referred to in clauses (i), (ii), (iii) and (iv) below:
(i) a copy of the certificate or articles of incorporation, partnership
agreement or limited liability agreement, including all amendments thereto, or other
relevant constitutional documents under applicable law of each Loan Party, (A) in
the case of a corporation, certified as of a recent date by the Secretary of State
(or other similar official) and a certificate as to the good standing (to the extent
such concept or a similar concept exists under the laws of such jurisdiction) of
each such Loan Party as of a recent date from such Secretary of State (or other
similar official) or (B) in the case of a partnership of or limited liability
company, certified by the Secretary or Assistant Secretary of each such Loan Party;
(ii) a certificate of the Secretary or Assistant Secretary or similar officer
of each Loan Party, in each case dated the Closing Date and certifying:
(A) that attached thereto is a true and complete copy of the by-laws
(or partnership agreement, memorandum and articles of association, limited
liability company agreement or other equivalent governing documents) of such
Loan Party as in effect on the Closing Date and at all times since a date
prior to the date of the resolutions described in clause (B) below,
(B) that attached thereto is a true and complete copy of resolutions
duly adopted by the Board of Directors (or equivalent governing body) of
such Loan Party (or its managing general partner or managing member)
authorizing the execution, delivery and performance of the Loan Documents to
which such Person is a party and, in the case of the Borrower, the
borrowings hereunder, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect on the Closing Date,
(C) that the certificate or articles of incorporation, partnership
agreement or limited liability agreement of such Loan Party has not been
amended since the date of the last amendment thereto disclosed pursuant to
clause (i) above,
(D) as to the incumbency and specimen signature of each officer
executing any Loan Document or any other document delivered in connection
herewith on behalf of such Loan Party, and
CI Acquisition Credit Agreement
(E) as to the absence of any pending proceeding for the dissolution or
liquidation of such Loan Party or, to the knowledge of such Person,
threatening the existence of such Loan Party; and
(iii) such other documents as the Administrative Agent may reasonably request
(including without limitation, tax identification numbers and addresses).
(e) The Collateral and Guarantee Requirement with respect to items to be completed as of the
Closing Date shall have been satisfied and the Administrative Agent shall have received completed
Perfection Certificates dated the Closing Date and signed by a Responsible Officer of the Borrower,
together with all attachments contemplated thereby, including the results of a search of the UCC
(or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by
the Perfection Certificates and copies of the financing statements (or similar documents) disclosed
by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens
indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have
been released.
(f) The Transactions shall have been consummated or shall be consummated simultaneously with
or immediately following the closing under this Agreement in accordance with the Acquisition
Agreement and all other related documentation (without material amendment, modification or waiver
thereof which is adverse to the Lenders (as reasonably determined by the Administrative Agent)
without the prior consent of the Administrative Agent), including each of the following:
(i) The Equity Financing shall have been consummated or shall be consummated
simultaneously with or immediately following the closing under this Agreement. The
terms and conditions of the Equity Financing shall be reasonably satisfactory in all
respects to the Administrative Agent;
(ii) The Borrower shall have received or shall receive simultaneously net cash
proceeds from the issuance of U.S.$170.0 million of Senior Subordinated Notes
pursuant to the Senior Subordinated Note Indenture; and
(iii) The terms and conditions of the Senior Subordinated Notes (including
terms and conditions relating to the interest rate, fees, amortization, maturity,
subordination, covenants, defaults and remedies) shall be as set forth in the
Offering Memorandum or otherwise reasonably satisfactory to the Administrative
Agent.
(g) The Lenders shall have received:
(i) the financial statements referred to in Section 3.05; and
(ii) any additional financial statements received by Acquisition Corp. on or
prior to the Closing pursuant to the Acquisition Agreement.
(h) After giving effect to the Transactions and the other transactions contemplated hereby,
Holdings and its Subsidiaries shall have outstanding no Indebtedness other
CI Acquisition Credit Agreement
than (i) the Loans and
other extensions of credit under this Agreement, (ii) the Senior Subordinated Notes and (iii) other
Indebtedness permitted pursuant to Section 6.01.
(i) The Lenders shall have received a solvency certificate substantially in the form of
Exhibit F
and signed by the chief financial officer or another Responsible Officer of the
Borrower confirming the solvency of the Borrower and its Subsidiaries on a consolidated basis after
giving effect to the Transactions.
(j) There has not been any Material Adverse Effect, after giving effect to the Transactions,
taken as a whole, since December 31, 2004.
(k) Except as set forth in
Schedule 4.02(k)
, no provision of any applicable law or
regulation, and no judgment, injunction, order or decree shall prohibit the consummation of the
Transactions, and all material actions by or in respect of or material filings with any
Governmental Authority required to permit the consummation of the Transactions shall have been
taken, made or obtained, except for any such actions or filings the failure to take, make or obtain
would not be material to the Borrower and its Subsidiaries, taken as a whole.
(l) The Agents shall have received all fees payable thereto or to any Lender on or prior to
the Closing Date and, to the extent invoiced, all other amounts due and payable pursuant to the
Loan Documents on or prior to the Closing Date, including, to the extent invoiced, reimbursement or
payment of all reasonable out-of-pocket expenses (including reasonable fees, charges and
disbursements of Shearman & Sterling LLP and local counsel) required to be reimbursed or paid by
the Loan Parties hereunder or under any Loan Document.
(m) The representations and warranties set forth in Sections 3.02, 3.03 and 3.04 hereof shall
be true and correct in all material respects on and as of the Closing Date.
(n) The ratio of Consolidated Debt to
Pro
Forma
Adjusted EBITDA for the
trailing four quarters ended immediately prior to the Closing Date shall not be greater than 5.75
to 1.00.
(o) The Administrative Agent shall have received copies of any Phase I assessments reports
being generated by Environ Corporation on behalf of the Borrower.
(p) The Administrative Agent shall have received a certificate signed by a Responsible Officer
of each of Holdings and the Borrower as to the matters set forth in clauses (f), (h), (j), (k), (m)
and (n) of this Section 4.02.
ARTICLE V
AFFIRMATIVE COVENANTS
Each of Holdings and the Borrower covenant and agree with each Lender that so long as this
Agreement shall remain in effect and until the commitments have been terminated and the principal
of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan
Document shall have been paid in full and all Letters of Credit have
CI Acquisition Credit Agreement
been canceled or have expired
and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing, each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to:
SECTION 5.01.
Existence; Businesses and Properties
. (a) Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal existence, except
as otherwise expressly permitted under Section 6.05, and except for the liquidation or dissolution
of Subsidiaries if the assets of such Subsidiaries to the extent they exceed estimated liabilities
are acquired by the Borrower or a Wholly Owned Subsidiary of the Borrower in such liquidation or
dissolution;
provided
that Subsidiaries that are Loan Parties may not be liquidated into
Subsidiaries that are not Loan Parties.
(b) Do or cause to be done all things necessary to (i) obtain, preserve, renew, extend and
keep in full force and effect the permits, franchises, authorizations, patents, trademarks, service
marks, trade names, copyrights, licenses and rights with respect thereto necessary to the normal
conduct of its business, (ii) comply in all material respects with all material applicable laws,
rules, regulations (including any zoning, building, ordinance, code or approval or any building
permits or any restrictions of record or agreements affecting the Mortgaged Properties) and
judgments, writs, injunctions, decrees and orders of any Governmental Authority, whether now in
effect or hereafter enacted and (iii) at all times maintain and preserve all property necessary to
the normal conduct of its business and keep such property in good repair, working order and
condition and from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order that the business
carried on in connection therewith, if any, may be properly conducted at all times (in each case
except as expressly permitted by this Agreement); in each case in this paragraph (b) except where
the failure would not reasonably be expected to have a Material Adverse Effect.
SECTION 5.02.
Insurance
. (a) Keep its insurable properties insured at all times by
financially sound and reputable insurers in such amounts as shall be customary for similar
businesses and maintain such other reasonable insurance (including, to the extent consistent with
past practices, self-insurance), of such types, to such extent and against such risks, as is
customary with companies in the same or similar businesses and maintain such other insurance as may
be required by law or any other Loan Document.
(b) Cause all such property and casualty insurance policies with respect to the Mortgaged
Properties located in the United States to be endorsed or otherwise amended to include a “standard”
or “New York” lender’s loss payable endorsement, in form and substance reasonably satisfactory to
the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and
after the Closing Date, if the insurance carrier shall have received written notice from the
Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the
insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties
under such policies directly to the Collateral Agent; cause all such policies to provide that
neither the Borrower, the Administrative Agent, the Collateral Agent nor any other party shall be a
coinsurer thereunder and to contain a “Replacement Cost Endorsement,” without any deduction for
depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may
reasonably (in light of a Default or a material development in respect of
CI Acquisition Credit Agreement
the insured Mortgaged Property) require from time to time to protect their interests; deliver
original or certified copies of all such policies or a certificate of an insurance broker to the
Collateral Agent; cause each such policy to provide that it shall not be canceled or not renewed
upon less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent and
the Collateral Agent; deliver to the Administrative Agent and the Collateral Agent, prior to the
cancellation or nonrenewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent
and the Collateral Agent), or insurance certificate with respect thereto, together with evidence
satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium
therefor.
(c) If at any time the area in which the Premises (as defined in the Mortgages) are located is
designated a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency
Management Agency (or any successor agency), obtain flood insurance in such reasonable total amount
as the Administrative Agent or the Collateral Agent may from time to time reasonably require, and
otherwise to ensure compliance with the National Flood Insurance Program as set forth in the Flood
Disaster Protection Act of 1973, as it may be amended from time to time.
(d) With respect to each Mortgaged Property located in the United States, carry and maintain
comprehensive general liability insurance including the “broad form CGL endorsement” (or equivalent
coverage) and coverage on an occurrence basis against claims made for personal injury (including
bodily injury, death and property damage) and umbrella liability insurance against any and all
claims, in each case in amounts and against such risks as are customarily maintained by companies
engaged in the same or similar industry operating in the same or similar locations naming the
Collateral Agent as an additional insured, on forms reasonably satisfactory to the Collateral
Agent.
(e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate
insurance concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 5.02 is taken out by the Borrower or any of its Subsidiaries; and
promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of
such policy or policies, or an insurance certificate with respect thereto.
(f) In connection with the covenants set forth in this Section 5.02, it is understood and
agreed that:
(i) none of the Agents, the Lenders, the Issuing Bank and their respective agents or
employees shall be liable for any loss or damage insured by the insurance policies required
to be maintained under this Section 5.02, it being understood that (A) the Borrower and the
other Loan Parties shall look solely to their insurance companies or any parties other than
the aforesaid parties for the recovery of such loss or damage and (B) such insurance
companies shall have no rights of subrogation against the Agents, the Lenders, any Issuing
Bank or their agents or employees. If, however, the insurance policies do not provide
waiver of subrogation rights against such parties, as required above, then the Borrower
hereby agrees, to the extent permitted by law, to waive, and to
CI Acquisition Credit Agreement
cause each of its Subsidiaries to waive, its right of recovery, if any, against the
Agents, the Lenders, any Issuing Bank and their agents and employees; and
(ii) the designation of any form, type or amount of insurance coverage by the
Administrative Agent, the Collateral Agent under this Section 5.02 shall in no event be
deemed a representation, warranty or advice by the Administrative Agent, the Collateral
Agent or the Lenders that such insurance is adequate for the purposes of the business of the
Borrower and its Subsidiaries or the protection of their properties.
SECTION 5.03.
Taxes
. Pay and discharge promptly when due all material Taxes,
assessments and governmental charges or levies imposed upon it or upon its income or profits or in
respect of its property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a
Lien upon such properties or any part thereof;
provided
,
however
, that such payment
and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim
so long as (a) the validity or amount thereof shall be contested in good faith by appropriate
proceedings, and the affected Borrower or the affected Subsidiary, as applicable, shall have set
aside on its books reserves in accordance with GAAP with respect thereto or (b) the aggregate
amount of such Taxes, assessments, charges, levies or claims does not exceed U.S.$2.5 million.
SECTION 5.04.
Financial Statements, Reports, etc
. Furnish to the Administrative
Agent (which will promptly furnish such information to the Lenders):
(a) within 120 days after the end of the fiscal year ended December 31, 2005, and within 90
days (or such shorter period as the SEC shall specify for the filing of Annual Reports on Form
10-K) after the end of each subsequent fiscal year, a consolidated balance sheet and related
statements of operations, cash flows and owners’ equity showing the financial position of Borrower
and its Subsidiaries as of the close of such fiscal year and the consolidated results of their
operations during such year and setting forth in comparative form the corresponding figures for the
prior fiscal year, all audited by independent public accountants of recognized national standing
reasonably acceptable to the Administrative Agent and accompanied by an opinion of such accountants
(which shall not be qualified in any material respect) to the effect that such consolidated
financial statements fairly present, in all material respects, the financial position and results
of operations of Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (it
being understood that the delivery by Borrower of Annual Reports on Form 10-K of Borrower and its
consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(a) to the extent such
Annual Reports include the information specified herein).
(b) within 45 days (or such shorter period as the SEC shall specify for the filing of
Quarterly Reports on Form 10-Q) after the end of each of the first three fiscal quarters of each
fiscal year, a consolidated balance sheet and related statements of operations and cash flows
showing the financial position of Borrower and its Subsidiaries as of the close of such
fiscal quarter and the consolidated results of their operations during such fiscal quarter and
the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding
figures for the corresponding periods of the prior fiscal year, all certified by a Financial
Officer of Borrower, on behalf of Borrower, as fairly presenting, in all material respects, the
financial
CI Acquisition Credit Agreement
position and results of operations of Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of
footnotes) (it being understood that the delivery by Borrower of Quarterly Reports on Form 10-Q of
Borrower and its consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(b)
to the extent such Quarterly Reports include the information specified herein);
(c) (x) concurrently with any delivery of financial statements under (a) or (b) above, a
certificate of a Financial Officer of Borrower (i) certifying that no Event of Default or Default
has occurred or, if such an Event of Default or Default has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken with respect thereto and
(ii) commencing with the fiscal period ending December 31, 2005 setting forth computations in
reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the
covenants contained in Sections 6.10, 6.11 and 6.12 and (y) concurrently with any delivery of
financial statements under (a) above, a certificate of the accounting firm opining on or certifying
such statements stating whether they obtained knowledge during the course of their examination of
such statements of any Default or Event of Default (which certificate may be limited to accounting
matters and disclaims responsibility for legal interpretations);
(d) promptly after the same become publicly available, copies of all periodic and other
publicly available reports, proxy statements and, to the extent requested by the Administrative
Agent, other materials filed by the Borrower or any of the Subsidiaries with the SEC, or after an
initial public offering, distributed to its stockholders generally, as applicable;
(e) if, as a result of any change in accounting principles and policies from those as in
effect on the Closing Date, the consolidated financial statements of Borrower and its Subsidiaries
delivered pursuant to paragraphs (a) or (b) above will differ in any material respect from the
consolidated financial statements that would have been delivered pursuant to such clauses had no
such change in accounting principles and policies been made, then, together with the first delivery
of financial statements pursuant to paragraph (a) and (b) above following such change, a schedule
prepared by a Financial Officer on behalf of Borrower reconciling such changes to what the
financial statements would have been without such changes;
(f) within 90 days after the beginning of each fiscal year, an operating and capital
expenditure budget, in form satisfactory to the Administrative Agent prepared by the Borrower for
each of the four fiscal quarters of such fiscal year prepared in reasonable detail, of the Borrower
and the Subsidiaries, accompanied by the statement of a Financial Officer of the Borrower to the
effect that, to the best of his knowledge, the budget is a reasonable estimate for the period
covered thereby;
(g) annually, upon the reasonable request of the Administrative Agent, updated Perfection
Certificates (or, to the extent such request relates to specified information
contained in the Perfection Certificates, such information) reflecting all changes since the
date of the information most recently received pursuant to this paragraph (g) or Section 5.10(d);
CI Acquisition Credit Agreement
(h) promptly, a copy of all reports submitted to the Board of Directors (or any committee
thereof) of the Borrower or any Subsidiary in connection with any material interim or special audit
made by independent accountants of the books of the Borrower or any Subsidiary;
(i) promptly, from time to time, such other information regarding the operations, business
affairs and financial condition of the Borrower or any of the Subsidiaries, or compliance with the
terms of any Loan Document, or such consolidating financial statements, as in each case the
Administrative Agent may reasonably request (for itself or on behalf of any Lender); and
(j) promptly upon request by the Administrative Agent, copies of: (i) each
Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) filed with the Internal Revenue
Service with respect to a Plan; (ii) the most recent actuarial valuation report for any Plan; (iii)
all notices received from a Multiemployer Plan sponsor or a Plan sponsor or any governmental agency
concerning an ERISA Event; and (iv) such other documents or governmental reports or filings
relating to any Plan or Multiemployer Plan as the Administrative Agent shall reasonably request.
SECTION 5.05.
Litigation and Other Notices
. Furnish to the Administrative Agent
written notice of the following promptly after any Responsible Officer of the Borrower obtains
actual knowledge thereof:
(a) any Event of Default or Default, specifying the nature and extent thereof and the
corrective action (if any) proposed to be taken with respect thereto;
(b) the filing or commencement of, or any written threat or written notice of intention of any
Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or
before any Governmental Authority or in arbitration, against the Borrower or any of the
Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;
(c) any other development specific to the Borrower or any of the Subsidiaries that is not a
matter of general public knowledge and that has had, or could reasonably be expected to have, a
Material Adverse Effect; and
(d) the occurrence of any ERISA Event, that together with all other ERISA Events that have
occurred, could reasonably be expected to have a Material Adverse Effect.
SECTION 5.06.
Compliance with Laws
. Comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property (owned or leased), except
where the failure to do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse
Effect;
provided
that this Section 5.06 shall not apply to Environmental Laws, which
are the subject of Section 5.09, or to laws related to Taxes, which are the subject of Section
5.03.
SECTION 5.07.
Maintaining Records; Access to Properties and Inspections
. Maintain
all financial records in accordance with GAAP and permit any Persons designated by the
Administrative Agent or, upon the occurrence and during the continuance of an Event of
CI Acquisition Credit Agreement
Default, any
Lender to visit and inspect the financial records and the properties of the Borrower or any of the
Subsidiaries at reasonable times, upon reasonable prior notice to the Borrower, and as often as
reasonably requested and to make extracts from and copies of such financial records, and permit any
Persons designated by the Agents or, upon the occurrence and during the continuance of an Event of
Default, any Lender upon reasonable prior notice to the Borrower to discuss the affairs, finances
and condition of the Borrower or any of the Subsidiaries with the officers thereof and independent
accountants therefor (subject to reasonable requirements of confidentiality, including requirements
imposed by law or by contract).
SECTION 5.08.
Use of Proceeds
. Use the proceeds of the Loans and the issuance of
Letters of Credit solely for the purposes described in Section 3.11.
SECTION 5.09.
Compliance with Environmental Laws
. Comply, and make commercially
reasonable efforts to cause all lessees and other Persons occupying its properties to comply, with
all Environmental Laws applicable to its operations and properties; and obtain and renew all
material authorizations and permits required pursuant to Environmental Law for its operations and
properties, in each case in accordance with Environmental Laws, except, in each case with respect
to this Section 5.09, to the extent the failure to do so could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 5.10.
Further Assurances
. (a) Execute any and all further documents,
financing statements, agreements and instruments, and take all such further actions (including the
filing and recording of financing statements, fixture filings, Mortgages and other documents and
recordings of Liens in stock registries), that may be required under any applicable law, or that
the Administrative Agent may reasonably request, to cause the Collateral and Guarantee Requirement
to be and remain satisfied, all at the expense of the applicable Loan Parties and provide to the
Administrative Agent, from time to time upon reasonable request, evidence reasonably satisfactory
to the Administrative Agent as to the perfection and priority of the Liens created or intended to
be created by the Security Documents.
(b) In the case of the Borrower, grant and cause each of the Subsidiary Loan Parties to grant
to the Collateral Agent security interests and Mortgages in such Material Real Property located in
the United States of the Borrower or such Subsidiary Loan Party as are acquired after the Closing
Date and satisfy the requirements of clause (h) of the definition of Collateral and Guarantee
Requirement (other than clause (iii)) with respect to such Material Real
Properties within ninety (90) days after the date such Material Real Property is acquired.
With respect to each of the items identified in this clause (b) that are required to be delivered
within ninety (90) days after the date the applicable Material Real Property is acquired, the
Administrative Agent, in each case, may (in its sole discretion) extend such date on two separate
occasions by up to 30 days on each such occasion.
(c) If any additional direct or indirect Subsidiary of the Borrower becomes a Subsidiary Loan
Party (including as a result of becoming a Material Subsidiary) after the Closing Date within five
Business Days after the date such Subsidiary becomes a Subsidiary Loan Party (including as a result
of becoming a Material Subsidiary), notify the Administrative Agent and the Lenders thereof and,
within sixty (60) Business Days after the date such Subsidiary becomes a Subsidiary Loan Party
(including as a result of becoming a Material Subsidiary), cause the
CI Acquisition Credit Agreement
Collateral and Guarantee
Requirement to be satisfied with respect to such Subsidiary and with respect to any Equity Interest
in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party.
(d) In the case of any Loan Party, (i) furnish to the Collateral Agent prompt written notice
of any change (A) in such Loan Party’s corporate or organization name, (B) in such Loan Party’s
identity or organizational structure or (C) in such Loan Party’s organizational identification
number;
provided
that no Loan Party shall effect or permit any such change unless all
filings have been made, or will have been made within any statutory period, under the UCC or
otherwise that are required in order for the Collateral Agent to continue at all times following
such change to have a valid, legal and perfected security interest in all the Collateral for the
benefit of the Secured Parties and (ii) promptly notify the Administrative Agent if any material
portion of the Collateral is damaged or destroyed.
(e) The Collateral and Guarantee Requirement and the other provisions of this Section 5.10
need not be satisfied if such action would violate Section 9.22 hereof. In addition, the
Collateral and Guarantee Requirement and the other provisions of this Section 5.10 need not be
satisfied with respect to (i) any Equity Interests acquired after the Closing Date in accordance
with this Agreement if, and to the extent that, and for so long as (A) doing so would violate
applicable law or a contractual obligation binding on such Equity Interests and (B) such law or
obligation existed at the time of the acquisition thereof and was not created or made binding on
such Equity Interests in contemplation of or in connection with the acquisition of such Subsidiary
(
provided
that the foregoing clause (B) shall not apply in the case of a joint venture,
including a joint venture that is a Subsidiary), (ii) any assets acquired after the Closing Date,
to the extent that, and for so long as, taking such actions would violate a contractual obligation
binding on such assets that existed at the time of the acquisition thereof and was not created or
made binding on such assets in contemplation or in connection with the acquisition of such assets
(except in the case of assets acquired with Indebtedness permitted pursuant to Section 6.01(i) that
is secured by a Lien permitted pursuant to Section 6.02(i)) or (iii) any Equity Interests in or any
asset of a Foreign Subsidiary if the Borrower demonstrates to the Collateral Agent and the
Collateral Agent determines (in its reasonable discretion) that the cost of the satisfaction of the
Collateral and Guarantee Requirement of this Section 5.10 with respect thereto exceeds the value of
the security offered thereby;
provided
that, upon the reasonable request of the Collateral
Agent, the Borrower shall, and shall cause any applicable Subsidiary to, use commercially
reasonable efforts to have waived or eliminated any contractual obligation of the
types described in clauses (i) and (ii) above, other than those set forth in a joint venture
agreement to which the Borrower or any Subsidiary is a party.
SECTION 5.11.
Fiscal Year
. In the case of the Borrower and the Subsidiaries, cause
their fiscal year to end on December 31.
SECTION 5.12.
Interest Rate Protection Agreements
. As promptly as practicable and in
any event within 90 days after the Closing Date, enter into, and for a period of not less than
three years after the Closing Date maintain in effect, one or more Swap Agreements with one or more
of the Lenders (or Affiliates thereof), the effect of which is that at least 50% of Consolidated
Debt (other than any Indebtedness under Revolving Facility Borrowings) will bear interest at a
fixed or capped rate or the interest cost in respect of which will be fixed or capped,
CI Acquisition Credit Agreement
in each case on terms and conditions reasonably acceptable, taking into account
current market conditions, to the Administrative Agent.
SECTION 5.13.
Proceeds of Certain Dispositions
. If, as a result of the receipt of any
cash proceeds by the Borrower or any Subsidiary in connection with any sale, transfer, lease or
other disposition of any asset, including any Equity Interest, the Borrower would be required by
the terms of the Senior Subordinated
Note Indenture to make an offer to purchase any Senior Subordinated Notes, as applicable,
then, in the case of the Borrower or a Subsidiary, prior to the first day on which the Borrower
would be required to commence such an offer to purchase, (i) prepay Loans in accordance with
Section 2.11 or (ii) acquire assets, Equity Interests or other securities in a manner that is
permitted by Section 6.04 or Section 6.05, in each case in a manner that will eliminate any such
requirement to make such an offer to purchase.
SECTION 5.14.
Post-Closing Matters
. Execute and deliver the documents and complete
the tasks set forth in the definition of “Collateral and Guarantee Requirement,” in each case
within the time periods specified therein (including any extension of such time periods permitted
by the Administrative Agent pursuant to paragraph (j) of the definition of “Collateral and
Guarantee Requirement”).
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as this Agreement shall
remain in effect and until the Commitments have been terminated and the principal of and interest
on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been
paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn
thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in
writing, the Borrower will not, and will not cause or permit any of the Subsidiaries to:
SECTION 6.01.
Indebtedness
. Incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness existing on the Closing Date and (other than in the case of any existing
letters of credit to be replaced with Letters of Credit issued hereunder) set forth on
Schedule
6.01
and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness (other
than intercompany Indebtedness Refinanced with Indebtedness owed to a Person not affiliated with
the Borrower or any Subsidiary);
(b) Indebtedness created hereunder and under the other Loan Documents;
(c) Indebtedness of the Borrower and the Subsidiaries pursuant to Swap Agreements permitted by
Section 6.13;
(d) Indebtedness owed to (including obligations in respect of letters of credit or bank
guarantees or similar instruments for the benefit of) any Person providing workers’
CI Acquisition Credit Agreement
compensation, ealth, disability or other employee benefits or property, casualty or liability insurance to the
Borrower or any Subsidiary, pursuant to reimbursement or indemnification obligations to such
Person,
provided
that upon the incurrence of Indebtedness with respect to
reimbursement obligations regarding workers’ compensation claims, such obligations are
reimbursed not later than 30 days following such incurrence;
(e) Indebtedness of the Borrower or any Subsidiary to the extent permitted by Section 6.04,
provided
that Indebtedness of any Loan Party to any Subsidiary that is not a Loan Party
(the “
Subordinated Intercompany Debt
”) shall be subordinated to the Obligations on terms
reasonably satisfactory to the Administrative Agent;
(f) Indebtedness in respect of performance bonds, warranty bonds, bid bonds, appeal bonds,
surety bonds and completion or performance guarantees and similar obligations, in each case
provided in the ordinary course of business, including those incurred to secure health, safety and
environmental obligations in the ordinary course of business and Indebtedness arising out of
advances on exports, advances on imports, advances on trade receivables, customer prepayments and
similar transactions in the ordinary course of business and consistent with past practice;
(g) Indebtedness arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument drawn against insufficient funds in the ordinary course of
business or other cash management services in the ordinary course of business,
provided
that (x) such Indebtedness (other than credit or purchase cards) is extinguished within three
Business Days of its incurrence and (y) such Indebtedness in respect of credit or purchase cards is
extinguished within 60 days from its incurrence;
(h) (i) Indebtedness of a Subsidiary acquired after the Closing Date or a Person merged into
or consolidated with the Borrower or any Subsidiary after the Closing Date and Indebtedness assumed
in connection with the acquisition of assets, which Indebtedness in each case, exists at the time
of such acquisition, merger or consolidation and is not created in contemplation of such event and
where such acquisition, merger or consolidation is permitted by this Agreement and (ii) any
Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness,
provided
that
the aggregate principal amount of such Indebtedness at the time of, and after giving effect to,
such acquisition, merger or consolidation, such assumption or such incurrence, as applicable
(together with Indebtedness outstanding pursuant to this paragraph (h), paragraph (i) of this
Section 6.01 and the Remaining Present Value of outstanding leases permitted under Section 6.03),
would not exceed 3.75% of Consolidated Total Assets as of the end of the fiscal quarter immediately
prior to the date of such acquisition, merger or consolidation, such assumption or such incurrence,
as applicable, for which financial statements have been delivered pursuant to Section 5.04;
(i) Capital Lease Obligations, mortgage financings and purchase money Indebtedness incurred by
the Borrower or any Subsidiary prior to or within 270 days after the acquisition, lease or
improvement of the respective asset permitted under this Agreement in order to finance such
acquisition or improvement, and any Permitted Refinancing Indebtedness in respect thereof, in an
aggregate principal amount that at the time of, and after giving effect to, the incurrence thereof
(together with Indebtedness outstanding pursuant to paragraph (h) of this
CI Acquisition Credit Agreement
Section 6.01, this paragraph (i) and the Remaining Present Value of leases permitted under Section 6.03) would not
exceed 3.75% of Consolidated Total Assets as of the end of the fiscal
quarter immediately prior to the date of such incurrence for which financial statements have
been delivered pursuant to Section 5.04;
(j) Capital Lease Obligations incurred by the Borrower or any Subsidiary in respect of any
Sale and Lease-Back Transaction that is permitted under Section 6.03;
(k) other Indebtedness, in an aggregate principal amount at any time outstanding pursuant to
this paragraph (k) not in excess of U.S.$20.0 million;
(l) Indebtedness of the Borrower pursuant to the Senior Subordinated Notes in an aggregate
principal amount that is not in excess of the sum of U.S.$170.0 million and any Permitted
Refinancing Indebtedness incurred to Refinance such Indebtedness in the form of Permitted
Subordinated Debt Securities;
(m) Guarantees (i) by the Loan Parties of the Indebtedness of the Borrower described in
paragraph (l), (ii) by any Loan Party of any Indebtedness of the Borrower or any Loan Party
expressly permitted to be incurred under this Agreement, (iii) by the Borrower or any Subsidiary of
Indebtedness otherwise expressly permitted hereunder of the Borrower or any Subsidiary that is not
a Loan Party to the extent permitted by Section 6.04, (iv) by any Subsidiary that is not a Loan
Party of Indebtedness of another Subsidiary that is not a Loan Party;
provided
that all
Foreign Subsidiaries may guarantee obligations of other Foreign Subsidiaries under ordinary course
cash management obligations, and (v) by the Borrower of Indebtedness of Foreign Subsidiaries
incurred for working capital purposes in the ordinary course of business on ordinary business terms
so long as such Indebtedness is permitted to be incurred under 6.01(a), (k) or (s);
provided
that Guarantees by any Loan Party under this Section 6.01(m) of any other
Indebtedness of a Person that is subordinated to other Indebtedness of such Person shall be
expressly subordinated to the Obligations on terms consistent with those used, or to be used, for
Subordinated Intercompany Debt;
(n) Indebtedness arising from agreements of the Borrower or any Subsidiary providing for
indemnification, adjustment of purchase price, earn outs or similar obligations, in each case,
incurred or assumed in connection with the disposition of any business, assets or a Subsidiary,
other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such acquisition;
(o) Indebtedness in connection with Permitted Receivables Financings;
provided
that
the proceeds thereof are applied in accordance with Section 2.11(c);
(p) letters of credit or bank guarantees (other than Letters of Credit issued pursuant to
Section 2.05) having an aggregate face amount not in excess of U.S.$20.0 million;
(q) Indebtedness supported by a Letter of Credit, in a principal amount not in excess of the
stated amount of such Letter of Credit;
CI Acquisition Credit Agreement
(r) Indebtedness consisting of Permitted Subordinated Debt Securities or Permitted Senior Debt
Securities to the extent, in each case, the Net Proceeds in respect thereof are actually utilized
to repay Term B Borrowings;
(s) Indebtedness of Foreign Subsidiaries (including letters of credit or bank guarantees
(other than Letters of Credit issued pursuant to Section 2.05) and including all Indebtedness of
Ferox, a.s. under its existing revolving credit facility or any refinancings thereof) for working
capital purposes incurred in the ordinary course of business on ordinary business terms in an
aggregate amount not to exceed U.S.$25.0 million outstanding at any time;
(t) Indebtedness of the Borrower or any of its Subsidiaries in respect of the Management Notes
in an aggregate amount not to exceed $10.0 million outstanding at any time; and
(u) all premium (if any), interest (including post-petition interest), fees, expenses, charges
and additional or contingent interest on obligations described in paragraphs (a) through (s) above.
SECTION 6.02.
Liens
. Create, incur, assume or permit to exist any Lien on any
property or assets (including stock or other securities of any Person, including any Subsidiary) at
the time owned by it or on any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and the Subsidiaries existing on the Closing
Date and set forth on
Schedule 6.02(a)
;
provided
that such Liens shall secure only
those obligations that they secure on the Closing Date (and extensions, renewals and refinancings
of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other
property or assets of the Borrower or any Subsidiary;
(b) any Lien created under the Loan Documents or permitted in respect of any Mortgaged
Property by the terms of the applicable Mortgage;
(c) any Lien on any property or asset of the Borrower or any Subsidiary securing Indebtedness
or Permitted Refinancing Indebtedness permitted by Section 6.01(h),
provided
that (i) such
Lien does not apply to any other property or assets of the Borrower or any of the Subsidiaries not
securing such Indebtedness at the date of the acquisition of such property or asset (other than
after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred
prior to such date and which Indebtedness and other obligations are permitted hereunder that
require a pledge of after-acquired property, it being understood that such requirement shall not be
permitted to apply to any property to which such requirement would not have applied but for such
acquisition), (ii) such Lien is not created in contemplation of or in connection with such
acquisition and (iii) in the case of a Lien securing Permitted Refinancing Indebtedness, such Lien
is permitted in accordance with clause (e) of the definition of the term “Permitted Refinancing
Indebtedness”;
(d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or
that are being contested in compliance with Section 5.03;
CI Acquisition Credit Agreement
(e) Liens imposed by law (including, without limitation, Liens in favor of customers for
equipment under order or in respect of advances paid in connection therewith) such as landlord’s,
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
construction or other like Liens arising in the ordinary course of business and securing
obligations that are not overdue by more than 60 days or that are being contested in good faith by
appropriate proceedings and in respect of which, if applicable, the Borrower or any Subsidiary
shall have set aside on its books reserves in accordance with GAAP;
(f) (i) pledges and deposits made in the ordinary course of business in compliance with the
Federal Employers Liability Act or any other workers’ compensation, unemployment insurance and
other social security laws or regulations and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements in respect of such obligations and (ii) pledges and
deposits securing liability for reimbursement or indemnification obligations of (including
obligations in respect of letters of credit or bank guarantees for the benefit of) insurance
carriers providing property, casualty or liability insurance to the Borrower or any Subsidiary;
(g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness),
leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds,
performance and return of money bonds, warranty bonds, bids, leases, government contracts, trade
contracts, completion or performance guarantees and other obligations of a like nature incurred in
the ordinary course of business, including those incurred to secure health, safety and
environmental obligations in the ordinary course of business;
(h) zoning restrictions, easements, trackage rights, leases (other than Capital Lease
Obligations), licenses, special assessments, rights-of-way, restrictions on use of real property
and other similar encumbrances incurred in the ordinary course of business that do not render title
unmarketable and that, in the aggregate, do not interfere in any material respect with the ordinary
conduct of the business of the Borrower or any Subsidiary or would result in a Material Adverse
Effect;
(i) purchase money security interests in equipment or other property or improvements thereto
hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary
(including the interests of vendors and lessors under conditional sale and title retention
agreements);
provided
that (i) such security interests secure Indebtedness permitted by
Section 6.01(i) (including any Permitted Refinancing Indebtedness in respect thereof), (ii) such
security interests are incurred, and the Indebtedness secured thereby is created, within 270 days
after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed
100% of the cost of such equipment or other property or improvements at the time of such
acquisition (or construction), including transaction costs incurred by the Borrower or any
Subsidiary in connection with such acquisition (or construction) and (iv) such security interests
do not apply to any other property or assets of the Borrower or any Subsidiary (other than to
accessions to such equipment or other property or improvements);
provided
further
that individual financings of equipment provided by a single lender may be cross-collateralized to
other financings of equipment provided solely by such lender;
CI Acquisition Credit Agreement
(j) Liens arising out of capitalized lease transactions permitted under Section 6.03, so long
as such Liens attach only to the property sold and being leased in such transaction and any
accessions thereto or proceeds thereof and related property;
(k) Liens securing judgments that do not constitute an Event of Default under Section 7.01(j);
(l) other Liens with respect to property or assets of the Borrower or any Subsidiary not
constituting Collateral for the Obligations with an aggregate fair market value (valued at the time
of creation thereof) of not more than U.S.$20.0 million at any time;
(m) Liens disclosed by the title insurance policies and any replacement, extension or renewal
of any such Lien;
provided
that such replacement, extension or renewal Lien shall not cover
any property other than the property that was subject to such Lien prior to such replacement,
extension or renewal;
provided
further
that the Indebtedness and other obligations
secured by such replacement, extension or renewal Lien are permitted by this Agreement;
(n) Liens in respect of Permitted Receivables Financings;
(o) any interest or title of, or Liens created by, a lessor under any leases or subleases
entered into by the Borrower or any Subsidiary, as tenant, in the ordinary course of business;
(p) Liens that are contractual rights of set-off (i) relating to the establishment of
depository relations with banks not given in connection with the issuance of Indebtedness, (ii)
relating to pooled deposit or sweep accounts of the Borrower or any Subsidiary to permit
satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the
Borrower and the Subsidiaries or (iii) relating to purchase orders and other agreements entered
into with customers of the Borrower or any Subsidiary in the ordinary course of business;
(q) Liens arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of set-off or similar rights;
(r) Liens securing obligations in respect of trade-related letters of credit permitted under
Section 6.01(f) or (p) and covering the goods (or the documents of title in respect of such goods)
financed by such letters of credit and the proceeds and products thereof;
(s) licenses of intellectual property granted in the ordinary course of business;
(t) Liens in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods;
(u) Liens on the assets of a Foreign Subsidiary that do not constitute Collateral and which
secure Indebtedness of such Foreign Subsidiary that is not otherwise secured by a Lien on the
Collateral under the Loan Documents and that is permitted to be incurred under Section 6.01(a) or
(k);
CI Acquisition Credit Agreement
(v) Liens upon specific items of inventory or other goods and proceeds of the Borrower or any
of the Subsidiaries securing such Person’s obligations in respect of bankers’ acceptances issued or
created for the account of such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;
(w) Liens solely on any cash earnest money deposits made by the Borrower or any of the
Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
(x) Liens arising from precautionary Uniform Commercial Code financing statement filings
regarding operating leases entered into by the Borrower or any of the Subsidiaries in the ordinary
course of business;
(y) Liens securing insurance premium financing arrangements in an aggregate principal amount
not to exceed 2% of Consolidated Total Assets,
provided
that such Lien is limited to the
applicable insurance contracts; and
(z) Liens on the assets of a Foreign Subsidiary which secure Indebtedness of such Foreign
Subsidiary that is permitted to be incurred under Section 6.01(p) or (s);
provided
,
however
, that if such Liens are on assets that constitute Collateral, such Liens may be
pari passu
with, but not prior to, the Liens granted in favor of the Collateral Agent under the
Collateral Agreements unless such Liens secure letters of credit or bank guarantees and such assets
constitute the rights of such Foreign Subsidiary under the contracts and agreements in respect of
which such Indebtedness was incurred.
Notwithstanding the foregoing, no Liens shall be permitted to exist, directly or indirectly,
on (1) Pledged Collateral, other than Liens in favor of the Collateral Agent and Liens permitted by
Section 6.02(d), (e), (q) or (z), or (2) Mortgaged Property, in each case, other than Liens in
favor of the Collateral Agent, Prior Liens and Permitted Encumbrances.
SECTION 6.03.
Sale and Lease-Back Transactions
. Enter into any arrangement, directly
or indirectly, with any Person whereby it shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or
lease such property or other property that it intends to use for substantially the same purpose or
purposes as the property being sold or transferred (a “
Sale and Lease-Back Transaction
”),
provided
that a Sale and Lease-Back Transaction shall be permitted so long as at the time
the lease in connection therewith is entered into, and after giving effect to the entering into of
such Lease, the Remaining Present Value of such lease (together with Indebtedness outstanding
pursuant to paragraphs (h) and (i) of Section 6.01 and the Remaining Present Value of outstanding
leases previously entered into under this Section 6.03) would not exceed 3.75% of Consolidated
Total Assets as of the end of the fiscal quarter immediately prior to the date such lease is
entered into for which financial statements have been delivered pursuant to Section 5.04.
SECTION 6.04.
Investments, Loans and Advances
. Purchase, hold or acquire (including
pursuant to any merger with a Person that is not a Wholly Owned Subsidiary immediately prior to
such merger) any Equity Interests, evidences of Indebtedness or other securities of, make or permit
to exist any loans or advances (other than intercompany current
CI Acquisition Credit Agreement
liabilities incurred in the
ordinary course of business in connection with the cash management operations of the Borrower and
the Subsidiaries) to or
Guarantees of the obligations of, or make or permit to exist any investment or any other
interest in (each, an “
Investment
”), in any other Person, except:
(a) Investments (including, but not limited to, Investments in Equity Interests, intercompany
loans, and Guarantees of Indebtedness otherwise expressly permitted hereunder) after the Closing
Date by (i) Loan Parties in Subsidiaries that are not Loan Parties in an aggregate amount (valued
at the time of the making thereof and without giving effect to any write-downs or write-offs
thereof) not to exceed an amount equal to (x) U.S.$30.0 million (
plus
any return of capital
actually received by the respective investors in respect of investments previously made by them
pursuant to this clause a(i)),
plus
(y) the portion, if any, of the Available Investment
Basket Amount on the date of such election that the Borrower elects to apply to this Section
6.04(a), (ii) Loan Parties in other Loan Parties and (iii) Subsidiaries that are not Loan Parties
in Loan Parties.
(b) Permitted Investments and investments that were Permitted Investments when made;
(c) Investments arising out of the receipt by the Borrower or any Subsidiary of noncash
consideration for the sale of assets permitted under Section 6.05;
(d) (i) loans and advances to employees of the Borrower or any Subsidiary in the ordinary
course of business not to exceed U.S.$2.5 million in the aggregate at any time outstanding
(calculated without regard to write-downs or write-offs thereof) and (ii) advances of payroll
payments and expenses to employees in the ordinary course of business;
(e) accounts receivable arising and trade credit granted in the ordinary course of business
and any securities received in satisfaction or partial satisfaction thereof from financially
troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and
any prepayments and other credits to suppliers made in the ordinary course of business;
(f) Swap Agreements permitted pursuant to Section 6.13 and Capital Expenditures permitted
pursuant to Section 6.10;
(g) Investments existing on the Closing Date and set forth on Part I of
Schedule 6.04
and Investments set forth on Part II of
Schedule 6.04
;
(h) Investments resulting from pledges and deposits referred to in Sections 6.02(f) and (g);
(i) other Investments by the Borrower or any Subsidiary in an aggregate amount (valued at the
time of the making thereof, and without giving effect to any write-downs or write-offs thereof) not
to exceed (i) U.S.$20.0 million (
plus
any returns of capital actually received by the
respective investor in respect of investments theretofore made by it pursuant to this paragraph
(i)),
plus
(ii) the portion, if any, of the Available Investment Basket Amount on the date
such election is made that the Borrower elects to apply to this paragraph (i);
CI Acquisition Credit Agreement
(j) Investments constituting Permitted Business Acquisitions in an aggregate amount, which
shall be deemed to include the principal amount of Indebtedness that is assumed pursuant to Section
6.01 in connection with such Permitted Business Acquisitions, not to exceed (i) U.S.$35.0 million
(net of any return representing return of capital in respect of any such investment and valued at
the time of the making thereof);
provided
that (x) such amount shall be increased to (a)
U.S.$70.0 million, during any period that is a Permitted Business Acquisition Step Up Period
pursuant to clause (a) of the definition thereof, or (b) U.S.$100.0 million, during any period that
is a Permitted Business Acquisition Step Up Period pursuant to clause (b) of the definition
thereof, in each case
plus
(y) the portion, if any, of the Available Investment Basket
Amount on the date such election is made that the Borrower elects to apply to this paragraph (j),
(ii) if any Person acquired in a Permitted Business Acquisition is not merged into the Borrower or
a Loan Party or does not become upon consummation of such Permitted Business Acquisition a Loan
Party, the aggregate amount expended in respect thereof and for all such similar Permitted Business
Acquisitions shall not exceed an amount equal to 50% of the amount of Permitted Business
Acquisitions otherwise permitted under this Section 6.04(j) and (iii) if the amount of Investments
constituting Permitted Business Acquisitions in accordance with this Section 6.04(j) and
outstanding at the time a Permitted Business Acquisition Step-Up Period ends exceeds the amount of
Investments constituting Permitted Business Acquisitions that would be permitted under this Section
6.04(j) immediately after the end of such Permitted Business Acquisition Step-Up Period, then the
amount of such excess (less the amount by which investments constituting Permitted Business
Acquisitions are reduced from such time until the commencement of the next Permitted Business
Acquisition Step-Up Period, if any) shall be deemed to be permitted under this Section 6.04(j);
provided
further
that such excess, if any, shall be deemed an election by the
Borrower to utilize the Available Investment Basket Amount in any amount equal to such excess;
(k) additional Investments may be made from time to time to the extent made with proceeds of
Equity Interests (excluding proceeds received as a result of the exercise of Cure Rights pursuant
to Section 7.03) of the Borrower, which proceeds or Investments in turn are contributed (as common
equity) to any Loan Party;
(l) Investments (including, but not limited to, Investments in Equity Interests, intercompany
loans, and Guarantees of Indebtedness otherwise expressly permitted hereunder) after the Closing
Date by Subsidiaries that are not Loan Parties in any Loan Party or other Subsidiary.
(m) Investments arising as a result of Permitted Receivables Financings;
(n) the Transactions;
(o) Investments received in connection with the bankruptcy or reorganization of, or settlement
of delinquent accounts and disputes with or judgments against, customers and suppliers, in each
case in the ordinary course of business;
(p) Investments of a Subsidiary acquired after the Closing Date or of a corporation merged
into the Borrower or merged into or consolidated with a Subsidiary in accordance with Section 6.05
after the Closing Date to the extent that such Investments were not
CI Acquisition Credit Agreement
made in contemplation of or in connection with such acquisition, merger or consolidation and
were in existence on the date of such acquisition, merger or consolidation; and
(q) Guarantees by the Borrower or any Subsidiary of operating leases (other than Capital Lease
Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into
by any Subsidiary in the ordinary course of business.
SECTION 6.05.
Mergers, Consolidations, Sales of Assets and Acquisitions
. Merge into
or consolidate with any other Person, or permit any other Person to merge into or consolidate with
it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or any part of its assets (whether now owned or hereafter acquired), or issue,
sell, transfer or otherwise dispose of any Equity Interests of the Borrower or any Subsidiary or
preferred equity interests of the Borrower, or purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or any substantial part of the assets of any other
Person, except that this Section shall not prohibit:
(a) (i) the purchase and sale of inventory, supplies, materials and equipment and the purchase
and sale of contract rights or licenses or leases of intellectual property, in each case in the
ordinary course of business by the Borrower or any Subsidiary, (ii) the sale of any other asset in
the ordinary course of business by the Borrower or any Subsidiary, (iii) the sale of surplus,
obsolete or worn out equipment or other property in the ordinary course of business by the Borrower
or any Subsidiary or (iv) the sale of Permitted Investments in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect thereto no Event of Default
shall have occurred and be continuing, (i) the merger of any Subsidiary into the Borrower in a
transaction in which the Borrower is the surviving corporation, (ii) the merger or consolidation of
any Subsidiary into or with any Loan Party in a transaction in which the surviving or resulting
entity is a Loan Party and, in the case of each of clauses (i) and (ii), no Person other than the
Borrower or a Loan Party receives any consideration, (iii) the merger or consolidation of any
Subsidiary that is not a Loan Party into or with any other Subsidiary that is not a Loan Party or
(iv) the liquidation or dissolution (other than the Borrower) or change in form of entity of the
Borrower or any Subsidiary if the Borrower determines in good faith that such liquidation or
dissolution is in the best interests of the Borrower and is not materially disadvantageous to the
Lenders;
(c) sales, transfers, leases or other dispositions to the Borrower or a Subsidiary (upon
voluntary liquidation or otherwise);
provided
that any sales, transfers, leases or other
dispositions by a Loan Party to a Subsidiary that is not a Loan Party shall be made in compliance
with Section 6.07;
provided
further
that the aggregate gross proceeds of any sales,
transfers, leases or other dispositions by a Loan Party to a Subsidiary that is not a Loan Party in
reliance upon this paragraph (c) and the aggregate gross proceeds of any or all assets sold,
transferred or leased in reliance upon paragraph (h) below shall not exceed, in any fiscal year of
the Borrower, 3.75% of Consolidated Total Assets as of the end of the immediately preceding fiscal
year;
(d) Sale and Lease-Back Transactions permitted by Section 6.03;
CI Acquisition Credit Agreement
(e) Investments permitted by Section 6.04, Liens permitted by Section 6.02 and Dividends
permitted by Section 6.06;
(f) the purchase and sale or other transfer (including by capital contribution) of Receivables
Assets pursuant to Permitted Receivables Financings;
(g) the sale of defaulted receivables in the ordinary course of business and not as part of an
accounts receivables financing transaction;
(h) sales, transfers, leases or other dispositions of assets not otherwise permitted by this
Section 6.05;
provided
that the aggregate gross proceeds (including noncash proceeds) of
any or all assets sold, transferred, leased or otherwise disposed of in reliance upon this
paragraph (h) and in reliance upon the second proviso to paragraph (c) above shall not exceed, in
any fiscal year of the Borrower, 3.75% of Consolidated Total Assets as of the end of the
immediately preceding fiscal year;
provided
further
that the Net Proceeds thereof
are applied in accordance with Section 2.11(c);
(i) any merger or consolidation in connection with a Permitted Business Acquisition,
provided
that following any such merger or consolidation (i) involving the Borrower, the
Borrower is the surviving corporation and (ii) involving a domestic Subsidiary, the surviving or
resulting entity shall be a Loan Party that is a Wholly Owned Subsidiary;
(j) licensing and cross-licensing arrangements involving any technology or other intellectual
property of the Borrower or any Subsidiary in the ordinary course of business;
(k) abandonment, cancellation or disposition of any intellectual property of the Borrower in
the ordinary course of business,
(l) the sale of the facility located at Plaistow, New Hampshire, and
(m) sales, leases or other dispositions of inventory of the Borrower and its Subsidiaries
determined by the management of the Borrower to be no longer useful or necessary in the operation
of the business of the Borrower or any of the Subsidiaries;
provided
that the Net Proceeds
thereof are applied in accordance with Section 2.11(c).
Notwithstanding anything to the contrary contained in Section 6.05 above, (i) Holdings or the
Borrower may, subject to clause (ii) and so long as no Event of Default shall have occurred and be
continuing or would result therefrom, sell, grant or otherwise issue Equity Interests to members of
management of Holdings or the Borrower pursuant to stock option, stock ownership, stock incentive
or similar plans, (ii) Holdings shall at all times own, directly or indirectly, at least 80% of the
Equity Interests of the Borrower, (iii) no sale, transfer or other disposition of assets shall be
permitted by this Section 6.05 (other than sales, transfers, leases or other dispositions to Loan
Parties pursuant to paragraph (c) hereof and purchases, sales or transfers pursuant to paragraph
(f) hereof) unless such disposition is for fair market value, (iv) no sale, transfer or other
disposition of assets shall be permitted by paragraph (a), (d), (f) or (k) of this Section 6.05
unless such disposition is for at least 75% cash consideration and (v) no sale,
transfer or other disposition of assets in excess of U.S.$5.0 million shall be permitted by
paragraph (h) of this Section 6.05 unless such disposition is for at least 75% cash consideration;
CI Acquisition Credit Agreement
provided
that for purposes of clauses (iii) and (iv), the amount of any secured
Indebtedness or other Indebtedness of a Subsidiary that is not a Loan Party (as shown on the
Borrower’s or such Subsidiary’s most recent balance sheet or in the notes thereto) of the Borrower
or any Subsidiary of the Borrower that is assumed by the transferee of any such assets shall be
deemed cash.
SECTION 6.06.
Dividends and Distributions
. Declare or pay, directly or indirectly,
any dividend or make any other distribution (by reduction of capital or otherwise), whether in
cash, property, securities or a combination thereof, with respect to any of its Equity Interests
(other than dividends and distributions on Equity Interests payable solely by the issuance of
additional shares of Equity Interests of the Person paying such dividends or distributions) or
directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any
Subsidiary to purchase or acquire) any shares of any class of its Equity Interests or set aside any
amount for any such purpose;
provided
,
however
, that:
(a) any Subsidiary of the Borrower may declare and pay dividends to, repurchase its Equity
Interests from or make other distributions to, the Borrower or to any Wholly Owned Subsidiary of
the Borrower (or, in the case of non-Wholly Owned Subsidiaries, to the Borrower or any subsidiary
that is a direct or indirect parent of such subsidiary and to each other owner of Equity Interests
of such subsidiary on a
pro
rata
basis (or more favorable basis from the
perspective of the Borrower or such subsidiary) based on their relative ownership interests);
(b) the Borrower and each Subsidiary may declare and pay dividends or make other distributions
to any Parent Company in respect of overhead of such Parent Company or its direct or indirect
owners, including, without limitation, legal, accounting and professional fees and other fees and
expenses in connection with the maintenance of its existence and its ownership of the Borrower, in
each case, to the extent attributable to the ownership of such Parent Company in the Borrower or
such Subsidiary;
(c) the Borrower and each Subsidiary may repurchase, redeem or otherwise acquire or retire (or
make dividends or distributions to any Parent Company to finance any such repurchase, redemption or
other acquisition or retirement) for value any Equity Interests of the Borrower, any Parent Company
or any Subsidiary held by any current or former officer, director, consultant or employee of the
Borrower, any Parent Company or any Subsidiary pursuant to any equity subscription agreement, stock
option agreement, shareholders’ or members’ agreement or similar agreement, plan or arrangement or
any Plan and Subsidiaries may declare and pay dividends to the Borrower or any other Subsidiary the
proceeds of which are used for such purposes,
provided
that the aggregate amount of such
purchases or redemptions under this paragraph (c) shall not exceed in any fiscal year U.S.$5.0
million (plus the amount of net proceeds (x) received by the Borrower during such calendar year
from sales of Equity Interests of the Borrower to directors, consultants, officers or employees of
the Borrower or any Subsidiary in connection with permitted employee compensation and incentive
arrangements and (y) of any key-man life insurance policies recorded during such calendar year) which, if not
used in any year, may be carried forward to any subsequent calendar year;
(d) noncash repurchases of Equity Interests deemed to occur upon exercise of stock options if
such Equity Interests represent a portion of the exercise price of such options;
CI Acquisition Credit Agreement
(e) so long as no Default or Event of Default shall have occurred and is continuing, the
Borrower may declare and pay dividends or make other distributions of up to 5% per calendar year of
the net cash proceeds received by the Borrower from any public offering of the Equity Interests of
the Borrower;
(f) the Borrower may make distributions to its members of management that hold Equity
Interests of the Borrower in respect of such Equity Interests in an aggregate amount not to exceed
in any fiscal year, together with such amounts permitted under Section 6.06(g) for such fiscal
year, U.S.$5 million;
(g) the Borrower may make distributions to any Parent Company solely in connection with
distributions to members of management of Holdings that hold profit interests in Holdings in an
aggregate amount not to exceed in any fiscal year, together with such amounts permitted under
Section 6.06(f) for such fiscal year, U.S.$3 million; and
(h) Payments on Management Notes so long as such payments are in accordance with the
subordination provisions related thereto.
SECTION 6.07.
Transactions with Affiliates
. (a) Sell or transfer any property or
assets to, or purchase or acquire any property or assets from, or otherwise engage in any other
transaction with, any of its Affiliates, unless such transaction is (i) otherwise permitted (or
required) under this Agreement (including in connection with any Permitted Receivables Financing)
or (ii) upon terms no less favorable to the Borrower or such Subsidiary, as applicable, than would
be obtained in a comparable arm’s-length transaction with a Person that is not an Affiliate;
provided
that this clause (ii) shall not apply to the indemnification of directors of the
Borrower and the Subsidiaries in accordance with customary practice.
(b) The foregoing paragraph (a) shall not prohibit, to the extent otherwise permitted under
this Agreement,
(i) any issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock options, stock
ownership plans and the granting and performance of registration rights approved by the
Board of Directors of the Borrower,
(ii) transactions among the Borrower and the Loan Parties and transactions among the
non-Loan Parties otherwise permitted by this Agreement,
(iii) any indemnification agreement or any similar arrangement entered into with
directors, officers, consultants and employees of the Borrower and the Subsidiaries
or any Parent Company in the ordinary course of business and the payment of fees and
indemnities to directors, officers, consultants and employees of the Borrower and the
Subsidiaries or any Parent Company in the ordinary course of business,
(iv) transactions pursuant to permitted agreements in existence on the Closing Date and
set forth on
Schedule 6.07
or any amendment thereto to the extent such amendment is
not adverse to the Lenders in any material respect,
CI Acquisition Credit Agreement
(v) any employment agreement or employee benefit plan entered into by the Borrower or
any of the Subsidiaries in the ordinary course of business or consistent with past practice
and payments pursuant thereto,
(vi) transactions otherwise permitted under Section 6.04 and Section 6.06,
(vii) any purchase by the Funds or any Fund Affiliate of Equity Interests of the
Borrower or any contribution by the Borrower to, or purchase by the Borrower of, the equity
capital of the Borrower;
provided
that any Equity Interests of the Borrower
purchased by the Borrower shall be pledged to the Collateral Agent on behalf of the Lenders
pursuant to the applicable Collateral Agreement,
(viii) payments by the Borrower or any of the Subsidiaries to the Funds or any Fund
Affiliate made for any financial advisory, financing, underwriting or placement services or
in respect of other investment banking activities, including in connection with acquisitions
or divestitures, which payments are approved by the majority of the board of directors of
the Borrower, in good faith,
(ix) the existence of, or the performance by the Borrower or any of the Subsidiaries of
its obligations under the terms of, the Acquisition Agreement, or any agreement contemplated
thereunder to which it is a party as of the Closing Date, or the Holdings LLC Agreement;
provided
,
however
, that the existence of, or the performance by the Borrower
or any subsidiary of obligations under any future amendment to any such existing agreement
or under any similar agreement entered into after the Closing Date shall only be permitted
by this clause (x) to the extent that the terms of any such amendment or new agreement are
not otherwise disadvantageous to the Lenders in any material respect,
(x) transactions with any Affiliate for the purchase or sale of goods, products, parts
and services entered into in the ordinary course of business in a manner consistent with
past practice,
(xi) any transaction in respect of which the Borrower delivers to the Administrative
Agent (for delivery to the Lenders) a letter addressed to the Board of Directors of the
Borrower from an accounting, appraisal or investment banking firm, in each case of
nationally recognized standing that is (A) in the good faith determination of the Borrower
qualified to render such letter and (B) reasonably satisfactory to the Administrative Agent,
which letter states that such transaction is on terms that are no less favorable to the
Borrower or such Subsidiary, as applicable, than would be obtained in a comparable
arm’s-length transaction with a Person that is not an Affiliate,
(xii) the payment of all fees, expenses, bonuses and awards related to the Transactions
contemplated by the Acquisition Documents, including fees to the Funds or any Fund
Affiliate,
(xiii) transactions pursuant to any Permitted Receivables Financing,
CI Acquisition Credit Agreement
(xiv) the issuance of Management Notes, and payments pursuant thereto, so long as such
payments are in accordance with the subordination provisions related thereto,
(xv) so long as not otherwise prohibited under this Agreement, guarantees of
performance by the Borrower or any Subsidiary of any other Subsidiary or the Borrower that
are not a Loan Party in the ordinary course of business, except for guarantees of
Indebtedness in respect of borrowed money, and
(xvi) if such transaction is with a Person in its capacity as a holder (A) of
Indebtedness of the Borrower or any Subsidiary where such Person is treated no more
favorably than the other holders of Indebtedness of the Borrower or any Subsidiary or (B) at
any time after an initial public offering of Equity Interests of the Borrower, of Equity
Interests of the Borrower or any Subsidiary where such Person is treated no more favorably
than the other holders of Equity Interests of the Borrower or any Subsidiary.
SECTION 6.08.
Business of the Borrower and the Subsidiaries
. Notwithstanding any
other provisions hereof, engage at any time in any business or business activity other than any
business or business activity conducted by it on the Closing Date and any business or business
activities incidental or related thereto, or any business or activity that is reasonably similar
thereto or a reasonable extension, development or expansion thereof or ancillary thereto, including
the consummation of the Transactions.
SECTION 6.09.
Limitation on Modifications of Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements; etc
. (a) Amend or modify in any manner
materially adverse to the Lenders, or grant any waiver or release under or terminate in any manner
(if such granting or termination shall be materially adverse to the Lenders), the articles or
certificate of incorporation or by-laws or partnership agreement or limited liability company
operating agreement of the Borrower or any of the Subsidiaries or the Acquisition Agreement.
(b) (i) Make, or agree or offer to pay or make, directly or indirectly, any payment or other
distribution (whether in cash, securities or other property) of or in respect of principal of or
interest on the Senior Subordinated Notes or any Permitted Subordinated Debt Securities, or any
payment or other distribution (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of the Senior Subordinated Notes or any Permitted Subordinated Debt
Securities (except for Refinancings permitted by Section 6.01(l)), except for (A) payments of
regularly scheduled interest, (B) with respect to Permitted Subordinated Debt Securities, payments
made solely with the proceeds from the issuance of
Equity Interests or from equity contributions, other than those received in connection with
Permitted Cure Securities and (C) with respect to the Senior Subordinated Notes, so long as no
Default or Event of Default has occurred and is continuing or would result therefrom, purchases and
redemptions of Senior Subordinated Notes in an amount not to exceed U.S. $60.0 million
provided
that, after giving effect to any such purchases and redemptions under this clause
(C), the Leverage Ratio shall be less than 3.00:1.00, calculated on a pro forma basis as of the
last day
CI Acquisition Credit Agreement
of the most recently ended fiscal quarter in respect of which financial statements have
been delivered pursuant to Section 5.04; or
(ii) Amend or modify, or permit the amendment or modification of, any provision of any Senior
Subordinated Note or any Permitted Senior Debt Securities or Permitted Subordinated Debt
Securities, any Permitted Receivables Document or any agreement (including any Senior Subordinated
Notes Document or any document relating to any Permitted Senior Debt Securities or Permitted
Subordinated Debt Securities) relating thereto, other than amendments or modifications that are not
in any manner materially adverse to Lenders and that do not affect the subordination provisions
thereof (if any) in a manner adverse to the Lenders.
(c) Permit any Subsidiary to enter into any agreement or instrument that by its terms
restricts (i) the payment of dividends or distributions or the making of cash advances by such
Subsidiary to the Borrower or any Subsidiary that is a direct or indirect parent of such Subsidiary
or (ii) the granting of Liens by such Subsidiary pursuant to the Security Documents, in each case
other than those arising under any Loan Document, except, in each case, restrictions existing by
reason of:
(A) restrictions imposed by applicable law;
(B) restrictions contained in any Permitted Receivables Document with respect to any
Special Purpose Receivables Subsidiary;
(C) contractual encumbrances or restrictions in effect on the Closing Date under (x)
any Senior Subordinated Note Document or (y) any agreements related to any permitted
renewal, extension or refinancing of any Indebtedness existing on the Closing Date that does
not expand the scope of any such encumbrance or restriction;
(D) restrictions imposed by any Permitted Senior Debt Securities that are substantially
similar to restrictions set forth in the Credit Agreement;
(E) any restriction on a Subsidiary imposed pursuant to an agreement entered into for
the sale or disposition of all or substantially all the Equity Interests or assets of a
Subsidiary pending the closing of such sale or disposition;
(F) customary provisions in joint venture agreements and other similar agreements
applicable to joint ventures entered into in the ordinary course of business;
(G) any restrictions imposed by any agreement relating to secured Indebtedness
permitted by this Agreement to the extent that such restrictions apply only to the property
or assets securing such Indebtedness;
(H) customary provisions contained in leases or licenses of intellectual property and
other similar agreements entered into in the ordinary course of business;
(I) customary provisions restricting subletting or assignment of any lease governing a
leasehold interest;
CI Acquisition Credit Agreement
(J) customary provisions restricting assignment of any agreement entered into in the
ordinary course of business;
(K) customary restrictions and conditions contained in any agreement relating to the
sale of any asset permitted under Section 6.05 pending the consummation of such sale; or
(L) any agreement in effect at the time such subsidiary becomes a Subsidiary, so long
as such agreement was not entered into in contemplation of such Person becoming a
Subsidiary.
SECTION 6.10.
Capital Expenditures
. Permit the Borrower or its Subsidiaries to make
any Capital Expenditure, except that:
(a) The Borrower and its Subsidiaries may make Capital Expenditures so long as during any
fiscal year the aggregate amount thereof does not exceed the amount set forth opposite such fiscal
year below:
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
|
|
|
Amount
|
|
2006
|
|
|
|
|
|
$
|
15,000,000
|
|
|
2007
|
|
|
|
|
|
$
|
15,000,000
|
|
|
2008
|
|
|
|
|
|
$
|
15,000,000
|
|
|
2009
|
|
|
|
|
|
$
|
15,000,000
|
|
|
2010
|
|
|
|
|
|
$
|
15,000,000
|
|
(b) Notwithstanding anything to the contrary contained in paragraph (a) above, to the extent
that the aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries in any
fiscal year of the Borrower pursuant to Section 6.10(a) is less than the amount set forth for such
fiscal year, the amount of such difference may be carried forward and used to make Capital
Expenditures in the two succeeding fiscal years;
provided
that in any fiscal year, the
amount permitted to be applied to make Capital Expenditures pursuant to this paragraph (b) shall in
no event exceed an amount equal to 50% of the amount set forth in Section 6.10(a) for such fiscal
year.
(c) In addition to the Capital Expenditures permitted pursuant to the preceding paragraphs (a)
and (b), the Borrower and its Subsidiaries may make additional Capital Expenditures at any time in
an amount not to exceed the portion, if any, of the Available Investment Basket Amount on the date
of such Capital Expenditure that the Borrower elects to apply to this Section 6.10(c).
SECTION 6.11.
Interest Coverage Ratio
. Permit the ratio (the “
Interest Coverage
Ratio
”) on the last day of the fiscal quarter set forth below, for the four quarter period
ended as of such day of (a) EBITDA to (b) Cash Interest Expense to be less than the ratio set forth
below for such period;
provided
that to the extent any Asset Disposition or any Asset
Acquisition (or any similar transaction or transactions for which a waiver or a consent of the
Required Lenders pursuant to Section 6.05 has been obtained) or incurrence or repayment of
Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working
CI Acquisition Credit Agreement
capital
purposes) has occurred during the relevant Test Period, the Interest Coverage Ratio shall be
determined for the respective Test Period on a pro forma Basis for such occurrences.
|
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|
Period Ended
|
|
Ratio
|
|
December 31, 2005
|
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1.75 to 1.00
|
|
March 31, 2006
|
|
1.75 to 1.00
|
|
June 30, 2006
|
|
1.75 to 1.00
|
|
September 30, 2006
|
|
1.75 to 1.00
|
|
December 31, 2006
|
|
2.00 to 1.00
|
|
March 31, 2007
|
|
2.00 to 1.00
|
|
June 30, 2007
|
|
2.00 to 1.00
|
|
September 30, 2007
|
|
2.00 to 1.00
|
|
December 31, 2007
|
|
2.00 to 1.00
|
|
March 31, 2008
|
|
2.25 to 1.00
|
|
June 30, 2008
|
|
2.25 to 1.00
|
|
September 30, 2008
|
|
2.25 to 1.00
|
|
December 31, 2008 and thereafter
|
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2.25 to 1.00
|
SECTION 6.12.
Leverage Ratio
. Permit the Leverage Ratio on the last day of any fiscal
quarter set forth below, to be in excess of the ratio set forth below for such period.
CI Acquisition Credit Agreement
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|
|
Period Ended
|
|
Ratio
|
|
December 31, 2005
|
|
6.75 to 1.000
|
|
March 31, 2006
|
|
6.75 to 1.000
|
|
June 30, 2006
|
|
6.75 to 1.000
|
|
September 30, 2006
|
|
6.50 to 1.000
|
|
December 31, 2006
|
|
6.50 to 1.000
|
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March 31, 2007
|
|
6.25 to 1.000
|
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June 30, 2007
|
|
6.25 to 1.000
|
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September 30, 2007
|
|
6.00 to 1.000
|
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December 31, 2007
|
|
6.00 to 1.000
|
|
March 31, 2008
|
|
5.75 to 1.000
|
|
June 30, 2008
|
|
5.75 to 1.000
|
|
September 30, 2008
|
|
5.50 to 1.000
|
|
December 31, 2008 and thereafter
|
|
5.00 to 1.000
|
SECTION 6.13.
Swap Agreements
. Enter into any Swap Agreement, other than (a) Swap
Agreements required by Section 5.12 or any Permitted Receivables Financing, (b) Swap Agreements
entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or
any Subsidiary is exposed in the conduct of its business or the management of its liabilities, and
(c) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates
(from fixed to floating rates, from one floating rate to another floating rate or otherwise) with
respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.
SECTION 6.14.
Designated Senior Debt
. Designate any Indebtedness of the Borrower or
any of the Subsidiaries other than (i) the Obligations hereunder and (ii) Permitted Senior Debt
Securities as “Designated Senior Indebtedness” under, and as defined in, the Senior Subordinated
Notes Indenture.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01.
Events of Default
. In case of the happening of any of the following
events (“
Events of Default
”):
(a) any representation or warranty made or deemed made by the Borrower or any other Loan Party
in any Loan Document, or any representation, warranty, statement or information contained in any
report, certificate, financial statement or other instrument furnished in connection with or
pursuant to any Loan Document, shall prove to have been false or misleading in any material respect
when so made, deemed made or furnished by the Borrower or any other Loan Party;
(b) default shall be made in the payment of any principal of any Loan or the reimbursement
with respect to any L/C Disbursement when and as the same shall become due
CI Acquisition Credit Agreement
and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or on any L/C
Disbursement or in the payment of any Fee or any other amount (other than an amount referred to in
(b) above) due under any Loan Document, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of five (5) Business Days;
(d) default shall be made in the due observance or performance by the Borrower or any of the
Subsidiaries of any covenant, condition or agreement contained in Section 5.01(a) (with respect to
the Borrower), 5.05(a), 5.08, 5.10(c) or in Article VI;
(e) default shall be made in the due observance or performance by the Borrower or any of the
Subsidiaries of any covenant, condition or agreement contained in any Loan Document (other than
those specified in paragraphs (b), (c) and (d) above) and such default shall continue unremedied
for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the
Borrower;
(f) (i) any event or condition occurs that (A) results in any Material Indebtedness becoming
due prior to its scheduled maturity or (B) enables or permits (with all applicable grace periods
having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its
or their behalf to cause any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity or (ii) the Borrower
or any of the Subsidiaries shall fail to pay the principal of any Material Indebtedness at the
stated final maturity thereof;
provided
that this clause (f) shall not apply to secured
Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the
documents providing for such Indebtedness;
(g) there shall have occurred a Change in Control;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in
a court of competent jurisdiction seeking (i) relief in respect of the Borrower or any of the
Subsidiaries, or of a substantial part of the property or assets of the Borrower or any Subsidiary,
under Title 11 of the United States Code, as now constituted or hereafter amended, or any other
federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower
or any of the Subsidiaries or for a substantial part of the property or assets of the Borrower or
any of the Subsidiaries or (iii) the winding-up or liquidation of the Borrower or any Subsidiary
(except, in the case of any Subsidiary, in a transaction permitted by Section 6.05); and such
proceeding or petition shall continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of, or fail to contest in a
timely and
CI Acquisition Credit Agreement
appropriate manner, any proceeding or the filing of any petition described in paragraph
(h) above, (iii) apply for, request or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or any of the
Subsidiaries or for a substantial part of the property or assets of the Borrower or any Subsidiary,
(iv) file an answer admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable, admit
in writing its inability or fail generally to pay its debts as they become due;
(j) the failure by the Borrower or any Subsidiary to pay one or more final judgments
aggregating in excess of U.S.$10.0 million (net of any amounts which are covered by insurance or
bonded), which judgments are not discharged or effectively waived or stayed for a period of 30
consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets
or properties of the Borrower or any Subsidiary to enforce any such judgment;
(k) one or more ERISA Events shall have occurred that, when taken together with all other
ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse
Effect;
(l) (i) any Loan Document shall for any reason be asserted in writing by the Borrower or any
Subsidiary not to be a legal, valid and binding obligation of any party thereto, (ii) any security
interest purported to be created by any Security Document and to extend to Collateral that is not
immaterial to the Borrower and its Subsidiaries on a consolidated basis shall cease to be, or shall
be asserted in writing by the Borrower or any other Loan Party not to be, a valid and perfected
security interest (having the priority required by this Agreement or the relevant Security
Document) in the securities, assets or properties covered thereby, except to the extent that (x)
any such loss of perfection or priority results from the failure of the Collateral Agent to
maintain possession of certificates actually delivered to it representing securities pledged under
the Collateral Agreements or to file UCC continuation statements, (y) such loss is covered by a
lender’s title insurance policy and the Administrative Agent shall be reasonably satisfied with the
credit of such insurer or (z) any such loss of validity, perfection or priority is the result of
any failure by the Collateral Agent or the Administrative Agent to take any action necessary to
secure the validity, perfection or priority of the liens, or (iii) the Guarantees pursuant to the
Security Documents by the Borrower or the Subsidiary Loan Parties of any of the Obligations shall
cease to be in full force and effect (other than in accordance with the terms thereof), or shall be
asserted in writing by the Borrower or any Subsidiary Loan Party not to be in effect or not to be
legal, valid and binding obligations;
then, and in every such event (other than an event with respect to the Borrower described in
paragraph (h), (i) or (l) above), and at any time thereafter during the continuance of such event,
the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrower,
take any or all of the following actions, at the same or different times: (i) terminate forthwith
the Commitments, (ii) declare the Loans then outstanding to be forthwith due and payable in whole
or in part, whereupon the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower
accrued hereunder and under any other Loan Document, shall become forthwith due and payable,
without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by the Borrower, anything contained herein or in any
CI Acquisition Credit Agreement
other Loan Document to the contrary notwithstanding and (iii) demand cash collateral pursuant to Section
2.05(j); and in any event with respect to the Borrower described in paragraph (h) or (i) above, the
Commitments shall automatically terminate, the principal of the Loans then outstanding, together
with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower
accrued hereunder and under any other Loan Document, shall automatically become due and payable and
the Administrative Agent shall be deemed to have made a demand for cash collateral to the full
extent permitted under Section 2.05(j), without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in
any other Loan Document to the contrary notwithstanding.
SECTION 7.02.
Exclusion of Immaterial Subsidiaries
. Solely for the purposes of
determining whether an Event of Default has occurred under clause (h) or (i) of Section 7.01, any
reference in any such clause to any Subsidiary shall be deemed not to include any Subsidiary
affected by any event or circumstance referred to in any such clause that did not, as of the last
day of the fiscal quarter of the Borrower most recently ended, have assets with a value in excess
of 2.5% of the Consolidated Total Assets or 2.5% of total revenues of the Borrower and its
Subsidiaries as of such date;
provided
that if it is necessary to exclude more than one
Subsidiary from clause (h) or (i) of Section 7.01 pursuant to this Section 7.02 in order to avoid
an Event of Default thereunder, all excluded Subsidiaries shall be considered to be a single
consolidated Subsidiary for purposes of determining whether the condition specified above is
satisfied.
SECTION 7.03.
The Borrower’s Right to Cure
. (a)
Financial Performance
Covenants
. Notwithstanding anything to the contrary contained in Section 7.01, in the event
that the Borrower fails to comply with the requirements of any Financial Performance Covenant,
until the expiration of the 10th day subsequent to the date the certificate calculating such
Financial Performance Covenant is required to be delivered pursuant to Section 5.04(c), the
Borrower shall have the right to issue Permitted Cure Securities for cash or otherwise receive cash
contributions to the capital of the Borrower (collectively, the “
Cure Right
”), and upon the
receipt by the Borrower of such cash (the “
Cure Amount
”) pursuant to the exercise by the
Borrower of such Cure Right such Financial Performance Covenant shall be recalculated giving effect
to the following
pro
forma
adjustments:
(i) EBITDA shall be increased, solely for the purpose of measuring the Financial
Performance Covenants and not for any other purpose under this Agreement, by an amount equal
to the Cure Amount; and
(ii) If, after giving effect to the foregoing recalculations, the Borrower shall then
be in compliance with the requirements of all Financial Performance Covenants, the Borrower
shall be deemed to have satisfied the requirements of the Financial Performance Covenants as
of the relevant date of determination with the same effect as though there had been no
failure to comply therewith at such date, and the applicable breach or default of the Financial Performance Covenants that had occurred shall be deemed cured for this purposes of the Agreement.
(b)
Limitation on Exercise of Cure Right
. Notwithstanding anything herein to the
contrary, (a) in each four-fiscal-quarter period there shall be at least one fiscal quarter in
CI Acquisition Credit Agreement
which the Cure Right is not exercised, (b) in each eight-fiscal-quarter period, there shall be a
period of at least four consecutive fiscal quarters during which the Cure Right is not exercised
and (c) the Cure Amount shall be no greater than the amount required for purposes of complying with
the Financial Performance Covenants.
ARTICLE VIII
THE AGENTS
SECTION 8.01.
Appointment
. (a) In order to expedite the transactions contemplated
by this Agreement, (i) Citicorp North America, Inc. is hereby appointed to act as Administrative
Agent and Collateral Agent and (ii) Morgan Stanley Senior Funding, Inc. is hereby appointed to act
as Syndication Agent. Each of the Lenders and each assignee of any such Lender hereby irrevocably
authorizes the Administrative Agent to take such actions on behalf of such Lender or assignee and
to exercise such powers as are specifically delegated to the Administrative Agent by the terms and
provisions hereof and of the other Loan Documents, together with such actions and powers as are
reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the
Lenders and each Issuing Bank, without hereby limiting any implied authority, (a) to receive on
behalf of the Lenders and such Issuing Bank all payments of principal of and interest on the Loans,
all payments in respect of L/C Disbursements and all other amounts due to the Lenders and such
Issuing Bank hereunder, and promptly to distribute to each Lender or such Issuing Bank its proper
share of each payment so received; (b) to give notice on behalf of each of the Lenders of any Event
of Default specified in this Agreement of which the Administrative Agent has actual knowledge
acquired in connection with the performance of its duties as Administrative Agent hereunder; and
(c) to distribute to each Lender copies of all notices, financial statements and other materials
delivered by the Borrower pursuant to this Agreement as received by the Administrative Agent.
Without limiting the generality of the foregoing, the Collateral Agent is hereby expressly
authorized to execute any and all documents (including releases) with respect to the Collateral and
the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with
the provisions of this Agreement and the Security Documents, and all rights and remedies in respect
of such Collateral shall be controlled by the Collateral Agent.
(b) Neither the Agents nor any of their respective directors, officers, employees or agents
shall be liable as such for any action taken or omitted by any of them except for its or his own
gross negligence or willful misconduct, or be responsible for any statement, warranty or
representation herein or the contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the performance or observance by the
Borrower or any other Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the
Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this
Agreement or any other Loan Documents or other instruments or agreements. The Agents shall in all
cases be fully protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders and, except as otherwise specifically provided herein,
such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders.
Each Agent shall, in the absence of knowledge to the contrary, be entitled to rely on
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any instrument or document believed by it in good faith to be genuine and correct and to have been
signed or sent by the proper Person. Neither the Agents nor any of their respective directors,
officers, employees or agents shall have any responsibility to the Borrower or any other Loan Party
or any other party hereto or to any Loan Document on account of the failure, delay in performance
or breach by, or as a result of information provided by, any Lender or Issuing Bank of any of its
obligations hereunder or to any Lender or Issuing Bank on account of the failure of or delay in
performance or breach by any other Lender or Issuing Bank or the Borrower or any other Loan Party
of any of their respective obligations hereunder or under any other Loan Document or in connection
herewith or therewith. Each Agent may execute any and all duties hereunder by or through agents,
employees or any sub-agent appointed by it and shall be entitled to rely upon the advice of legal
counsel selected by it with respect to all matters arising hereunder and shall not be liable for
any action taken or suffered in good faith by it in accordance with the advice of such counsel.
SECTION 8.02.
Nature of Duties
. The Lenders hereby acknowledge that no Agent shall
be under any duty to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by the Required
Lenders. The Lenders further acknowledge and agree that so long as an Agent shall make any
determination to be made by it hereunder or under any other Loan Document in good faith, such Agent
shall have no liability in respect of such determination to any Person. Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into the Loan Documents or otherwise exist against the Administrative
Agent. Each Lender recognizes and agrees that the Joint Lead Arrangers shall have no duties or
responsibilities under this Agreement or any other Loan Document, or any fiduciary relationship
with any Lender, and shall have no functions, responsibilities, duties, obligations or liabilities
for acting as such hereunder.
SECTION 8.03.
Resignation by the Agents
. Subject to the appointment and acceptance
of a successor Agent as provided below, any Agent may resign at any time by notifying the Lenders
and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint
a successor with the consent of the Borrower (not to be unreasonably withheld or delayed). If no
successor shall have been so appointed by the Required Lenders and approved by the Borrower and
shall have accepted such appointment within 45 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders with the consent of the Borrower
(not to be unreasonably withheld or delayed), appoint a successor Agent which shall be a bank with an
office in New York, New York and an office in London, England (or a bank having an Affiliate with
such an office) having a combined capital and surplus that is not less than U.S.$500.0 million or
an Affiliate of any such bank. Upon the acceptance of any appointment as Agent hereunder by a
successor bank, such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its
duties and obligations hereunder. After the Agent’s resignation hereunder, the provisions of this
Article and Section 9.05 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 Agent.
CI Acquisition Credit Agreement
SECTION 8.04.
Each Agent in Its Individual Capacity
. With respect to the Loans made
by it hereunder, each Agent in its individual capacity and not as Agent shall have the same rights
and powers as any other Lender and may exercise the same as though it were not an Agent, and the
Agents and their Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower or any of the Subsidiaries or other Affiliates thereof as if it
were not an Agent.
SECTION 8.05.
Indemnification
. Each Lender agrees (a) to reimburse the Agents, on
demand, in the amount of its
pro
rata
share (based on its Commitments hereunder (or
if such Commitments shall have expired or been terminated, in accordance with the respective
principal amounts of its applicable outstanding Loans or participations in L/C Disbursements, as
applicable)) of any reasonable expenses incurred for the benefit of the Lenders by the Agents,
including reasonable counsel fees and compensation of agents and employees paid for services
rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrower and (b) to
indemnify and hold harmless each Agent and any of its directors, officers, employees or agents, on
demand, in the amount of such
pro
rata
share, from and against any and all
liabilities, Taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against it in its capacity as Agent or any of them in any way relating to or arising out
of this Agreement or any other Loan Document or any action taken or omitted by it or any of them
under this Agreement or any other Loan Document, to the extent the same shall not have been
reimbursed by the Borrower,
provided
that no Lender shall be liable to an Agent for any
portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful misconduct of such
Agent or any of its directors, officers, employees or agents.
SECTION 8.06.
Lack of Reliance on Agents
. Each Lender acknowledges that it has,
independently and without reliance upon the Agents and any Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and without reliance
upon the Agents, any other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not taking action under
or based upon this Agreement or any other Loan Document, any related agreement or any document
furnished hereunder or thereunder.
SECTION 8.07.
Appointment of Supplemental Collateral Agents
. (a) It is the purpose
of this Agreement and the other Loan Documents that there shall be no violation of any law of any
jurisdiction denying or restricting the right of banking corporations or associations to transact
business as agent or trustee in such jurisdiction. It is recognized that in case of litigation
under this Agreement or any of the other Loan Documents, and in particular in case of the
enforcement of any of the Loan Documents, or in case the Administrative Agent deems that by reason
of any present or future law of any jurisdiction it may not exercise any of the rights, powers or
remedies granted herein or in any of the other Loan Documents or take any other action which may be
desirable or necessary in connection therewith, it may be necessary that the Administrative Agent
appoint an additional individual or institution as a separate trustee, co-trustee, collateral
agent, collateral sub-agent or collateral co-agent (any such additional
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individual or institution being referred to herein individually as a “
Supplemental Collateral Agent
” and collectively
as “
Supplemental Collateral Agents
”).
(b) In the event that the Administrative Agent appoints a Supplemental Collateral Agent with
respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended
by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to
the Administrative Agent with respect to such Collateral shall be exercisable by and vest in such
Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such
Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such
Collateral and to perform such duties with respect to such Collateral, and every covenant and
obligation contained in the Loan Documents and necessary to the exercise or performance thereof by
such Supplemental Collateral Agent shall run to and be enforceable by either the Administrative
Agent or such Supplemental Collateral Agent, and (ii) the provisions of this Article and of Section
9.05 that refer to the Administrative Agent shall inure to the benefit of such Supplemental
Collateral Agent and all references therein to the Administrative Agent shall be deemed to be
references to the Administrative Agent and/or such Supplemental Collateral Agent, as the context
may require.
(c) Should any instrument in writing from any Loan Party be required by any Supplemental
Collateral Agent so appointed by the Administrative Agent for more fully and certainly vesting in
and confirming to it such rights, powers, privileges and duties, such Loan Party shall execute,
acknowledge and deliver any and all such instruments promptly upon request by the Administrative
Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such
Supplemental Collateral Agent, to the extent permitted by law, shall vest in and be exercised by
the Administrative Agent until the appointment of a new Supplemental Collateral Agent.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01.
Notices
. (a) Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy, as follows:
(i) if to the Borrower, to it at One Infinity Corporate Centre Drive, Suite 300,
Garfield Heights, Ohio 44125, Attention: Michael F. Biehl, Chief Financial Officer
(telecopy (440) 753-1491) (e-mail: michael.biehl@chart-ind.com), with a copy to First
Reserve Corporation, One Lafayette Place, Greenwich, Connecticut 06830;
(ii) if to the Administrative Agent or the Collateral Agent, to Citicorp North America,
Inc., 2 Penns Way, Suite 200, New Castle, Delaware 19720, Attention: Valerie Burrows
(telecopy (212) 994-0961) (e-mail: valerie.r.burrows@citigroup.com), with a copy to Shearman
& Sterling LLP, 599 Lexington Avenue, New York, New York 10022, attention: Maura O’
Sullivan, Esq. (telecopy: (646) 848-7897); and
CI Acquisition Credit Agreement
(iii) if to an Issuing Bank, to it at the address or telecopy number set forth
separately in writing.
(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the Administrative Agent;
provided
that the foregoing shall not apply to notices pursuant to Article II unless
otherwise agreed by the Administrative Agent and the applicable Lender. Each of the Administrative
Agent, the Collateral Agent and the Borrower may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to procedures approved
by it;
provided
further
that approval of such procedures may be limited to
particular notices or communications.
(c) All notices and other communications given to any party hereto in accordance with the
provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered
by hand or overnight courier service, sent by telecopy or (to the extent permitted by paragraph (b)
above) electronic means or on the date five Business Days after dispatch by certified or registered
mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as
provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party
given in accordance with this Section 9.01.
(d) Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto.
SECTION 9.02.
Survival of Agreement
. All covenants, agreements, representations and
warranties made by the Borrower and the Loan Parties herein, in the other Loan Documents and in the
certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or
any other Loan Document shall be considered to have been relied upon by the Lenders and each
Issuing Bank and shall survive the making by the Lenders of the Loans, the execution and delivery
of the Loan Documents and the issuance of the Letters of Credit, regardless of any investigation
made by such Persons or on their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or L/C Disbursement or any Fee or any other amount
payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not been terminated. Without prejudice
to the survival of any other agreements contained herein, indemnification and reimbursement
obligations contained herein (including pursuant to Sections 2.15, 2.17 and 9.05) shall survive the
payment in full of the principal and interest hereunder, the expiration of the Letters of Credit
and the termination of the Commitments or this Agreement.
SECTION 9.03.
Binding Effect
. This Agreement shall become effective when it shall
have been executed by Holdings, the Borrower and the Agents and when the Administrative Agent shall
have received copies hereof which, when taken together, bear the signatures of each of the other
parties hereto, and thereafter shall be binding upon and inure to the benefit of Holdings, the
Borrower, each Issuing Bank, the Agents and each Lender and their respective permitted successors
and assigns.
CI Acquisition Credit Agreement
SECTION 9.04.
Successors and Assigns
. (a) The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of
Credit), except that (i) other than pursuant to a merger permitted by Section 6.05(b) or 6.05(i),
the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any attempted assignment or transfer by the
Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise
transfer its rights or obligations hereunder except in accordance with this Section. Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the
parties hereto, their respective successors and assigns permitted hereby (including any Affiliate
of any Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in
paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Agents, each Issuing Bank and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.
(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign
to one or more assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing to it) with the prior
written consent (such consent not to be unreasonably withheld or delayed) of:
(A) the Borrower;
provided
that no consent of the Borrower shall be required
for an assignment in respect of the primary syndication of the Facilities (as reasonably
determined by the Administrative Agent), so long as the Borrower is consulted with respect
to such assignments;
provided
further
that no consent of the Borrower shall
be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or,
if an Event of Default has occurred and is continuing, any other assignee (
provided
that any liability of the Borrower to an assignee that is an Approved Fund or Affiliate of
the assigning Lender under Section 2.15 or 2.17 shall be limited to the amount, if any, that
would have been payable hereunder by the Borrower in the absence of such assignment); and
(B) the Administrative Agent and, in the case of Revolving Facility Commitment, the
Swingline Lenders;
provided
that no consent of the Administrative Agent or the
Swingline Lenders, as applicable, shall be required for an assignment of (i) a Revolving
Facility Commitment to an assignee that is a Revolving Facility Lender immediately prior to
giving effect to such assignment, or (ii) a Term B Loan to a Lender, an Affiliate of a
Lender or Approved Fund immediately prior to giving effect to such assignment.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund, an assignment of the entire remaining amount of the assigning Lender’s
Commitment or contemporaneous assignments to related Approved Funds that equal at least
U.S.$1.0 million in the aggregate, the amount of the commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the
CI Acquisition Credit Agreement
Administrative Agent) shall not be less
than U.S.$5.0 million, in the case of assignments under the Revolving Facility and U.S.$1.0
million, in the case of assignments under the Term Loan B Facility unless the Borrower and
the Administrative Agent otherwise consent;
provided
that no such consent of the
Borrower shall be required if an Event of Default under paragraph (b), (c), (h) or (i) of
Section 7.01 has occurred and is continuing;
(B) each partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender’s rights and obligations under this Agreement;
(C) the parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with a processing and recordation fee of
U.S.$3,500;
provided
that no such recordation fee shall be due in connection with an
assignment to an existing Lender or Affiliate of a Lender or an Approved Fund of such Lender
or an assignment by the Administrative Agent and
provided
further
that only
one such fee shall be payable in connection with contemporaneous assignments to related
Approved Funds; and
(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire.
For purposes of this Section 9.04(b), the term “
Approved Fund
” shall have the
following meaning:
“
Approved Fund
” shall mean any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by a Lender, an
Affiliate of a Lender or an entity or an Affiliate of an entity that administers or manages
a Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this
Section, from and after the effective date specified in each Assignment and Acceptance the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning
Lender hereunder shall, to the extent of the interest assigned by such Assignment and Acceptance,
be released from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.15, 2.16, 2.17 and 9.05). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 9.04 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (c) of this Section.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall
maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the Commitment of, and
principal amount of the Loans and L/C Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the “
Register
”). The entries in the
CI Acquisition Credit Agreement
Register shall be conclusive, and the Borrower, the Agents, each Issuing Bank and the Lenders shall treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, any Issuing Bank and any Lender, at any reasonable time
and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning
Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Acceptance and record the
information contained therein in the Register. No assignment shall be effective for purposes of
this Agreement unless it has been recorded in the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Borrower, the Administrative Agent, any
Issuing Bank or any Swingline Lender, sell participations to one or more banks or other entities (a
“
Participant
”) in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to it);
provided
that (A) such Lender’s obligations under this Agreement shall remain unchanged,
(B) such Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Agents, each Issuing Bank and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. Any agreement or instrument (oral or written) pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve
any amendment, modification or waiver of any provision of this Agreement and the other Loan
Documents;
provided
that (x) such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment, modification or waiver
described in Section 9.04(a)(i) or clauses (i), (ii), (iii), (iv), (v) or (vi) of the first proviso
to Section 9.08(b) that affects such Participant and (y) no other agreement (oral or written) with
respect to such Participant may exist between such Lender and such Participant. Subject to
paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to
the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though
it were a Lender,
provided
such Participant agrees to be subject to Section 2.18(c) as
though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater payment under Section 2.15,
2.16 or 2.17 than the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to such Participant is
made with the Borrower’s prior written consent (which shall not be unreasonably withheld). A
Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.17 to the extent such Participant fails to comply with Section 2.17(e) as
though it were a Lender.
CI Acquisition Credit Agreement
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest;
provided
that no such pledge or
assignment of a security interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05.
Expenses; Indemnity
. (a) The Borrower agrees to pay all reasonable
and documented out-of-pocket expenses incurred by the Agents in connection with the preparation of
this Agreement and the other Loan Documents, or by the Agents in connection with the syndication of
the Commitments or the administration of this Agreement (including expenses incurred in connection
with due diligence and initial and ongoing Collateral examination to the extent incurred with the
reasonable prior approval of the Borrower and the reasonable fees, disbursements and the charges
for no more than one counsel in each jurisdiction where Collateral is located) or in connection
with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not
the Transactions hereby contemplated shall be consummated) or incurred by the Agents or any Lender
in connection with the enforcement or protection of their rights in connection with this Agreement
and the other Loan Documents, in connection with the Loans made or the Letters of Credit issued
hereunder, including the reasonable fees, charges and disbursements of Shearman & Sterling LLP,
counsel for the Agents and the Joint Lead Arrangers, and, in connection with any such enforcement
or protection, the reasonable fees, charges and disbursements of any other counsel) (including the
reasonable and documented allocated costs of internal counsel for the Agents, the Joint Lead Arrangers, any Issuing Bank
or any Lender (but no more than one such counsel for any Lender)).
(b) The Borrower agrees to indemnify the Agents, the Joint Lead Arrangers, each Issuing Bank,
each Lender and each of their respective directors, trustees, officers, employees, investment
advisors and agents (each such Person being called an “
Indemnitee
”) against, and to hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable and documented counsel fees, charges and disbursements, incurred by
or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i)
the execution or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of
their respective obligations thereunder or the consummation of the Transactions and the other
transactions contemplated hereby, (ii) the use of the proceeds of the Loans or the use of any
Letter of Credit or (iii) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto,
provided
that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses result primarily from the gross negligence or willful misconduct of
such Indemnitee (treating, for this purpose only, any Agent, any Joint Lead Arranger, any Issuing
Bank, any Lender and any of their respective Related Parties as a single Indemnitee). Subject to
and without limiting the generality of the foregoing sentence, the Borrower agrees to indemnify
each Indemnitee against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable and documented counsel or
consultant fees, charges and disbursements, incurred by or asserted against any Indemnitee arising
out of, in any way connected with, or as a result of (A) any Environmental Claim related in any way
to Holdings, the Borrower or any of
CI Acquisition Credit Agreement
their Subsidiaries, or (B) any actual or alleged presence,
Release or threatened Release of Hazardous Materials at, under, on or from any Property, any
property owned, leased or operated by any predecessor of Holdings, the Borrower or any of their
Subsidiaries, or any property at which Holdings, the Borrower or any of their Subsidiaries has sent
Hazardous Wastes for treatment, storage or disposal,
provided
that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses result from the gross negligence or willful misconduct of such
Indemnitee or any of its Related Parties. The provisions of this Section 9.05 shall remain
operative and in full force and effect regardless of the expiration of the term of this Agreement,
the consummation of the transactions contemplated hereby, the repayment of any of the Obligations,
the invalidity or unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of any Agent, any Issuing Bank or any Lender.
All amounts due under this Section 9.05 shall be payable on written demand therefor accompanied by
reasonable documentation with respect to any reimbursement, indemnification or other amount
requested.
(c) Unless an Event of Default shall have occurred and be continuing, the Borrower shall be
entitled to assume the defense of any action for which indemnification is sought hereunder with
counsel of their choice at its expense (in which case the Borrower shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by an Indemnitee except as
set forth below);
provided
,
however
, that such counsel shall be reasonably
satisfactory to each such Indemnitee. Notwithstanding the Borrower’s election to assume the
defense of such action, each Indemnitee shall have the right to employ separate counsel and to
participate in the defense of such action, and the Borrower shall bear the reasonable fees,
costs and expenses of such separate counsel, if (i) the use of counsel chosen by the Borrower to
represent such Indemnitee would present such counsel with a conflict of interest; (ii) the actual
or potential defendants in, or targets of, any such action include both the Borrower and such
Indemnitee and such Indemnitee shall have reasonably concluded that there may be legal defenses
available to it that are different from or additional to those available to the Borrower (in which
case the Borrower shall not have the right to assume the defense or such action on behalf of such
Indemnitee); (iii) the Borrower shall not have employed counsel reasonably satisfactory to such
Indemnitee to represent it within a reasonable time after notice of the institution of such action;
or (iv) the Borrower shall authorize in writing such Indemnitee to employ separate counsel at the
Borrower’s expense. The Borrower will not be liable under this Agreement for any amount paid by an
Indemnitee to settle any claims or actions if the settlement is entered into without the Borrower’s
consent, which consent may not be withheld or delayed unless such settlement is unreasonable in
light of such claims or actions against, and defenses available to, such Indemnitee.
(d) This Section 9.05 shall not apply to Taxes.
SECTION 9.06.
Right of Set-off
. Subject to Section 9.22, if an Event of Default
shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or
the account of any Loan Party or any other Domestic Subsidiary, against any and all obligations of
the Loan Parties, now or hereafter existing under this Agreement or any other Loan Document
CI Acquisition Credit Agreement
held by such Lender or such Issuing Bank, irrespective of whether or not such Lender or such Issuing Bank
shall have made any demand under this Agreement or such other Loan Document and although the
obligations may be unmatured. The rights of each Lender and each Issuing Bank under this Section
9.06 are in addition to other rights and remedies (including other rights of set-off) that such
Lender or such Issuing Bank may have.
SECTION 9.07.
Applicable Law
. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER
THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08.
Waivers; Amendment
. (a) No failure or delay of the Agents, any
Issuing Bank or any Lender in exercising any right or power hereunder or under any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right or power. The rights and
remedies of the Agents, each Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No waiver of any
provision of this Agreement or any other Loan Document or consent to any departure by the Borrower
or any other Loan Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice or demand on the Borrower or any
other Loan Party in any case shall entitle such Person to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may
be waived, amended or modified except (x) in the case of this Agreement, pursuant to an agreement
or agreements in writing entered into by the Borrower and the Required Lenders and (y) in the case
of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each
party thereto and the Collateral Agent and consented to by the Required Lenders;
provided
,
however
, that no such agreement shall
(i) decrease or forgive the principal amount of, or extend the final maturity of, or
decrease the rate of interest on, any Loan or any L/C Disbursement, without the prior
written consent of each Lender directly affected thereby;
provided
that any
amendment to the financial covenant definitions in this Agreement shall not constitute a
reduction in the rate of interest for purposes of this clause (i),
(ii) increase or extend the Commitment of any Lender or decrease the Commitment Fees or
L/C Participation Fees or other fees of any Lender without the prior written consent of such
Lender (it being understood that waivers or modifications of conditions precedent,
covenants, Defaults or Events of Default or of a mandatory reduction in the aggregate
Commitments shall not constitute an increase of the Commitments of any Lender),
(iii) extend or waive any Installment Date or reduce the amount due on any Installment
Date or extend any date on which payment of interest on any Loan or any L/C
CI Acquisition Credit Agreement
Disbursement or
any Fees is due, without the prior written consent of each Lender adversely affected
thereby,
(iv) amend or modify the provisions of Section 2.18(b) or (c) in a manner that would by
its terms alter the
pro
rata
sharing of payments required thereby, without
the prior written consent of each Lender adversely affected thereby,
(v) amend or modify the provisions of this Section or the definition of the terms
“Required Lenders,” “Majority Lenders” or any other provision hereof specifying the number
or percentage of Lenders required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the prior written consent of each
Lender adversely affected thereby (it being understood that, with the consent of the
Required Lenders, additional extensions of credit pursuant to this Agreement may be included
in the determination of the Required Lenders on substantially the same basis as the Loans
and Commitments are included on the Closing Date),
(vi) release all or substantially all the Collateral or release any Subsidiary Loan
Party from its Guarantee under a Collateral Agreement, unless, in the case of a Subsidiary
Loan Party, all or substantially all the Equity Interests of such Subsidiary Loan Party is
sold or otherwise disposed of in a transaction permitted by this Agreement, without the
prior written consent of each Lender, or
(vii) effect any waiver, amendment or modification that by its terms adversely affects
the rights in respect of payments or collateral of Lenders participating in any Facility
differently from those of Lenders participating in other Facilities, without the consent of
the Majority Lenders participating in the adversely affected Facility (it being agreed that
the Required Lenders may waive, in whole or in part, any prepayment or Commitment reduction
required by Section 2.11 so long as the application of any prepayment or Commitment
reduction still required to be made is not changed);
provided
further
that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Administrative Agent or an Issuing Bank hereunder without the prior written
consent of the Administrative Agent or such Issuing Bank acting as such at the effective date of
such agreement, as applicable. Each Lender shall be bound by any waiver, amendment or modification
authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall
bind any assignee of such Lender.
(c) Without the consent of any Syndication Agent, Joint Lead Arranger or Lender, the Loan
Parties and the Administrative Agent and/or Collateral Agent may (in their respective sole
discretion, or shall, to the extent required by any Loan Document) enter into any amendment,
modification or waiver of any Loan Document, or enter into any new agreement or instrument, to
effect the granting, perfection, protection, expansion or enhancement of any security interest in
any Collateral or additional property to become Collateral for the benefit of the Secured Parties,
or as required by local law to give effect to, or protect any security interest for the benefit of
the Secured Parties, in any property or so that the security interests therein comply with
applicable law.
CI Acquisition Credit Agreement
(d) Notwithstanding the foregoing, this Agreement may be amended (or amended and restated)
with the written consent of the Required Lenders, the Administrative Agent, and the Borrower (a) to
add one or more additional credit facilities to this Agreement and to permit the extensions of
credit from time to time outstanding thereunder and the accrued interest and fees in respect
thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the
Term B Loans and the Revolving Facility Loans and the accrued interest and fees in respect thereof
and (b) to include appropriately the Lenders holding such credit facilities in any determination of
the Required Lenders.
(e) In addition, notwithstanding the foregoing, this Agreement may be amended with the written
consent of the Administrative Agent, the Borrower and the Lenders providing the relevant
Replacement Term B Loans (as defined below) to permit the refinancing of all outstanding Term B
Loans (“
Refinanced Term B Loans
”) with a replacement “B” term loan tranche hereunder which
shall be Loans hereunder (“
Replacement Term B Loans
”);
provided
that (a) the
aggregate principal amount of such Replacement Term B Loans shall not exceed the aggregate
principal amount of such Refinanced Term B Loans, (b) the Applicable Margin for such Replacement Term B Loans shall not be higher than the Applicable Margin for
such Refinanced Term B Loans, (c) the weighted average life to maturity of such Replacement Term B
Loans shall not be shorter than the weighted average life to maturity of such Refinanced Term B
Loans at the time of such refinancing and (d) all other terms applicable to such Replacement Term B
Loans shall be substantially identical to, or less favorable to the Lenders providing such
Replacement Term B Loans than, those applicable to such Refinanced Term B Loans, except to the
extent necessary to provide for covenants and other terms applicable to any period after the latest
final maturity of the Term B Loans in effect immediately prior to such refinancing.
(f) Notwithstanding the foregoing, technical and conforming modifications to the Loan
Documents may be made with the consent of the Borrower and the Administrative Agent to the extent
necessary to integrate any New Term B Commitments or New Revolving Facility Commitments on
substantially the same basis as the Term B Loans or Revolving Facility Loans, as applicable.
SECTION 9.09.
Interest Rate Limitation
. Notwithstanding anything herein to the
contrary, if at any time the applicable interest rate, together with all fees and charges that are
treated as interest under applicable law (collectively, the “
Charges
”), as provided for
herein or in any other document executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by any Lender or any Issuing Bank, shall exceed the maximum
lawful rate (the “
Maximum Rate
”) that may be contracted for, charged, taken, received or
reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder,
together with all Charges payable to such Lender or such Issuing Bank, shall be limited to the
Maximum Rate,
provided
that such excess amount shall be paid to such Lender or such Issuing
Bank on subsequent payment dates to the extent not exceeding the legal limitation.
SECTION 9.10.
Entire Agreement
. This Agreement, the other Loan Documents and the
agreements regarding certain Fees referred to herein constitute the entire contract between the
parties relative to the subject matter hereof. Any previous agreement among or representations
from the parties or their Affiliates with respect to the subject matter hereof is
CI Acquisition Credit Agreement
superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall
survive the execution and delivery of this Agreement and remain in full force and effect. Nothing
in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon
any party other than the parties hereto and thereto any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11.
WAIVER OF JURY TRIAL
.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.11.
SECTION 9.12.
Severability
. In the event any one or more of the provisions contained
in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining provisions contained herein
and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of the invalid, illegal
or unenforceable provisions.
SECTION 9.13.
Counterparts
. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which, when taken together,
shall constitute but one contract, and shall become effective as provided in Section 9.03.
Delivery of an executed counterpart to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed original.
SECTION 9.14.
Headings
. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, this Agreement.
SECTION 9.15.
Jurisdiction; Consent to Service of Process
. (a) The Borrower hereby
irrevocably and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States of America sitting
in New York City, and any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of
any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such federal court.
CI Acquisition Credit Agreement
The Borrower further irrevocably
consents to the service of process in any action or proceeding in such courts by the mailing
thereof by any parties thereto by registered or certified mail, postage prepaid, to the Borrower at
the address specified for the Loan Parties in Section 9.01(a). Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Lender or
any Issuing Bank may otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against the Borrower or any Loan Party or their properties in the courts
of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
SECTION 9.16.
Confidentiality
. Each of the Lenders, each Issuing Bank and each of
the Agents agrees that it shall maintain in confidence any information relating to Holdings, the
Borrower and the other Loan Parties furnished to it by or on behalf of Holdings, the Borrower or
the other Loan Parties (other than information that (a) has become generally available to the
public other than as a result of a disclosure by such party, (b) has been independently developed
by such Lender, such Issuing Bank or such Agent without violating this Section 9.16 or (c) was
available to such Lender, such Issuing Bank or such Agent from a third party having, to such
Person’s knowledge, no obligations of confidentiality to Holdings, the Borrower or any other Loan
Party) and shall not reveal the same other than to its directors, trustees, officers, employees and
advisors with a need to know or to any Person that approves or administers the Loans on behalf of
such Lender (so long as each such Person shall have been instructed to keep the same confidential
in accordance with this Section 9.16), except: (A) to the extent necessary to comply with law or
any legal process or the requirements of any Governmental Authority, the National Association of
Insurance Commissioners or of any securities exchange on which securities of the disclosing party
or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or
review procedures to Governmental Authorities or the National Association of Insurance
Commissioners, (C) to its parent companies, Affiliates or auditors (so long as each such Person
shall have been instructed to keep the same confidential in accordance with this Section 9.16), (D)
in order to enforce its rights under any Loan Document in a legal proceeding, (E) to any
prospective assignee of, or prospective Participant in, any of its rights under this Agreement (so
long as such Person shall have been instructed to keep the same confidential in accordance with
this Section 9.16) and (F) to any direct or indirect contractual counterparty in Swap Agreements or
such contractual counterparty’s professional advisor (so long as such contractual counterparty or
professional advisor to such contractual counterparty agrees to be bound by the provisions of this
Section).
SECTION
9.17.
Citigroup Direct Website Communications
. (a)
Delivery
. (i) Each Loan Party hereby agrees that it will use all reasonable efforts to provide to the
Administrative Agent all information, documents and other materials that it is obligated to furnish
to the Administrative Agent pursuant to this Agreement and any other Loan Document,
CI Acquisition Credit Agreement
including, without limitation, all notices, requests, financial statements, financial and other
reports, certificates and other information materials, but excluding any such communication
that (A) relates to a request for a new, or a conversion of an existing, borrowing or other
extension of credit (including any election of an interest rate or interest period relating
thereto), (B) relates to the payment of any principal or other amount due under this Agreement
prior to the scheduled date therefor, (C) provides notice of any Default or Event of Default under
this Agreement or (D) is required to be delivered to satisfy any condition precedent to the
effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder (all
such non-excluded communications collectively, the “
Communications
”), by transmitting the
Communications in an electronic/soft medium in a format reasonably acceptable to the Administrative
Agent to oploanswebadmin@citigroup.com. Nothing in this Section 9.17 shall prejudice the right of
the Agents, the Syndication Agent, the Joint Lead Arrangers or any Lender or any Loan Party to give
any notice or other communication pursuant to this Agreement or any other Loan Document in any
other manner specified in this Agreement or any other Loan Document.
(ii) The Administrative Agent agrees that receipt of the Communications by the Administrative
Agent at its e-mail address set forth above shall constitute effective delivery of the
Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender agrees
that notice to it (as provided in the next sentence) specifying that the Communications have been
posted to the Platform (as defined below) shall constitute effective delivery of the Communications
to such Lender for purposes of the Loan Documents. Each Lender agrees (A) to notify the
Administrative Agent in writing (including by electronic communication) from time to time of such
Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and
(B) that the foregoing notice may be sent to such e-mail address.
(b)
Posting
. Each Loan Party further agrees that the Administrative Agent may make
the Communications available to the Lenders by posting the Communications on Intralinks or a
substantially similar electronic transmission system (the “
Platform
”).
(c) The Platform is provided “as is” and “as available.” The Agent Parties (as defined below)
do not warrant the accuracy or completeness of the Communications, or the adequacy of the Platform
and expressly disclaim liability for errors or omissions in the communications. No warranty of any
kind, express, implied or statutory, including, without limitation, any warranty of
merchantability, fitness for a particular purpose, non-infringement of third party rights or
freedom from viruses or other code defects, is made by any Agent Party in connection with the
Communications or the Platform. In no event shall the Administrative Agent or any of its
affiliates or any of their respective officers, directors, employees, agents advisors or
representatives (collectively, “
Agent Parties
”) have any liability to the Loan Parties, any
Lender or any other Person or entity for damages of any kind, including, without limitation, direct
or indirect, special, incidental or consequential damages, losses or expenses (whether in tort,
contract or otherwise) arising out of any Loan Party’s or the Administrative Agent’s transmission
of communications through the internet, except to the extent the liability of any Agent Party is
found in a final non-appealable judgment by a court of competent jurisdiction to have resulted
primarily from such Agent Party’s gross negligence or willful misconduct.
CI Acquisition Credit Agreement
SECTION 9.18.
Release of Liens and Guarantees
. In the event that any Loan Party conveys, sells, leases, assigns, transfers or otherwise
disposes of all or any portion of any of the Equity Interests or assets of any Subsidiary Loan
Party (other than the Equity Interests of the Borrower) to a Person that is not (and is not
required to become) a Loan Party in a transaction not prohibited by Section 6.05, the
Administrative Agent and the Collateral Agent shall promptly (and the Lenders hereby authorize the
Administrative Agent and the Collateral Agent to) take such action and execute any such documents
as may be reasonably requested by the Borrower and at the Borrower’s expense to release any Liens
created by any Loan Document in respect of such Equity Interests, and, in the case of a disposition
of the Equity Interests of any Subsidiary Loan Party that is not the Borrower in a transaction
permitted by Section 6.05 and as a result of which such Subsidiary Loan Party would cease to be a
Subsidiary, terminate such Subsidiary Loan Party’s obligations under its Guarantee. In addition,
the Administrative Agent and the Collateral Agent agree to take such actions as are reasonably
requested by the Borrower and at the Borrower’s expense to terminate the Liens and security
interests created by the Loan Documents when all the Obligations are paid in full and all Letters
of Credit and Commitments are terminated. Any representation, warranty or covenant contained in
any Loan Document relating to any such Equity Interests, asset or subsidiary of the Borrower shall
no longer be deemed to be made once such Equity Interests or asset is so conveyed, sold, leased,
assigned, transferred or disposed of.
SECTION 9.19.
U.S. Patriot Act
. Each Lender hereby notifies each Loan Party that
pursuant to the requirements of the U.S. Patriot Act, it is required to obtain, verify and record
information that identifies Loan Parties, which information includes the name and address of each
Loan Party and other information that will allow the Lenders to identify such Loan Party in
accordance with the U.S. Patriot Act.
SECTION 9.20.
Judgment
. If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall
be that at which in accordance with normal banking procedures the Administrative Agent could
purchase Dollars with such other currency at Citibank, N.A.’s principal office in London at 11:00
a.m. (London time) on the Business Day preceding that on which final judgment is given.
SECTION 9.21.
Termination or Release
. The Security Documents, the guarantees made
therein, the Security Interest (as defined therein) and all other security interests granted
thereby shall terminate, and a Subsidiary Loan Party shall automatically be released from its
obligations thereunder and the security interests in the Collateral granted by any Loan Party shall
be automatically released, in each case in accordance with Section 7.14 of the Collateral Agreement
or the comparable provisions of the other Collateral Agreements.
SECTION 9.22.
Pledge and Guarantee Restrictions
. Notwithstanding any provision of this Agreement or any other Loan Document to the contrary
(including any provision that would otherwise apply notwithstanding other provisions or that is the
beneficiary of other overriding language):
(a) (i) no more than 65% of the issued and outstanding Equity Interests of (x) any
Foreign Subsidiary or (y) any Domestic Subsidiary substantially all of whose assets
CI Acquisition Credit Agreement
consist
of the Equity Interests in “controlled foreign corporations” under Section 957 of the Code
shall be pledged or similarly hypothecated to guarantee, secure or support any Obligation of
any Loan Party;
(ii) no Foreign Subsidiary or any Domestic Subsidiary substantially all of whose assets
consist of the Equity Interests in “controlled foreign corporations” under Section 957 of
the Code shall guarantee or support any Obligation of any Loan Party;
(iii) no security or similar interest shall be granted in the assets of any Foreign
Subsidiary or any Domestic Subsidiary substantially all of whose assets consist of the
Equity Interests in “controlled foreign corporations under Section 957 of the Code
(including indirectly by way of an offset or otherwise) which security or similar interests
guarantees or supports any Obligation of any Loan Party; and
(b) no Subsidiary shall guarantee or support any Obligation of any Loan Party if such
guarantee or support would contravene the Agreed Security Principles.
The parties hereto agree that any pledge, guaranty or security or similar interest made or granted
in contravention of this Section 9.22 shall be void
ab initio
.
[
Signature Pages Follow
]
CI Acquisition Credit Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first written above.
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FR X CHART HOLDINGS LLC,
as Holdings
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By:
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/s/ Timothy H. Day
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Name: Timothy H. Day
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Title: Vice President and Treasurer
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CI ACQUISITION, INC., as the Borrower
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By:
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/s/ Timothy H. Day
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Name: Timothy H. Day
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Title: Vice President and Treasurer
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CITICORP NORTH AMERICA, INC.,
as Administrative Agent, Lender
and Swingline Lender
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By:
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/s/ Stephen Cunningham
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Name: Stephen Cunningham
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Title: Vice President
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CITIBANK, N.A.,
as Issuing Bank
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By:
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/s/ Stephen Cunningham
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Name: Stephen Cunningham
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Title: Vice President
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CITIGROUP GLOBAL MARKETS INC.,
as Joint Lead Arranger and Joint Book Manager
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By:
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/s/ Stephen Cunningham
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Name: Stephen Cunningham
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Title: Managing Director
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MORGAN STANLEY SENIOR FUNDING, INC.,
as Syndication Agent, Joint Lead Arranger and
Joint Book Manager
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By:
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/s/ Eugene F. Martin
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Name: Eugene F. Martin
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Title: Vice President
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NATEXIS BANQUES POPULAIRES,
as Initial Lender
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By:
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/s/ Timothy Polvado
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Name: Timothy Palvado
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Title: Vice President and Manager
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By:
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/s/ Louis P. LaVille
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Name: Timothy Palvado
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Title: Vice President and Manager
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CI Acquisition Credit Agreement
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SOVEREIGN BANK, as Initial Lender
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By:
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/s/ Daniel M. Grondin
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Name: Daniel M. Grondin
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Title: Senior Vice President
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CI Acquisition Credit Agreement
Exhibit 10.2
GUARANTEE AND COLLATERAL AGREEMENT
dated and effective as of
October 17, 2005,
among
FR X CHART HOLDINGS LLC,
as Guarantor and Pledgor,
CI ACQUISITION, INC.,
as Borrower,
each Subsidiary Loan Party
identified herein,
and
CITICORP NORTH AMERICA, INC.,
as Collateral Agent
TABLE OF CONTENTS
Page
Article I
Definitions
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SECTION 1.01.
Credit Agreement
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1
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SECTION 1.02.
Other Defined Terms
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1
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Article II
Guarantee
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SECTION 2.01.
Guarantee
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4
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SECTION 2.02.
Guarantee of Payment
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5
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SECTION 2.03.
No Limitations, etc.
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5
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SECTION 2.04.
Reinstatement
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6
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SECTION 2.05.
Agreement To Pay; Subrogation
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7
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SECTION 2.06.
Information
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7
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SECTION 2.07.
Maximum Liability
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7
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SECTION
2.08.
Payments Free and Clear of Taxes, Etc.
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7
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Article III
Pledge of Securities
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SECTION 3.01.
Pledge
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7
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SECTION 3.02.
Delivery of the Pledged Collateral
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8
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SECTION 3.03.
Representations, Warranties and Covenants
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9
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SECTION 3.04.
Certification of Limited Liability Company and
Limited Partnership Interests
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10
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SECTION 3.05.
Registration in Nominee Name; Denominations
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11
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SECTION 3.06.
Voting Rights; Dividends and Interest, etc.
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11
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-i-
Article IV
Security Interests in Personal Property
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SECTION 4.01.
Security Interest
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13
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SECTION 4.02.
Representations and Warranties
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14
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SECTION 4.03.
Covenants
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17
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SECTION 4.04.
Other Actions
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19
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SECTION 4.05.
Covenants Regarding Patent, Trademark and Copyright Collateral
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20
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Article V
Remedies
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SECTION 5.01.
Remedies Upon Default
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22
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SECTION 5.02.
Application of Proceeds
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23
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SECTION 5.03.
Grant of License To Use Intellectual Property
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24
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SECTION 5.04.
Securities Act, etc.
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24
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SECTION 5.05.
Registration, etc.
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25
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Article VI
Indemnity, Subrogation and Subordination
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SECTION
6.01.
Indemnity and Subrogation
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26
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SECTION
6.02.
Contribution and Subrogation
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26
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SECTION
6.03.
Subordination
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26
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Article VII
Miscellaneous
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SECTION 7.01.
Notices
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27
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SECTION 7.02.
Security Interest Absolute
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27
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SECTION 7.03.
Binding Effect; Several Agreement
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27
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SECTION 7.04.
Successors and Assigns
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27
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-ii-
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SECTION 7.05.
Collateral Agent’s Fees and Expenses; Indemnification
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27
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SECTION 7.06.
Collateral Agent Appointed Attorney-in-Fact
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28
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SECTION 7.07.
GOVERNING LAW
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28
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SECTION 7.08.
Waivers; Amendment
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29
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SECTION 7.09.
WAIVER OF JURY TRIAL
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29
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SECTION 7.10.
Severability
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29
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SECTION 7.11.
Counterparts
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30
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SECTION 7.12.
Headings
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30
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SECTION 7.13.
Jurisdiction; Consent to Service of Process
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30
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SECTION 7.14.
Termination or Release
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30
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SECTION 7.15.
Additional Subsidiaries
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31
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SECTION 7.16.
Right of Set-off
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31
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SECTION 7.17.
Credit Agreement
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31
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Schedules
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Schedule I
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Subsidiary Loan Parties
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Schedule II
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Pledged Stock; Pledged Debt Securities
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Schedule III
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Intellectual Property
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Schedule IV
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Limited Liability Company Interests
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Schedule V
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Commercial Tort Claims
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Schedule VI
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Partnership Interests
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Exhibits
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Exhibit I
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Form of Supplement to the Guarantee and Collateral Agreement
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Exhibit II
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Form of Perfection Certificate
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Exhibit III
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Form of Intercompany Note
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-iii-
GUARANTEE AND COLLATERAL AGREEMENT dated and effective as of October 17, 2005 (this
“
Agreement
”), among FR X CHART HOLDINGS LLC, a Delaware limited liability company
(“Holdings”), CI ACQUISITION, INC., a Delaware corporation (“
Acquisition Corp.
” or the
“
Borrower
”), each Subsidiary Loan Party listed on the signature page and any other entity
that becomes a party pursuant to Section 7.15 (each, a “
Subsidiary Loan Party
”) and
CITICORP NORTH AMERICA, INC. (“
CNAI
”), as collateral agent (in such capacity, the
“
Collateral Agent
”) for the Secured Parties (as defined below).
Reference is made to the Credit Agreement dated as of October 17, 2005 (as amended, restated,
supplemented, waived or otherwise modified from time to time, the “
Credit Agreement
”),
among Holdings, the Borrower, the lenders party thereto from time to time (the “
Lenders
”),
CNAI, as Administrative Agent and as Collateral Agent for the Lenders, MORGAN STANLEY SENIOR
FUNDING, INC. (“
MS
”), as Syndication Agent, CITIGROUP GLOBAL MARKETS INC. and MS, as Joint
Lead Arrangers and Joint Book Managers and Natexis Banques Populaires and Sovereign Bank, as
Co-Documentation Agents.
The Lenders have agreed to extend credit to the Borrower (as defined in the Credit Agreement)
subject to the terms and conditions set forth in the Credit Agreement. The obligations of the
Lenders to extend such credit are conditioned upon, among other things, the execution and delivery
of this Agreement. Holdings and the Subsidiary Loan Parties are Affiliates of the Borrower, will
derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit
Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders to
extend such credit. Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01.
Credit Agreement
. (a) Capitalized terms used in this Agreement and not
otherwise defined herein have the respective meanings assigned thereto in the Credit Agreement.
All terms defined in the New York UCC (as defined herein) and not defined in this Agreement have
the meanings specified therein. The term “instrument” shall have the meaning specified in Article
9 of the New York UCC.
(b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to
this Agreement.
SECTION 1.02.
Other Defined Terms
. As used in this Agreement, the following terms
have the meanings specified below:
“
Account Debtor
” means any person who is or who may become obligated to any Guarantor
under, with respect to or on account of an Account.
“
Article 9 Collateral
” has the meaning assigned to such term in Section 4.01.
“
Cash Management Arrangement
” means existing and future indebtedness and liabilities
of every kind, nature and character, direct or indirect, absolute or contingent, liquidated
or unliquidated, voluntary or involuntary, of each Loan Party to a Lender howsoever associated with
any cash management services that are provided by such Lender to or for the benefit of such Loan
Party (including all renewals, extensions and modifications thereof and all costs, attorneys’ fees
and expenses incurred by such Lender in connection with the collection or enforcement thereof).
“
Collateral
” means Article 9 Collateral and Pledged Collateral.
“
Control Agreement
” means a securities account control agreement or commodity account
control agreement, as applicable, in form and substance reasonably satisfactory to the Collateral
Agent.
“
Copyrights
” means all of the following: (a) all copyright rights in any work subject
to the copyright laws of the United States or any other country, whether as author, assignee,
transferee or otherwise; and (b) all registrations and applications for registration of any such
Copyright in the United States or any other country, including registrations, supplemental
registrations and pending applications for registration in the United States Copyright Office,
including those listed on
Schedule III
.
“
Credit Agreement
” has the meaning assigned to such term in the preliminary statement
of this Agreement.
“
Subsidiary Loan Party
” has the meaning assigned to such term in the preliminary
statement of this Agreement.
“
Federal Securities Laws
” has the meaning assigned to such term in Section 5.04.
“
General Intangibles
” means all “General Intangibles” as defined in the New York UCC,
including all choses in action and causes of action and all other intangible personal property of
any Guarantor of every kind and nature (other than Accounts) now owned or hereafter acquired by any
Guarantor, including corporate or other business records, indemnification claims, contract rights
(including rights under leases, whether entered into as lessor or lessee, Swap Agreements, Cash
Management Arrangements (as defined above) and other agreements), Intellectual Property, goodwill,
registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security
interest or other security held by or granted to any Guarantor to secure payment by an Account
Debtor of any of the Accounts.
“
Guaranteed Obligations
” means (a) the Loan Document Obligations and (b) the due and
punctual payment and performance of all obligations of each Loan Party under each Swap Agreement
and each Cash Management Arrangement (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) that (i) is in effect on the Closing Date with a counterparty that is
a Lender or an Affiliate of a Lender as of the Closing Date or (ii) is entered into after the
Closing Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such
Swap Agreement or Cash Management Arrangement is entered into.
“
Guarantor Intellectual Property
” means all Intellectual Property now or hereafter
owned or licensed by any Guarantor.
“
Guarantors
” means Holdings, the Borrower and each Subsidiary Loan Party.
“
Intellectual Property
” means all Patents, Copyrights, Trademarks, IP Agreements,
trade secrets, domain names, and all inventions, designs, confidential or proprietary technical and
business information, know-how, show-how and other data or information and all related
documentation.
“
Intercompany Note
” shall mean a promissory note substantially in the form of
Exhibit III
.
“
IP Agreements
” means all agreements granting to or receiving from a third party any
rights to Intellectual Property to which any Guarantor, now or hereafter, is a party.
“
Loan Document Obligations
” means (a) the due and punctual payment by the Borrower of
(i) the unpaid principal of and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans made to the Borrower, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each
payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of disbursements, interest
thereon (including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or allowable in such
proceeding) and obligations to provide cash collateral and (iii) all other monetary obligations of
the Borrower to any of the Secured Parties under the Credit Agreement and each of the other Loan
Documents, including obligations to pay fees, expense and reimbursement obligations and
indemnification obligations, whether primary, secondary, direct, indirect, contingent, fixed or
otherwise (including interest incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or allowable in such
proceeding) and (b) the due and punctual performance of all other obligations of the Borrower under
or pursuant to the Credit Agreement and each of the other Loan Documents (other than the Guaranteed
Obligations referred to in clause
(b) of the definition of “Guaranteed Obligations”) (including interest incurred during the
pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding).
“
Material Pledged Debt Securities
” has the meaning assigned to such term in Section
3.01.
“
New York UCC
” means the Uniform Commercial Code as from time to time in effect in the
State of New York.
“
Patents
” means all of the following: (a) all letters patent of the United States or
the equivalent thereof in any other country, and all applications for letters patent of the United
States or the equivalent thereof in any other country, including those listed on
Schedule
III
, and (b) all reissues, continuations, divisions, continuations-in-part or extensions
thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or
sell the inventions disclosed or claimed therein.
“
Perfection Certificate
” means a certificate substantially in the form of
Exhibit
II
, completed and supplemented with the schedules and attachments contemplated thereby, and
duly executed by a Financial Officer of the Borrower.
“
Pledged Collateral
” has the meaning assigned to such term in Section 3.01.
“
Pledged Debt Securities
” has the meaning assigned to such term in Section 3.01.
“
Pledged Securities
” means any promissory notes, stock certificates or other
certificated securities now or hereafter included in the Pledged Collateral, including all
certificates, instruments or other documents representing or evidencing any Pledged Collateral.
“
Pledged Stock
” has the meaning assigned to such term in Section 3.01.
“
Pledgor
” shall mean each Guarantor.
“
Secured Parties
” means (a) the Lenders, (b) the Administrative Agent, (c) the
Collateral Agent, (d) each Issuing Bank, (e) each counterparty to any Swap Agreement entered into
with a Loan Party the obligations under which constitute Guaranteed Obligations, (f) each
counterparty to any Cash Management Arrangement entered into with a Loan Party the obligations
under which constitute Guaranteed Obligations, (g) the beneficiaries of each indemnification
obligation undertaken by any Loan Party under any Loan Document and (h) the successors and
permitted assigns of each of the foregoing.
“
Security Interest
” has the meaning assigned to such term in Section 4.01.
“
Trademarks
” means all of the following: (a) all trademarks, service marks, corporate
names, company names, business names, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all
registrations thereof (if any), and all registration and recording applications filed in connection
therewith in the United States Patent and Trademark Office or any similar offices in any State of
the United States or any other country or any political subdivision thereof, and all renewals
thereof, including those listed on
Schedule III
(provided that no security interest shall
be granted in United States intent-to-use trademark applications to the extent that, and solely
during the period in which, the grant of a security interest therein would impair the validity or
enforceability of such intent-to-use trademark applications under applicable federal law) and (b)
all goodwill associated therewith or symbolized thereby.
ARTICLE II
GUARANTEE
SECTION 2.01.
Guarantee
. Each Guarantor absolutely, irrevocably and
unconditionally guarantees, jointly with the other Guarantors and severally, as a primary
obligor and not merely as a surety, the due and punctual payment and performance of the Guaranteed
Obligations. Each Guarantor further agrees that the Guaranteed Obligations may be extended,
modified, substituted, amended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any extension or
renewal
of any Guaranteed Obligation. Each Guarantor unconditionally and irrevocably waives notice of
nonperformance, acceleration, presentment to, demand of payment from and protest to the Borrower or
any other Loan Party of any of the Guaranteed Obligations, and also waives notice of acceptance of
its guarantee and notice of protest for nonpayment.
SECTION 2.02.
Guarantee of Payment
. Each Guarantor further agrees that its guarantee
hereunder constitutes a guarantee of payment when due, whether at scheduled maturity or on any date
of a required prepayment or by acceleration, demand or otherwise, and not of collection, and waives
any right to require that any resort be had by the Collateral Agent or any other Secured Party to
any security held for the payment of the Guaranteed Obligations or to any balance of any deposit
account or credit on the books of the Collateral Agent or any other Secured Party in favor of the
Borrower or any other person.
SECTION 2.03.
No Limitations, etc
. (a) Except for termination of a Guarantor’s
obligations hereunder as expressly provided for in Section 7.14, the obligations of each Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or termination for any
reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not
be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor
hereunder shall not be discharged or impaired or otherwise affected by:
(i) the failure of the Administrative Agent, the Collateral Agent or any other Secured
Party to assert any claim or demand or to exercise or enforce any right or remedy under the
provisions of any Loan Document or otherwise;
(ii) any rescission, waiver, amendment or modification of, or any release from any of
the terms or provisions of, any Loan Document or any other agreement, including with
respect to any other Guarantor under this Agreement;
(iii) the failure to perfect any security interest in, or the exchange, substitution,
release or any impairment of, any Collateral or any other collateral securing the
Guaranteed Obligations;
(iv) any default, failure or delay, willful or otherwise, in the performance of the
Guaranteed Obligations;
(v) any other act or omission that may or might in any manner or to any extent vary
the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter
of law or equity (other than the indefeasible payment in full in cash of all the Guaranteed
Obligations);
(vi) any illegality, lack of validity or enforceability of any Guaranteed Obligation;
(vii) any change in the corporate existence, structure or ownership of the Borrower,
or any insolvency, bankruptcy, reorganization or other similar proceeding
affecting the
Borrower or its assets or any resulting release or discharge of any Guaranteed Obligation;
(viii) the existence of any claim, set-off or other rights that the Guarantor may have
at any time against the Borrower, the Collateral Agent, or any other corporation or person,
whether in connection herewith or any unrelated transactions, provided that nothing herein
will prevent the assertion of any such claim by separate suit or compulsory counterclaim;
and
(ix) any other circumstance (including without limitation, the expiration of any
statute of limitations) or any existence of or reliance on any representation by the
Collateral Agent that might otherwise constitute a defense to, or a legal or equitable
discharge of, the Borrower or the Guarantor or any other guarantor or surety.
Each Guarantor expressly authorizes the Secured Parties to take and hold security for the payment
and performance of the Guaranteed Obligations, to exchange, waive or release any or all such
security (with or without consideration), to enforce or apply such security
and direct the order and manner of any sale thereof in their sole discretion or to release or
substitute any one or more other guarantors or obligors upon or in respect of the Guaranteed
Obligations, all without affecting the obligations of any Guarantor hereunder. Each Guarantor
acknowledges that its guarantee is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future. Each Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements contemplated by the Loan
Documents and that the waivers set forth in this Article II are knowingly made in contemplation of
such benefits.
(b) To the fullest extent permitted by applicable law, each Guarantor waives any defense based
on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of
the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of
the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full
in cash of all the Guaranteed Obligations. The Collateral Agent and the other Secured Parties may,
at their election, foreclose on any security held by one or more of them by one or more judicial or
nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or
adjust any part of the Guaranteed Obligations, make any other accommodation with the Borrower or
any other Loan Party or exercise any other right or remedy available to them against the Borrower
or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the Guaranteed Obligations have been fully and indefeasibly paid in
full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense
arising out of any such election even though such election operates, pursuant to applicable law, to
impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such
Guarantor against the Borrower or any other Loan Party, as the case may be, or any security.
SECTION 2.04.
Reinstatement
. Each Guarantor agrees that its guarantee hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any Guaranteed Obligation is rescinded or must otherwise be restored by the
Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of the
Borrower, any other Loan Party or otherwise.
SECTION 2.05.
Agreement To Pay; Subrogation
. In furtherance of the foregoing and not
in limitation of any other right that the Collateral Agent or any other Secured Party has at law or
in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other
Loan Party to pay any Guaranteed Obligation when and as the same shall become due, whether at
maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises
to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the
applicable Secured Parties in cash the amount of such unpaid Guaranteed Obligation. Upon payment
by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such
Guarantor against the Borrower, or other
Loan Party or any other Guarantor arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI.
SECTION 2.06.
Information
. Each Guarantor assumes all responsibility for being and
keeping itself informed of the financial condition and assets of the Borrower and each other Loan
Party, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs
hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any
duty to advise such Guarantor of information known to it or any of them regarding such
circumstances or risks.
SECTION 2.07.
Maximum Liability
. Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor (other than Holdings and the
Borrower) hereunder and under the other Loan Documents shall in no event exceed the amount which
can be guaranteed by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution established in Section
6.02).
SECTION 2.08.
Payments Free and Clear of Taxes, Etc
. (a) Any and all payments made by
any Guarantor under or in respect of this Agreement or any other Loan Document shall be made, in
accordance with Section 2.17 of the Credit Agreement.
ARTICLE III
PLEDGE OF SECURITIES
SECTION 3.01.
Pledge
. As security for the payment or performance, as the case may be,
in full of the Guaranteed Obligations, each Pledgor hereby assigns and pledges to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby
grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in all of such Pledgor’s right, title and interest in, to and under
(a) the Equity Interests of any Material Subsidiary directly owned by it as of the Closing Date and
any other Equity Interests of any Material Subsidiary directly owned in the future by such Pledgor
and any certificates representing all such Equity Interests (the “
Pledged Stock
”);
provided
that the Pledged Stock shall not include (i) more than 65% of the issued and
outstanding voting Equity Interests of any Foreign Subsidiary or any Domestic Subsidiary
substantially all of whose assets consist of the Equity Interests in “controlled foreign companies”
under Section 957 of the Code, (ii) any Equity Interests of any Subsidiary to the extent that, as of
the Closing Date and for so long
as, a pledge of such Equity Interests would violate a contractual obligation binding on the issuer
or holder of such Equity Interests, (iii) any Equity Interests of any Subsidiary acquired after the
Closing Date in accordance with the Credit Agreement if, and to the extent that, and for so long as
(A) pledging such Equity Interests would violate applicable law or a contractual obligation binding
on the issuer or holder of such Equity Interests and (B) such law or obligation existed at the time
of the acquisition thereof and was not created or made binding on such Equity Interests in
contemplation of or in connection with the acquisition of such Subsidiary,
provided
that
the foregoing clause (B) shall not apply in the case of a joint venture, including a joint venture
that is a Subsidiary, and, (iv) Equity Interests in any Foreign Subsidiary if the Borrower
demonstrates to the Collateral Agent and the Collateral Agent determines (in its reasonable
discretion) that the cost of pledging the Equity Interests in such Foreign Subsidiary exceeds the
value of the security offered thereby;
provided
that, upon the reasonable request of the
Collateral Agent, Borrower shall, and shall cause any applicable Subsidiary to, use commercially
reasonable efforts to have waived or eliminated any contractual obligation of the types described
in clauses (ii) and (iii) above, other than those set forth in a joint venture agreement to which
Holdings or any Subsidiary is a party;
provided
further
, that Pledged Stock shall
include the interests listed on
Schedule II
; (b)(i) the debt securities for borrowed money
having an aggregate principal amount in excess of $7,500,000 (other than (A) intercompany current
liabilities incurred in the ordinary course of business in connection with the cash management
operations of Holdings, the Borrower and the Subsidiaries and (B) any debt securities held by such
Pledgor as of the Closing Date “
Material Pledged Debt Securities
”), (ii) any Material
Pledged Debt Securities in the future issued to such Pledgor and (iii) the promissory notes and any
other instruments, if any, evidencing such Material Pledged Debt Securities (the “
Pledged Debt
Securities
”);
provided
, that the Pledged Debt Securities shall include the debt
securities listed on Schedule II; (c) subject to Section 3.06, all payments of principal or
interest, dividends, cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for or upon the conversion of, and all other
proceeds received in respect of, the securities referred to in clauses (a) and (b) above; (d) all
rights and privileges of such Pledgor with respect to the securities and other property referred to
in clauses (a), (b) and (c) above; and (e) all proceeds of any of the foregoing (the items referred
to in clauses (a) through (e) above being collectively referred to as the “
Pledged
Collateral
”).
TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers,
privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, forever;
subject
,
however
, to the terms, covenants and conditions hereinafter set forth.
SECTION 3.02.
Delivery of the Pledged Collateral
. (a) Each Pledgor agrees promptly
to deliver or cause to be delivered to the Collateral Agent, for the ratable benefit of the Secured
Parties, any and all Pledged Stock and any and all Pledged Debt Securities to the extent such
Pledged Securities, in
the case of promissory notes or other instruments evidencing Indebtedness, are required to be
delivered pursuant to paragraph (b) of this Section 3.02.
(b) Each Pledgor will cause any Material Pledged Debt Securities owed to such Pledgor by any
person to be evidenced by a duly executed promissory note that is pledged and delivered to the
Collateral Agent, including the Intercompany Note, for the ratable benefit of
the Secured Parties,
pursuant to the terms hereof. To the extent any such promissory note is a demand note, each
Pledgor party thereto agrees, if requested by the Collateral Agent, to immediately demand payment
thereunder upon an Event of Default specified under Sections 7.01(b), (c), (f), (h) or (i) of the
Credit Agreement.
(c) Upon delivery to the Collateral Agent, (i) any Pledged Securities required to be delivered
pursuant to the foregoing paragraphs (a) and (b) of this Section 3.02 (other than the Intercompany
Note) shall be accompanied by stock powers or note powers, as applicable, duly executed in blank or
other instruments of transfer reasonably satisfactory to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably request and (ii) all other
property composing part of the Pledged Collateral delivered pursuant to the terms of this Agreement
shall be accompanied to the extent necessary to perfect the security interest in or allow
realization on the Pledged Collateral by proper instruments of assignment duly executed by the
applicable Pledgor and such other instruments or documents (including issuer acknowledgments in
respect of uncertificated securities) as the Collateral Agent may reasonably request. Each
delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which
schedule shall be attached hereto as
Schedule II
and made a part hereof;
provided
that failure to attach any such schedule hereto shall not affect the validity of such pledge of
such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so
delivered.
SECTION 3.03.
Representations, Warranties and Covenants
. The Pledgors, jointly and
severally, represent, warrant and covenant to and with the Collateral Agent, for the ratable
benefit of the Secured Parties, that:
(a)
Schedule II
correctly sets forth as of the Closing Date the (x) name and
jurisdiction of each issuer of, and the ownership interest (including percentage owned and number
of shares or units) of each Pledgor in, the Pledged Stock and (y) amount and obligor under the
Material Pledged Debt Securities;
(b) the Pledged Stock and Pledged Debt Securities (solely with respect to Pledged Debt
Securities issued by a person that is not a Subsidiary of Holdings or an Affiliate of any such
Subsidiary, to each Pledgor’s knowledge) have been duly and validly authorized and issued by the
issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in
the case of Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a
person that is not a Subsidiary of Holdings or an Affiliate of any such Subsidiary, to each
Pledgor’s knowledge) are legal, valid and binding obligations of the issuers thereof;
(c) except for the security interests granted hereunder, each Pledgor (i) is and, subject to
any transfers made in compliance with the Credit Agreement, will continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on
Schedule II
as owned by
such Pledgor, (ii) holds the same free and clear of all Liens, other than Liens permitted under
Section 6.02 of the Credit Agreement, (iii) will make no assignment, pledge, hypothecation or
transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged
Collateral, other than pursuant to a transaction permitted by the Credit Agreement and other than
Liens permitted under Section 6.02 of the Credit Agreement and (iv) subject to
the rights of such Pledgor under the Loan Documents to dispose of Pledged Collateral, will defend its title or
interest hereto or therein against any and all Liens (other than Liens permitted under Section 6.02
of the Credit Agreement), however arising, of all persons;
(d) except for restrictions and limitations imposed by the Loan Documents, securities laws
generally, the laws of any applicable foreign jurisdiction (with respect to Pledged Collateral
pledged after the Closing Date) or otherwise permitted to exist pursuant to the terms of the Credit
Agreement, (i) the Pledged Collateral is and will continue to be freely transferable and assignable
and (ii) none of the Pledged Collateral is or will be subject to any option, right of first
refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any
nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral
hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent
of rights and remedies hereunder;
(e) each Pledgor has the power and authority to pledge the Pledged Collateral pledged by it
hereunder in the manner hereby done or contemplated;
(f) except for consents or approvals required by laws of any applicable foreign jurisdiction
(with respect to Pledged Collateral pledged after the Closing Date), no consent or approval of any
Governmental Authority, any securities exchange or any other person was or is necessary to the
validity of the pledge effected hereby (other than such as have been obtained and are in full force
and effect);
(g) by virtue of the execution and delivery by the Pledgors of this Agreement, when any
Pledged Securities are delivered to the Collateral Agent, for the ratable benefit of the Secured
Parties, in accordance with this Agreement, the Collateral Agent will obtain, for the ratable
benefit of the Secured Parties, a legal, valid and perfected first priority lien upon and security
interest in such Pledged Securities as security for the payment and performance of the Guaranteed
Obligations under the New York UCC, except, in the case of Pledged Securities delivered after the
Closing Date, as provided by the laws of any applicable foreign jurisdiction and subject to Liens
permitted by the Credit Agreement; and
(h) the pledge effected hereby is effective to vest in the Collateral Agent, for the ratable
benefit of the Secured Parties, the rights of the Pledgors in the Pledged Collateral as set forth
herein, except as provided by the laws of any applicable foreign jurisdiction (with respect to
Pledged Collateral pledged after the Closing Date).
SECTION 3.04.
Certification of Limited Liability Company and Limited Partnership
Interests
. Except as provided by the laws of any applicable foreign jurisdiction, each
interest in any limited liability company or limited partnership controlled by any Loan Party and
pledged hereunder shall be represented by a certificate, shall to the extent permitted by
applicable laws be a “security” within the meaning of Article 8 of the New York UCC and shall be
governed by Article 8 of the New York UCC;
provided
,
however
, in the case of (a)
the limited liability company interests set forth on
Schedule IV
, the Borrower shall cause
such interests to be represented by a certificate, to be a “security” within the meaning of Article
8 of the New York UCC and to be governed by Article 8 of the New York UCC, in each case not later
than 20 Business Days after the Closing Date and (b) that any limited liability company or limited
partnership that, in either case, is organized under the laws of any state of the United States and
is a Wholly Owned Subsidiary formed or acquired after the Closing Date, the Borrower shall cause
such interests to be represented by a certificate, to be a “security” within the meaning of Article
8 of the New York UCC and to be governed by Article 8 of the New York UCC, in each case not later
than 20 Business Days after the date of formation or acquisition thereof, as applicable.
SECTION 3.05.
Registration in Nominee Name; Denominations
. The Collateral Agent, on
behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold
the Pledged Securities in the name of the applicable Pledgor, endorsed or assigned in blank or in
favor of the Collateral Agent or, if an Event of Default shall have occurred and be continuing, in
its own name as pledgee or the name of its nominee (as pledgee or as sub-agent). Each Pledgor will
promptly give to the Collateral Agent copies of any notices or other communications received by it
with respect to Pledged Securities registered in the name of such Pledgor. If an Event of Default
shall have occurred and be continuing, the Collateral Agent shall have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or larger denominations
for any purpose consistent with this Agreement. Each Pledgor shall use its commercially reasonable
efforts to cause any Loan Party that is not a party to this Agreement to comply with a request by
the Collateral Agent, pursuant to this Section 3.05, to exchange certificates representing Pledged
Securities of such Loan Party for certificates of smaller or larger denominations.
SECTION 3.06.
Voting Rights; Dividends and Interest, etc
. (a) Unless and until an
Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any part thereof
for any purpose consistent with the terms of this Agreement, the Credit Agreement and the
other Loan Documents;
provided
that such rights and powers shall not be exercised
in any manner that could materially and adversely
affect the rights inuring to a holder of any Pledged Securities, the rights and
remedies of any of the Collateral Agent or the other Secured Parties under this Agreement,
the Credit Agreement or any other Loan Document or the ability of the Secured Parties to
exercise the same.
(ii) The Collateral Agent shall promptly execute and deliver to each Pledgor, or cause
to be executed and delivered to such Pledgor, all such proxies, powers of attorney and
other instruments as such Pledgor may reasonably request for the purpose of enabling such
Pledgor to exercise the voting and/or consensual rights and powers it is entitled to
exercise pursuant to subparagraph (i) above.
(iii) Each Pledgor shall be entitled to receive and retain any and all dividends,
interest, principal and other distributions paid on or distributed in respect of the
Pledged Securities to the extent and only to the extent that such dividends, interest,
principal and other distributions are permitted by, and otherwise paid or distributed in
accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents
and applicable laws;
provided
that any noncash dividends, interest, principal or
other distributions that would constitute Pledged Securities, whether resulting from a
subdivision, combination or reclassification of the outstanding Equity Interests of the
issuer of any Pledged Securities or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition
or other exchange of assets to which such issuer may be a party or otherwise, shall be and
become part of the Pledged Collateral, and, if received by any Pledgor, shall not be
commingled by such Pledgor with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of the Collateral
Agent, for the ratable benefit of the Secured Parties, and shall be forthwith delivered to
the Collateral Agent, for the ratable benefit of the Secured Parties, in the same form as
so received (endorsed in a manner reasonably satisfactory to the Collateral Agent).
(b) Upon the occurrence and during the continuance of an Event of Default and after notice by
the Collateral Agent to the relevant Pledgors of the Collateral Agent’s intention to exercise its
rights hereunder, except as provided by the laws of any applicable foreign jurisdiction, all rights
of any Pledgor to dividends, interest, principal or other distributions that such Pledgor is
authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06 shall cease, and all such
rights shall thereupon become vested, for the ratable benefit of the Secured Parties, in the
Collateral Agent which shall have the sole and exclusive right and authority to receive and retain
such dividends, interest, principal or other distributions. All dividends, interest, principal or
other distributions received by any Pledgor contrary to the provisions of this Section 3.06 shall
not be commingled by such Pledgor with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent, for
the ratable benefit of the Secured Parties, and shall be forthwith delivered to the Collateral
Agent, for the ratable benefit of the Secured Parties, in the same form as so received (endorsed in
a manner reasonably satisfactory to the Collateral Agent). Any and all money and other property
paid over to or received by the Collateral Agent pursuant to the provisions of
this paragraph (b) shall be retained by the Collateral Agent in an account to be established
by the Collateral Agent upon receipt of such money or other property and shall be applied in
accordance with the provisions of Section 5.02. After all Events of Default have been cured or
waived and the Borrower has delivered to the Collateral Agent a certificate to that effect, the
Collateral Agent shall promptly repay to each Pledgor (without interest) all dividends, interest,
principal or other distributions that such Pledgor would otherwise be permitted to retain pursuant
to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default and after notice by
the Collateral Agent to the relevant Pledgors of the Collateral Agent’s intention to exercise its
rights hereunder, except as provided by the laws of any applicable foreign jurisdiction, all rights
of any Pledgor to exercise the voting and/or consensual rights and powers it is entitled to
exercise pursuant to paragraph (a)(i) of this Section 3.06, and the obligations of the Collateral
Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, for the ratable benefit of the Secured Parties,
which shall have the sole and exclusive right and authority to exercise such voting and consensual
rights and powers;
provided
that, unless otherwise directed by the Required Lenders, the
Collateral Agent shall have the right from time to time following and during the continuance of an
Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have
been cured or waived and the Borrower has delivered to the Collateral Agent a certificate to that
effect, each Pledgor shall have the right to exercise the
voting and/or consensual rights and
powers that such Pledgor would otherwise be entitled to exercise pursuant to the terms of paragraph
(a)(i) above.
ARTICLE IV
SECURITY INTERESTS IN PERSONAL PROPERTY
SECTION 4.01.
Security Interest
. (a) As security for the payment or performance, as
the case may be, in full of the Guaranteed Obligations, each Guarantor hereby assigns and pledges
to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a security interest (the “
Security Interest
”) in all right,
title and interest in or to any and all of the following assets and properties now owned or at any
time hereafter acquired by such Guarantor or in which such Guarantor now has or at any time in the
future may acquire any right, title or interest (collectively, the “
Article 9 Collateral
”):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all cash and Deposit Accounts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all Instruments;
(ix) all Inventory;
(x) all Investment Property;
(xi) all Letter-of-Credit Rights;
(xii) all Commercial Tort Claims;
(xiii) all books and records pertaining to the Article 9 Collateral; and
(xiv) to the extent not otherwise included, all proceeds, supporting Obligations and
products of any and all of the foregoing and all collateral given by any person with
respect to any of the foregoing.
Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a
grant of a security interest (other than the grant of security interest in the Pledged Stock
pursuant to Section 3.01) in, and “Article 9 Collateral” shall not include, (a) any Equity
Interests
of any Person (except for Equity Interests of any Material Subsidiary listed on Schedule
VI hereto as such schedule may be updated from time to time, that can be perfected upon the filing
of a financing statement), (b) any Material Pledged Debt Securities or any debt securities that may
be pledged pursuant to any foreign pledge agreement under the terms of the Credit Agreement, (c)
any assets of any Subsidiary to the extent that, as of the Closing Date, and for so long as, a
pledge of such assets would violate a contractual obligation binding on such assets or such
Subsidiary, (d) any assets of any Subsidiary acquired after the Closing Date in accordance with the
Credit Agreement if, and to the extent that, and for so long as (1) pledging such assets would
violate applicable law or a contractual obligation binding on such assets or such Subsidiary and
(2) such law or obligation existed at the time of the acquisition thereof or (e) any United States
intent-to-use trademark applications to the extent that, and solely during the period in which, the
grant of a security interest therein would impair the validity or enforceability of such
intent-to-use trademark applications under applicable federal law;
provided
, that, upon the
reasonable request of the Collateral Agent, Borrower shall, and shall cause any applicable
Subsidiary to, use commercially reasonable efforts to have waived or eliminated any contractual
obligation of the types described in clauses (c) and (d) above, other than those set forth in a
joint venture agreement to which Holdings or any Subsidiary is a party.
(b) Each Guarantor hereby irrevocably authorizes the Collateral Agent at any time and from
time to time to file in any relevant jurisdiction any initial financing statements (including
fixture filings), continuation statements, or other filings and recordings, with respect to the
Article 9 Collateral and any other collateral pledged hereunder or any part thereof and amendments
thereto that contain the information required by Article 9 of the Uniform Commercial Code of each
applicable jurisdiction for the filing of any financing statement or amendment, or such other
information as may be required under applicable law including (i) whether such Guarantor is an
organization, the type of organization and any organizational identification number issued to such
Guarantor, (ii) in the case of Fixtures, a sufficient description of the real property to which
such Article 9 Collateral relates and (iii) a description of collateral that describes such
property in any other manner as the Collateral Agent may reasonably determine is necessary or
advisable to ensure the perfection of the security interest in the Article 9 Collateral or other
collateral granted under this Agreement, including describing such property as “all assets” or “all
property”. Each Guarantor agrees to provide such information to the Collateral Agent promptly upon
request.
The Collateral Agent is further authorized to file with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office or any similar office in any
other country) such documents as may be necessary or advisable for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest granted by each Guarantor,
without the signature of any Guarantor, and naming any Guarantor or the Guarantors as debtors and
the Collateral Agent as secured party.
(c) The Security Interest is granted as security only and shall not subject the Collateral
Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of
any Guarantor with respect to or arising out of the Article 9 Collateral.
SECTION 4.02.
Representations and Warranties
. The Guarantors jointly and severally
represent and warrant to the Collateral Agent and the Secured Parties that:
(a) Each Guarantor has good and valid rights in and title to the Article 9 Collateral with
respect to which it has purported to grant a Security Interest hereunder and has full power and
authority to grant to the Collateral Agent the Security Interest in such Article 9 Collateral
pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than any consent or
approval that has been obtained and is in full force and effect.
(b) The Perfection Certificate has been duly prepared, completed and executed and the
information set forth therein, including the exact legal name of each Guarantor, is correct and
complete, in all material respects, as of the Closing Date. Uniform Commercial Code financing
statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations containing a description of the
Article 9 Collateral have been prepared by the Collateral Agent based upon the information provided
to the Collateral Agent in the Perfection Certificate for filing in each governmental, municipal or
other office specified in Schedule 4 of Appendix I to the Perfection Certificate (or specified by
notice from the Borrower to the Collateral Agent after the Closing Date in the case of filings,
recordings or registrations required by Section 5.10 of the Credit Agreement), and constitute all
the filings, recordings and registrations (other than filings required to be made in the United
States Patent and Trademark Office and the United States Copyright Office in order to perfect the
Security Interest in Article 9 Collateral consisting of United States Patents, United States
registered Trademarks and United States registered Copyrights) that are necessary to publish notice
of and protect the validity of and to establish a legal, valid and perfected security interest in
favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all
Article 9 Collateral in which the Security Interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements or amendments. Each Guarantor represents and
warrants that a fully executed agreement in the form hereof (or a short form hereof which form
shall be reasonably acceptable to the Collateral Agent) containing a description of all Article 9
Collateral consisting of Intellectual Property with respect to United States Patents (and Patents
for which United States registration applications are pending), United States registered Trademarks
(and Trademarks for which United States registration applications are pending) and United States
registered Copyrights (and Copyrights for which United States registration applications are
pending) has been delivered to the Collateral Agent for recording with the United States Patent and
Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. §
1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and reasonably requested by
the Collateral Agent, to protect the validity of and to establish a legal, valid and perfected
security interest in favor of the Collateral Agent, for the ratable benefit of the Secured Parties,
in respect of all Article 9 Collateral consisting of such Intellectual Property in which a security
interest may be perfected by recording with the United States Patent and Trademark Office and the
United States Copyright Office, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary (other than such actions as are necessary
to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents,
Trademarks and Copyrights (or registration or application for registration thereof) acquired or
developed after the date hereof).
(c) The Security Interest constitutes (i) a legal and valid security interest in all the
Article 9 Collateral securing the payment and performance of the Guaranteed Obligations under the
New York UCC, (ii) subject to the filings described in Section 4.02(b), a perfected security
interest in all Article 9 Collateral in which a security interest may be perfected by filing,
recording or registering a financing statement or analogous document in the United States (or any
political subdivision thereof) and its territories and possessions pursuant to the Uniform
Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that
shall be perfected in all Article 9 Collateral
in which a security interest may be perfected upon the receipt and recording of this Agreement
with the United States Patent and Trademark Office and the United States Copyright Office, as
applicable. The Security Interest is not subject to any prior ranking or
pari passu
ranking Lien
and shall be prior to any other Lien on any of the Article 9 Collateral, other than Liens expressly
permitted pursuant to Section 6.02 of the Credit Agreement or arising by operation of law.
(d) The Article 9 Collateral is owned by the Guarantors free and clear of any Lien, other than
Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement or arising by operation
of law. None of the Guarantors has filed or consented to the filing of (i) any financing statement
or analogous document under the Uniform Commercial Code or any other applicable laws covering any
Article 9 Collateral, (ii) any assignment in which any Guarantor assigns any Article 9 Collateral
or any security agreement or similar instrument covering any Article 9 Collateral with the United
States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in
which any Guarantor assigns any Article 9 Collateral or any security agreement or similar
instrument covering any Article 9 Collateral with any foreign governmental, municipal or other
office, which financing statement or analogous document, assignment, security agreement or similar
instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement.
(e) None of the Guarantors holds any Commercial Tort Claim individually in excess of
$7,500,000 as of the Closing Date except as indicated on
Schedule V
hereto, as such
schedule may be updated or supplemented from time to time.
(f) All Accounts have been originated by the Guarantors and all Inventory has been acquired by
the Guarantors in the ordinary course of business.
(g) As to itself and its Intellectual Property, except to the extent not reasonably expected
to have a Material Adverse Effect:
(i) The operation of such Guarantor’s business as currently conducted and the use of
the Guarantor Intellectual Property in connection therewith do not infringe, misappropriate
or otherwise violate the intellectual property rights of any third party.
(ii) Such Guarantor owns or has the right to use the Guarantor Intellectual Property.
(iii) The Intellectual Property set forth on Schedule III hereto includes all of the
patents, patent applications, domain names, trademark registrations and applications and
copyright registrations and applications owned by such Guarantor.
(iv) The Guarantor Intellectual Property has not been abandoned and has not been
adjudged invalid or unenforceable in whole or part.
SECTION 4.03.
Covenants
. (a) Each Guarantor agrees promptly to notify the Collateral
Agent in writing of any change (i) in its corporate name, (ii) in its identity or type of
organization or corporate structure, (iii) in its Federal Taxpayer Identification Number or
organizational identification number or (iv) in its jurisdiction of organization. Each Guarantor
agrees promptly to provide the Collateral Agent with certified organizational documents reflecting
any of the changes described in the immediately preceding sentence. Each Guarantor agrees not to
effect or permit any change referred to in the first sentence of this paragraph (a) unless all
filings have been made under the Uniform Commercial Code or otherwise that are required in order
for the Collateral Agent to continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Article 9 Collateral, for the ratable benefit
of the Secured Parties. Each Guarantor agrees promptly to notify the Collateral Agent if any
material portion of the Article 9 Collateral owned or held by such Guarantor is damaged or
destroyed.
(b) Subject to the rights of such Guarantor under the Loan Documents to dispose of Collateral,
each Guarantor shall, at its own expense, take any and all actions necessary to defend title to the
Article 9 Collateral against all persons and to defend the Security Interest of the Collateral
Agent, for the ratable benefit of the Secured Parties, in the Article 9 Collateral and the priority
thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement.
(c) Each Guarantor agrees, at its own expense, to execute, acknowledge, deliver and cause to
be duly filed all such further instruments and documents and take all such actions as the
Collateral Agent may from time to time reasonably request to preserve, protect and perfect the
Security Interest and the rights and remedies created hereby, including the payment of any fees and
taxes required in connection with the execution and delivery of this Agreement, the granting of the
Security Interest and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. If any amount payable under or in connection with
any of the Article 9 Collateral that is in excess of $7,500,000 shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be promptly pledged and
delivered to the Collateral Agent, for the ratable benefit of the Secured Parties, duly endorsed in
a manner reasonably satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Guarantor hereby authorizes the
Collateral Agent, with prompt notice thereof to the Guarantors, to supplement this Agreement by
supplementing
Schedule III
or adding additional schedules hereto to specifically identify
any asset or item that may constitute Copyrights, Patents, Trademarks or IP Agreements;
provided
that any Guarantor shall have the right, exercisable within 30 days after it has
been notified by the Collateral Agent of the specific identification of such Article 9 Collateral,
to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties
made by such Guarantor hereunder with respect to such Article 9 Collateral. Each Guarantor agrees
that it will use its commercially reasonable efforts to take such action as shall be necessary in
order that
all representations and warranties hereunder shall be true and correct with
respect to such Article 9 Collateral within 30 days after the date it has been notified by the Collateral Agent of
the specific identification of such Article 9 Collateral.
(d) After the occurrence of an Event of Default and during the continuance thereof, the
Collateral Agent shall have the right to verify under reasonable procedures the validity, amount,
quality, quantity, value, condition and status of, or any other matter relating to, the Article 9
Collateral, including, in the case of Accounts or Article 9 Collateral in the possession of any
third person, by contacting Account Debtors or the third person possessing such Article 9
Collateral for the purpose of making such a verification. The Collateral Agent shall have the
right to share any information it gains from such inspection or verification with any Secured
Party.
(e) At its option, the Collateral Agent may discharge past due taxes, assessments, charges,
fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9
Collateral and not permitted pursuant to Section 6.02 of the Credit Agreement, and may pay for the
maintenance and preservation of the Article 9 Collateral to the extent any Guarantor fails to do so
as required by the Credit Agreement or this Agreement, and each Guarantor jointly and severally
agrees to reimburse the Collateral Agent on demand for any reasonable payment made or any
reasonable expense incurred by the Collateral Agent pursuant to the foregoing authorization;
provided
,
however
, that nothing in this Section 4.03(e) shall be interpreted as
excusing any Guarantor from the performance of, or imposing any obligation on the Collateral Agent
or any Secured Party to cure or perform, any covenants or other promises of any Guarantor with
respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and
maintenance as set forth herein or in the other Loan Documents.
(f) Each Guarantor (rather than the Collateral Agent or any Secured Party) shall remain liable
for the observance and performance of all the conditions and obligations to be observed and
performed by it under each contract, agreement or instrument relating to the Article 9 Collateral
and each Guarantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent
and the Secured Parties from and against any and all liability for such performance.
(g) None of the Guarantors shall make or permit to be made an assignment, pledge or
hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9
Collateral, except as expressly permitted by the Credit Agreement. None of the Guarantors shall
make or permit to be made any transfer of the Article 9 Collateral and each Guarantor shall remain
at all times in possession of the Article 9 Collateral owned by it, except as permitted by the
Credit Agreement.
(h) None of the Guarantors will, without the Collateral Agent’s prior written consent, grant
any extension of the time of payment of any Accounts included in the Article 9 Collateral,
compromise, compound or settle the same for less than the full amount thereof, release, wholly or
partly, any person liable for the payment thereof or allow any credit or discount whatsoever
thereon, other than extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business and
consistent with prudent business practices or as otherwise permitted by the Credit Agreement.
(i) Each Guarantor irrevocably makes, constitutes and appoints the Collateral Agent (and all
officers, employees or agents designated by the Collateral Agent) as such Guarantor’s true and
lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default,
of making, settling and adjusting claims in respect of Article 9 Collateral under policies of
insurance covering the Article 9 Collateral, endorsing the name of such Guarantor on any check,
draft, instrument or other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that any Guarantor at
any time or times shall fail to obtain or maintain any of the policies of insurance required by the
Credit Agreement or to pay any premium in whole or part relating thereto, the Collateral Agent may,
without waiving or releasing any obligation or liability of the Guarantors hereunder or any Event
of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Collateral Agent reasonably deems
advisable. All sums disbursed by the Collateral Agent in connection with this Section 4.03(i),
including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto,
shall be payable, upon demand, by the Guarantors to the Collateral Agent and shall be additional
Guaranteed Obligations secured hereby.
SECTION 4.04.
Other Actions
. In order to further ensure the attachment, perfection
and priority of, and the ability of the Collateral Agent to enforce, for the ratable benefit of the
Secured Parties, the Collateral Agent’s security interest in the Article 9 Collateral, each
Guarantor agrees, in each case at such Guarantor’s own expense, to take the following actions with,
respect to the following Article 9 Collateral:
(a)
Instruments and Tangible Chattel Paper
. If any Guarantor shall at any time hold
or acquire any Instruments or Tangible Chattel Paper evidencing an amount in excess of $7,500,000,
such Guarantor shall forthwith endorse, assign and deliver the same to the Collateral Agent,
accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral
Agent may from time to time reasonably request.
(b)
Cash Accounts
. No Guarantor shall grant control of any deposit account to any
Person other than the Collateral Agent and the bank with which the deposit account is maintained.
(c)
Investment Property
. Except to the extent otherwise provided in Article III, if
any Guarantor shall at any time hold or acquire any certificated security, such Guarantor shall
forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such
instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time
to time reasonably specify. If any security now or hereafter acquired by any Guarantor that is
part of the Article 9 Collateral is uncertificated and is issued to such Guarantor or its nominee
directly by the issuer
thereof, upon the Collateral Agent’s reasonable request and following the occurrence of an
Event of Default, such Guarantor shall promptly notify the Collateral Agent of such uncertificated
securities and pursuant to an agreement in form and substance reasonably satisfactory to the
Collateral Agent, either (i) cause the issuer to agree to comply with instructions from the
Collateral Agent as to such security, without further consent of any Guarantor or such nominee, or
(ii) cause the issuer to register the Collateral Agent as the registered owner of such security.
If any security or other Investment Property that is part of the Article 9 Collateral, whether
certificated or uncertificated, representing an Equity Interest in a
third party and having a fair market value in excess of $7,500,000 now or hereafter acquired by any Guarantor is held by such
Guarantor or its nominee through a securities intermediary or commodity intermediary, such
Guarantor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent’s request
and option, pursuant to a Control Agreement either (A) cause such securities intermediary or
commodity intermediary, as applicable, to agree, in the case of a securities intermediary, to
comply with entitlement orders or other instructions from the Collateral Agent to such securities
intermediary as to such securities or other Investment Property or, in the case of a commodity
intermediary, to apply any value distributed on account of any commodity contract as directed by
the Collateral Agent to such commodity intermediary, in each case without further consent of any
Guarantor or such nominee, or (B) in the case of Financial Assets or other Investment Property held
through a securities intermediary, arrange for the Collateral Agent to become the entitlement
holder with respect to such Investment Property, for the ratable benefit of the Secured Parties,
with such Guarantor being permitted, only with the consent of the Collateral Agent, to exercise
rights to withdraw or otherwise deal with such Investment Property. The Collateral Agent agrees
with each of the Guarantors that the Collateral Agent shall not give any such entitlement orders or
instructions or directions to any such issuer, securities intermediary or commodity intermediary,
and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any
Guarantor, unless an Event of Default has occurred and is continuing or, after giving effect to any
such withdrawal or dealing rights, would occur. The provisions of this paragraph (c) shall not
apply to any Financial Assets credited to a securities account for which the Collateral Agent is
the securities intermediary.
(d)
Tort Claims
. If any Guarantor shall at any time hold or acquire a Commercial Tort
Claim in an amount reasonably estimated to exceed $7,500,000, such Guarantor shall promptly notify
the Collateral Agent thereof in a writing signed by such Guarantor, including a summary description
of such claim, and grant to the Collateral Agent in writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and
substance reasonably satisfactory to the Collateral Agent.
SECTION 4.05.
Covenants Regarding Patent, Trademark and Copyright Collateral
. (a)
Each Guarantor agrees that it will not knowingly do any act or omit to do any act (and will
exercise commercially reasonable efforts to prevent its licensees from doing any act or omitting to
do any act) whereby any Patent that is material to the
normal conduct of such Guarantor’s business may become prematurely invalidated or dedicated to
the public, and agrees that it shall take commercially reasonable steps with respect to any
material products covered by any such Patent as necessary and sufficient to establish and preserve
its rights under applicable patent laws.
(b) Each Guarantor will, and will use its commercially reasonable efforts to cause its licensees
or its sublicensees to, for each material Trademark necessary to the normal conduct of such
Guarantor’s business, (i) maintain such Trademark in full force free from any adjudication of
abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered
under such Trademark consistent with the quality of such products and services as of the date
hereof, (iii) display such Trademark with notice of federal or foreign registration or claim of
trademark or service mark as required under applicable law and (iv) not knowingly use or knowingly
permit its licensees’ use of such Trademark in violation of any third-party rights.
(c) Each Guarantor will, and will use its commercially reasonable efforts to cause its
licensees or its sublicensees to, for each work covered by a material Copyright
necessary to the normal conduct of such Guarantor’s business that it publishes, displays and
distributes, use copyright notice as required under applicable copyright laws.
(d) Each Guarantor shall notify the Collateral Agent promptly if it knows that any Patent,
Trademark or Copyright material to the normal conduct of such Guarantor’s business may imminently
become abandoned, lost or dedicated to the public other than by expiration, or of any materially
adverse determination or development, excluding office actions and similar determinations in the
United States Patent and Trademark Office, United States Copyright Office, any court or any similar
office of any country, regarding such Guarantor’s ownership of any such material Patent, Trademark
or Copyright or its right to register or to maintain the same.
(e) Each Guarantor, either itself or through any agent, employee, licensee or designee, shall
(i) inform the Collateral Agent on a semi-annual basis of each application by itself, or through
any agent, employee, licensee or designee, for any Patent with the United States Patent and
Trademark Office and each registration of any Trademark or Copyright with the United States Patent
and Trademark Office, the United States Copyright Office or any comparable office or agency in any
other country filed during the preceding six-month period, and (ii) upon the reasonable request of
the Collateral Agent, execute and deliver any and all agreements, instruments, documents and papers
as the Collateral Agent may reasonably request to evidence the Collateral Agent’s security interest
in such Patent, Trademark or Copyright.
(f) Each Guarantor shall exercise its reasonable business judgment consistent with the
practice in any proceeding before the United States Patent and Trademark Office, the United States
Copyright Office or any comparable office or agency in any other country with respect to
maintaining and prosecuting each material application relating to any Patent, Trademark and/or
Copyright (and obtaining the relevant grant or registration) material to the normal conduct of such
Guarantor’s business and to maintain (i) each issued Patent and (ii) the registrations of each
Trademark and each Copyright in each case that is material to the normal conduct of such
Guarantor’s business, including, when applicable and necessary in such Guarantor’s reasonable
business judgment, timely filings of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and, if any Guarantor believes necessary in its
reasonable business judgment, to initiate opposition, interference and cancellation proceedings
against third parties.
(g) In the event that any Guarantor knows or has reason to know that any Article 9 Collateral
consisting of a Patent, Trademark or Copyright material to the normal conduct of its business has
been or is about to be materially infringed, misappropriated or diluted by a third party, such
Guarantor shall promptly notify the Collateral Agent and shall, if such Guarantor deems it
necessary in its reasonable business judgment, promptly contact such third party, and if necessary
in its reasonable business judgment, sue and recover damages, and take such other actions as are
reasonably appropriate under the circumstances.
(h) Upon and during the continuance of an Event of Default, each Guarantor shall use
commercially reasonable efforts to obtain all requisite consents or approvals from the licensor
under each IP Agreement to effect the assignment of all such Guarantor’s right, title and
interest thereunder to (in the Collateral Agent’s sole discretion) the designee of the Collateral Agent or
the Collateral Agent.
ARTICLE V
REMEDIES
SECTION 5.01.
Remedies Upon Default
. Upon the occurrence and during the continuance
of an Event of Default, each Pledgor agrees to deliver each item of Collateral to the Collateral
Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or
all the following actions at the same or different times: (a) with respect to any Article 9
Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become
an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable
Guarantors to the Collateral Agent or to license or sublicense, whether general, special or
otherwise, and whether on an exclusive or a nonexclusive basis, any such Article 9 Collateral
throughout the world on such terms and conditions and in such manner as the Collateral Agent shall
determine (other than in violation of any then-existing licensing arrangements to the extent that
waivers thereunder cannot be obtained) and (b) with or without legal process and with or without
prior notice or demand for performance, to take possession of the Article 9 Collateral and without
liability for trespass to enter any premises where the Article 9 Collateral may be located for the
purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise
any and all rights afforded to a secured party under the applicable Uniform Commercial Code or
other applicable law. Without limiting the generality of the foregoing, each Pledgor agrees that
the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law,
to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at
any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as
the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized in
connection with any sale of a security (if it deems it advisable to do so) pursuant to the
foregoing to restrict the prospective bidders or purchasers to persons who represent and agree that
they are purchasing such security for their own account, for investment, and not with a view to the
distribution or sale thereof. Upon consummation of any such sale of Collateral pursuant to this
Section 5.01 the Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right on the part of any Pledgor, and
each Pledgor hereby waives and releases (to the extent permitted by law) all rights of redemption,
stay, valuation and appraisal that such Pledgor now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the applicable Pledgors 10 Business Days’ written notice
(which each Pledgor agrees is reasonable notice within the meaning of Section 9-611 of the New York
UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale
of Collateral. Such notice, in the case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such public sale shall be
held at such time or times within ordinary business hours and at such place or places as
the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or the portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral shall have been given.
The Collateral Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place to which the same
was so adjourned. In the case of any sale of all or any part of the Collateral made on credit or
for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale
price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in the event that any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in the case of any such failure, such Collateral may be sold again upon
notice given in accordance with provisions above. At any public (or, to the extent permitted by
law, private) sale made pursuant to this Section 5.01, any Secured Party may bid for or purchase
for cash, free (to the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Pledgor (all such rights being also hereby waived and released to the
extent permitted by law), the Collateral or any part thereof offered for sale and such Secured
Party may, upon compliance with the terms of sale, hold, retain and dispose of such property in
accordance with Section 5.02 hereof without further accountability to any Pledgor therefor. For
purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and no Pledgor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied and the Guaranteed
Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon
it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the
Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to
the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its
equivalent in other jurisdictions.
SECTION 5.02.
Application of Proceeds
. The Collateral Agent shall promptly apply the
proceeds, moneys or balances of any collection or sale of Collateral, as well as any Collateral
consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the Administrative Agent
and the Collateral Agent in connection with such collection or sale or otherwise in
connection with this Agreement, any other Loan Document or any of the Guaranteed
Obligations, including all court costs and the fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Administrative Agent and the Collateral
Agent hereunder or under any other Loan Document on behalf of any Pledgor and any other
costs or expenses incurred in connection with the exercise of any right or remedy hereunder
or under any other Loan Document;
SECOND, to the payment in full of the Guaranteed Obligations (the amounts so applied to
be distributed among the Secured Parties pro rata in accordance with the
respective amounts of the Guaranteed Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgors, their successors or assigns, or as a court of competent
jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of application of any such
proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the
Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and
such purchaser or purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Collateral Agent or such officer or be answerable in any way for
the misapplication thereof.
SECTION 5.03.
Grant of License To Use Intellectual Property
. For the purpose of
enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as
the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each
Guarantor hereby grants to (in the Collateral Agent’s sole discretion) a designee of the Collateral
Agent or the Collateral Agent, for the ratable benefit of the Secured Parties, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other compensation to any
Guarantor) to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual
Property (excluding Trademarks) now owned or hereafter acquired by such Guarantor, wherever the
same may be located, and including, without limitation, in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof, the right to prosecute and maintain all
intellectual property and the right to sue for past infringement of the intellectual property. The
use of such license by the Collateral Agent may be exercised, at the option of the Collateral
Agent, upon the occurrence and during the continuation of an Event of Default;
provided
that any license, sublicense or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Guarantors notwithstanding any subsequent cure of an
Event of Default.
SECTION 5.04.
Securities Act, etc
. In view of the position of the Pledgors in
relation to the Pledged Collateral, or because of other current or future circumstances, a question
may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar federal
statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as
from time to time in effect being called the “
Federal Securities Laws
”) with respect to any
disposition of the Pledged Collateral permitted hereunder. Each Pledgor understands that
compliance with the Federal Securities Laws might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the
Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other
legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all
or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or
similar laws analogous in purpose or effect. Each Pledgor acknowledges and agrees that in light of such restrictions and
limitations, the Collateral Agent, in its sole and absolute discretion, (a) may proceed to make
such a sale whether or not a registration statement for the purpose of registering such Pledged
Collateral or part thereof shall have been filed under the Federal Securities Laws or, to the
extent applicable, Blue Sky or other state securities laws and (b) may approach and negotiate with
a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any
such sale might result in prices and other terms less favorable to the seller than if such sale
were a public sale without such restrictions. In the event of any such sale, the Collateral Agent
shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at
a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a substantially higher
price might have been realized if the sale were deferred until after registration as aforesaid or
if more than a single purchaser were approached. The provisions of this Section 5.04 will apply
notwithstanding the existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Collateral Agent sells.
SECTION 5.05.
Registration, etc
. Each Pledgor agrees that, upon the occurrence and
during the continuance of an Event of Default, if for any reason the Collateral Agent desires to
sell any of the Pledged Collateral at a public sale, it will, at any time and from time to time,
upon the written request of the Collateral Agent, use its commercially reasonable efforts to take
or to cause the issuer of such Pledged Collateral to take such action and prepare, distribute
and/or file such documents, as are required or advisable in the reasonable opinion of counsel for
the Collateral Agent to permit the public sale of such Pledged Collateral. Each Pledgor further
agrees to indemnify, defend and hold harmless the Administrative Agent, each other Secured Party,
any underwriter and their respective officers, directors, affiliates and controlling persons from
and against all loss, liability, expenses, costs of counsel (including reasonable fees and expenses
to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that
they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any
alleged untrue statement of a material fact contained in any prospectus (or any amendment or
supplement thereto) or in any notification or offering circular, or arises out of or is based upon
any alleged omission to state a material fact required to be stated therein or necessary to make
the statements in any thereof not misleading, except insofar as the same may have been caused by
any untrue statement or omission based upon information furnished in writing to such Pledgor or the
issuer of such Pledged Collateral by the Collateral Agent or any other Secured Party expressly for
use therein. Each Pledgor further agrees, upon such written request referred to above, to use its
commercially reasonable efforts to qualify, file or register, or cause the issuer of such Pledged
Collateral to qualify, file or register, any of the Pledged Collateral under the Blue Sky or other
securities laws of such states as may be reasonably requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or registrations. Each
Pledgor will bear all costs and expenses of carrying out its obligations under this Section 5.05.
Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with
the provisions of this Section 5.05 only and that such failure would not be adequately compensable
in damages and, therefore, agrees that its agreements contained in this Section 5.05 may be
specifically enforced.
ARTICLE VI
INDEMNITY, SUBROGATION AND SUBORDINATION
SECTION 6.01.
Indemnity and Subrogation
. In addition to all such rights of indemnity
and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the
Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Agreement
in respect of any Obligation of the Borrower, the Borrower shall indemnify such Guarantor for the
full amount of such payment and such Guarantor shall be subrogated to the rights of the person to
whom such payment shall have been made to the extent of such payment and (b) in the event any
assets of any Guarantor shall be sold pursuant to this Agreement or any other Security Document to
satisfy in whole or in part an Obligation of the Borrower, the Borrower shall indemnify such
Guarantor in an amount equal to the greater of the book value or the fair market value of the
assets so sold.
SECTION 6.02.
Contribution and Subrogation
. Each Guarantor (other than Holdings and
the Borrower) (a “
Contributing Guarantor
”) agrees (subject to Section 6.03) that, in the
event a payment shall be made by any other Guarantor (other than Holdings and the Borrower)
hereunder in respect of any Guaranteed Obligation or assets of any other Guarantor (other than
Holdings and the Borrower) shall be sold pursuant to any Security Document to satisfy any
Guaranteed Obligation owed to any Secured Party and such other Guarantor (the “
Claiming
Guarantor
”) shall not have been fully indemnified by the Borrower as provided in Section 6.01,
the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount
of such payment or the greater of the book value or the fair market value of such assets, as
applicable, in each case multiplied by a fraction of which the numerator shall be the net worth of
such Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth
of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto
pursuant to Section 7.15, the date of the supplement hereto executed and delivered by such
Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this
Section 6.02 shall be subrogated to the rights of such Claiming Guarantor under Section 6.01 to the
extent of such payment.
SECTION 6.03.
Subordination
. (a) Notwithstanding any provision of this Agreement to
the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 and all other rights of
indemnity, contribution or subrogation of the Pledgor under applicable law or otherwise shall be
fully subordinated to the indefeasible payment in full in cash of the Guaranteed Obligations. No
failure on the part of the Borrower or any Guarantor to make the payments required by Sections 6.01
and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect
limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder,
and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor
hereunder.
(b) Each Guarantor hereby agrees that all Indebtedness and other monetary obligations owed by
it to any other Guarantor or any Subsidiary shall be fully subordinated to the indefeasible payment
in full in cash of the Guaranteed Obligations.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01.
Notices
. All communications and notices hereunder shall (except as
otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the
Credit Agreement. All communications and notices hereunder to any Subsidiary Loan Party shall be
given to it in care of the Borrower, with such notice to be given as provided in Section 9.01 of
the Credit Agreement.
SECTION 7.02.
Security Interest Absolute
. All rights of the Collateral Agent
hereunder, the Security Interest, the security interest in the Pledged Collateral and all
obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement
with respect to any of the Guaranteed Obligations or any other agreement or instrument relating to
any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement, any other Loan Document or any other agreement
or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any
release or amendment or waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Guaranteed Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the
Guaranteed Obligations or this Agreement.
SECTION 7.03.
Binding Effect; Several Agreement
. This Agreement shall become
effective as to any party to this Agreement when a counterpart hereof executed on behalf of such
party shall have been delivered to the Administrative Agent and a counterpart hereof shall have
been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such party
and the Collateral Agent and their respective permitted successors and assigns, and shall inure to
the benefit of such party, the Collateral Agent and the other Secured Parties and their respective
permitted successors and assigns, except that no party shall have the right to assign or transfer
its rights or obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly contemplated by this Agreement or the
Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each
party and may be amended, modified, supplemented, waived or released with respect to any party
without the approval of any other party and without affecting the obligations of any other party
hereunder.
SECTION 7.04.
Successors and Assigns
. Whenever in this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the permitted successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor or the Collateral Agent that are contained
in this Agreement shall bind and inure to the benefit of their respective permitted successors and
assigns.
SECTION 7.05.
Collateral Agent’s Fees and Expenses; Indemnification
. (a) The parties
hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred
hereunder as provided in Section 9.05 of the Credit Agreement.
(b) The Parties hereto agree that the Collateral Agent shall be entitled to indemnification as
provided in Section 9.05 of the Credit Agreement.
(c) Any such amounts payable as provided hereunder shall be additional Guaranteed Obligations
secured hereby and by the other Security Documents. The provisions of this Section 7.05 shall
remain operative and in full force and effect regardless of the termination of this Agreement or
any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of
any of the Obligations, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral
Agent or any other Secured Party. All amounts due under this Section 7.05 shall be payable on
written demand therefor.
SECTION 7.06.
Collateral Agent Appointed Attorney-in-Fact
. Each Pledgor hereby
appoints the Collateral Agent as the attorney-in-fact of such Pledgor for the purpose of carrying
out the provisions of this Agreement and taking any action and executing any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in the Collateral
Agent’s name or in the name of such Pledgor, (a) to receive, endorse, assign or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and
give discharges and releases of all or any of the Collateral; (c) to ask for, demand, sue for,
collect, receive and give acquittance for any and all moneys due or to become due under and by
virtue of any Collateral; (d) to sign the name of any Pledgor on any invoice or bill of lading
relating to any of the Collateral; (e) to send verifications of Accounts to any Account Debtor; (f)
to commence and prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (g) to settle, compromise, compound, adjust or
defend any actions, suits or proceedings relating to all or any of the Collateral; (h) to notify,
or to require any Guarantor to notify, Account Debtors to make payment directly to the Collateral
Agent; and (i) to use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to
carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the Collateral for all
purposes;
provided
, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof or the moneys due
or to become due in respect thereof or any property covered thereby. The Collateral Agent and the
other Secured Parties shall be accountable only for amounts actually received as a result of the
exercise of the powers granted to them herein, and neither they nor their officers, directors,
employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder,
except for their own gross negligence or wilful misconduct.
SECTION 7.07.
GOVERNING LAW
.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 7.08.
Waivers; Amendment
. (a) No failure or delay by the Administrative
Agent, the Collateral Agent, any Issuing Bank or any Lender in exercising any right, power or
remedy hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy, or any abandonment or discontinuance
of steps to enforce such a right, power or remedy, preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The rights, powers and remedies of the
Administrative Agent, the Collateral Agent, any Issuing Bank and the Lenders hereunder and under
the other Loan Documents are cumulative and are not exclusive of any rights, powers or remedies
that they would otherwise have. No waiver of any provision of this Agreement or consent to any
departure by any Loan Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section 7.08, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. Without limiting the generality
of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed
as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, the
Collateral Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default
or Event of Default at the time. No notice or demand on any Loan Party in any case shall entitle
any Loan Party to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan
Party or Loan Parties with respect to which such waiver, amendment or modification is to apply,
subject to any consent required in accordance with Section 9.08 of the Credit Agreement.
SECTION 7.09.
WAIVER OF JURY TRIAL
.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS. EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION 7.09.
SECTION 7.10.
Severability
. In the event any one or more of the provisions contained
in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining provisions contained herein
and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal
or unenforceable provisions.
SECTION 7.11.
Counterparts
. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when taken together shall
constitute but one contract, and shall become effective as provided in Section 7.03. Delivery of
an executed counterpart to this Agreement by facsimile transmission shall be as effective as
delivery of a manually signed original.
SECTION 7.12.
Headings
. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, this Agreement.
SECTION 7.13.
Jurisdiction; Consent to Service of Process
. (a) Each party to this
Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the United States of
America sitting in New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such federal court. Each
of the parties hereto further irrevocably consents to the service of process in any action or
proceeding in such courts by the mailing thereof by any
parties thereto by registered or certified mail, postage prepaid, to the Borrower at the
address specified for the Loan Parties in Section 9.01(a) of the Credit Agreement. Each of the
parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the
Collateral Agent, any Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement or any other Loan Document against any Pledgor, or its
properties, in the courts of any jurisdiction.
(b) Each party to this Agreement hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement
or any other Loan Document in any New York State or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
SECTION 7.14.
Termination or Release
. (a) This Agreement, the guarantees made
herein, the Security Interest and all other security interests granted hereby shall terminate when
all the Obligations have been indefeasibly paid in full in cash and the Lenders have no further
commitment to lend under the Credit Agreement, the Revolving L/C Exposure has been reduced to zero
and each Issuing Bank has no further obligations to issue Letters of Credit under the Credit
Agreement.
(b) A Subsidiary Loan Party shall automatically be released from its obligations hereunder and
the security interests in the Collateral of such Subsidiary Loan Party shall be automatically
released upon the consummation of any transaction permitted by the Credit Agreement as a result of
which such Subsidiary Loan Party ceases to be a Subsidiary of Holdings pursuant to the terms of the
Credit Agreement.
(c) Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under
the Credit Agreement to any person that is not a Pledgor, or upon the effectiveness of any written
consent to the release of the security interest granted hereby in any Collateral pursuant to
Section 9.08 of the Credit Agreement, the security interest in such Collateral shall be
automatically released.
(d) If any security interest granted hereby in any Collateral violates Section 9.22 of the
Credit Agreement, the security interest in such Collateral shall be automatically released.
(e) In connection with any termination or release pursuant to paragraph (a), (b), (c) or (d)
of this Section 7.14, the Collateral Agent shall execute and deliver to any Pledgor, at such
Pledgor’s expense all documents that such Pledgor shall reasonably request to evidence such
termination or release and shall assist such Pledgor in making any filing in connection therewith.
Any execution and delivery of documents pursuant to this Section 7.14 shall be without recourse to
or warranty by the Collateral Agent.
SECTION 7.15.
Additional Subsidiaries
. Upon execution and delivery by the Collateral Agent and any Subsidiary Loan Party that is
required to become a party hereto by Section 5.10 of the Credit Agreement of an instrument
substantially in the form of
Exhibit I
hereto with such changes and modifications thereto
as may be required by the laws of any applicable foreign jurisdiction, such Subsidiary Loan Party
shall become a Subsidiary Loan Party hereunder with the same force and effect as if originally
named as a Subsidiary Loan Party herein. The execution and delivery of any such instrument shall
not require the consent of any other party to this Agreement. The rights and obligations of each
party to this Agreement shall remain in full force and effect notwithstanding the addition of any
new party to this Agreement.
SECTION 7.16.
Right of Set-off
. If an Event of Default shall have occurred and be
continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other indebtedness at any time
owing by such Lender or such Issuing Bank to or for the credit or the account of any Pledgor to
this Agreement against any of and all the obligations of such Pledgor now or hereafter existing
under this Agreement owed to such Lender or such Issuing Bank, irrespective of whether or not such
Lender or such Issuing Bank shall have made any demand under this Agreement and although such
obligations may be unmatured. The rights of each Lender under this Section 7.16 are in addition to
other rights and remedies (including other rights of set-off) that such Lender or such Issuing Bank
may have.
SECTION 7.17.
Credit Agreement
. If any conflict or inconsistency exists between this
Agreement and the Credit Agreement, the Credit Agreement shall govern.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year
first above written.
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FR X HOLDINGS LLC,
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as a Guarantor and Pledgor (in each capacity)
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By:
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/s/ Timothy H. Day
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Name: Timothy H. Day
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Title: Vice President and Treasurer
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CI ACQUISITION, INC.,
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as Borrower, Guarantor and Pledgor (in each capacity)
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By:
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/s/ Timothy H. Day
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Name: Timothy H. Day
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Title: Vice President and Treasurer
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CHART INC.
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CAIRE INC.
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CHART ENERGY & CHEMICALS, INC.
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COOLTEL, INC.
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CHART INTERNATIONAL HOLDINGS, INC.
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CHART ASIA, INC.
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CHART INTERNATIONAL, INC.,
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as a Guarantor and Subsidiary Loan
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Party (in each capacity)
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By:
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/s/ Michael H. Biehl
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Name: Michael H. Biehl
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Title: Chief Financial Officer and Treasurer
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CITICORP NORTH AMERICA, INC.,
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as Collateral Agent
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By:
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/s/ Stephen Cunningham
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Name: Stephen Cunningham
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Title: Vice President
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Exhibit I
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to the Guarantee and
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Collateral Agreement
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SUPPLEMENT
NO. ___ dated as of (this “
Supplement
”), to the Guarantee and
Collateral Agreement dated as of October 17, 2005 (the “
Guarantee and Collateral
Agreement
”), among FR X HOLDINGS LLC, a Delaware limited liability company (“Holdings”), CI
ACQUISITION, INC., a Delaware corporation (“
Acquisition Corp.
” or the “
Borrower
”),
each Subsidiary Loan Party identified therein (each, a “
Subsidiary Loan Party
”) and
CITICORP NORTH AMERICA, INC. (“
CNAI
”), as collateral agent (in such capacity, the
“
Collateral Agent
”) for the Secured Parties.
A. Reference is made to the Credit Agreement dated as of October 17, 2005 (as amended,
supplemented, waived or otherwise modified from time to time, the “
Credit Agreement
”),
among Holdings, the Borrower, the lenders party thereto from time to time (the “
Lenders
”),
CNAI as Administrative Agent and as Collateral Agent for the Lenders, MORGAN STANLEY SENIOR
FUNDING, INC. (“
MS
”), as Syndication Agent, CITIGROUP GLOBAL MARKETS INC. and MS, as Joint
Lead Arrangers and Joint Book Managers and Natexis Banques Populaires and Sovereign Bank, as
Co-Documentation Agents.
B. Capitalized terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement and the Guarantee and Collateral Agreement referred
to therein.
C. The Guarantors have entered into the Guarantee and Collateral Agreement in order to induce
the Lenders to make Loans and each Issuing Bank to issue Letters of Credit. Section 7.15 of the
Guarantee and Collateral Agreement provides that additional Subsidiaries may become Subsidiary Loan
Parties under the Guarantee and Collateral Agreement by execution and delivery of an instrument in
the form of this Supplement. The undersigned Subsidiary (the “
New Subsidiary
”) is
executing this Supplement in accordance with the requirements of the Credit Agreement to become a
Subsidiary Loan Party under the Guarantee and Collateral Agreement in order to induce the Lenders
to make additional Loans and each Issuing Bank to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Subsidiary agree as follows:
SECTION 1. In accordance with Section 7.15 of the Guarantee and Collateral Agreement, the New
Subsidiary by its signature below becomes a Subsidiary Loan Party and a Guarantor under the
Guarantee and Collateral Agreement with the same force and effect as if originally named therein as
a Subsidiary Loan Party and a Guarantor, and the New Subsidiary hereby (a) agrees to all the terms
and provisions of the Guarantee and Collateral Agreement applicable to it as a Subsidiary Loan
Party and Guarantor thereunder and (b) represents and warrants that the representations and
warranties made by it as a Guarantor thereunder (as supplemented by the attached supplemental
Schedules to the Perfection Certificate) are true and correct, in all material respects, on and as
of the date hereof. In furtherance of the foregoing, the New Subsidiary, as security for the
payment and performance in full of the Guaranteed
Exh I-1
Obligations, does hereby create and grant to the Collateral Agent, its successors and
assigns, for the ratable benefit of the Secured Parties, their successors and assigns, a security
interest in and Lien on all the New Subsidiary’s right, title and interest in and to the Collateral
(as defined in the Guarantee and Collateral Agreement) of the New Subsidiary. Each reference to a
“Subsidiary Loan Party” or a “Guarantor” in the Guarantee and Collateral Agreement shall be deemed
to include the New Subsidiary. The Guarantee and Collateral Agreement is hereby incorporated
herein by reference.
SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent and the other
Secured Parties that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in accordance with its
terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or other similar laws affecting creditors’ rights generally, (ii) general principles of
equity (regardless of whether such enforceability is considered in a proceeding in equity or at
law) and (iii) implied covenants of good faith and fair dealing.
SECTION 3. This Agreement may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute but one contract.
This Supplement shall become effective when (a) the Collateral Agent shall have received a
counterpart of this Supplement that bears the signature of the New Subsidiary and (b) the
Collateral Agent has executed a counterpart hereof.
SECTION 4. The New Subsidiary has attached hereto supplemental Schedules 1(a) through 17 to
the Perfection Certificate in substantially the same form as the equivalent Schedules to the
Perfection Certificate, and the New Subsidiary hereby represents and warrants that the attached
Schedules are complete and correct with respect to the New Subsidiary.
SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In the event any one or more of the provisions contained in this Supplement should
be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall
not in any way be affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in writing and given as provided
in Section 7.01 of the Guarantee and Collateral Agreement.
SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for its reasonable
out-of-pocket expenses in connection with this Supplement, including the reasonable fees,
disbursements and other charges of counsel for the Collateral Agent.
IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this
Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.
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[Name of New Subsidiary]
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By:
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Name:
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Title:
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CITICORP NORTH AMERICA, INC., as
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Collateral Agent
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By:
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Name:
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Title:
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Exhibit 10.7
IAM
AGREEMENT
2004 — 2007
ARTICLE I
- RECOGNITION
Chart Heat Exchangers (hereinafter referred to as the “Company”) recognizes Local Lodge 2191 of
District Lodge 66 of The International Association of Machinists and Aerospace Workers, AFL-CIO
(hereinafter referred to as the “Union”) as the sole and exclusive bargaining agent for its
employees at its La Crosse, Wisconsin manufacturing facility for the purpose of collective
bargaining with respect to the wages, hours and working conditions of said employees.
As used in this Agreement, the terms “employee” and “employees” shall include all production and
maintenance employees, including all craters, receiving clerks and tool room employees, but shall
exclude all administrative employees, factory office clerical employees, engineers and technical
employees, standards and factory cost department employees, professional employees, guards, safety
inspectors, nurses, student trainees and all supervisory employees as defined in the Labor
Management Relations Act.
Employees in the above excluded jobs are not covered by this Agreement; but if employees currently
in such jobs subsequently take other jobs within the coverage of this Agreement, then such
employees shall be eligible to membership in the Union upon such notification to them by the
Company.
This Agreement shall be binding on any and all successors and assigns, who by purchase, lease,
transfer of stock or merger, acquire control of the Company’s manufacturing facility in La Crosse,
Wisconsin.
ARTICLE II
- UNION SECURITY
Employees eligible for Union membership as defined in this Agreement shall be required at the
expiration of their probationary period to become and remain members of the Union in good standing
with respect to the payment of uniformly levied initiation fee and periodic dues as a condition of
employment.
ARTICLE III
- NON-DISCRIMINATION
The Company or the Union shall not discriminate against employees because of color, race, sex,
religious affiliation, nationality, age, handicap or status as a disabled veteran or Vietnam era
veteran, as prescribed by applicable state or federal law. Pronouns in the male gender appearing in
this Agreement are intended to include the female gender.
ARTICLE IV
- HOURS
Regular Work Day and Week
Eight (8) hours shall constitute a regular day’s work and not more than forty (40) hours shall
constitute a regular week’s work. The regular workweek will begin at 11:00 p.m. on Sunday and will
end on Friday.
Shift Hours
The shifts may consist of one day and two night shifts. The regular working hours are as follows:
3rd Shift 11:00 P.M. to 7:00 A.M.
1st Shift 7:00 A.M. to 3:00 P.M.
2nd Shift 3:00 P.M. to 11:00 P.M.
Third shift weekly start will be 11:00 P.M., Sunday.
Regular Lunch Periods.
1st Shift 12:00 Noon
2nd Shift 8:00 P.M.
3rd Shift 4:00 A.M.
Employees shall also be provided during their shift one (1) rest period not to exceed ten (10)
minutes in accordance with operational requirements. Normally, the break times will be as specified
below:
1st shift: 9:30 am to 9:40 am
2nd shift: 5:30 pm to 5:40 pm
3rd shift: 1:30 am to 1:40 am
The consumption of food items and visits to the lunch room shall be limited to designated lunch and
break periods and will not be permitted during other work hours. Beverages will be allowed at the
workstations.
All employees are assigned to a three-shift basis and will have a paid 15-minute lunch period
starting at one of the times listed above in this paragraph.
ARTICLE V
- OVERTIME
General
Union members will cooperate in working of necessary overtime; however, an employee shall have the
right to refuse to perform overtime work where the Company is able to secure someone else who is
experienced to perform the work.
An employee shall have the right to refuse to accept overtime work whenever they have a reasonable
excuse or where the length of time is so excessive so as to endanger their health.
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It shall be the policy of the Company to ask for overtime before 12 o’clock for the day shift — 9
o’clock for the second shift and the day before for the third shift for daily overtime. In no event
shall a first or second shift employee be required to work Saturday when notification is given
later than the end of the employee’s Thursday shift nor where the Saturday shift is more than five
(5) hours. For first and second shift employees, the Company will schedule consecutive 5-hour
shifts on Saturday and/or Sunday except production needs require another schedule. When two shifts
are being scheduled, the first and second shifts will be scheduled for the same number of hours.
Third shift employees will not be required to work Saturday when notification is given later than
the end of the employee’s Thursday shift. The normal Saturday or Sunday shift for third shift
employees is eight (8) consecutive hours. 3rd shift will have the right to work five (5) hours
starting on their regular Saturday and Sunday shift. If a change in schedule is necessary, the Shop
Committee will be notified and given the reason for such deviation — this will be done before the
deviation whenever possible. 1st and 2nd shifts will have the right to work five (5) hours starting
on their regular Saturday and Sunday shift, since the regular shift on weekends is five (5) hours.
Overtime Premium
All hours worked in excess of eight (8) in a work day will be paid at one and one-half (1
1
/
2
) times
the regular straight time hourly rate.
When an employee works hours prior to or after their normal shift they will be paid overtime at
time and one-half. The exception to this is when an employee requests earlier starting and stopping
time and the Management agrees, then the Company is not obligated to pay overtime hours before or
after their regularly scheduled shift.
The Management has agreed to pay double time for all overtime hours worked which exceed sixteen
(16) hours in any one week with the understanding with the Shop Committee that the Management has a
right to replace the employee that is working and has put in sixteen (16) hours overtime. The
Management will make the transfers in such cases. The Management will replace the employee with an
employee from within the department as follows:
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a.
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With an employee from the same department and shift.
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b.
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If possible with an employee from the same department on another shift.
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c.
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Where employees for replacement are not available within the department, employees capable of
performing the work will be transferred in from other Departments.
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Hours worked on a day observed, as a holiday under this Agreement will be included in such sixteen
(16) hours under this paragraph.
Saturday and Holiday Pay
All Saturday work shall be paid for at the rate of one and one-half (1
1
/
2
) times the hourly rate
including third shift Saturday work which starts at 11:00 p.m. on Friday. All work done on Sunday
and legal holidays shall be paid for at the rate of double time except where a regular third
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shift starts on a Sunday or a holiday and then the regular working hours shall be compensated at
the applicable regular rate.
Overtime Charging
An employee’s overtime record shall be credited with overtime when they are asked whether they work
or not. If the department works overtime, an absent employee’s overtime record shall be charged
with any overtime for which they would have been eligible had they not been absent, including an
employee on vacation or sick leave.
An employee on a day-at-a-time vacation when overtime is scheduled but who returns before the
overtime is worked shall be asked for that overtime if such employee is eligible and qualified. If
such employee replaces another employee, the employee being replaced is not charged for that
overtime. An employee’s absence on Thursday will not jeopardize that employee’s rights to weekend
overtime if they return to work on Friday. However, it will be the employee’s responsibility to
communicate with management no later than the start of the lunch period of their Friday shift to
determine if weekend overtime is available.
Where the applicable rate of pay is time and one-half, the employee will be charged with one and
one-half hours overtime for each overtime hour.
Where the applicable rate of pay is double time, the employee will be charged with two hours
overtime for each overtime hour.
An employee asked to work overtime after the deadlines defined in Paragraph 15, where the overtime
is in a department or shift other than their own, will not be charged with such overtime refused
but will be charged if they work such overtime.
An employee, who is asked to work additional overtime while working a weekend overtime shift, will
not be charged for such additional overtime if refused, but will be charged if they work such
additional overtime.
Telephone offers of overtime where management reaches the employee are charged whether or not the
overtime is worked. Where a message is left with someone other than the employee, and the employee
fails to work, the overtime will not be charged. All work, or refusal of work, on a day observed as
a holiday under this Agreement is charged.
An employee who accepts an overtime assignment but fails to report for and work such assignment
without being excused by management will be recorded with an unexcused absence.
No employee will be subject to an unexcused absence being recorded for an overtime assignment
missed due to hospitalization of the employee or death or hospitalization of a member of the
employee’s immediate family.
When an employee is transferred to a different Department, they will get the average overtime for
that Department. When they are transferred back to their Home Department, they will receive the
overtime average of their Home Department.
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Overtime Distribution
The supervisor will keep daily records of all overtime worked by the employees. In order that the
overtime within the various departments is distributed as evenly as possible, those with the least
amount of overtime shall be asked to work first among those qualified to do the work. It is
recognized that an employee may be qualified to do the overtime work without holding the applicable
job classification. If an employee is eligible for overtime but declines the hours that are
offered, the overtime may be offered to the next qualified employee. The supervisor’s copy of the
overtime record will be posted at the supervisor’s desk and kept as current as possible. The names
and work centers, where applicable, of those scheduled for weekend overtime work in the department
and shift will be displayed in the department area by the supervisor prior to the overtime work to
permit checking by employees so they may determine before the overtime is worked if any errors in
selection have been made. This information is to be used by employees to point out any overtime
assignment errors to the supervisor before the overtime is worked, wherever possible. When an
entire shift in a department is scheduled for weekend work, a notice displayed to that effect need
not include names and work centers.
The Company will continue its practice of distributing overtime as equally as possible on the shift
in a department.
It is further agreed that the Company will maintain as close a balance of overtime hours among the
shifts within a department as production necessities and individual skills allow.
Overtime Entitlement on Transfer or Probation
A transferred employee shall have to work five (5) days before they are entitled to overtime.
However, they may work if all other people in the Department have been asked.
Probationary employees will not be asked to work until all employees with seniority working in the
department and on the shift, including transferred employees, have been asked to work; except that
when all employees in the department on all shifts who are qualified for the work involved have
been asked to work and more employees are needed, qualified probationary employees may be asked.
ARTICLE VI
- HOLIDAYS
Paid Holidays
All employees on the seniority list shall receive eight (8) hours pay at their regular straight
time hourly rate inclusive of shift premiums for the following holidays: New Year’s Day, Good
Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, day after Thanksgiving Day,
December twenty-fourth, Christmas Day and December thirty-first, providing the employee has worked
a major part of their last scheduled work day before and the major part of their first scheduled
work day after the holiday, providing such days are in the same work week as the holiday; except
where this work requirement is specifically waived by the Company for reasons of personal urgency.
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When December twenty-fourth and December thirty-first fall on Saturday or Sunday, the holidays will
be observed on the preceding Friday. When any other holiday listed above falls on Saturday, it will
be observed on the preceding Friday.
On Layoff and Sick or Military Leave
Employees who have been laid off in a reduction of force during the workweek prior to or during the
week in which the holiday falls shall receive pay for such holiday.
In the event one of the paid holidays falls during an employee’s vacation, they have the option of
substituting the day(s) before or the day(s) after their vacation for said holiday(s).
Employees who go on sick leave during the workweek prior to or during the week in which the holiday
falls shall receive pay for such holiday.
Employees who go on military leave during the first or second workweek prior to or during the week
in which the holiday falls shall receive pay for such holiday.
ARTICLE VII
- OTHER PAY PROVISIONS
Call Back Pay
Any employee called back for work outside their regularly scheduled hours shall receive not less
than three (3) hours pay at their applicable rate.
Reporting Pay
When an employee reports for work and no work is available, they shall be paid up to four (4) hours
at their regular straight time rate for the time lost during the first half of their shift unless
they were notified in advance of the starting time of their shift not to report for work. However,
if stoppage of work is due to fire, lightning, failure of power lines or other causes beyond the
Company’s control no payment for lost time shall be made.
An employee shall be notified not to report for work by either, the supervisor of their department,
the Human Resources Department or other supervisory personnel, provided the employee has furnished
the correct phone number to the Company. If the correct phone number is not provided and the
employee cannot be contacted, no reporting pay will be paid.
Time Lost Due to Injury
If it has been established that an injury to an employee has arisen out of and in the course of
their employment with the Company, and the employee is instructed by the Company to receive outside
treatment for the injury during the current shift, they will be paid for time necessary to obtain
such treatment. If follow-up outside treatment is required which cannot be scheduled outside the
employee’s regular working hours, the employee will be paid up to three (3) hours at their regular
straight time hourly rate for time lost from their regular working hours for any such follow-up
visits.
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In the event an employee is instructed by the Company to receive subsequent outside treatment
during their regular shift because of their inability to continue work due to the original injury,
they will be paid for time necessary to obtain such treatment.
In any case in which an employee believes outside treatment for the injury is necessary during
their regular working hours even though the Company has refused to instruct them to receive such
outside treatment, the employee may at their option leave work to receive outside treatment. Should
it be determined that the treatment was necessary in order the employee continue work or if it is
determined that they are unable to continue work, the employee will be paid for the time lost from
their regular working hours in accordance with Paragraphs 45, 46, and 48.
If the employee loses time and the attending physician determines they are physically unable to
work the balance of the shift on which they received outside treatment due to the severity of the
injury, they shall be paid for the balance of that regular shift, but not to exceed eight (8)
regular hours, upon furnishing proof of the physician’s determination. If an employee is injured
while working in the plant and such injury arises out of and in the course of their employment, and
the injury is of such nature as to prevent the employee’s return to work for an initial period of
three (3) or more consecutive calendar days excluding Sunday or paid holiday or vacation following
the day of injury, then the Company will pay such employee a sum equal to the current sickness and
accident daily benefit rate for each of such three (3) days; provided however, that such payment
shall not be made if the Workmen’s Compensation carrier of the Company is required to pay the
employee Workmen’s Compensation for the three (3) day period following the day of injury.
Under the following circumstances the Company will pay for up to two and one-half (2
1
/
2
) hours for
working time lost by an employee on Monday:
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a.
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An employee is injured at work on a Saturday and obtains outside treatment.
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b.
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An injured employee is instructed by their doctor to report for medical evaluation on the
following Monday morning before going to work.
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c.
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The employee notifies their supervisor in advance that they won’t be in on time.
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d.
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The employee reports for work on the Monday involved before 9:30 a.m.
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Bereavement
An employee with seniority, who is working at the time, will be granted three (3) regular working
days off with pay in the event of a death in the employee’s immediate family. Immediate family is
defined as the employee’s wife, husband, father, mother, son, daughter, brother, sister,
father-in-law or mother-in-law. An employee may take the time off with pay later than the day of
death or funeral if circumstances warrant and are a direct result of the death. An employee with
seniority, who is working at the time, will be granted one (1) regular workday off with pay to
attend the funeral of a grandparent or grandchild of the employee.
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Jury Duty
An employee with seniority shall be excused from work on a work day on which they are called to
perform jury service in a court of record, provided they give prior notice to the Company.
An employee with seniority who is excused from work for jury service and who furnishes the Company
with a statement from the court with regard to jury pay received and time spent on jury service
will be reimbursed by the Company as follows:
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a.
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All employees will receive eight (8) hours pay at their regular straight time rate including
all applicable premium pay less the amount received as jury pay for each day they are called
to serve as a juror.
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b.
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A day of jury duty is defined as any day for which the employee is required to appear
regardless of having served, certified by written statement from the court.
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c.
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Hourly rate of pay shall be limited to Sixty (60) workdays annually commending with the first
day of jury service paid.
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ARTICLE VIII
- SENIORITY
It shall be the policy of the Company to recognize seniority. To accomplish this, there shall be
one seniority list covering all employees in all production departments. Where two or more
employees gain seniority on the same day, their relative seniority shall be determined by last name
alphabetical sequence with, for example, an employee whose last name begins with “A” being regarded
as senior to one whose last name begins with “B”. Last name changes due to marriage, etc., which
occur after the day on which an employee gains seniority, shall not affect seniority.
In the event that, before June 1, 1988, a person who, as of the effective date of this agreement,
is an employee of the Trane Company temporarily assigned to ALBRAZE International (Chart Heat
Exchangers) the ALBRAZE (Chart) seniority date of said person will be January 5, 1986.
Notwithstanding the provisions of Paragraph 39, above, the relative seniority of employees whose
ALBRAZE (Chart) seniority date is January 5, 1986 shall be determined by the amount of Trane
Company seniority which they possessed as of the effective date of this Agreement.
Probationary Period
An employee shall have no seniority rights until the completion of their probationary period. The
probationary period shall consist of sixty (60) actual days worked. This calculation does not
include overtime outside the normal schedule. The date given the employee for their seniority
standing will be the day following the end of their probationary period.
An employee shall lose their seniority rights for the following reasons:
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a.
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If they voluntarily terminate their employment with the Company.
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b.
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If they have been discharged for just cause.
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c.
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After being laid off, if an employee fails to report for work within five (5) days after
being notified through the Company Human Resources department. Notification to return to work
will be confirmed by certified letter to the employee. However, no employee shall lose their
seniority rights if their failure to report is the result of sickness or causes beyond their
control, in which case the employee shall furnish written proof as to that fact.
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d.
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If for any reason an employee has had twenty-four (24) consecutive months of unemployment
with the Company or a period equal to one-half (
1
/
2
) of their seniority, whichever is greater.
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Layoff
When it becomes necessary to reduce the working forces, the last employee on the plant seniority
list shall be the first employee laid off, etc., and the last employee laid off shall be the first
employee recalled, etc., except as hereinafter provided. Before any layoffs or recalls of any
employees occur, a list of employees to be laid off or recalled will be presented to the Shop
Committee as to the employees laid off or recalled and the effect on seniority; but this shall not
in any way interfere with the right of the Company to reduce its force.
Voluntary Layoff
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a.
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Senior employees not affected by the layoff will be allowed to volunteer to replace the most
senior people on the layoff list. Employees volunteering for layoff status are required to
accept the layoff for two (2) months unless the employees involved are recalled before that
time.
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b.
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An employee opting for and receiving voluntary status may exercise this option one (1) time
per calendar year.
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c.
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This voluntary layoff procedure will be administered through one (1) list per layoff date.
When an employee on a two (2) month voluntary layoff returns to work, the junior employee will
be laid off unless another senior employee has signed the list for the specific layoff or
until the list is exhausted.
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d.
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A new list will be used for each successive layoff date and the procedure stated above will
apply. The previous list will be cancelled at this time. Employees not receiving voluntary
layoff on previous lists will be allowed to sign these new lists to determine the availability
and opportunity for voluntary layoff status.
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e.
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The Company retains the right to recall those on a voluntary layoff at any time based on
production needs or if the skills of the volunteer are required. The Company also retains the
right to deny voluntary layoff if the volunteer’s skill is needed at the time of layoff.
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f.
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The Company agrees to pay their share of all insurance premiums for any employee on voluntary
layoff. Also, the employee agrees to pay their share of all insurance premiums. All other
benefit restrictions will apply as for employees on normal layoff. Insurance payments are due
the first of the month of applicable coverage.
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Exemptions and Deviations From Layoff
All welders, electricians, and tool room employees are exempt from the seniority clause as to
layoff as long as they are needed on their exempted jobs. It is understood that an exempted
employee must have demonstrated the capability to perform the required job. If the Company replaces
an employee exempted in one of the above jobs with an older qualified employee, the exempted
employee will be laid off.
Deviations from straight plant seniority in addition to those listed above can only be made for
justifiable reasons, that is, when an employee’s qualifications are essential on available work and
no senior employee not subject to layoff has the necessary qualifications. The Company will specify
such exemptions to the Shop Committee sufficiently in advance of the layoff giving the specific
reasons for such deviations in each case. The Company will endeavor to find alternate qualified
employees not subject to layoff for such exempted employees to replace those so exempted. The
Company will not be required to make more than two transfers to replace one employee under this
paragraph.
The parties may discuss from time to time the problem of deviations from seniority on layoff.
If the Union does not agree with certain exemptions, the Company and the Shop Committee shall make
every effort to resolve their differences before resorting to the grievance procedure.
Layoff Notice
When layoffs, because of lack of work, are in accordance with straight seniority, the employees
affected shall be given five (5) working days notice before being laid off for a period of two (2)
weeks or more. It is further agreed that in case of material shortages resulting from conditions
beyond the Company’s control, the five (5) days’ notice provision will be waived. Employees
exempted from layoff who are to be laid off because they are no longer needed on the work for which
they are exempted may be laid off without notice. However, first and second shift exempted
employees will work to the end of the shift in which layoff notice is given. Paragraph 43 will
apply to third shift exempt employees who are to be laid off without notice.
One-Day Layoffs
Layoffs, due to lack of work or material shortages, will be made by seniority in a department,
provided such a layoff does not exceed eight (8) hours in any one week. For any layoff in excess of
eight (8) hours in any one-week, the procedure set forth in Paragraphs 57-61 will be followed. This
paragraph is not intended to be used to establish a regular work week of less than five (5) days
for the employees in any department, and shall be applied in such a way that no employee is
affected in their department more than six (6) times nor more than three (3) consecutive weeks in a
twelve (12) month period. The Union Committee will be notified in advance of any layoff under this
paragraph.
Inventory
In the event that production is interrupted due to the taking of inventory, the parties will meet
to discuss appropriate work assignments.
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ARTICLE IX
- TRANSFER
Requests for Transfer
All requests for permanent transfers by employees may be granted by the mutual consent of the Shop
Committee and Management. The selection of employees shall be based upon the Job Selection
Guidelines.
When an employee is granted a job or department transfer at their own request they shall have a
trial period of up to thirty (30) days. The exception to the foregoing sentence is in cases where
an extension of a trial period, due to skills is requested by the Company or the Union, and such
extension is agreed to by the Company and the Union. They will receive the rate of the job they are
performing while on transfer if they are qualified. If it is decided to make the transfer
permanent, the employee will be given a rating for which they are qualified.
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a.
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When such request is made, the Union and the employee and the supervisor will receive a
written notification.
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b.
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In the event that an employee is accepted for training on a job with a labor grade higher
than their present job they shall, when they complete the trial period, be paid the time and
grade rate of the new job but not less than their time and grade rate on their former job.
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c.
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In a posting requesting multiple employees for the same labor grade and classification, the
senior employee will not be paid less than the time and grade rate of the junior employee(s).
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Temporary/Forced Transfers
Employees will be considered as temporarily transferred until notified of being forced to accept a
permanent job or department transfer due to shortage of work, material, manpower, etc. Said
employee shall carry their present classification and pay rate for a period not less than six (6)
months. Employees will receive the rate of the job they are performing while on transfer if they
are qualified and if the rate is higher than their current rate. After six (6) months the employee
will be given a rating in the new department for which they are qualified.
If, up to three (3) months from the employee’s date of forced transfer a position opens up in their
home department, the employee will have the option to return to their home department, if they are
qualified for the position.
Seniority Principle
It shall be the policy of the Company to follow the principle of seniority whenever skill is not a
consideration when moving transferred employees out and returning employees to their home
department. Employees will be transferred from their home department by inverse seniority
regardless of shift assignment provided the remaining employees are qualified to perform the work.
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When it is necessary to transfer employees and the position to be transferred to is a job of a
higher labor grade than in the department, employees are to be transferred by seniority. Senior
employees will be offered said transfer prior to junior employees being forced to transfer,
provided the remaining employees are qualified to perform the work. Transferred employees will be
returned to their home department on the basis of seniority whenever skill is not a consideration.
Exception for Union Representatives
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a.
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A department steward or a member of the Shop Committee may be transferred or farmed, by
inverse seniority, from their home department, but not subject to being replaced on their
shift. This provision shall not be construed to give extra seniority to such representative in
the event of a layoff, nor to prevent such Union Representative from exercising their
seniority.
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b.
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In the event the selection of a safety steward is other than a department steward, the
language of paragraph #1 above will apply to said safety stewards.
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Calling Back Transferred Employees
When it is established that there is a need for additional personnel for ten (10) working days or
more in a Department, with employees out on transfer such employees will be returned to their Home
Department to fill the need in accordance with Paragraph 51 unless such need is being met
temporarily by an employee with physical limitations who is unable to perform their normal duties.
Such needed employees will be returned to their home department as soon as possible but not later
than thirty (30) calendar days. Presence of a physically limited employee in a Department will not
result in a senior employee on transfer losing their rate or job.
Except where production needs reasonably require otherwise, employees shall not be placed in a
department where employees are transferred out prior to returning those on transferred back to
their home department by seniority.
It is recognized that in order to use the work force efficiently and keep people working in so far
as possible, the company requires flexibility in farming or transferring employees for a period of
time, due to the reduction of work in the Home Department, or their specific skill is needed in
another department, or because of the production need of another department. The farming of an
employee shall be by inverse seniority by shift, and will not exceed 15 working days.
Wage Rate Handling
When an employee is transferred into a job classification they previously carried, they shall
receive the rate for that job retroactively, after accumulating three (3) full days, provided such
a rate is higher than they are carrying. If they continue on the job for a period of six (6)
months, their short-term rate shall become their new classification.
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Notice of Transfer
The Company will endeavor to give each employee a Notice to Report Form on the day preceding the
transfer or shift change by 12:00 P.M. (noon) on the first shift, 9:00 P.M. on the second shift and
4:45 A.M. on the third shift.
New Technology, Product Transfer or Discontinuance
The Company and the Union agree that it is to both their mutual benefit and a sound economic and
social goal to utilize the most efficient machines, processes, methods and/or materials. In this
way, the Company will be able to compete effectively in the market place and, thereby, provide
economically secure jobs for its employees.
When the Company changes technology, transfers a product line or a portion thereof from La Crosse,
or discontinues the manufacture of a product line or portion thereof at La Crosse, or merges two or
more departments and as a result of such action a department is dissolved or a major portion of the
regular employees in such department are no longer needed on their jobs, each employee in the
department whose job is abolished because of this action will be subject to the following
procedure:
|
a.
|
|
Prior to the implementation of any of the above, the Company will meet with the Union to
discuss the impact.
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|
|
b.
|
|
The Company agrees to train displaced employees within a reasonable period of time (6 months
or less) for available positions.
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|
c.
|
|
Employees in classifications and areas will be handled in a manner consistent with marginal
paragraph 67 of the agreement.
|
New Department
A new department is created when a new product line is originally manufactured in a separate plant
area, and such department is assigned a new department number. When a new department is created,
the Company and the Union will agree upon a procedure for the distribution of information regarding
the department and the minimum requirements therefore. The selection of the employees will be made
in accordance with Paragraphs 65 and 87 and the provisions of Paragraph 66 shall also apply.
The Job Selection Guidelines will be the determining factor when making the selection.
Upgrading
|
a.
|
|
The Company will continue to upgrade employees to higher skilled jobs where possible to do
so. The fact that an employee is proficient on their current job will not in itself be the
cause to prevent their being upgraded to a higher skilled job.
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b.
|
|
When a successful bidder is selected to report to the posted/notice job they can be held up
to thirty (30) days in their current job. If it is necessary to hold the employee beyond the
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13
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|
|
thirty (30) days, the employee will be reimbursed for any monetary loss upon the successful
completion of the training/trial period for the new job.
|
Transfer to Lighter Work and Incapability
When a senior employee, who is at the time working, requests a transfer to light work, or the
Company determines that such an employee can no longer perform their job due to advanced age,
physical incapacity or is incapable of performing their regular job, the Company and the Union will
discuss the problem with the intent of:
|
a.
|
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Assigning them to available work which they are able to perform and which needs to be
performed, and
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b.
|
|
Paying for such work at the wage rate of the job they would be performing.
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It is understood that the above does not obligate the Company to make-work for an employee or to
assign an employee to work which they cannot perform satisfactorily.
Leaving or Returning to Bargaining Unit
Any member of the bargaining unit who has been promoted or transferred or is promoted or
transferred to a position outside the bargaining unit described to a position outside the
bargaining unit described in Article I shall maintain the amount of seniority they had at the time
of such promotion or transfer and will not continue to accumulate seniority within the bargaining
unit.
Should such employee request to return to the bargaining unit or should the Company decide to
return such employee to the bargaining unit, they will be reinstated with the amount of seniority
they maintained at the time of their promotion or transfer. The Company agrees that it will not
return employees to the bargaining unit for the purpose of temporarily reducing the staff of
non-bargaining unit employees. When such employee returns to the bargaining unit, their job and
department assignment will be at the discretion of the Company. The Union will be notified of the
job and department assignment five (5) days prior to such assignment wherever possible. However,
they will not be placed in a department where their assignment would cause the transfer of a
regular department employee then working in the department or where there are employees out of such
department on transfer, or where there is not a need for them in the department for at least ten
(10) working days. Furthermore, upon return to the bargaining unit, such an employee will be
assigned a labor grade no higher than the highest they held in the three-year period just prior to
their promotion from the bargaining unit.
Nothing, however, contained in Paragraph 82 shall be construed as limiting the Company’s right to
discharge any employee promoted or transferred from the bargaining unit for cause.
Should any employee who has been promoted or transferred from the bargaining unit and then returned
to the bargaining unit under the above procedures, be subsequently again promoted or transferred
from the bargaining unit, they will lose all seniority status ion the bargaining unit on the date
of such promotion or transfer.
14
An initial temporary vacation replacement assignment of up to 3 months outside the bargaining unit
will not be counted toward the limitations of this paragraph.
Transfers Not Covered
All transfers not covered elsewhere in this Agreement shall be discussed with the Shop Committee
before such transfers are made.
ARTICLE X
- SHIFT TRANSFERS
Voluntary Shift Exchange (up to 1 week)
Voluntary shift exchanges, which are approved by management, will be permitted between two (2)
employees in the same department on a temporary basis (up to 1 week) if such exchange conforms to
the Walsh-Healey Act and does not cause overtime payments. No changes in night shift premium will
be made for either employee involved in temporary shift exchange under this paragraph.
For all voluntary shift exchanges, both employees must report to the department and shift from
which they intend to switch for a minimum of one (1) week.
Voluntary Shift Exchange (more than 1 week)
A request for an exchange of shifts — for up to one (1) year by two employees in the same
department will be permitted providing:
|
a.
|
|
Neither employee puts in more than eight (8) hours in a 24-hour period in making the
exchange, to conform with the Walsh-Healey Act.
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|
b.
|
|
Neither of the employees making the exchange may do so more than three (3) times within a
year.
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c.
|
|
The qualifications and experience of both employees are relatively equal.
|
Relatively equal is defined as:
|
a.
|
|
Two (2) employees who can perform similar job(s).
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|
b.
|
|
An employee that is not from the department must be approved by the cell leader (engineer)
and department supervisor affected to determine what job(s) they can perform or have working
knowledge of before any trade with a Home Department employee.
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c.
|
|
Such request must be in writing to the Company, signed by the employees involved, specifying
the duration of the voluntary shift exchange, with a copy to the Union.
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d.
|
|
With respect to this paragraph, all other provisions of this Agreement shall apply.
|
|
|
|
e.
|
|
For all voluntary shift exchanges, both employees must report to the department and shift
from which they intend to switch for a minimum of one (1) week.
|
15
Shift Preference
An employee upon attaining seniority may replace a junior employee in the same skill on a different
shift in the same department subject to the following:
|
a.
|
|
When an employee gains seniority they can be replaced by a senior employee.
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b.
|
|
Where the senior employee is replacing an employee in the same or a lower rated labor grade,
the Company will in all instances where possible train a replacement within three (3) months
for the senior employee so that they will be able to exercise their shift transfer. The
training period will start within a one (1) week period after the employee’s written request
is acted on at the regular meeting.
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c.
|
|
Employees shall have the right to change shifts under this Section no more than (4) times
within each calendar year.
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Transfer to Night Shift
When it is necessary to transfer a first shift worker to the second or third shift or a second
shift worker to the third shift or the starting of a second or third shift, the youngest employee
by seniority in the Department capable of doing the work involved shall be so transferred, unless a
senior employee has preference to be transferred to the shift involved.
ARTICLE XI
- POSTED VACANCIES
Should a vacancy occur within the Department due to retirement, termination, promotion, etc., the
Company will discuss with the Union if said vacancy needs to be filled.
|
a.
|
|
Employees from within the department where the opening is will be offered said openings by
seniority before moving to step #2 of this paragraph.
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|
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b.
|
|
When a vacancy exists, the posting shall indicate the department, shift and for information
purposes only, an identification of the major department functions(s), and a listing of
typical labor grades in the department.
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c.
|
|
If the posted vacancy is filled by an employee from the posted department from another shift,
this transfer may result in a vacancy on their shift, which in that event will be posted. No
further transfer or postings will be made.
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d.
|
|
If the posted vacancy is not filled by someone from the posted department, it may be filled
by a bidder from another department.
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e.
|
|
If an employee, after having received a posted vacancy, returns to their home department, a
second employee from the original list of bidders may be selected to fill the vacancy.
|
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f.
|
|
If an employee is selected for a posted vacancy and subsequently returns to their Home
Department at their own request, they shall be restricted from bidding on another posting for
a period of six (6) months from the date of transfer to the posted vacancy.
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16
|
g.
|
|
Vacancies will be filled based on the Job Selection Guidelines established and agreed to by
the Union and Company.
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h.
|
|
When additional personnel are required the Company will post a notice.
|
|
|
|
i.
|
|
The Company and Union will review notices prior to publication.
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j.
|
|
When an employee is selected for a position and completes the training period, said employee
will be restricted from bidding on another posting or notice for four (4) months. This is not
intended to prevent an employee from bidding on a higher skilled job during this four (4)
month period.
|
ARTICLE XII
- RULES AND REGULATIONS
|
a.
|
|
Stealing or taking away of any Company property, including scrap without the written
permission of the Manager of Manufacturing or other supervisory personnel is prohibited.
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|
|
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b.
|
|
Falsification by an employee of their own starting and stopping time is prohibited.
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|
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c.
|
|
Carelessness of an employee which contributes to the injury of a fellow employee; any act of
an employee which does or might contribute to the serious injury of an employee, which
includes fighting on Company property; or any intentional act which results in the
destruction, the defacing of Company property, or the writing of indecent language, drawing
obscene drawings on cards, bulletin boards, walls, or any other part of the Company property,
is prohibited.
|
A VIOLATION OF ANY OF THE RULES a
THROUGH c WILL BE CAUSE FOR IMMEDIATE
DISCHARGE.
d. Those employees who are capable of performing their assigned job efficiently and capably, but
who fail to do so, will receive a written warning, a copy of which will be given to the Shop
Committee. The employee will be given at least thirty (30) days to show satisfactory
improvement. If following receipt of the written warning, the employee fails to show
satisfactory improvement; they will, not earlier than thirty (30) days and not later than
sixty (60) days following such receipt, be given a one (1) week suspension. Where an
employee’s previous service record has been good, the length of suspension may be modified. If
the employee receives a second written warning within six (6) months of the beginning of their
suspension, they will be given at least thirty (30) additional days to show satisfactory
improvement. If, following receipt of the second written warning, the employee fails to show
satisfactory improvement, they may, not earlier than thirty (30) days and not later than sixty
(60) days following such receipt, be discharged. In all cases under this rule, an employee’s
previous Company service record shall be given consideration before the discharge penalty is
invoked. The time periods given in this paragraph are understood to be periods “of working
time”.
“Working Time” Defined
17
The phrase “working time” referred to in Article XI of this Agreement shall include periods during
which the employee is actually working, vacations, time lost due to bona fide illness or injury,
military training, and a consecutive absence of six (6) months or more for any reason. Each period
of time three (3) months, one (1) year, etc. followed by “working time” will in every case
terminate no later than eighteen (18) months after the date it begins.
|
e.
|
|
Insubordination.
|
|
|
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f.
|
|
The refusal of any employee to obey the work orders of their immediate supervisor(s) is
prohibited.
|
|
|
|
g.
|
|
Extreme insubordination will be cause for discharge.
|
|
|
|
h.
|
|
Any employee who directly or indirectly willfully slows down or limits production of himself
or another employee, or machine, will have violated these Rules.
|
ANY VIOLATION OF RULES d THROUGH h SHALL SUBJECT THE EMPLOYEE TO A ONE (1) WEEK SUSPENSION WITHOUT
PAY FOR THE FIRST VIOLATION AND DISCHARGE FOR THE SECOND VIOLATION WITHIN A PERIOD OF ONE (1) YEAR
OF WORKING TIME.
|
i.
|
|
The employees agree not to loaf during regular working hours.
|
|
|
|
j.
|
|
Employees are prohibited from doing other than Company work during working hours or using
Company machinery, tools, equipment or materials for personal use.
|
ANY VIOLATION OF RULES i OR j SHALL SUBJECT THE EMPLOYEE TO A ONE (1) WEEK SUSPENSION WITHOUT PAY
FOR THE FIRST VIOLATION. A SECOND VIOLATION WITHIN THREE (3) MONTHS OF WORKING TIME OR THREE (3)
VIOLATIONS WITHIN A YEAR OF WORKING TIME WILL SUBJECT THE EMPLOYEE TO DISMISSAL.
|
k.
|
|
Employees shall be at their work at the designated starting and stopping times. Washing up,
except when designated by the supervisor or for safety or hygienic purposes, shall be done
after the designated stopping times.
|
|
|
|
l.
|
|
Employees shall observe designated starting and stopping times.
|
|
|
|
m.
|
|
Leaving the plant without permission.
|
FOR THE FIRST VIOLATION OF THE RULES k THOUGH m THE EMPLOYEE WILL BE SUBJECT TO A WRITTEN WARNING.
FOR A SECOND OFFENSE WITHIN SIX (6) MONTHS OF WORKING TIME, THE EMPLOYEE WILL BE SUBJECT TO
SUSPENSION FOR ONE (1) WEEK. FOR A THIRD OFFENSE WITHIN ONE (1) YEAR OF WORKING TIME, THE EMPLOYEE
WILL BE SUBJECT TO DISCHARGE.
18
If an employee’s attendance record is good, permission to leave for personal reasons will be
granted by their supervisor provided the request is made not later than one-half (1/2) hour after
the beginning of their work shift.
It is agreed that the intent of this paragraph is to enable an employee with a good attendance
record to leave work to attend to pressing matters not readily attended to outside their regular
working hours. Any abuse of this intent by an employee will be a violation of Rule m.
Permission to leave the plant shall be granted in cases of extreme emergency (death, serious
illness or accident in family, etc.). However, in such emergency cases, the employee shall notify
their supervisor or other company representative before their departure.
Reporting Absence
All employees must call into the Central Reporting System no later than ten (10) minutes before the
start of the employee’s shift when they are unable to report for work, unless their absence has
been approved in advance by their supervisor. Employees calling into the Central Reporting System
must clearly give the reason for their absence and when they expect to return to work.
Excused Absence Defined
The following absences will be excused when approved by the Company and will not be subject to the
progressive discipline procedure:
|
a.
|
|
Jury duty, military duty, funeral leave, occupational illness/injury, supervisory
pre-approved leaves of absence, vacation, paid holidays, not scheduled for work, Union
business, sickness, and situations that are caused by extenuating circumstances not
preventable by the employee.
|
|
|
|
b.
|
|
Employee must provide medical proof acceptable to the Company upon returning to work, if they
have excessive absenteeism, as defined in Par. 108c.
|
Unexcused Absence Defined
Unexcused absence is defined as:
|
a.
|
|
Failure to notify the Company before the absence or failure to notify the Company in
accordance with Paragraph 106, except where the employee furnishes proof that it was
impossible to give such required notice, the absence will be excused.
|
|
|
|
b.
|
|
Absence, which is not excused by the Company even though it is reported on time.
|
The following language will apply when an employee has reached the THIRD STEP of the
Unexcused Absence Discipline as defined in Paragraph
109 of the current labor agreement
19
|
c.
|
|
An employee having an excessive absentee record must furnish proof acceptable to the Company
that their absence was the result of sickness or causes beyond their control to be excused for
such absence.
|
Unexcused Absence — Discipline
Unexcused absences will be subject to the following schedule of discipline:
|
|
|
|
|
Step 1:
|
|
An unexcused absence for any violation for any regular workday will result in a
documented verbal warning to the employee for the first violation.
|
|
|
|
|
|
Step 2:
|
|
A second unexcused absence within a period of six (6) months from the date of the first
violation will result in a second documented verbal warning.
|
|
|
|
|
|
Step 3:
|
|
A third unexcused absence within a period of six (6) months from the date of the second
documented verbal warning will result in a written warning.
|
|
|
|
|
|
Step 4:
|
|
A fourth unexcused absence within a period of six (6) months from the second documented
verbal warning will result in a three (3) day suspension without pay.
|
|
|
|
|
|
Step 5:
|
|
A fifth unexcused absence within a period of six (6) months from the second documented
verbal warning will result in a five (5) day suspension without pay.
|
|
|
|
|
|
Step 6:
|
|
A sixth unexcused absence within a period of one (1) year from the second documented
verbal warning will subject the employee to immediate discharge.
|
MEDICAL DOCUMENTATION REQUIRED
Employees must obtain medical documentation from the attending physician, when they are requesting
an excused absence(s). The documentation must state that it is medically necessary to be off work
and must designate the date(s) the employee is requesting to be excused and a return to work date.
Medical documentation that simply states that the employee was “seen and treated” will not be
accepted.
Medical documentation should not include a diagnosis or details of the employee’s medical
condition, unless the medical excuse is for work related injury or illness. However, it is
important to provide documentation regarding any work limitations an employee may have upon return
to work.
Documented medical appointments will be excused absences when notice is given to the employee’s
supervisor by the end of the shift prior to the day of the appointment.
Medical excuses will not be accepted that retroactively excuse absences prior to the date the
employee received medical care. If an employee cannot see a doctor on the first day due to the
illness and they see a doctor on the second day, the previous sick day will be excused if
acceptable documentation is provided. In these cases, the doctor must specifically identify that
due to medical reasons, the employee was unable to work and missed the first day due to illness.
The employee must see the doctor on their own time.
20
The intent of these guidelines is to insure the information provided the Company for excused time
off is specific and necessary and is not intended to diminish an employee’s potential excessive
absentee record.
Consecutive regular working days of unexcused absence will be considered as a separate
violation.
|
a.
|
|
Insubordination.
|
|
|
|
b.
|
|
The refusal of any employee to obey the work orders of their immediate supervisor(s) is
prohibited.
|
|
|
|
c.
|
|
Extreme insubordination will be cause for discharge.
|
|
|
|
d.
|
|
Any employee who directly or indirectly willfully slows down or limits production of himself
or another employee, or machine, will have violated these Rules and Regulations.
|
ANY VIOLATION OF THE RULES AND REGULATIONS a, OR d ABOVE SHALL SUBJECT THE EMPLOYEE TO ONE (1)
WEEK’S LAYOFF WITHOUT PAY FOR THE FIRST VIOLATION AND DISCHARGE FOR THE SECOND VIOLATION WITHIN A
PERIOD OF ONE (1) YEAR OF WORKING TIME.
|
a.
|
|
The employees agree not to loaf during regular working hours.
|
|
|
|
b.
|
|
Employees are prohibited from doing other than Company work during working hours, and from
using machinery, tools and equipment or Company materials for personal use.
|
ANY VIOLATION OF THE RULES AND REGULATIONS a THROUGH b ABOVE SHALL SUBJECT THE EMPLOYEE TO A ONE
(1) WEEK’S LAYOFF WITHOUT PAY AND TWO (2) VIOLATIONS WITHIN THREE (3) MONTHS OF WORKING TIME OR
THREE (3) VIOLATIONS WITHIN A YEAR OF WORKING TIME WILL SUBJECT THE EMPLOYEE TO DISMISSAL.
|
a.
|
|
Employees shall be at their work at the designated starting and stopping times. Washing up
except when designated by the supervisor or for safety or hygienic purposes shall be done
after the designated stopping times.
|
|
|
|
b.
|
|
Employees shall observe designated starting and stopping times.
|
|
|
|
c.
|
|
Leaving the plant without permission.
|
If an employee’s attendance record is good, permission to leave for personal reasons will be
granted by their supervisor provided the request is made not later than one-half (1/2) hour after
the beginning of their work shift.
It is agreed that the intent of this paragraph is to enable an employee with a good attendance
record to leave work to attend to pressing matters not readily attended to outside their regular
working hours. Any abuse of this intent by an employee will be a violation of Rule c above.
21
Permission shall be automatically granted in cases of extreme emergency (death, serious illness or
accident in family, etc.). However, in such emergency cases, the employee shall notify their
supervisor wherever possible before their departure.
FOR THE FIRST VIOLATION OF THE RULES AND REGULATIONS a THOUGH c, ABOVE, THE EMPLOYEE WILL BE
SUBJECT TO A WRITTEN WARNING. FOR A SECOND OFFENSE WITHIN SIX (6) MONTHS OF WORKING TIME, THE
EMPLOYEE WILL BE SUBJECT TO SUSPENSION FOR ONE (1) WEEK. FOR A THIRD OFFENSE WITHIN ONE (1) YEAR OF
WORKING TIME, THE EMPLOYEE WILL BE SUBJECT TO DISCHARGE.
Tardiness
If an employee is tardy, they will be excused provided they have a reason for their tardiness
acceptable to the Company. In deciding on the acceptability of such reason, the Company will not
act in an arbitrary manner.
An employee who has an unexcused tardy two (2) times or more will receive a written warning slip
from the Company. Receipt of three (3) warning slips within one (1) year will subject an employee
to a three (3) day disciplinary suspension.
Receipt of three (3) warning slips within six (6) months of the date of the three (3) day
suspension warning will result in a five (5) day suspension.
Receipt of three (3) warning slips within six (6) months of the five (5) day suspension warning
will subject the employee to immediate discharge.
Discipline or Discharge
When it is necessary to discipline or discharge an employee for just cause, the Company will issue
a written notification to the employee and to the Union within four (4) working days after the
Manager of Manufacturing or designated Company representative has knowledge of the improper conduct
or performance, unless special investigation is required and the Union is so notified. A
disciplined or discharged employee must file a written grievance within five (5) working days of
the foregoing notification otherwise the discipline or discharge will be final.
When Union Representation is Required
If a Union employee is summoned into the office to answer a charge of violating the rules and
regulations, they shall have Union representation.
22
ARTICLE XIII
GRIEVANCE PROCEDURE AND ARBITRATION
GRIEVANCE PROCEDURE
Preamble
It is the conviction of the Parties that prompt and fair handling of complaints of employees and
charges of violation and provisions of this Agreement will lead to more efficient operations and
more harmonious relations among the employees, the Union and the Company.
If order to be considered within the grievance procedure a complaint of an employee or a charge of
violation of this Agreement must be brought to the attention of the Company within ten (10)
calendar days of the event causing the complaint or charge or within ten (10) calendar days after
the date on which such event should reasonably have become known.
Step 1
A complaint by an employee not resolved above shall be discussed in an attempt to resolve, by the
employee and steward with the Supervisor within five (5) regular working days following the initial
meeting/discussion between the employee and Supervisor.
If no resolution is met, the steward will present the matter to the Shop Committee Chairman who
will within five (5) regular working days, present the written grievance and discuss the matter
with the Supervisor and Human Resources Representative.
The Supervisor or Human Resources Representative will forward their written answer to the Shop
Committee within five (5) regular working days after their discussion.
It is understood that no settlement at Step 1 can establish a precedent for future cases. It is
further understood that no settlement at any Step of the grievance procedure can be inconsistent
with the provisions of this agreement.
If the complaint or charge (herein after referred to as a “grievance”) is not carried to Step 2
within five 5) working days from the time of the supervisor or Human Resources Representative’s
answer, it shall be considered settled.
Step 2
In investigating a grievance and in discussing it with the supervisor, the department steward or
Shop Committee Chairperson will take only such time as is reasonably necessary.
If the grievance is not settled in Step 1, the Union will present the grievance to the Manager of
Manufacturing within five (5) regular working days after receipt of the Supervisor’s or Human
Resources Representative’s answer. If the grievance is not presented to the Manager of
Manufacturing within the five (5) regular working day time limit, it shall be considered settled.
23
Any grievance involving disciplinary time of or discharge may be initiated by the Shop Committee
directly at Step 2.
Within ten (10) regular working days, after the grievance is presented to the Manager of
Manufacturing a meeting will be held between the Managers of Manufacturing, a Human Resources
Representative, and the Shop Committee. A representative of the IAMAW may be present and
participate in this meeting.
The Manager of Manufacturing will forward their written answer on the grievance to the Shop
Chairman within five (5) regular working days after the Step 2 meeting.
Step 3
If no settlement is reached at Step 3, the following will apply:
If the grievance involves a potentially continuing liability to the Company, a request for
arbitration must be made within seven (7) working days following receipt by the Union of the
Company’s Step 2 answer. The IAMAW representative must make such request in writing to the Manager
of Manufacturing of the Company. If no such request is made within the seven (7) regular working
day time limit, the grievance will be considered settled.
If the grievance does not involve a potentially continuing liability to the Company, a request for
arbitration must be made within sixty (60) calendar days following receipt by the Union of the
Manager of Manufacturing’s Step 2 answer. The IAMAW representative must make such request in
writing to the Manager of Manufacturing of the Company. If no such request is made within the sixty
(60) calendar day time limit, the grievance will be considered settled.
Monetary Adjustment Limitation
If any Step 1 settlement, grievance settlement, or arbitration decision involves monetary
adjustment, such adjustment shall be made effective on the date the complaint or charge was
presented to the supervisor at Step 1 or directly initiated at Step 2 and shall not be made
retroactive for any period prior to said date.
Time Limits
The time limits set forth in the grievance procedure may be extended by mutual agreement.
ARBITRATION
Selection of Arbitrator
Following a request for arbitration, The Company and the Union shall jointly request the Federal
Mediation and Conciliation Service to submit a panel of seven (7) arbitrators. Each party shall
have thirty (30) calendar days to accept or reject the first panel submitted. The thirty (30)
calendar days may be extended by mutual agreement between the parties. If such panel is rejected,
the parties shall immediately request a new panel, which must be used. Upon mutual acceptance of
the first panel or receipt of a second panel, as the case may be, the company and
24
the Union shall alternately strike a name from the panel until a single name remains and that
person shall be the arbitrator. The Company shall first cross out a name on the first arbitration
under this agreement and thereafter on the odd-numbered arbitration’s. The Union shall cross out a
name on the second arbitration and thereafter on the even-numbered arbitration’s.
The cost of the panel of arbitrator’s will be done in the same manner as stated above.
The Company will be responsible for the payment of the first arbitration and each odd-numbered
panel thereafter and the Union will be responsible for the second arbitration panel and each
even-numbered panel thereafter.
Arbitration Arrangements
The arbitrator chosen shall be notified of their selection by the parties. Expenses and charges by
the arbitrator shall be borne equally by the Company and the Union.
A date mutually satisfactory to the parties shall be agreed upon and the dispute or grievance shall
be submitted to the arbitrator.
General
A question raised by either party as to the arbitrability of a grievance shall be subject to
arbitration. The function of the arbitrator shall be of judicial nature. The decision of the
arbitrator will be final and binding upon the parties, but they shall not have the power to add to,
subtract from or modify the terms of this Agreement and shall decide only the issues properly
before him. An arbitrable grievance must involve a question of interpretation or application of the
terms of this agreement. The decision of the arbitrator will be complied with as soon as possible.
Resolution of Grievances
The resolution of a grievance shall be recorded and signed by the parties.
ARTICLE
XIV – UNION REPRESENTATIVES
General
The Union will inform the Company of the names of all Union officials including stewards. The
number of Union stewards may be adjusted by mutual agreement of the Company and Union. It is agreed
that no employee will be discriminated against because of elected status in the Union.
The Company will agree to such arrangements as may be necessary for the Shop Chairman and/or Union
stewards to carry on their Union duties. Such arrangements shall include permission for the Union
representatives to leave their department and go to any other department within the bargaining unit
to investigate and/or bring about a proper and expeditious disposition of a grievance or complaint.
The Company will pay the Shop Chairman and/or Union stewards for working time lost in processing
grievances, and joint Union-Company conferences.
25
The view of the Company’s agreement above to compensate Union representatives for working time
lost, the Union agrees that such time will be limited to that which is reasonably necessary to
accomplish the Union duties described above.
Absence for Union Business
Regular members of the Shop Committee who are to be absent on legitimate business of the Union will
be excused for such absence, providing advance notification is given to their supervisor. Upon
advance notice from a designated officer of the Union to the Manager of Manufacturing or their
designated representatives, employees other than Union representatives will be excused from work to
perform legitimate Union business provided the number requested does not interfere with production
requirements.
Any time spent on Union business in accordance with this paragraph is considered as time worked in
qualifying for vacations, pension, profit sharing and holidays. It is understood that the Union
will not abuse this privilege.
Pass Procedure
None of the department stewards nor representatives of the Union shall leave their department,
except on Company business until they have notified their supervisor.
ARTICLE
XV
– LEAVE OF ABSENCE
General
An employee must receive permission through their supervisor for time off up to one week. Any time
off in excess of one week must be supported by a leave of absence. It is understood that an
employee shall not deliberately falsify reasons for requesting a leave.
The privilege of leave of absence not to exceed (60) days in a year may be granted to any employee
if the application for such leave of absence is approved by the Company and the Financial Secretary
of the Union prior to the time off requested. The Union will be notified of leaves approved by the
Company. In case of sick leaves and emergencies, prior approval is not necessary.
Extension of a leave of absence may be granted by the Company and the Financial Secretary of the
Union for good cause shown.
Leave of absence not to exceed sixty (60) days in a year will be allowed for up to two (2)
employees total at any one time for personal reasons providing such leaves of absence are approved
in advance of the requested time off by the Company and the Financial Secretary of the Union.
No employee will receive leave of absence for the purpose of trying another job.
26
Public Office of Union Position
Leave of absence will be granted to an employee elected or appointed to Public Office or elected or
appointed to a Union position with the Local Lodge, the IAMAW, or such other labor organization as
the parties may mutually agree, upon proper application of the Company. Such leave shall be granted
for a period of one year, and will be extended from year to year, but only for the same purpose for
which the leave was granted.
Notwithstanding the provisions of Paragraph 56, an employee elected or appointed to Public Office
may renew their leave from year to year for a period equal to their total seniority with the
Company, except that they will not accrue seniority or service beyond a period equal to one-half
their total seniority when they went on leave.
Educational Leave – Veteran
Leave of absence up to eighteen (18) cumulative months of such leave will be granted upon request
to a military service veteran for the purpose of furthering their education providing they are
eligible for such educational benefits under applicable law and has submitted proof of enrollment
in an institution authorized to conduct such training.
Such leave of absence may be extended at the discretion of the Company for a period of up to an
additional eighteen (18) cumulative months of such leave subject to the above conditions.
Returning From Leave
An employee who returns to work within the leave of absence shall be reinstated according to their
position on the seniority list at their former rate of pay plus increases or minus decreases that
may have become effective during their absence, provided they give at least three (3) days notice
of their intention to return.
Returning From Sick Leave
An employee must present to the Human Resource Department, documentation acceptable to the Company
for return from Sick Leave to full-time work at full capacity or part-time work at limited capacity
as denoted, if warranted by the employee’s seniority standing and qualifications, will be offered
an assignment to return effective no later than the second regular working day following the date
of such presentation of medical approval. Failure to meet such offer deadline will require the
Company to pay the employee a sum equal to the current sickness and accident daily benefit rate for
each regular working day following the date of presentation of such medical evidence and continuing
until the date such offer of work is made available to the employee.
Physical Exam Requirement
When an employee who is on a leave of absence for medical reasons (non-industrial) desire to return
to work, they may be required to take and pass a physical examination to prove that they are
capable of performing their regular work or the equivalent thereof.
27
ARTICLE
XVI
– JOB RATING
The Job Rating Committee shall consist of two (2) members of the Union, and at least two (2)
members of the Company. Continuity of experience in job rating is intended so that proper
administration of the plan will result. When a new job develops, or the requirements of an old job
changes the job content, the job shall first be standardized as to methods of production, tooling
and equipment etc. Within thirty (30) calendar days after the job is standardized and is
functioning satisfactorily as to quality and quantity, the Job Rating Committee will rate out the
job. The Job Rating Committee will schedule its regular meeting dates in advance on a monthly
frequency. Based on the number and the urgency of pending ratings, the parties may schedule an
interim meeting by mutual agreement.
Disagreement on Rating
In the event of a disagreement between the Company and Union members of the Job Rating Committee on
the job content of a new job or the job content change of an existing job they will conduct a floor
review within thirty (30) calendar days. If, after the floor review is completed, a disagreement
still exists a grievance will be filed. Any grievance over a job rating to be considered timely
must be filed in Step 3 of the grievance procedure within thirty (30) calendar days following the
floor review. Any settlement of such a grievance will be effective on the date of the floor review.
Newly Created Job
On a newly-created job, no permanent assignment will be made until thirty (30) days after the date
of the Committee’s rating or the date the Company-determined rate is put into affect, whichever is
the earlier. If the employee performing the job has a higher rate than that put into effect, they
may accept the lower rate for the job or, within the thirty (30) days, decide to return to their
previous job. However, the Company may retain them on the new job at their current rate for a
period of time adequate for training a replacement.
Effective Date – Grievance
Where a job is re-rated and the labor grade is increased, an employee performing the job will
receive the higher rate effective on the date of the floor review, provided a timely grievance
concerning the rating of the job was presented to the Company and, provided they have completed the
job progression.
In the event that the labor grade of a job is to be decreased, the parties will meet to determine
the appropriate means of handling the situation.
ARTICLE
XVII
– VACATION
The vacation period will run from January 1 through December 31 of each year during the term of
this Agreement. One week of vacation entitlement may be carried over from one year to the next;
however, each year’s vacation may not exceed the annual entitlement plus 1 week carryover and then
only if the employee qualifying for and requesting such consideration meets
28
the scheduling requirements of Paragraph 186. Accident and Sickness weekly benefits will not be
paid for the same period as vacation except with advance Company approval.
Vacation Entitlement
Years of Service as of January 1 Vacation Entitlement
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1 but less than 4
4 but less than 8
8 but less than 12
12 but less than 16
16 or more
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2 weeks
2.5 weeks
3 weeks
3.5 weeks
4 weeks
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In the calendar year during which an employee reaches their 4th and 12th anniversary date they
shall be entitled to an additional 1/2 week of vacation. With Company approval, said week may be
taken up to one month prior to the employee’s anniversary date.
Work Requirements
In order for an employee to qualify for a vacation in any vacation period they must have worked at
least six (6) months during the previous vacation period. For the purpose only of calculating such
work requirements, time lost from work due to a compensable work-related injury during the vacation
period in which the injury occurs, will be considered as time worked.
An employee who has worked for the Company less than one year prior to January 1 of a given year
shall, upon reaching their first anniversary date, become entitled to a two (2) week vacation
during such year provided they have worked at least six (6) of the twelve (12) months preceding
their first anniversary date. In the event that such employee’s anniversary date falls between
December 15 and December 31 their vacation may, with Company approval, be scheduled to commence up
to two (2) weeks prior to their first anniversary date.
If Work Requirements Not met
An employee who, as of the beginning of a vacation period has one (1) or more years’ service and
has worked during the preceding year but does not meet the six (6) months’ work requirement set
forth in marginal Paragraph 182 above shall not be entitled to a vacation during said vacation
period. They shall, instead, receive an in-lieu-of vacation payment based upon the following
formula:
Years of
Service # of Straight Time Earnings
as of January 1 During Preceding Year
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1 but less than 4
4 but less than 8
8 but less than 12
12 but less than 16
16 or more
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4%
5%
6%
7%
8%
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29
Vacation Pay
An employee will be paid prior to their vacation of one week or more for the appropriate number of
hours to be taken at this regular rate subject to the above requirements and appropriate advance
scheduling. In order to receive vacation pay in advance of their vacation, notification must be
received by the Company before 9:00 a.m. of the second Thursday, which precedes the week in which
their vacation is to be taken.
Scheduling Procedure
The procedure to be followed in scheduling vacations shall include the following:
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a.
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The number of weeks of vacation eligibility is determined for each department.
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b.
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Based on this number, the vacation quota(s) are established for the departments. The Company
follows the policy of allowing vacation weeks to be taken between January 1 and December 31.
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c.
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During December of each year, employees are asked their vacation preference for the coming
vacation year. The principle of seniority in asking vacation preference is followed within
each department and shift, insofar as possible.
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d.
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At Company option, operations may be shut down for vacation for up to four (4) working days
each year and vacation pay will be given to employees who elect to take such time as vacation.
Such days must be scheduled in conjunction with Christmas, and/or New Year’s Day, and/or July
4 holidays.
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e.
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An employee may take a day at a time vacation up to their full entitlement of such vacation.
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f.
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Seven (7) existing days of current vacation can be taken in 1/2 day increments
not to be coupled with personal business.
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g.
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Regular vacations plus day-at-a-time vacations on the last regular work day prior to and the
first regular work day after a holiday(s) and the Friday prior to deer season cannot exceed
the department or shift group established quota plus 50%.
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h.
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Requests for day-at-a-time/half day vacations should be made no later than ten (10) minutes
before the start of their shift on the day requested. If an employee is sick and calls in on
time, they may specify that day as a day of vacation to a maximum of their full entitlement.
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i.
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The use of day-at-a-time/half day vacation cannot disrupt production operations.
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Pay in Lieu of Vacation
An employee who is quitting or retiring will be entitled to pro-rate vacation pay based on the
appropriate percentage for their length of service for all regular straight time earnings from the
30
beginning of the vacation period until their termination if they satisfy the work requirements
listed in Paragraph 185 and if they gives the Company at least five (5) working days notice of
their intention to quit or retire.
Payment in lieu of vacation may be made to any employee for a vacation not taken by the individual,
if they are eligible for a vacation in accordance with the above paragraphs, but has not actually
worked ten (10) months during the qualifying period. Upon an employee’s death, their beneficiary,
as shown in the Group Life Insurance Record, will be entitled to pro-rate vacation pay based on the
appropriate percentage for the employee’s length of service for all regular straight-time earnings
from the beginning of the vacation period until their death.
Return From Military Service
When an employee returns to work from a duly authorized leave of absence to the armed services,
their vacation rights will be determined as follows:
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a.
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If the employee returns to work between January 1st and June 30th inclusive, they shall be
entitled to full vacation rights for the vacation period in which they return and must take
their vacation.
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b.
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If the employee returns to work between July 1st and December 31st inclusive, they shall be
depending upon their years of service, entitled to 4%, 5%, 6%, or 8% of their regular straight
time hourly earnings between July 1st and December 31st in lieu of a vacation for the vacation
year during which they return.
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c.
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All time spent in the armed services which is supported by a duly authorized leave of absence
shall be considered the same as work time for computing vacation rights for the vacation
period which follows the vacation period during which the employee returns to work.
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ARTICLE
XVIII
– WAGES
New Hire Rate and Progression
The new hire rate shall be in accordance with the Wage Rate Schedule below; but, after consultation
with the Shop Committee, the Company may employ applicants with significant experience at a higher
rate than the new hire rate. Upon attaining seniority, an employee shall receive a seniority rate
in accordance with the annual rate schedules following this paragraph, (unless they were employed
at a higher rate) and be assigned a home department. The rate increases for twelve (12) months,
twenty-four (24) months, etc., shown on the rate schedules below shall become effective once the
employee in question has actually worked fifty-two (52) calendar weeks, one hundred and four (104)
calendar weeks, etc. on the job in question. Layoffs of three (3) months or less will be considered
as time worked in the above stated time frames. (The above applies to progression rates only).
31
WAGES
Sickness and Accident (S&A)
Short Term Disability
Employees are eligible after completing their probation period.
Benefits to be paid at 50% of the weekly rate with a minimum benefit rate of $300.00 and a maximum
benefit rate of $350.00. Benefits are payable for up to twenty-six (26) weeks.
Long Term Disability
Long-term Disability benefits will be paid at 60% of employee’s monthly base wage upon completion
of the benefit waiting period. The benefit waiting period will be 180 days of continuous
disability. A period of disability will be considered continuous even if the employee returns to
work for up to a total of 30 days during the benefit waiting period. The benefit waiting period
will be extended by the number of days the employee temporarily returned to work.
Long-term Disability benefits will continue until the earlier of the following dates: date the
employee ceases to be disabled; or the date of the employee’s normal retirement to receive full
Social Security Benefits as stated by the Social Security Administration.
Effective February 7, 2004, the Company will increase all levels of the progression rates for each
job as follows:
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Effective 2/7/04
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$
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.40
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Effective 2/5/05
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$
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.55
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Effective 2/4/06
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$
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.40
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401K SAVINGS PLAN
401K match will be 25% up to the first 6% of employee’s base wage saved.
The 401K match will be made on the employee’s annual base wage except for exclusions noted in
subparagraph i of paragraph 200 – Compensation Excluded for Profit Sharing and 401K match.
The Company agrees to discuss all 401K-plan amendments or plan terminations with the Union prior to
the implementation of such plan amendments or termination of plan benefits.
PROFIT SHARING
Profit sharing for the Chart personnel shall be on the following basis, for 2004 – 2007.
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a.
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10% common pool for all Chart employees.
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b.
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Minimum EBIT for profit sharing.
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2,000,000 each year for the duration of the agreement.
Distribution of EBIT Profit Sharing Pool
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a.
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The profit sharing distribution will be made as a % of individual annual base wages except
for exclusions noted in sub-paragraph i.
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b.
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The base wage distribution % is determined as follows;
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Base Wage Profit Sharing % =
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EBIT Pool $
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Total Chart Annual
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Base Wage Payroll
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c.
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Actual distribution will occur in August of the current year and February of the following
year for current year profit sharing. The August distribution will be 50% of the estimated
common EBIT profit sharing pool based on mid-year EBIT. The reason for a reduced distribution
at mid-year is to allow for possible variations in profit in the last half of the year.
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d.
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Profit sharing will be a 100% distribution of the Common EBIT Pool as a % of base wage.
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e.
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The Profit Sharing Payment Schedule will be as follows;
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2004 Pool $ August 2004 February 2005
2005 Pool $ August 2005 February 2006
2006 Pool $ August 2006 February 2007
COMPENSATION BASIS FOR PROFIT SHARING
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f.
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Partial Year Distribution
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It is agreed that those individuals who retired during a current year would receive a
pro-rata distribution based on that current year’s base wages earned. The same will also
apply to individuals who left the hourly work force during the duration of this agreement.
For employees terminated for disciplinary reasons, no pro-rata distribution will be made.
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Probationary Employees
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g.
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Probationary employees will be paid profit sharing on a pro-rata basis for base wages earned
in a given year. Payment will be made after the probationary employee achieves seniority.
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h.
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Determination of base wages will be based on wages from the start date.
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33
Compensation Excluded for Profit Sharing and 401k Match
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i.
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Compensation excluded from the wage base for purposes of calculating profit sharing and 401k
Match are:
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Overtime
Service Trip Premium
S&A Benefits
Worker’s Compensation
Profit Sharing
All other compensation is included in the wage base for determination of profit sharing AND 401k
Match.
Shift Premiums
The second shift shall receive thirty-five ($.35) cents per hour over the day shift and the third
shift shall receive forty ($.40) cents per hour over the day shift.
Apprenticeship Program
The Apprenticeship Committee shall consist of two from the Company and two from the Union.
One representative of the Union will be from the Apprenticeship category required; the second
representative shall be the Local Lodge President or a designated appointee.
Before any changes are implemented in the Apprenticeship Program, the Company and the Union Shop
Committee will discuss such change.
ARTICLE
XIX
– CHECK-OFF
Upon receipt of a signed authorization of the employee involved, the Company shall deduct from the
employee’s pay the initiation fee and regular monthly dues payable by them to the Union during the
period provided for in said authorization. The amount will be certified by the Financial Secretary
of the Local Lodge.
Deductions shall be made on account of the initiation fee and regular monthly dues payable from the
first paycheck of the employee after receipt of the authorization and monthly thereafter from the
second paycheck of the employee in each month.
Deductions provided in Paragraphs 206 and 207 shall be remitted to the Financial Secretary of the
Union no later than the fifth (5th) day following the deduction and shall include all amounts due
and those dues not deducted in the previous month. The Company shall furnish the Financial
Secretary of the Union, monthly, with an alphabetical record of those for whom deductions have been
made and the amounts of the deduction.
34
The parties agree that check-off authorizations shall be in the following form:
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“Name of Employee
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Dept. No.
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Clock No.
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Date
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I hereby authorize and direct the Company to deduct from my pay beginning with the current month,
the initiation fee and regular monthly membership dues in the IAMAW.
I submit this authorization with the understanding that it will be effective and irrevocable for a
period of one (1) year from this date, or up to the termination date of the current collective
bargaining agreement between the Company and the IAMAW, whichever occurs sooner.
This authorization shall continue in full force and effect for yearly periods beyond the
irrevocable period set forth above unless revoked by me within fifteen (15) days prior to the end
of any such period. I shall also have the right to revoke this authorization at any time within a
period of fifteen (15) days prior to the termination date of any collective bargaining agreement
between the Company and the Union if such termination shall occur within one of the aforenoted
yearly periods. Such revocation shall be effected by written notice, sent by Registered Mail,
Return Receipt Requested, to the Company and the Union within such fifteen (15) day period.
Signature:
”.
The Union agrees to indemnify and save the Company harmless against any and all claims, demands,
suits or other forms of liability that may arise out of, or by reason of, action taken or not taken
by the Company in complying with the provisions of this Article, in reliance upon the Check-Off
Authorizations which have been furnished it.
ARTICLE
XX
CLAUSES RELATING TO PENSION PLAN
Section I: Chart Pension Plan
Subject to the provisions of Section 4 of this Article, and unless the parties otherwise agree, the
Pension Plan for Hourly Rated Employees of Chart Heat Exchangers (hereinafter referred to as the
“Pension Plan”) which was effective January 4, 1986, will continue to be maintained pursuant to the
terms of the Pension Plan, except that the Pension Plan will be frozen and no further contributions
shall be made to the Pension Plan after March 31, 1998. The Company may continue to make such
changes in the Pension Plan as, in the opinion of the Company, are required for compliance with the
Employer Retirement Income Security Act of 1974, as amended, and any rules and regulations
promulgated thereunder (hereinafter collectively referred
35
to as the “Act”), provided that if any such changes diminish benefits under the Pension Plan, the
Company shall attempt to minimize such effect.
To be effective, written notice of proposed change(s) must be served by one party upon the other no
less than sixty (60) days prior to any modification or change in the Pension Plan, except such as
may be required to conform with the Act or Section 401(a) of the Internal Revenue Code of 1954,
shall be prospective in its application and shall be made effective as of the date on which
agreement with respect to such modification or change is reached by the Company and the Union.
Section II: Funding of Benefits
The Company will continue to make contributions to the Chart Pension Plan to fund obligations for
past service credit.
Neither the Company nor the Union, except under the conditions specified in Paragraph 151 of this
section, shall demand any change in the Pension Plan nor shall either be requested to bargain with
respect to any change in the Pension Plan, nor during the term of the Pension Plan, nor shall any
modification, alteration, or amendment of said Pension Plan, be an objective of, or reason for, any
strike or lockout or other exercise of economic force or threat by either the Union or the Company.
Section 3: Agreement Retirement Date
The normal retirement date of each employee will be the first day of the month following the month
in which the employee’s 65th birthday occurs. An employee who retires after their normal retirement
date shall receive a retirement pension, payable commencing at their actual retirement date,
consisting of the following:
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a.
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An amount determined as if they had retired on their normal retirement date; plus
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b.
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For service accrued after their normal retirement date, an amount determined in accordance
with the respective benefit rates in effect for each year or portion thereof in which such
service was accrued.
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Other
Retirement Death Benefit
For those employees retiring after February 4, 2001, the retiree death benefit is $5,000.
Medicare Plan “B” Supplement
Actual cost up to a maximum of $55.00/month, life of agreement.
36
IAM NATIONAL PENSION FUND — NATIONAL PENSION PLAN
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a.
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The Employer shall contribute to the I.A.M. National Pension Fund, National Pension Plan as
shown below for each hour for which employees in all job classifications covered by this
Agreement are entitled to receive pay under this Agreement as follows:
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$.60 per hour effective February 7, 2004
$.65 per hour effective February 5, 2005
$.70 per hour effective February 4, 2006
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b.
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The Employer shall continue contributions based on a forty (40) hour work week while an
employee is off work and being compensated for any such time by the employer.
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c.
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Contributions for a full-time employee are payable from the first day of employment.
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d.
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The I.A.M. Lodge and the Employer adopt and agree to be bound by, and hereby assent to, the
Trust Agreement, dated May 1, 1960, as amended, creating the I.A.M. National Pension Fund and
the Plan rules adopted by the Trustees of the I.A.M. National Pension Fund in establishing and
administering the foregoing Plan pursuant to the said Trust Agreement, as currently in effect
and as the Trust and Plan may be amended from time to time.
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e.
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The parties acknowledge that the Trustees of the I.A.M. National Pension Fund may terminate
the participation of the employees and the Employer in the Plan if the successor collective
bargaining agreement fails to renew the provisions of this pension Article or reduces the
Contribution Rate. The parties may increase the Contribution Rate and/or add job
classifications or categories of hours for which contributions are payable.
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f.
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This Article contains the entire agreement between the parties regarding pensions and
retirement under this Plan and any contrary provision in this Agreement shall be void. No oral
or written modification of this Agreement shall be binding upon the Trustees of the I.A.M.
National Pension Fund. No grievance procedure, settlement or arbitration decision with respect
to the obligation to contribute shall be binding upon the Trustees of the said Pension Fund.
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HEALTH INSURANCE (HEALTH AND DENTAL INSURANCE)
The Company will offer individuals retiring after December 21, 1990, the opportunity to participate
in the Chart Heat Exchangers Health Care Plan for an additional 18 months beyond the 18 month
period allowed by COBRA (Consolidated Omnibus Budget Reconciliation Act), by paying 100% of the
premium cost for coverage of similarly situated individuals. This applies to individuals retiring
at age 62 or later. This offer is effective from December 21, 1990 through February 3, 2007 on a
non-precedent setting basis. Actual cost of this plan may change on a year-to-year basis as
determined by the health care provider. This provision is no longer applicable when an individual
reaches age 65 or is eligible for Medicare.
Cost experience and impact of this group on Health Insurance costs is to be followed.
37
Section 4: Effective Date
Any modification agreed upon between the parties under Section 1, Paragraph 215 of this Article,
resulting from negotiations commenced as a result of the sixty (60) day notice referred to therein
shall take effect on the day after the Pension Plan expiration date which was in effect at the time
the sixty (60) day notice was given.
ARTICLE
XXI
– INSURANCE
BOOKLET
The new Health Insurance Booklet will be distributed to the membership within one (1) month from
the date of receipt by the Company.
The Company will maintain an employee assistance program, which is mutually acceptable to the
Company and the Union.
Insurance Committee
The insurance committee shall consist of two (2) representatives of the Company and two (2)
representatives of the Union. The Union President or IAMAW representative or their representative
may attend meetings at any time.
This committee shall have the necessary time needed to provide Alternative Health Plans annually
and the Company shall pay the time spent. Union Committee representatives shall have the time spent
on this committee applied as hours worked on their shift for each day needed to investigate
Alternative Plans.
Duties of Insurance Committee
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a.
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The insurance committee shall meet every three (3) months and the agenda shall be established
prior to the date of the meeting. A representative of the insurance carrier shall be asked to
attend the meetings.
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b.
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The insurance committee shall be authorized to review all financial aspects of the insurance
plan and be furnished complete expenditure and benefit data.
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|
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c.
|
|
Members of the insurance committee shall be authorized to inquire on the status of any claim
submitted by any member of the Union.
|
General
|
a.
|
|
The group insurance coverage will terminate on February 3, 2007.
|
|
|
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b.
|
|
There shall be no modification in the benefits provided under the insurance plans during the
policy term except as mutually agreed by the parties or required by law. Any dividend paid on
the insurance policy shall be paid in full to the Company.
|
38
|
c.
|
|
In the event the insurance carrier does not pay full benefit as prescribed in the master
policy without justifiable reasons, Chart Heat Exchangers shall further process the claim on
behalf of the employee with the insurance carrier.
|
|
|
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d.
|
|
If an employee’s insurance terminates due to temporary layoff or leave of absence, such
employees shall be eligible for insurance on the date of return to full time work.
|
|
|
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e.
|
|
If an employee is not At Work on the date the insurance would otherwise become effective,
such effective date of insurance shall be the first day the employee returns to active work.
However, the insurance will become effective as if the employee was At Work if such employee
is off work due to vacation or holiday.
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|
|
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f.
|
|
Alternative Health Plans (HMO’s, POS, PPO plans etc.) will be provided annually in a similar
form or one that has the same benefits as the current plans. During the life of the agreement,
the Insurance Committee will evaluate other Alternative Health Plans for 2005, 2006 and 2007.
|
|
|
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g.
|
|
Should alternate company health insurance plans become available, the Company and Union will
meet to discuss the opportunity to participate in such plans.
|
|
|
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h.
|
|
The Company and Union agree that the Section 125 Plan is in effect for the duration of this
agreement.
|
Health and Dental Insurance Cost Sharing
Effective January 1, 2004
|
a.
|
|
Chart Basic
|
|
|
|
|
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Employee shares 10% of future premium increases or decreases for life of agreement.
|
|
|
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b.
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Chart Plus
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|
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|
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Employee shares 20% of future premium increases or decreases for life of agreement.
|
|
|
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c.
|
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Alternative Health Plans (HMO’s, POS, PPO plans, etc)
|
|
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|
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Employee shares 30% of future premium increases or decreases for life of agreement.
|
Effective January 1, 2005
|
a.
|
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Chart Basic
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|
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Employee shares 20% of current total premium during the term of this agreement.
|
|
|
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b.
|
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Chart Plus
|
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|
|
Employee shares 20% of current total Chart Basic premium plus 100% of the premium difference
between Chart Basic and Chart Plus during the term of this agreement.
|
39
|
c.
|
|
Alternative Health Plans (HMO’s, POS, PPO plans, etc)
|
|
|
|
|
|
Employee shares 20% of current total Chart Basic premium plus 100% of the premium difference
between Chart Basic and the alternative plan during the term of this agreement.
|
Employees who can provide proof of other medical plan coverage may opt out of Chart plans or HMO
and receive a payment during the course of the plan year. The payment may be taken as either cash,
which is taxable, or placed on a pre-tax basis in a flexible spending account in the employee’s
name. The payment for each year is as follows:
|
|
|
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|
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1st Year
|
|
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—
|
|
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$
|
1,500.00
|
|
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2nd Year
|
|
|
—
|
|
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$
|
1,500.00
|
|
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3rd Year
|
|
|
—
|
|
|
$
|
1,500.00
|
|
Payout will occur on a monthly basis
(Ex: 12 mos X $125.00 = $1,500.00)
Dental
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a.
|
|
Employee shares 20% of premium increases for the remainder of 2004 calendar year.
|
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|
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b.
|
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Employee shares 32% of total premium effective January 1, 2005.
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c.
|
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Employee shares 50% of total premium effective January 1, 2006.
|
Life Insurance
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a.
|
|
For the life of the agreement employees will be insured to a minimum of $23,000 or a maximum
of one times annual base wage, whichever is greater.
|
|
|
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b.
|
|
Employees may purchase up to three times base wage (minimum $23,000)
|
ARTICLE
XXII
— COMPANY OWNED TOOLS
In an effort to provide safer and more effective production equipment, the Company and the Union,
do hereby agree to the following:
The Company shall loan to each employee, at no cost to him, a set of tools and tool container with
lock (where needed) adequate for the proper and efficient performance of their duties subject to
the following conditions:
|
a.
|
|
The Company shall determine what tools are required for each job, and shall list against each
job the normal tools required for it. Any tools which are to be required at the worker’s
expense shall be listed accordingly.
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|
|
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b.
|
|
The Company shall replace worn tools, which are broken through normal use at no cost to the
worker.
|
40
|
c.
|
|
The Company shall indelibly mark each tool and tool container so that it may be identified to
the individual worker.
|
|
|
|
d.
|
|
The Company shall, through its supervisor, make such inspections of the tools and tool
containers used by each worker as may be required. All inspections of the tools and tool
containers shall be done in the presence of the employee to whom they are charged. No tool
container shall be opened during the absence of the employee to whom they are charged. When
inspection is being made in search of a missing tool, it shall be done in the presence of an
authorized Union steward.
|
|
|
|
e.
|
|
Each worker shall maintain a complete set of tools at all times and shall report any and all
tools or tool containers missing, lost, or stolen from their set to their supervisor for
replacement immediately.
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|
|
|
f.
|
|
Each worker shall reimburse the Company for replacement of Company tools or tool containers
lost or stolen while charged to him. If payment is not made in cash to the crib clerk, the
amount for which the worker is charged shall be deducted from their paycheck. If the cost is
more than three dollars ($3.00), deduction can be made from more than one paycheck. If the
missing, lost or stolen tool is recovered in good condition, suitable adjustment shall be made
to the worker. In the event that a toolbox equipped with tools is missing, lost or stolen, the
Company will be responsible for the cost of such equipped toolbox.
|
|
|
|
g.
|
|
A worker shall only use personally owned tools when authorized by their supervisor.
|
|
|
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h.
|
|
Any improperly identified tools found in a worker’s possession shall be removed and placed in
the tool crib.
|
|
|
|
i.
|
|
Any tools or tool containers with identification markings found in any improper area shall be
returned to the worker to whom they are then charged.
|
Any employee leaving the employment of the Company shall satisfy their tool account before
receiving their final pay.
Safety Creed
“One must not believe the
SAFETY
begins with your fellow employees, it begins with
YOU!
The Safety Program can do everything possible to protect you and your fellow
employees, but if
YOU
disregard
SAFETY
, you not only endanger yourself, but those
around you.
SAFETY
must be practiced twenty-four hours a day, as an accident requires less
than one second to happen. That “second” may mean a costly and permanent injury to yourself or to a
fellow employee, which you will think about for the rest of your life. It is far easier to live
with
SAFETY
than the results of a careless “accident”.
41
ARTICLE
XXII
– ACCIDENT PREVENTION
Safety Committee
The Safety Committee shall consist of the Shop Chairman, Health and Safety Coordinator, Safety
Technician, Safety Steward, and other designated hourly and salaried representatives.
Function of Safety Organization
The function of the Safety Committee shall be to cooperate in reducing accidents by:
|
a.
|
|
Reporting of hazards and unsafe practices from their respective departments.
|
|
|
|
b.
|
|
Bringing about the cooperation of all employees both Union and Management to carry out the
safety program.
|
Safety Problems
If a safety problem arises in the department, the steward will call it to the attention of the
Supervisor. Should the safety problem still not be solved within a reasonable period of time, the
steward may call the Shop Chairman to investigate the problem. The Shop Chairman may discuss the
problem with the Health and Safety Coordinator. If the problem still exists, it shall be placed on
the agenda of the next regular Safety Committee meeting. If the problem exists following
consideration by the Safety Committee, the Union may call in an outside expert to review the
problem and discuss it with the Shop committee and the Company with the objective of obtaining a
mutually satisfactory solution.
Safety Committee
The duties of the Safety Committee shall be:
|
a.
|
|
To meet at least once during each month to consider and, if appropriate, implement safety
recommendations of the Safety Committee or others.
|
|
|
|
b.
|
|
To participate on inspection teams that will make monthly inspection tours of the plant. The
inspection team will consist of members of the Safety Committee or designated representatives.
|
|
|
|
c.
|
|
To investigate reports of hazards and unsafe practices and effect correction. Reports made by
the inspection team and any other reports from the Safety Committee will be reviewed at the
monthly safety meeting and any unsafe conditions or practices will be called to the attention
of the supervisor of the department involved. Every reasonable effort will be made to have the
unsafe condition or practice corrected promptly.
|
|
|
|
d.
|
|
Upon the request of the Shop Chairman or their designated representative where evidence
exists that a chemical or substance to which an employee is exposed in the workplace may be
toxic and hazardous, the Company will provide the Union and the employee with
|
42
|
|
|
the Company’s safety data sheets or their equivalent, including information about any
available remedies and antidotes for such materials.
|
|
|
|
e.
|
|
In case of a serious injury to an employee, the Safety Technician and the Health & Safety
Coordinator will be notified promptly so that they can investigate the accident.
|
|
|
|
f.
|
|
In the event of a disagreement as to the liability of the Company in the case of an injury of
an employee, the Manager of Manufacturing will, upon request, review the pertinent facts of
the case with the Shop Chairman. The Company agrees to pay for the time lost by the Shop
Chairman from regular working hours for such review with the understanding that this privilege
will not be abused. No such review will be made if the case is given to an attorney.
|
|
|
|
g.
|
|
The Safety Steward will be permitted to carry out their duties relating to safety and health.
|
|
|
|
h.
|
|
The Safety Committee is responsible for making proper decisions on Safety, consistent with
established safety practices.
|
|
|
|
i.
|
|
The Company will be responsible for any and all discipline resulting from any safety
violation.
|
Safety Cooperation
The Safety Committee realizes that a safe plant is an efficient one and will devote its energies to
this accomplishment. In order to carry out this program, the Safety Committee will need 100%
cooperation of all employees of Chart Heat Exchangers. The committee encourages the making of
suggestions.
The Union and employees agree that they will cooperate in promoting safety and health programs and
will comply with all safety rules and regulations and to use safety equipment as required by OSHA
and the Company.
The general rules of safety must be observed. Failure to do so will incur the penalties as set
forth in the Safety Code. The Company and employees will cooperate to see that these rules of
safety are observed by all employees.
Selection of Committee
The Company and Union Safety Committee representatives will be chosen by the Health and Safety
Coordinator and Shop Chairman respectively, and will serve for a period of one year. Stewards
selected will serve the full period whether or not they continue as stewards for the full term. A
replacement who fills a vacancy shall serve out the balance of the term of their predecessor and
may serve the next full term, if selected.
43
Safety Codes
The purpose of these safety rules is to protect the employees as they work and ensure that they
work safely. By following these rules, they should avoid injury to themselves or fellow employees.
Strict enforcement of these safety rules will materially reduce the possibility that someone else
will commit an unsafe act which could endanger them.
|
a.
|
|
The work place is to be keep clean and orderly.
|
|
|
|
b.
|
|
The Safety equipment prescribed for any particular job shall be used in a proper manner at
all times.
|
|
|
|
c.
|
|
Safety glasses and/or approved eye protection are to be worn as prescribed, in all designated
areas at all times.
|
|
|
|
d.
|
|
Rings, bracelets, wristwatches, loose garments or neckties are not permitted while operating
a machine. Clothing worn shall be appropriate for the shop floor environment and shall not
pose a threat to safety.
|
|
|
|
e.
|
|
Safety toe footwear is required by all employees on the shop floor. Safety toe footwear worn
must comply with all current American National Standard Codes (A.N.S.I. Z41-1991 Directive)
and O.S.H.A. guidelines that are in effect.
|
|
|
|
f.
|
|
Complete instructions and permission must be obtained from a supervisor before operating any
machine, which an individual does not normally operate. All safety guards on machines must be
in place and functional.
|
|
|
|
g.
|
|
A lockout on the power switch must be used while performing any maintenance work on a
machine, which requires placing any part of the body into or near its mechanism.
|
|
|
|
h.
|
|
Individuals must not reach through or behind a safety guard while a machine is running.
|
|
|
|
i.
|
|
Before cleaning, oiling, or adjusting the moving parts of a machine, it is mandatory that the
machine be completely shut down and locked out.
|
|
|
|
j.
|
|
Cranes must be operated only by individuals familiar with their operation.
|
|
|
|
k.
|
|
Only authorized personnel are permitted to operate industrial power trucks or power hand
trucks. Such authorized personnel will comply with the General Operating & Safety Rules for
Power Vehicles.
|
|
|
|
l.
|
|
Defective or damaged hand tools, mushroomed chisels, punches, etc., and files without handles
are not to be used.
|
|
|
|
m.
|
|
Aisles must not be blocked. If at any time anything is placed in an aisle, it must be moved.
If the aisle is to be blocked for any period of time, the area supervisor will notify the
appropriate personnel.
|
44
|
n.
|
|
There will be no smoking during the period between the starting and stopping time of your
designated shifts up to and including overtime worked. Smoking will be allowed during the
employee’s designated break periods outside all Chart buildings.
|
|
|
|
o.
|
|
Compressed air is to be used with caution. Never use compressed air for cleaning clothing,
exposed parts of the body, or for cooling purposes. Nozzles must have an approved relief vent.
Unapproved alteration of air nozzles is prohibited.
|
|
|
|
p.
|
|
Projecting nails in boxes, boards, or barrels, which are exposed, are to be bent over or
removed. Other dangerous sharp projections should either be eliminated or protected.
|
|
|
|
q.
|
|
Electrical apparatus should be repaired only by authorized personnel, regardless of how minor
the problem seems to be. The supervisor is to be advised of the condition, they will secure
proper assistance. Electrical cabinets are not to be blocked or used for storage.
|
|
|
|
r.
|
|
Lift properly – with the knees and legs, and not the back. Get help rather than risk a
strain.
|
|
|
|
s.
|
|
All injuries, no matter how minor, are to be reported promptly to a supervisor and then to
the appropriate medical facility.
|
|
|
|
t.
|
|
Horseplay, scuffling, throwing of objects, and running is unsafe and it is forbidden. This
applies to all Company premises, including the parking lots.
|
|
|
|
u.
|
|
Industrial gases are to be stored in a safe manner, in keeping with standards established for
their storage.
|
|
|
|
v.
|
|
No employee shall remove, displace or damage any safety device or safeguard furnished and
provided for use in any employment or place of employment, nor interfere in any way with the
use thereof by any other person, nor shall any such employee interfere with the use of any
method or process adopted for the protection of any employee in such employment or place of
employment or frequenter of such place of employment, nor fail or neglect to do every other
thing reasonable necessary to protect the life, health, safety or welfare of such employees or
frequenters. (Extracted in part from the Wisconsin Industrial Commission statutes and
provision).
|
|
|
|
w.
|
|
The above safety rules are not meant to be inclusive nor do they supersede existing plant
rules, which may imply stricter measures.
|
|
|
|
x.
|
|
No employee shall be disciplined or discharged for refusing to work on a job if refusal is
based on a reasonable claim that said job is not safe or might unduly endanger the employee’s
health and safety.
|
|
|
|
y.
|
|
$130.00 per person total, life of contract for the purchase of safety toe footwear.
|
45
Reporting Violations
The reporting of violations will be conducted in the following manner: the supervisor will make out
violation forms in quadruplicate, the supervisor will retain one (1) copy and send three (3) copies
to the Health and Safety Coordinator. One completed copy will be sent to the Union.
Penalties
Penalties for the above violations will be as follows:
1ST VIOLATION: Violator will be presented with a violation slip, and instructed in accident
prevention and warned against future violations.
2ND VIOLATION: Violator will be presented with a violation slip and be suspended for a period of
five (5) hours.
3RD VIOLATION: Violator will be presented with a violation slip and be suspended for a period of
two (2) days.
4TH VIOLATION: Violator will be presented with a violation slip and will be suspended for a period
of one (1) week.
SUBSEQUENT VIOLATIONS: Violators shall be subject to further disciplinary action including
discharge.
The above penalties are based on cumulative violations within any one-year period.
General Safety Guides
Employees are not required or expected to take any risks from which they cannot protect themselves
by care and judgment.
Employees are not to rely on the watchfulness of others, but must protect themselves when and where
their own safety is involved.
In view of the possible effect on safety, no employee shall change any customary safety method or
work without first consulting the supervisor.
Learn the location of fire extinguishers in the work area and be familiar with their use and
purpose.
First Aid
Trained first aid attendants will be provided at the facility. A list of authorized first aid
attendants will be posted in a prominent place near each first aid office and will be revised as
necessary, with a copy to the Union. First Aid Attendants will receive ten (.10) cents per hour for
these duties.
46
Reporting Injuries
An employee shall not fail to report an injury immediately to their supervisor no matter how small
it may seem. In case the supervisor is out of their department, the injured employee shall report
the injury to the department steward or designated employee.
If it is necessary for an employee to go to the First Aid Room, they will notify their supervisor.
In case of an injury requiring emergency attention, the employee should go to the First Aid Room
immediately.
Medical attention for industrial injuries must be authorized by the Company prior to receiving
attention, except in cases of emergency.
Eye Protection
In line with the Company’s policy of providing the employee with a safe place in which to work, the
Company will maintain a 100% comprehensive eye protection program.
The type of eye protection required to be worn by employees must meet ANSI standards. The Company
will provide such eye protection to all employees. In addition, the Company will provide equipment
for protecting the eyes from damage due to grinding, burnishing, arc welding, etc.
When Company Furnishes Prescription Glasses
In the event it is determined that an employee with seniority needs corrective lenses in their
safety glasses due to near-far vision problems, the employee will furnish a copy of the
prescription and the Company will pay the cost of the glasses as follows:
a.
The Company pays
|
|
•
|
|
100% of the cost of basic single vision, bifocal, and trifocal lenses
|
|
|
|
|
•
|
|
100% of the cost of Basic or Group 1 frames
|
|
|
|
|
•
|
|
100% of the dispensing fee
|
|
|
|
|
•
|
|
100% of the cost of progressive lenses for all employees
|
b.
The Employee pays
|
|
•
|
|
100% of the cost of miscellaneous lens options (transition, tints, coatings,
etc.)
|
|
|
|
|
•
|
|
100% of charges for frame upgrades (frames other than Basic or Group 1)
|
|
|
|
|
•
|
|
100% of the eye exam charge (may be submitted to health insurance)
|
When it becomes necessary to replace prescription lenses after the first pair, because of a change
in prescription needs, the employee will furnish a copy of the prescription and the Company will
pay the cost of the lenses, according to Paragraph 267.
47
When it is necessary to replace an employee’s prescription safety glasses because they are pitted
to such an extent that they are no longer serviceable, the Company will pay for the cost of the new
lenses (according to paragraph 190) if the employee has had the glasses for a period of more than
two (2) years of working time. If the employee has had the glasses for less than two (2) years of
working time, the Company will pay the cost of the new lenses unless there has been negligence on
the part of the employee.
Damaged Glasses
Safety glasses damaged without the fault of the employee will be repaired or replaced at no cost to
the employee; however, it will be the employee’s responsibility to maintain the glasses in
acceptable condition and to replace them if they are lost, or if they are damaged through misuse or
improper care.
General
The Company will maintain adequate facilities for necessary minor repair of safety glasses. First
aid attendants will perform these functions.
All prescription safety glasses will be purchased through the Company. (Any exceptions must be
approved by the Health and Safety Coordinator.)
ARTICLE
XXIV
– MISCELLANEOUS
Limitation on Supervisor Doing Bargaining Unit
Work
The policy of the Company is to have supervisor perform supervisory work. Supervisor and other
non-bargaining unit employees of the Company shall not perform the work of employees in the
bargaining unit other than for instructive purposes, or in case of emergencies, and when attempting
to eliminate trouble on a job when employees who can eliminate the trouble or handle the emergency
are not readily available, but the work so performed shall not take away any work from any
employee.
Notices to Employees
All employees will be sent a notice to their address as it appears on the Company records. If it is
necessary to contact an employee by telephone, the message will be given to the person answering
the telephone. It is the employee’s responsibility to inform the Human Resources department of
their current phone number and address.
Physical Exam at Company Request
An employee will take a physical examination at Company expense upon the request of the Company.
Before an employee is sent for such physical examination, the Company will inform the Union and
discuss the reasons for the physical examination. The time spent for such an examination will be
paid at the rate of straight time.
48
Wash Up Period
A three (3) minute wash up period before the stopping signal will be granted for fin press
operators and also vacuum furnace operators to the extent that they have been working with
graphite.
Posted Union Notices
The Shop Committee will submit to the Company all proposed notices prior to the posting on Company
premises.
Educational Aid
An educational aid program will be made available to members of the bargaining unit.
Cellular Manufacturing and Quality Improvements
It is agreed between the Company and the Union that the parties will work together on the
implementation of cellular manufacturing and quality improvement, and will meet whenever necessary
to discuss issues relating to cellular manufacturing and quality improvement.
Sub-Contracting:
In cases where competition, schedule or workload require the transfer of work to outside vendors,
the Company will advise the Union of such need and the reasons for doing such prior to the
sub-contracting.
Out of Town Assignments
The Company will inform the Shop Chairman when members of the bargaining unit have been sent on
repair assignments outside La Crosse. Compensation while on such assignments will be based on the
applicable provisions of the Fair Labor Standard Act and Chart Heat Exchangers travel policy.
The Chart Heat Exchangers policy presently provides that an employee traveling on Company business
outside la Crosse will receive an additional 20% (or more for certain international trips) added to
their earnings applicable to paid travel time and work performed on the trip with the exception of
authorized time off before and/or after a trip, travel for purposes of the employee’s own training,
and any trip completed within one day.
Employees are considered first shift employees for purposes of determining normal working and
sleeping hours while traveling.
Travel, including time outside normal working hours, will be compensated according to the Chart
Heat Exchangers travel policy.
49
ITEMS FOR DISCUSSIONS
The Company and Union will discuss the following items should future conditions warrant:
|
a.
|
|
Method for handling National Health Care should it be instituted.
|
|
|
|
b.
|
|
Catastrophic economic conditions creating hardships for either party.
|
ARTICLE
XXV
– STRIKES AND LOCKOUTS
No Strike – No Lockout
Since the procedures set forth in this Agreement provide the means for peaceable settlement of all
differences, disputes, complaints, and grievances that may arise between the Company and the Union,
it is agreed that, during the term of this Agreement, neither the Union nor any of its members
shall authorize, encourage, or participate in any strike or slowdown, and that there shall be no
lockouts by the Company.
Violation of Clause
In the event of an illegal, unauthorized or uncondoned strike, sit down, slowdown or interference
with the operation by an employee or employees in violation of this Agreement, the Union will
undertake all reasonable means at its disposal to terminate such action. Employees who participate
in or are responsible for such violation may be discipline or discharged, and such discipline or
discharge shall be subject to the grievance procedure except as to employees who do not terminate
the violation promptly. The question of whether an employee participated in or had any
responsibility for such violation shall in every case be subject to the grievance procedure. In the
event that the Union, using immediate action, is unable to induce the employee or employees to
terminate such unauthorized action, the Company will not hold the local Union or its officers or
the International Union or its officers financially responsible therefor.
ARTICLE XXVI
SEVERANCE PACKAGE – PLANT CLOSING
In the case of the Plant Closing, the employees affected at the Chart Heat Exchangers Division in
La Crosse, WI, will fall under the following guidelines:
Monetary Compensation as follows:
One (1) week of pay for every two (2) years of service up to a maximum of twelve (12) weeks. Years
of service to be defined as no break in seniority.
Checks are to start one (1) week after said closing and will be paid on a weekly basis until pay
entitlement is exhausted.
50
Insurance:
Paid in the same format (employee contribution) as if working during the paid severance period.
Insurance benefits will remain in effect until the last day of the month following the last
severance payment.
ARTICLE
XXVI
DURATION OF AGREEMENT
This Agreement shall remain in full force and effect until 11:59 p.m. on February 3, 2007 and on a
year to year basis thereafter unless on or before December 5, 2006 (or in the event of a year to
year extension, at least sixty (60) days prior to the Agreement expiration date), either the
Company or the Union serves upon the other party a written notice of its desire to terminate this
Agreement and negotiate a succeeding Agreement.
No other agreement can modify the terms of this Agreement unless entered into as a written
amendment or supplement hereto.
It is understood that if any of the above articles or article or parts thereof, are in conflict
with federal or state rulings, laws, or executive orders, such federal or state rulings, laws or
executive orders shall apply.
Agreed to this
day of
, 2004.
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CHART HEAT EXCHANGERS, L.P.
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LOCAL LODGE 2191 OF DISTRICT
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LODGE 66 OF THE INTERNATIONAL
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ASSOCIATION OF MACHINISTS AND
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AEROSPACE WORKERS, AFL-CIO
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/S/ JOHN ROMAIN
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/S/ TOM O’HERON
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/S/ JOEL A. GUBERUD
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/S/ DENNIS A. GERKE
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/S/ MAX C. GRAMLING
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/S/ MARTIN L. CHRISTIANSON
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/S/ PHIL A. HEIMBECKER
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/S/ SCOTT T. PHILLIPS
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51
FREE STANDING AGREEMENT
LOCAL LODGE 2191 AND CHART HEAT EXCHANGERS
It is agreed; the company and Union will discuss the possibility of exceeding the Voluntary Shift
Exchange Language [more than one (1) week] due to manpower moves.
As in the past, these discussions will take place to allow employees the opportunity to change
shifts with other employees in excess of the limit stated in the current Labor Agreement.
This agreement is based on the additional requirements stated in the current Labor Agreement,
Voluntary Shift Exchange [more than one (1) week], and mutual agreement between the Company and
Union Shop Committee.
Any agreement to allow this to take place will be agreed to on a non-precedent basis.
It is recognized that the Company will have final say in decisions associated with the above stated
language.
DRUG AND ALCOHOL TESTING POLICY AND PROCEDURES
Purpose:
Chart Heat Exchangers is committed to providing and maintaining a safe, healthful and productive
environment for all of its employees. An integral part of such an environment is a workforce free
from individuals who are illegally and unsafely abusing drugs or alcohol. Therefore, it is in the
best interest of the Company, its customers, and its employees to recognize that illegal drug use
by employees would be a threat to the welfare and safety of Company personnel.
Policy:
Section 1.
It is the goal of this policy to eliminate or absolve illegal drug usage through education and
rehabilitation of the affected personnel. The possession, use or being under the influence of
alcoholic beverages or unauthorized drugs shall not be permitted at the Employer’s work site and/or
while an employee is on duty.
Section 2.
Pre-employment Testing:
As a precondition to obtaining employment with Chart Heat Exchangers to become Chart Heat
Exchangers employees, all applicants, following a conditional offer of employment, must
successfully complete a pre-employment physical examination by, in relevant part, testing negative
through urinalysis or similar tests administered to detect the use or abuse of drugs and/ or
alcohol. Such pre-employment testing bears a direct, material, and timely relationship to an
applicant’s capacity to perform his or her duties safely and effectively.
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Section 3.
Informing Employees About Drug and Alcohol Testing:
All employees shall be fully informed of the Chart Heat Exchangers drug and alcohol testing policy.
Employees will be provided with information concerning the impact of the use of alcohol and drugs
on job performance. In addition, the employer shall inform the employees on how the tests are
conducted, what the tests can determine and the consequence of testing positive for drug use. All
newly hired employees will be provided with this information on their initial date of hire. No
employee shall be tested before this information is provided to him/her. The Employer shall not
discipline employees who voluntarily come forward and ask for assistance to deal with a drug or
alcohol problem. Prior to any testing, the employee will be required to sign the attached consent
and release form. No disciplinary action will be taken against an employee unless he/she refuses to
sign the consent and release form, refuses to take a drug/alcohol test, refuses the opportunity for
rehabilitation, fails to complete a rehabilitation program successfully, or again tests positive
for drugs/alcohol within two (2) years of completing an appropriate rehabilitation program.
Section 4.
Employee Testing:
Employees shall not be subject to random medical testing involving urine or other similar or
related tests for the purpose of discovering possible drug or alcohol abuse however, if objective
evidence exists establishing probable cause to believe an employee’s work performance is impaired
due to drug or alcohol abuse, the employer will require the employee to undergo a medical test
consistent with the conditions set forth in this Policy. An employee that is ordered to participate
in a drug and alcohol test shall have the right to consult with the Medical Review Officer,
Treating Physician or Attending Physician following the testing process.
Section 5.
Sample Collection:
The collection and testing of the samples shall be performed only by a laboratory and by a
physician or health care professional qualified and authorized to administer and determine the
meaning of any test results. The laboratory performing the test shall be one that is certified by
the National Institute of Drug Abuse (NIDA). The laboratory chosen must be agreed to between the
Union and the Employer. The laboratory used shall also be one whose procedures are periodically
tested by the NIDA where they analyze unknown samples sent to an independent party. The results of
employee’s tests shall be made available to the Medical Review Officer. Collection of urine samples
shall be conducted in a manner, which provides the highest degree of security for the sample and
freedom from adulteration. Recognized strict chain of custody procedures must be followed for all
samples as set by NIDA. The Union and the Employer agree that security of the biological urine
samples is absolutely necessary therefore the Employer agrees that if the security of the sample is
compromised in anyway, any positive test shall be invalid and may not be used for any purpose.
Urine samples will be submitted as per NIDA Standards. Employees have the right for Union or legal
counsel representative to be present during the submission of the sample.
A split sample shall be reserved in all cases for an independent analysis in the event of a
positive test result. All samples must be stored in a scientific acceptable preserved manner as
established
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by NIDA. All positive confirmed samples and related paperwork must be retained by the laboratory
for at least six (6) months or for the duration of any grievance, disciplinary action or legal
proceedings whichever is longer. At the conclusion of this period, the paperwork and specimen shall
be destroyed.
Tests shall be conducted in a manner to ensure that an employee’s legal drug use and diet does not
affect the test results.
Section 6.
Drug Testing:
The laboratory shall test for only these substances and within the limits for the initial and
confirmation test as provided within the NIDA Standards. The initial test shall use an immunoassay,
which meets the requirements of the Food and Drug Administration for commercial distribution.
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Marijuana metabolites
Cocaine metabolites
Opiate metabolites
Phencyclidine
Amphetamines
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50 ng/ml
300 ng/ml
2000 ng/ml
25 ng/ml
1000 ng/ml
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If initial testing results are negative, testing shall be discontinued, all samples destroyed and
records of the testing expunged from the employee’s file. Only specimens identified as positive on
the initial test shall be confirmed using gas chromatograph/mass spectrometry (GC/MS) techniques at
the following listed cutoff values.
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Marijuana metabolites
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15 ng/ml
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Cocaine metabolites
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150 ng/ml
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Opiates
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Morphine
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2000 ng/ml
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Codeine
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2000 ng/ml
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Phencyclidine
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25 ng/ml
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Amphetamines
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Amphetamine
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500 ng/ml
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Methamphetamine
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500 ng/ml
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If confirmatory testing results are negative all samples shall be destroyed and records of the
testing expunged from the employee’s file.
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1.
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If immunoassay is specific for free morphine the initial test level is 25 ng/ml
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2.
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Delta-9-tetrahydrocannabinol-9-carboxylic acid
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3.
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Benzoylecgonine
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Section 7.
Alcohol Testing:
A Breathalyzer or similar test equipment shall be used to screen for alcohol. An initial positive
alcohol level shall be, .04 grams per 210L of breath. If initial testing results are negative,
testing shall be discontinued, all samples destroyed and records of the testing expunged from the
employee’s file. Sampling handling procedures, as detailed in Section 4, shall apply.
Section 8.
Medical Review Officer:
The Medical Review Officer shall be chosen and agreed upon between the Union and the Employer and
must be a licensed physician with a knowledge of substance abuse disorders. The Medical Review
Officer shall be familiar with the characteristics of drug tests (sensitivity, specificity, and
predictive value), the laboratories running the tests and the medical conditions and work exposures
of the employees. The role of the Medical Review Officer will be to review and interpret the
positive test results. The Medical Review Officer must examine alternate medical explanations for
any positive test results. This action shall include conducting a medical interview with the
affected employee, review of the employee’s medical history and review of any other relevant
biomedical factors. The Medical Review Officer must review all medical records made available by
the tested employee when a confirmed positive test could have resulted from legally prescribed
medication.
Section 9.
Laboratory Results:
The laboratory will advise only the employee and the Medical Review Officer of any positive
results. The results of a positive drug or alcohol test can only be released to the Employer by the
Medical Review Officer once he has completed his review and analysis of the laboratory’s test. The
employer will be required to keep the results confidential and it shall not be released to the
general public.
Section 10.
Testing Program Costs:
When the Company has proven a probable cause to believe that an employee is under the influence of
a substance, which is impairing job performance, the employee will be immediately placed on a
mandatory leave of absence from work, for the remainder of the shift involved, and sent for a
drug/alcohol test. The employee will report to work at the start of the next regular shift. The
Company will pay the employee for all hours (to include overtime hours) missed from work due to the
mandatory leave of absence upon receipt of verification of a negative substance test. If the result
of the substance test is positive, the Company will not pay the employee for any hours missed from
work due to the mandatory leave of absence.
For all costs associated with drug and alcohol testing, the Company will pay the medical testing
facility and Medical Review Officer.
Section 11.
Transportation:
The Company will provide transportation, at its expense, through a local taxi service to the
medical facility conducting the substance test. Both Management and the Union reserve the right to
have a representative accompany the employee to the testing facility.
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The Company will provide transportation, at its expense, through a local taxi service from the
medical testing facility to the employee’s home and their return to work the following day through
a local taxi service. In no instance will the employee be permitted to drive himself or herself
home.
Section 12.
Rehabilitation and Offenses and Penalties Program:
Any employee may voluntarily enter rehabilitation without a requirement for prior testing.
Employees who enter a program on their own initiative shall not be subject to testing. The
treatment and rehabilitation shall be paid for by the medical benefits plan, in which the employee
participates, to the extent provided by the plan. Employees who have chosen to opt out of the
Company’s Health Insurance Plans will first, apply for benefits under the plan that covers them and
secondly, be covered by the company if benefits are not provided by another plan.
Any employee, who tests positive the first time shall be medically evaluated, counseled and treated
for rehabilitation as recommended by an E.A.P. Counselor. Employees who complete a rehabilitation
program can be re-tested randomly at least once every quarter for the following six (6) months, if
an employee tests positive a second time during the six (6) month period, they shall be subject to
a disciplinary action. The employee will be reevaluated by an E.A.P. Counselor to determine if the
employee requires additional counseling or treatment. The employee will also receive a last chance
agreement. If the employee does not sign the last chance agreement, he/she will be subject to
disciplinary action up to and including dismissal. If the employee tests positive a third time
during this subsequent six (6) month period, he/she will be dismissed from his/her position with
Chart Heat Exchangers.
Section 13.
Duty Assignment After Treatment:
Once an employee successfully completes rehabilitation, they shall be returned to their regular
duty assignment. Once treatment and any follow-up care is completed, and two (2) years have passed
since the employee entered the program, the employee’s personnel file shall be purged of any
reference to his/her drug or alcohol problem.
Section 14.
Right of Appeal:
The employee has the right to challenge the results of the drug or alcohol tests and any discipline
imposed in the same manner that any of the employer actions under the terms of this agreement is
grievable.
Section 15.
Union Held Harmless:
This drug and alcohol-testing program was initiated at the request of the employer. Chart Heat
Exchangers assumes sole responsibility for the administration of this policy and shall be solely
liable for any legal obligations and costs arising out of the provision and/or application of this
policy relating to drug and alcohol testing. The Union shall be held harmless for the violation of
any worker rights arising from the administration of the drug and alcohol-testing program.
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Section 16.
Changes in Testing Procedures:
The parties recognize that there may be improvements in the technology of testing procedures, which
provide more accurate testing. In that event, the party’s shall bargain in good faith whether to
amend this procedure to include such improvements.
Section 17.
Conflict With Other Laws:
This article is in no way intended to supersede or waive any constitutional or other rights that
the employee may be entitled to under Federal, State or Local Statutes.
Section 18.
Non-Workplace Drug Related Convictions:
Any employee who is convicted of an illegal drug-related crime (does not apply to ordinance
violations) shall notify the Company immediately of such convictions. For the purpose of this
Policy, a “conviction” means finding of guilt (including a plea of nolo contendere) or imposition
of sentence, or both, by any judicial body with the responsibility to determine violations of
federal, state or local criminal statutes. Information concerning any such conviction for violation
of any statute based upon conduct occurring away from the Company’s premises and outside work time
shall not be a basis for imposing discipline under the collective bargaining agreement or for
requiring probable cause testing without the observation required by this Policy.
Section 19.
Diversion Agreement:
Any employee who accepts a diversion agreement, wherein the employee pleads guilty to an offense
but, the guilty plea is not accepted by the court if certain conditions are met within a prescribed
time line, will be required to notify the Company under this policy if and when the employee’s
guilty plea is accepted because of the employee’s failure to meet the set conditions.
Section 20.
Training:
The training of Company and Union representatives shall be from a formal training program endorsed
by a local Hospital and/or Law Enforcement Agency in detecting signs and symptoms of substance
abuse through speech, breath odor and conduct which indicates the need for testing.
The Company and Union will have an equal number of people trained to recognize individuals under
the influence of drugs and/or alcohol. It remains the responsibility of the Company to determine
testing of employees.
Section 21.
Confidentiality:
The Company will designate an official who will be responsible for receiving and maintaining
records regarding all substance tests administered under this Policy. These records shall be
maintained in separate files from routine personnel files and the Company shall limit access to
those specifically authorized management personnel listed below. The Company will conduct the
Policy in a manner calculated to preserve the employee’s privacy and dignity.
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In the event a grievance is filed as a result of a positive substance test, the Company shall
obtain from the laboratory its records relating to the drug test and, if necessary, any record
which might be in the possession of the Medical Review Officer. The Company shall provide copies of
all information to the Union, provided that the employee authorized the release of the medical
records. The Union and the Company shall confer and adopt a mutually acceptable release form.
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Human Resources Manager
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Date
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Manager of Manufacturing
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Date
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The Union reserves the right to grieve and/or arbitrate:
The Union reserves the right to grieve and/or arbitrate any or all of this Policy if it is deemed
necessary as determined by the Union.
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CONSENT and RELEASE FORM for Drug/Alcohol Test Program
I acknowledge that I have received a copy of, have been duly informed, and understand the Chart
Heat Exchangers drug and alcohol testing policy and procedures. I have been provided with the
information concerning the impact of the use of alcohol and drugs in the work place. In addition, I
have been informed on how the tests are conducted, what the test can determine and the consequence
of testing positive for drug/alcohol use.
I have been informed of Chart Heat Exchangers Employee Assistance Program (EAP). I understand that
if I voluntarily come forward and ask for assistance to deal with a drug or alcohol problem through
EAP, that, I will not be disciplined by the employer.
I understand how drug/alcohol tests are collected and further understand that there are medical
tests that are conducted under the auspices of a Medical Review Officer (MRO). I understand that
the MRO will review and interpret any positive test results, and that I will have an opportunity to
be interviewed by the MRO to review my status, my medical history and any relevant biomedical
factors prior to Chart Heat Exchangers being informed whether I passed or failed the test.
I understand that a confirmed positive drug or alcohol test will result in my referral to Chart
Heat Exchangers EAP and that I will be required to complete a rehabilitation program. No
disciplinary action will be taken against me unless I refuse to sign this consent and release form,
refuse to take a drug/alcohol test, refuse the opportunity for rehabilitation, fail to complete a
rehabilitation program successfully, or again test positive for drugs/alcohol within two (2) years
of completing an appropriate rehabilitation program. I understand that such disciplinary action, as
described herein, may include dismissal from Chart Heat Exchangers.
A copy of this form shall be provided to Local Lodge No.2191.
I,
, hereby consent and willingly submit to drug and alcohol testing, as stated above, to
be performed upon me and hereby authorize the Medical Review Officer to review such tests. I
further agree to have released, any positive test results and/or confirmation that the test was
performed to Chart Heat Exchangers, through its Human Resource Manager.
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Signature of Employee
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Date
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Witness
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Date
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LAST CHANCE AGREEMENT
It is the policy of Chart Heat Exchangers to maintain a work environment for all its employees that
is conducive toward maximum safety and optimum work standards. In application of this policy, the
use or possession, and/or sale of drugs by an employee is prohibited. Having detectable amounts of
alcohol/drugs in your body while on Company premises is also prohibited.
It is the policy of Chart Heat Exchangers to take action whenever alcohol and/or drugs are detected
through urinalysis/drug testing. Under such circumstances, the employee will be subject to
disciplinary action up to and including immediate discharge, as outlined in the Chart Heat
Exchangers substance abuse policy.
On
, you tested positive for drugs and/or alcohol for the second time. The Company will
provide you with an opportunity to rehabilitate yourself. The Company has agreed to provide you
with a leave of absence, if necessary, for your rehabilitation.
If you elect to participate in and successfully complete a rehabilitation program, the Company is
prepared to allow you to continue employment under the following conditions:
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You must successfully complete the rehabilitation program, including any recommended
follow-up and provide the Company with reports with regard to your attendance and your
completion of such programs. A plan of action must be agreed upon before hand.
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2.
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You agree, by your signature below, that your representatives of the Employees Assistance
Program and rehabilitation program are authorized to release to Chart Heat Exchangers
information related to your attendance and progress in an approved treatment and
rehabilitation program.
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3.
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You will not possess, use, sell, or be under the influence of drugs and/ or alcohol on
company premises or during work hours at any time in the future.
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4.
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You agree that the Company may require you to be tested for the presence of alcohol and or
drugs in your system at any time for any reason or for no reason at all in the next six (6)
months. Such tests will be conducted by a medical testing facility using any appropriate
testing procedure. If you are requested to take such an examination and refuse to take the
examination or test positive, you agree that you will be immediately terminated.
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In accepting the terms of this Last Chance Agreement, you agree that if you fail to live up to any
of the terms of this agreement, you will immediately be terminated. No excuses will be accepted for
not meeting the terms of this agreement.
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Human Resources Manager
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Date
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I have read and been given a copy of this Last Chance Agreement. I have been informed that I should
review this agreement with an attorney before I sign it. I understand that this is my last chance
to keep my job and that if I violate this agreement I will be terminated.
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