Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4 Registration Statement 63 386K
2: EX-1 Purchase Agreement 26 101K
3: EX-4.1 Indenture 117 396K
4: EX-5 Opinion of Olshan 2 12K
5: EX-23.1 Independent Auditors' Consent 1 7K
6: EX-25 Form T-1 5 20K
7: EX-99.1 Registration Rights Agreement 29 95K
8: EX-99.2 Form of Letter of Transmittal 11 33K
9: EX-99.3 Form of Tender for Outstanding Senior Notes 2 10K
10: EX-99.4 Form of Instruction 4 14K
11: EX-99.5 Form of Notice of Guaranteed Delivery 4 16K
As filed with the Securities and Exchange Commission on April 10, 1998
Registration No.___________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERICAN PACIFIC CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 2819 59-6490478
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
AMERICAN PACIFIC CORPORATION
3770 HOWARD
HUGHES PARKWAY
SUITE 300
LAS VEGAS, NEVADA 89109
(702) 735-2200
(Address and telephone number of registrant's principal executive offices)
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DAVID N. KEYS
AMERICAN PACIFIC CORPORATION
CHIEF FINANCIAL OFFICER
3770 HOWARD HUGHES PARKWAY
SUITE 300
LAS VEGAS, NEVADA 89109
(702) 735-2200
(Name, address and telephone number of agent for service for registrant)
------------------------------------
Copy to:
VICTOR M. ROSENZWEIG, ESQ.
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
505 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 753-7200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
Title of Each Class of Amount to be Proposed Maximum Aggregate Offering Amount of
Securities to be Registered Registered Offering Price Per Note Price Registration Fee
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9 1/4% Senior Notes Due 2005 $75,000,000 $1,000 $75,000,000 $22,125
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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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to buy nor shall there
be any sale of these securities in any state in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such state.
PROSPECTUS (Subject to Completion)
DATED APRIL ____, 1998
OFFER TO EXCHANGE
9 1/4% SENIOR NOTES DUE 2005
FOR
ALL OUTSTANDING
9 1/4% SENIOR NOTES DUE 2005
($75,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
OF
AMERICAN PACIFIC CORPORATION
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON __________ __, 1998, UNLESS EXTENDED
--------------
SEE "RISK FACTORS" AT PAGE 11 FOR A DISCUSSION OF CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE NEW NOTES.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
THE DATE OF THIS PROSPECTUS IS _________, 1998
(Continued on next page)
(Cover page continued)
American Pacific Corporation, a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Exchange Offer"), to
exchange $1,000 principal amount of its 9 1/4% Senior Notes Due 2005 (the "New
Notes") for each $1,000 principal amount of its outstanding 9 1/4% Senior Notes
Due 2005 (the "Old Notes"). The offer and sale of the New Notes have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to the Registration Statement (as defined herein) of which this
Prospectus constitutes a part. As of the date of this Prospectus, $75.0 million
aggregate principal amount of the Old Notes was outstanding. The Exchange Offer
is being made pursuant to the terms of the Registration Rights Agreement (the
"Registration Rights Agreement") dated March 12, 1998, by and between the
Company and Credit Suisse First Boston Corporation as Initial Purchaser (the
"Initial Purchaser") under the terms of a Purchase Agreement dated March 6,
1998, by and between the Company and the Initial Purchaser. The New Notes and
the Old Notes are referred to herein collectively as the "Notes." As used
herein, the term "Holder" means a holder of Notes.
THE NOTES ARE SENIOR UNSECURED OBLIGATIONS OF THE COMPANY AND RANK PARI
PASSU IN RIGHT OF PAYMENT WITH ALL EXISTING AND FUTURE UNSUBORDINATED, UNSECURED
INDEBTEDNESS OF THE COMPANY.
The Company will accept for exchange any and all Old Notes that are
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City time,
on the date the Exchange Offer expires, which will be __________ __, 1998 [20
BUSINESS DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER], unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is not conditioned upon any aggregate minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions, which may be waived by the Company, and to the terms and
provisions of the Registration Rights Agreement. Old Notes may be tendered only
in denominations of $1,000 aggregate principal amount and integral multiples
thereof. The Company has agreed to pay the expenses of the Exchange Offer. See
"The Exchange Offer."
Any waiver, extension or termination of the Exchange Offer will be
publicly announced by the Company through a release to the Dow Jones News
Service and as otherwise required by applicable law or regulations.
The Old Notes were issued in a private placement (the "March Offering")
under an indenture (the "Indenture"), dated as of March 1, 1998, by and among
the Company and United States Trust Company of New York (in such capacity, the
"Trustee"). The New Notes will be obligations of the Company and are entitled to
the benefits of the Indenture. The net proceeds of the March Offering were used
primarily in connection with the acquisition (the "Acquisition") from Kerr-McGee
Chemical Corporation ("Kerr-McGee") of certain intangible assets and rights
related to the production of ammonium perchlorate ("AP") and the repurchase of
the Company's outstanding 11% Subordinated Secured Term Notes due 2002 (the
"Azide Notes").
The form and terms of the New Notes are identical in all material
respects to the form and terms of the Old Notes, except that the offer and sale
of the New Notes have been registered under the Securities Act. Any Old Notes
not tendered and accepted in the Exchange Offer will remain outstanding and will
be entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the Holders of Old Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no further
obligation to such Holders to provide for the registration under the Securities
Act of the offer and sale of the Old Notes held by them. Following the
completion of the Exchange Offer, none of the Notes will be entitled to the
contingent increase in interest rate provided pursuant to the Registration
Rights Agreement. See "The Exchange Offer."
The Notes will mature on March 1, 2005. Interest on the Notes will be
paid in cash at a rate of 9 1/4% per annum on each March 1 and September 1,
commencing September 1, 1998.
The Notes will be redeemable at the option of the Company, in whole or
in part, at any time or from time to time, on or after March 1, 2002, at the
redemption prices set forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. In addition, upon a Change of
Control (as hereinafter defined), the Company will be required to make an offer
to purchase the Notes at a purchase price equal to 101% of their principal
amount plus accrued interest. See "Description the New Notes -- Change of
Control."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
that New Notes issued pursuant to this Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by a Holder thereof
other than (i) a broker-dealer who purchased such Old Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an "affiliate" (within the meaning
of Rule 405 of the Securities Act) of the Company without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the Holder is acquiring the New Notes in the ordinary course of its
business and is not participating, and has no arrangement or understanding with
any person to participate, in the distribution of the New Notes. Holders of Old
Notes who tender in the Exchange Offer with the intention to participate in a
distribution of the New Notes may not rely upon the position of the staff of the
Commission enunciated in the above-referenced no-action letters, and, in the
absence of an exemption, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Holders of Old Notes wishing to participate in the Exchange
Offer must represent to the Company in the Letter of Transmittal that such
conditions have been met.
Each broker-dealer (other than an "affiliate" of the Company) that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the consummation of the Exchange Offer, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution." Any broker-dealer who is an
affiliate of the Company may not rely on such no-action letters and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction.
The New Notes constitute a new issue of securities with no established
trading market. The Old Notes are eligible for trading in The Portal(sm) Market,
a subsidiary of The Nasdaq Stock Market, Inc. ("Nasdaq"). The Company does not
intend to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. The Company has been advised
by the Initial Purchaser that, following completion of the Exchange Offer, it
currently intends to make a market in the New Notes; however, the Initial
Purchaser is not obligated to do so and any market-making activities with
respect to the New Notes may be discontinued at any time. The Initial Purchaser
may act as principal or agent in such transactions. There can be no assurance
that an active trading market for the New Notes will develop. To the extent that
Old Notes are tendered and accepted in the Exchange Offer, a Holder's ability to
sell untendered Old Notes could be adversely affected.
This Prospectus, together with the Letter of Transmittal, is being sent
to all registered Holders of Old Notes as of ________________ ___, 1998.
The Company will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus and the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or the Exchange Agent (as defined herein). This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy the New
Notes in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. The delivery of this Prospectus
shall not, under any circumstances, create any implication that the information
herein is correct at any time subsequent to its date.
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TABLE OF CONTENTS
PAGE PAGE
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AVAILABLE INFORMATION.................................1 MATERIAL CHANGES....................................23
INCORPORATION OF CERTAIN DESCRIPTION OF THE NEW NOTES........................25
DOCUMENTS BY REFERENCE...............................2 CERTAIN UNITED STATES FEDERAL
PROSPECTUS SUMMARY....................................3 INCOME TAX CONSIDERATIONS..........................52
RISK FACTORS.........................................11 PLAN OF DISTRIBUTION................................53
THE EXCHANGE OFFER...................................16 LEGAL MATTERS.......................................53
USE OF PROCEEDS......................................22 EXPERTS.............................................54
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AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act with respect to the New Notes offered in the
Exchange Offer. For the purposes hereof, the term "Registration Statement" means
the original Registration Statement and any and all amendments thereto. In
accordance with the rules and regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration Statement
and the schedules and exhibits thereto. Each statement made in this Prospectus
concerning a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions. For further information pertaining to the Company and the New
Notes offered in the Exchange Offer, reference is made to such Registration
Statement, including the exhibits and schedules thereto and the financial
statements, notes and schedules filed as a part thereof. The Registration
Statement (and the exhibits and schedules thereto) may be inspected and copied
at the public reference facilities maintained by the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, or at its regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at Seven World Trade Center, Suite 1300, New York,
New York 10048. Any interested party may obtain copies of all or any portion of
the Registration Statement and the exhibits thereto at prescribed rates from the
Public Reference Section of the Commission at its principal office at Judiciary
Plaza, 450 Fifth Street, Room 1024, Washington, D.C. 20549. In addition,
registration statements and other filings made with the Commission through its
Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system are publicly
available through the Commission's site on the Internet's World Wide Web,
located at http://www.sec.gov.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Such reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549; 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Indenture requires the Company to file with the Commission, and to
provide to the Trustee and each Holder without cost, the annual and other
reports required by Sections 13 and 15(d) of the Exchange Act, regardless of
whether such Sections are applicable to the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K and Form 10-K/A for the fiscal
year ended September 30, 1997, Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997 and Current Reports on Form 8-K dated February 19, 1998
and March 27, 1998 are incorporated by reference in this Prospectus and shall be
deemed to be a part hereof. All documents subsequently filed by the Company
prior to the termination of this Exchange Offer pursuant to Sections 13(a),
13(c), 14 or 15 of the Exchange Act are incorporated by reference in this
Prospectus and shall be deemed to be a part hereof from the date of filing of
such documents.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above that have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents. Written requests for such copies should
be directed to American Pacific Corporation, 3770 Howard Hughes Parkway, Suite
300, Las Vegas, Nevada 89109, Attention: Chief Financial Officer. Oral requests
should be directed to such individual (telephone number (702) 735-2200).
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered hereby to any person in
any state or other jurisdiction in which such offer or solicitation is unlawful.
The delivery of this Prospectus at any time does not imply that information
contained herein is correct as of any time subsequent to its date.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM AMERICAN PACIFIC CORPORATION, 3770 HOWARD HUGHES PARKWAY, SUITE
300, LAS VEGAS, NEVADA 89109, ATTENTION: CHIEF FINANCIAL OFFICER, (702)
735-2200. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY ________, 1998 [FIVE BUSINESS DAYS PRIOR TO THE DATE ON WHICH
THE FINAL INVESTMENT DECISION MUST BE MADE].
--------------------
This Prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical facts included or
incorporated by reference in this Prospectus, including, without limitation,
statements regarding industry prospects, the Company's prospects and the
Company's financial position, are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, there can be no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations (the "Cautionary Statements")
are disclosed in this Prospectus, including, without limitation, those factors
described under "Risk Factors." All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
-2-
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information included elsewhere and incorporated by reference in
this Prospectus. Unless the context otherwise requires, as used in this
Prospectus: the term "Company" means American Pacific Corporation and its
subsidiaries; the terms "fiscal" and "fiscal year" refer to the Company's fiscal
years ended September 30, 1993, 1994, 1995, 1996, 1997 and 1998; and the term
"year" refers to a calendar year. Unless otherwise indicated, industry data
contained herein, other than with respect to the Company, are derived from
publicly-available industry publications, the Company's internal estimates and
other sources, which the Company has not independently verified but which the
Company believes to be reliable.
THE COMPANY
The Company's principal business is the production of AP, which is used
as an oxidizing agent in composite solid propellants for rockets, booster motors
and missiles. AP is employed in the Space Shuttle, the U.S. military's Titan
missile, the Delta family of commercial rockets and most other solid fuel rocket
motors. AP customers include contractors of the National Aeronautics and Space
Administration ("NASA"), the United States Department of Defense ("DOD") and
certain commercial rocket programs used to launch satellites for communication,
navigation, intelligence gathering, space exploration, weather forecasting and
environmental monitoring.
The Company also produces a variety of other specialty chemicals and
environmental protection equipment for niche applications, including: (i) sodium
azide, used in the inflation of automotive airbags; (ii) Halotron(R) products,
used to extinguish fires; and (iii) water treatment equipment, used to disinfect
effluents from sewage treatment and industrial facilities and for the treatment
of seawater. In addition, the Company has interests in two real estate assets in
the Las Vegas, Nevada area, consisting of approximately 100 acres of undeveloped
land in an industrial park and a 50% interest in a master-planned residential
community on approximately 320 acres.
RECENT DEVELOPMENTS
On March 12, 1998, the Company sold $75.0 million of the Old Notes in
the March Offering. Of the net proceeds of the March Offering, $39.0 million was
used in connection with the Acquisition, approximately $28.2 million was used to
repurchase the Azide Notes and the balance was and will be used for general
corporate purposes. The March Offering, the Acquisition and the repurchase of
the Azide Notes are referred to herein collectively as the "Transactions."
The intangible assets and rights acquired from Kerr-McGee in the
Acquisition were acquired pursuant to an Asset Purchase Agreement dated October
10, 1997 (the "Purchase Agreement") and consist primarily of process data,
technical information, customer lists and marketing contacts related to AP
production. The Kerr-McGee AP production facility was not purchased by the
Company; however, under the Purchase Agreement Kerr-McGee ceased manufacturing
AP at this facility, except to the limited extent permitted by the Purchase
Agreement. See "Material Changes--The Kerr-McGee Acquisition." Upon consummation
of the Acquisition, the Company effectively became the sole North American
producer of AP.
The Company's principal executive offices are located at 3770 Howard
Hughes Parkway, Suite 300, Las Vegas, Nevada 89109 and its phone number is (702)
735-2200.
-3-
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information presented below for fiscal
years 1993, 1994, 1995, 1996 and 1997 has been derived from the audited
consolidated financial statements of the Company, which have been audited by
Deloitte & Touche LLP, independent auditors for the Company and its
subsidiaries. The consolidated financial information for the three months ended
December 31, 1996 and 1997 and as of December 31, 1997 has been derived from the
Company's unaudited consolidated financial statements. The unaudited
consolidated financial statements have been prepared by the Company on a basis
consistent with the audited financial statements and include, in the opinion of
the Company, all normal recurring adjustments necessary for a fair presentation
of the information. Operating results for the three months ended December 31,
1997 are not necessarily indicative of the results that will be achieved for
future periods, including for the fiscal year ending September 30, 1998. The
selected consolidated financial information should be read in conjunction with
the consolidated financial statements and notes thereto incorporated by
reference in this Prospectus.
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THREE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
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1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Sales and operating revenues..... $37,441 $42,280 $39,250 $42,381 $44,050 $8,396 $11,268
Surcharge revenues (a)........... 19,774 8,913 -- -- -- -- --
------- ------- ------- ------- ------- ------ -------
Total sales and operating revenues 57,215 51,193 39,250 42,381 44,050 8,396 11,268
Cost of sales.................... 24,612 26,317 29,861 32,579 36,420 7,083 8,106
------ ------ ------ ------ ------ ----- -----
Gross profit..................... 32,603 24,876 9,389 9,802 7,630 1,313 3,162
Operating expenses............... 11,931 12,522 11,210 9,367 9,509 2,363 2,183
Impairment charge (b)............ -- 39,401 -- -- 52,605 -- --
Employee separation and management
reorganization costs (c)....... -- -- 226 -- 3,616 -- --
Equity in earnings of real estate
venture....................... -- -- -- 700 200 -- 300
------ ------ ------ ----- ------ ------ -----
Operating income (loss).......... 20,672 (27,047) (2,047) 1,135 (57,900) (1,050) 1,279
Net income (loss)................ 10,435 (19,337) (1,536) (211) (48,685) (850) 566
OTHER DATA:
Depreciation and amortization.... 11,365 7,679 5,883 7,810 7,685 1,900 837
Capital expenditures............. 47,865 9,218 4,462 3,248 1,557 912 969
Ratio of earnings to fixed
charges (d).................... 1.8x (e) (e) (e) (e) (e) 1.5x
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AT SEPTEMBER 30, AT
--------------------------------------------- DECEMBER 31,
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- ------ ------------
BALANCE SHEET DATA:
Cash (including restricted cash). $ 50,005 $ 24,468 $ 28,283 $ 23,470 $22,461 $19,397
Total assets..................... 231,138 154,922 157,789 150,019 90,081 89,854
Total debt....................... 89,681 42,680 42,554 36,786 31,066 30,006
Shareholders' equity............. 114,253 95,846 94,251 94,156 45,551 46,117
_____________________
(a) Reflects revenues from surcharges imposed on Thiokol Corporation ("Thiokol")
under certain agreements for the purchase of AP.
(b) During the fourth quarter of fiscal 1997, the Company concluded that the
cash flows associated with sodium azide operations would not be sufficient
to recover the Company's investment in sodium azide related fixed assets,
and, accordingly, a non-cash impairment charge of $52.6 million was
recognized in such quarter. During fiscal 1994, the Company recognized an
impairment charge of $39.4 million relating to its perchlorate manufacturing
facility.
(c) During the third quarter of fiscal 1995 and the fourth quarter of fiscal
1997, the Company recognized charges of $0.2 million and $3.6 million,
respectively, to account for the costs associated with employee separations
and management reorganizations.
(d) The ratio of earnings to fixed charges is computed by dividing pretax income
from continuing operations before fixed charges (other than capitalized
interest) by fixed charges. Fixed charges consist of interest expense,
amortization of debt expense and discount or premium related to
indebtedness, capitalized interest and such portion of rental expense, as
can be demonstrated to be representative of the interest factor in a
particular case.
-4-
(e) The ratios for the fiscal years ended September 30, 1994, 1995, 1996 and
1997 and the three months ended December 31, 1996 have been omitted because
the earnings were not sufficient to cover fixed charges. The deficiencies
were $33.4 million, $5.5 million, $1.9 million and $61.1 million for the
fiscal years ended September 30, 1994, 1995, 1996 and 1997, respectively,
and $1.9 million for the three months ended December 31, 1996.
-5-
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer.....................Pursuant to the Exchange Offer, New Notes
will be issued in exchange for
outstanding Old Notes validly tendered
and not withdrawn. The aggregate
principal amount of the New Notes will be
equal to that of the Old Notes and will
be issued in denominations of $1,000 in
principal amount and any integral
multiple of $1,000 in excess thereof. The
Company will issue New Notes to tendering
Holders of Old Notes as promptly as
practicable after the Expiration Date.
Resale ..............................Based on an interpretation by the staff
of the Commission set forth in no-action
letters issued to third parties, the
Company believes that the New Notes
issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for
resale, resold and otherwise transferred
by any Holder thereof (other than
broker-dealers, as set forth below, and
any such Holder that is an "affiliate,"
within the meaning of Rule 405 under the
Securities Act, of the Company) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that such New
Notes are acquired in the ordinary course
of such Holder's business and that such
Holder has no arrangement or
understanding with any person to
participate in the distribution of such
New Notes. Each broker-dealer (other than
an affiliate of the Company) that
receives New Notes for its own account in
exchange for Old Notes that were acquired
as a result of market-making or other
trading activity must acknowledge that it
will deliver a prospectus in connection
with any resale of such New Notes. The
Letter of Transmittal states that by so
acknowledging and delivering a
prospectus, such broker-dealer will not
be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it
may be amended or supplemented from time
to time, may be used by such
broker-dealer in connection with resales
of New Notes received in exchange for Old
Notes where such New Notes were acquired
by such broker-dealer as a result of
market-making activities or other trading
activities. The Company has agreed that,
for a period of 180 days after the
Expiration Date, it will make this
Prospectus available to any such
broker-dealer for use in connection with
any such resale. See "Plan of
Distribution." Any Holder who tenders in
the Exchange Offer with the intention to
participate, or for the purpose of
participating, in a distribution of the
New Notes or who is an affiliate of the
Company may not rely on the position of
the staff of the Commission enunciated in
Exxon Capital Holdings Corporation
(available May 13, 1988) or similar
no-action letters and, in the absence of
an exemption therefrom, must comply with
the registration and prospectus delivery
requirements of the Securities Act in
connection with a secondary resale
transaction. Failure to comply with such
requirements in such instance may result
in such Holder incurring liabilities
under the Securities Act for which the
Holder is not indemnified by the Company.
The Exchange Offer is not being made to,
nor will the Company accept surrenders
for exchanges from, Holders of
-6-
Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance
thereof would not be in compliance with
the securities or blue sky laws of such
jurisdiction.
Expiration Date...................... 5:00 p.m., New York City time, on _______
__, 1998 [20 BUSINESS DAYS AFTER
COMMENCEMENT OF THE EXCHANGE OFFER],
unless the Exchange Offer is extended, in
which case the term "Expiration Date"
means the latest date and time to which
the Exchange Offer is extended. Any
extension, if made, will be publicly
announced through a release to the Dow
Jones News Service and as otherwise
required by applicable law or
regulations.
Conditions to the
Exchange Offer.......................The Exchange Offer is subject to certain
conditions, which may be waived by the
Company. See "The Exchange Offer --
Conditions to the Exchange Offer." The
Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes
being tendered.
Procedures for Tendering Old Notes.....Each Holder of Old Notes wishing to
accept the Exchange Offer must complete,
sign and date the Letter of Transmittal,
or a facsimile thereof, in accordance
with the instructions contained herein
and therein, and mail or otherwise
deliver the Letter of Transmittal, or a
facsimile thereof, together with the Old
Notes to be exchanged and any other
required documentation to United States
Trust Company of New York, as Exchange
Agent (the "Exchange Agent"), at the
address set forth herein and therein. By
executing a Letter of Transmittal, each
Holder will represent to the Company
that, among other things, the New Notes
acquired pursuant to the Exchange Offer
are being obtained in the ordinary course
of business of the person receiving such
New Notes, whether or not such person is
the Holder, that neither the Holder nor
any such other person has any arrangement
or understanding with any person to
participate in the distribution of such
New Notes and that neither the Holder nor
any such other person is an "affiliate,"
as defined in Rule 405 under the
Securities Act, of the Company.
Special Procedures for
Beneficial Owners....................Any beneficial owner whose Old Notes are
registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and who wishes to tender in
the Exchange Offer should contact such
registered Holder promptly and instruct
such registered Holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on his
own behalf, such beneficial owner must,
prior to completing and executing the
Letter of Transmittal and delivering his
Old Notes, either make appropriate
arrangements to register ownership of the
Old Notes in such owner's name or obtain
a properly completed bond power from the
registered Holder. The transfer of
registered ownership may take
considerable time and may not be able to
be completed prior to the Expiration
Date.
-7-
Guaranteed Delivery Procedures.........Holders of Old Notes who wish to tender
such Old Notes and whose Old Notes are
not immediately available or who cannot
deliver their Old Notes and a properly
completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior
to the Expiration Date may tender their
Old Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer -- Procedures for
Tendering."
Acceptance of Old Notes and
Delivery of New Notes................Subject to certain conditions (as
described more fully in "The Exchange
Offer -- Conditions to the Exchange
Offer"), the Company will accept for
exchange any and all Old Notes that are
properly tendered in the Exchange Offer
and not withdrawn, prior to 5:00 p.m.,
New York City time, on the Expiration
Date. The New Notes issued pursuant to
the Exchange Offer will be delivered as
promptly as practicable following the
Expiration Date.
Withdrawal Rights......................Subject to the conditions set forth
herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration
Date. See "The Exchange Offer --
Withdrawal of Tenders."
Certain United States Federal
Income Tax Considerations............The exchange pursuant to the Exchange
Offer should not constitute a taxable
exchange for United States federal income
tax purposes. Each New Note should be
treated as having been originally issued
at the time the Old Note exchanged
therefor was originally issued. See
"Certain United States Federal Income Tax
Considerations."
Exchange Agent.........................United States Trust Company of New York,
the Trustee under the Indenture, is
serving as Exchange Agent in connection
with the Exchange Offer. For information
with respect to the Exchange Offer, the
telephone number for the Exchange Agent
is (800) 548-6565 and the facsimile
number for the Exchange Agent is (212)
780-0592.
See "The Exchange Offer" for more detailed information concerning the terms of
the Exchange Offer.
-8-
SUMMARY DESCRIPTION OF THE NEW NOTES
The Exchange Offer applies to $75.0 million aggregate principal amount
of Old Notes. The form and terms of the New Notes will be the same in all
material respects as the form and terms of the Old Notes, except that the offer
and sale of the New Notes will be registered under the Securities Act and,
therefore, the New Notes will not bear legends restricting the transfer thereof.
Upon consummation of the Exchange Offer, none of the Notes will be entitled to
registration rights under the Registration Rights Agreement. The New Notes will
evidence the same debt as the Old Notes, will be entitled to the benefits of the
Indenture and will be treated as a single class thereunder with any Old Notes
that remain outstanding. See "Description of the New Notes."
Securities Offered..................$75.0 million aggregate principal amount of
9 1/4% Senior Notes Due 2005.
Maturity Date.......................March 1, 2005
Interest Payment Dates..............March 1 and September 1 of each year,
commencing September 1, 1998.
Optional Redemption.................The Notes may be redeemed at the option of
the Company, in whole or in part, at any
time on or after March 1, 2002, at the
redemption prices set forth herein, together
with accrued and unpaid interest, if any, to
the date of redemption. See "Description of
the New Notes -- Optional Redemption."
Excess Cash Purchase Offer..........Within 90 days of the end of each fiscal
year, the Company will be required to make
an Excess Cash Purchase Offer to purchase
the maximum principal amount of Notes that
may be purchased with 50% of the Excess Cash
Flow in respect of the year then ended, at
an offer price equal to 102% of the
principal amount of the Notes to be
purchased, plus accrued and unpaid interest,
if any, to the date of purchase; provided,
however, that the Company will not be
required to make an Excess Cash Purchase
Offer unless and until Excess Cash Flow
exceeds $1.0 million. See "Description of
the New Notes--Certain Covenants--Excess
Cash Purchase Offer."
Change of Control...................Upon a Change of Control and subject to
certain conditions, each Holder will have
the right to require the Company to
repurchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase.
See "Description of the New Notes--Change of
Control."
Ranking ...........................The Notes are senior unsecured obligations
of the Company ranking pari passu in right
of payment of principal and interest with
all other existing and future
unsubordinated, unsecured indebtedness of
the Company and rank senior in right of
payment to all future subordinated
indebtedness of the Company. As of December
31, 1997, after giving pro forma effect to
the Transactions, the Company would have had
outstanding approximately $76.2 million of
senior indebtedness. See "Description of the
New Notes--Ranking" and "Prospectus
Summary--Selected Consolidated Financial
Information."
Restrictive Covenants...............The Indenture contains certain covenants
which, among other things, limit (i) the
incurrence of additional indebtedness by the
Company and its Restricted Subsidiaries (as
defined), (ii) the payment of dividends on
capital stock of the Company and the
purchase, redemption or retirement of
capital stock or subordinated indebtedness,
(iii) certain investments, (iv) certain
transactions with affiliates, (v) certain
liens and sale and
-9-
leaseback transactions, (vi) sales of assets
and (vii) certain consolidations and
mergers. The Indenture also prohibits
certain restrictions on distributions from
subsidiaries. All of these limitations and
prohibitions, however, are subject to a
number of important qualifications. See
"Description of the New Notes--Certain
Covenants."
-10-
RISK FACTORS
In addition to the other information set forth in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before exchanging Old Notes for New Notes.
DEPENDENCE ON THE CONTINUED OPERATION OF THE SPACE SHUTTLE AND CONTINUED USE OF
SOLID FUEL ROCKETS
A substantial proportion of the Company's EBITDA and sales is attributable
to perchlorate operations, principally AP production. In recent years, the Space
Shuttle program has accounted for approximately 40% to 70% of North American AP
market demand. Accordingly, the Company's AP business is highly dependent on the
continued operation of the Space Shuttle and the Shuttle's continued use of
solid fuel booster rockets. From January 1986 to September 1988, all missions
aboard the Space Shuttle were suspended pending the redesign of certain of its
subcomponents that contributed to the loss of the Space Shuttle Challenger. In
addition, the Space Shuttle fleet was temporarily grounded in 1990 as a result
of a hydrogen leak from the Space Shuttle's main engine system and again during
July and August 1995 to implement a design change to prevent future hot-gas
damage to the Space Shuttle's O-ring seal in the nozzle of its solid fuel
boosters. In addition, NASA is seeking to develop a fly-back booster rocket for
use with the Space Shuttle and an alternative manned reusable launch vehicle
(the X-33), which would replace the Space Shuttle at least for certain flights.
Both of these programs would use liquid fuel, which does not require AP as an
oxidizer. Any interruption or curtailment of Space Shuttle missions for any
reason (including accidents) or any reduction or elimination of solid fuel
rocket boosters for any reason (including technological obsolescence) would have
a material adverse effect on the Company's financial condition and results of
operations.
RISKS INHERENT IN GOVERNMENT CONTRACTS; DEPENDENCE ON CONGRESSIONAL
APPROPRIATIONS
Prospective purchasers of AP depend for revenue and profit upon their
principal customers, which are NASA, DOD and similar agencies of foreign
countries. Demand for the products and services produced by purchasers of AP is
affected by several factors, including the success or failure of ongoing
programs, the availability of adequate funding for ongoing and contemplated
programs and societal attitudes toward space exploration, weapons production and
the environment. The contracts of the Company's customers with NASA and DOD may
be terminated by such agencies at any time "for convenience," which would
include failure to receive sufficient funds from Congress. Congress usually
appropriates funds for a given program on a fiscal year basis even though
contract performance may take more than one year. No assurance can be given that
Congress will continue to fund NASA and DOD programs at levels that will permit
Space Shuttle missions and such DOD programs to continue on their current
schedules or that Congress will appropriate the funds necessary for NASA and DOD
to fulfill their obligations under relevant contracts with the Company's
customers. Any substantial reduction in Congressional funding for Space Shuttle
missions or such DOD programs would have a material adverse effect on the
Company's financial condition and results of operations.
As a supplier to United States government projects, the Company has been
and may continue to be subject to audit and review by the government of the
negotiation and performance of, and of the accounting and general practices
relating to, government contracts. Most of the Company's contracts for the sale
of AP are in whole or in part subject to the Federal Acquisition Regulations.
The Company's AP costs are audited by its customers and by government audit
agencies such as the United States Defense Contract Audit Agency. The Company's
costs and prices under such contracts may be subject to adjustment based upon
the results of such audits. To date, such audits have not had a material effect
on the Company's results of operations or financial position or resulted in
material adjustments.
LIMITED CUSTOMER BASE; ABSENCE OF ASSURED PURCHASE VOLUMES
Prospective purchasers of AP are primarily contractors in programs of NASA
and DOD. As a practical matter, the specialized nature of the activities of
these contractors restricts entry by others into competition with them.
Therefore, there are relatively few potential customers for AP, and individual
AP customers typically account for a significant portion of the Company's
revenues. Thiokol accounted for approximately 71%, 47% and 35% of the Company's
revenues during fiscal 1995, 1996 and 1997, respectively. Alliant Techsystems,
Inc. ("Alliant") accounted for approximately 10% of the Company's revenues
during the fiscal year ended September 30, 1997. For the fiscal year ended
September 30, 1997, on a pro forma basis after giving effect to the Acquisition,
Thiokol and Alliant would have accounted for approximately 30% and 19%,
respectively, of the Company's pro forma revenues. The
-11-
loss of either customer would have a material adverse effect on the Company.
Although the Company has entered into long-term pricing agreements with Thiokol
and Alliant, Alliant is not obligated to purchase its AP requirements from the
Company, and the Company does not have agreements with any of its customers
providing for any minimum purchases of AP.
The Company's prospective customers in its sodium azide business are also
limited. There are at present only two major suppliers of azide-based airbag
systems to the United States automotive industry, Autoliv ASP, Inc., formerly
Morton International Safety Products ("Autoliv") and TRW Vehicle Safety Systems,
Inc. ("TRW"). Autoliv or its predecessor accounted for 9%, 22% and 27% of the
Company's revenues in fiscal 1995, 1996 and 1997, respectively. TRW obtains
substantially all of its sodium azide from competitors of the Company.
DEPENDENCE ON SINGLE FACILITY
The Company has one operating facility located in Iron County, Utah. The
loss or shutdown of operations over an extended period of time at such facility
would have a material adverse effect on the Company. The Company's operations
are subject to the usual hazards associated with chemical manufacturing and the
related storage and transportation of products and wastes, including explosions,
fires, inclement weather and natural disasters, mechanical failure, unscheduled
downtime, transportation interruptions, chemical spills, discharges or releases
of toxic or hazardous substances or gases and other environmental risks, such as
required remediation of contamination. These hazards can cause personal injury
and loss of life, severe damage to or destruction of property and equipment and
environmental damage, and may result in the suspension of operations and the
imposition of civil or criminal penalties. The Company maintains property,
business interruption and casualty insurance at levels which it believes are in
accordance with customary industry practice, but there can be no assurance that
the Company will not incur losses beyond the limits or outside the coverage of
its insurance. See "-- Environmental Regulation and Risks."
On May 4, 1988, the former manufacturing and office facilities of the
Company in Henderson, Nevada were destroyed by a series of massive explosions
and associated fires (the "May 1988 Incident"). Extensive property damage
occurred both at the Company's facilities and in adjacent areas, the principal
damage occurring within a three-mile radius of the facilities. Production of AP,
the Company's principal business, ceased for a 15-month period. Significant
interruptions also occurred in the Company's other businesses, which occupied
the same or adjacent sites. While the Company's current facility is designed to
site particular components of the manufacturing process in discrete areas of the
facility and incorporates modern equipment and materials-handling systems
designed, constructed and operated in accordance with the operating and safety
requirements of the Company's customers, insurance carriers and governmental
authorities, there can be no assurance that another incident could not interrupt
some or all of the activities carried on at the Company's current manufacturing
site. See "--Safety Considerations."
SAFETY CONSIDERATIONS
AP, in the particle sizes and chemical purities produced by the Company, is
categorized for transportation purposes by the United States Department of
Transportation as a Class IV oxidizer. This classification indicates that the
Department of Transportation considers AP to be non-explosive, non-flammable and
non-toxic. The Company's AP manufacturing plant was constructed in a manner
intended to minimize, to the extent of known technologies and safety measures,
the combination of AP with other materials in a manner that could result in
explosions or combustion. However, no assurance can be given that the Company's
safety precautions will be effective in preventing explosions, fires and other
such events from occurring. On July 30, 1997, an explosion and fire occurred at
the Company's AP production facility in Iron County, Utah. Although damage to
the Company's property was confined to a relatively small area, the incident
resulted in the death of one employee and injured three others, one seriously.
As a result of this incident, the Utah Occupational Safety and Health Division
of the Utah Labor Commission cited the Company for violation of certain
applicable Utah safety regulations in connection with the handling of AP and
assessed fines totalling $5,250. Although the Company has taken steps to improve
safety measures and training in response to this incident, there can be no
assurance that such measures will be effective in preventing other such events
in the future.
Sodium azide is flammable and has exhibited toxicity in laboratory animal
tests. The Company's method of production is intended to limit the quantity of
sodium azide in process at any one time and to utilize known safety measures in
an effort to lessen attendant risks. In late 1992, a fire occurred in a sodium
azide reactor vessel at the Company's facility during start-up and testing of
the reactor vessel. In addition, fires are reported to have affected
-12-
production at a competitor's facility in the past. There can be no assurance
that a fire or other incident will not occur at the Company's sodium azide
production facility in the future.
The Company believes that exposure to sodium azide after an airbag is
installed in an automobile is highly unlikely because of the way in which sodium
azide is used in the airbag and the housing in which it is encased. However, the
Company understands that claims have been asserted by automobile drivers and
passengers that they have suffered hand burns from heated gas and facial
abrasions from airbag fabric after an airbag's deployment, although no such
claims have been asserted against the Company.
DECLINE IN MARKET FOR SODIUM AZIDE
Sodium azide prices have decreased significantly over the past several
years. The Company believes this price erosion is the result of a highly
competitive market environment with competing technologies reducing the use of
sodium azide. The Company has incurred significant operating losses in its
sodium azide operations during the last three fiscal years, and the Company
expects demand for sodium azide to decline as sodium azide use in inflators for
airbags is substantially reduced and ultimately discontinued. Based on the
uncertainties of the sodium azide market and the Company's view of the economics
thereof, the Company concluded that cash flows associated with sodium azide
operations would not be sufficient to recover the Company's investment in its
sodium azide related fixed assets. Accordingly, the Company recognized an
impairment charge of $52.6 million with respect to those assets in the fourth
quarter of fiscal 1997.
SUBSTANTIAL LEVERAGE AND ABILITY TO REPAY THE NOTES
The Company is highly leveraged. As of December 31, 1997, on a pro forma
basis after giving effect to the Transactions, the Company would have had
outstanding indebtedness of approximately $76.2 million (excluding the Azide
Notes). Although the Indenture limits the incurrence of additional indebtedness
by the Company, under certain circumstances the amount of such indebtedness
could be substantial. See "Description of the New Notes--Certain Covenants."
The Company's leverage could have important consequences to the holders of
the Notes, including but not limited to the following: (i) the Company's ability
to obtain additional financing for working capital, capital expenditures,
acquisitions, debt service requirements, general corporate purposes or other
purposes may be impaired in the future; (ii) a substantial portion of the
Company's cash flow from operations will be required to be dedicated to the
payment of principal and interest on its indebtedness, thereby reducing the
funds available to the Company for other purposes, including its operations and
future business opportunities; (iii) the Company's flexibility to adjust to
changing market conditions and ability to withstand competitive pressures could
be limited by its leveraged position and the covenants contained in its debt
instruments, thus putting the Company at a competitive disadvantage; and (iv)
the Company may be more vulnerable to a downturn in general economic conditions
or in its business.
During fiscal 1997, the Company's earnings were insufficient to cover its
fixed charges by $61.1 million. Even after eliminating the non-cash impairment
charge included in such period, the Company would still have had a deficiency.
The Company's ability to make scheduled payments or to refinance its obligations
with respect to its indebtedness, including the Notes, will depend on its
financial and operating performance, which is subject to prevailing economic and
competitive conditions and to certain financial, business and other factors
beyond its control, including those described under "--Dependence on the
Continued Operation of the Space Shuttle and Continued Use of Solid Fuel
Rockets," "--Risks Inherent in Government Contracts; Dependence on Congressional
Appropriations," "--Limited Customer Base; Absence of Assured Purchase Volumes,"
"--Dependence on Single Facility" and "--Safety Considerations." There can be no
assurance that the Company will maintain a level of cash flow from operations
sufficient to permit it to pay the principal, premium, if any, and interest on
its indebtedness (including the Notes).
If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, or seek to obtain additional equity capital
or restructure or refinance its debt (including the Notes). There can be no
assurance that such alternative measures would be successful or would permit the
Company to meet its scheduled debt service obligations. In the absence of such
operating results and resources, the Company could face substantial liquidity
problems and might be required to dispose of material assets or operations to
meet its debt service and other obligations. There can be no assurance
-13-
as to the ability of the Company to consummate such sales or the proceeds which
the Company could realize therefrom or that such proceeds would be adequate to
meet the obligations then due.
In the event that the Company is unable to generate sufficient cash flow
and the Company is otherwise unable to obtain funds necessary to meet required
payments of principal, premium, if any, and interest on its indebtedness, or if
the Company otherwise fails to comply with the various covenants in the
instruments governing such indebtedness (including covenants in the Indenture),
the Company could be in default under the terms of the agreements governing such
indebtedness, including the Indenture. In the event of such default, the holders
of such indebtedness could elect to declare all indebtedness thereunder to be
due and payable together with accrued and unpaid interest and the Company could
be forced into bankruptcy or liquidation. Any default under the agreements
governing the indebtedness of the Company could have a significant adverse
effect on the Company's ability to pay principal, premium, if any, and interest
on the Notes and on the market value of the Notes. See "Description of the New
Notes--Defaults."
REPURCHASE OBLIGATION WITH RESPECT TO WARRANTS
On December 31, 1999, the holders of certain warrants (the "Warrants")
issued by the Company to the purchasers of the Azide Notes have the right to put
to the Company up to one-third of the Warrants at a price determined by the
Company's fully diluted earnings per share and a multiple of 11, up to a maximum
of $5.0 million of cost to the Company. Such rights may not be exercised if the
Company's common stock, par value $.10 per share (the "Common Stock"), has
traded at values during the preceding 90-day period that would yield to the
Warrant holders a 25% per annum internal rate of return to the date of the put
(inclusive of the Azide Notes' interest rate of 11%).
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
The Company is a holding company that derives all of its operating income
and cash flow from its subsidiaries. Generally, claims of creditors of a
subsidiary, including trade creditors, secured creditors and creditors holding
indebtedness and guarantees issued by such subsidiary, and claims of preferred
stockholders (if any) of such subsidiary, will have priority in the assets and
earnings of such subsidiary over the claims of creditors of its parent company,
except to the extent that claims of creditors of the parent company are
guaranteed by such subsidiary. The Notes, therefore, will be effectively
subordinated to creditors (including trade creditors) and preferred stockholders
(if any) of the direct and indirect subsidiaries of the Company. As of December
31, 1997, after giving pro forma effect to the Transactions, the total
liabilities of the Company's subsidiaries would have been approximately $4.4
million. Although the Indenture limits the incurrence of indebtedness and
issuance of preferred stock of certain of the Company's subsidiaries, such
limitation is subject to a number of significant qualifications. Moreover, the
Indenture does not impose any limitation on the incurrence by such subsidiaries
of liabilities that are not considered "Indebtedness" or "Preferred Stock" under
the Indenture. See "Description of the New Notes--Certain Covenants--Limitation
on Indebtedness." In addition, the ability of the Company's subsidiaries to pay
dividends and make other payments to the Company may be restricted by, among
other things, applicable corporate and other laws and regulations and by the
terms of agreements to which such subsidiaries become subject. Although the
Indenture limits the ability of such subsidiaries to enter into consensual
restrictions on their ability to pay dividends and make other payments, such
limitations are subject to a number of significant qualifications. See
"Description of the New Notes--Certain Covenants--Limitation on Restrictions on
Distributions from Restricted Subsidiaries."
ENVIRONMENTAL REGULATION AND RISKS
The Company's operations are subject to extensive federal, state and local
regulation governing, among other things, emissions to air, discharges to water
and waste management. The Company's production facilities require operating
permits that are subject to revocation, modification and substantial fines and
civil or criminal sanctions for noncompliance. The operation of the Company's
manufacturing plant entails risk of adverse environmental and health effects,
including exposure to chemical products and by-products. There can be no
assurance that material costs or liabilities will not be incurred to rectify any
such occurrence. In addition, potentially significant expenditures could be
required in order to comply with environmental, health and safety laws and
regulations that may be adopted or imposed in the future. To meet changing
licensing and regulatory standards, the Company may be required to make
additional significant site or operational modifications, potentially involving
substantial expenditures or the reduction or suspension of certain operations.
See "--Dependence on Single Facility."
-14-
The Southern Nevada Water Authority has detected trace amounts of
perchlorate chemicals in Lake Mead and the Las Vegas Wash, bodies of water near
the Company's real estate development property in Henderson, Nevada. Lake Mead
is a source of drinking water for the City of Las Vegas, neighboring areas and
certain areas of metropolitan Southern California. Perchlorate chemicals
(including AP) are a potential health concern because they can interfere with
the production of a growth hormone by the thyroid gland, although they are not
currently included in the list of hazardous substances compiled by the United
States Environmental Protection Agency. The Company manufactured AP at a
facility on the Henderson site until the facility was destroyed in the May 1988
Incident, described above under "-- Dependence on Single Facility", after which
the Company relocated its AP production to its current facilities in Iron
County, Utah. Kerr-McGee has for many years operated an AP production facility
at a site near the Company's Henderson property. The Water Authority's testing
showed concentrations of 8 to 11 parts per billion (ppb) in drinking water. In
response to this discovery, the Company has engaged environmental consultants to
drill test wells and evaluate ground water and soils at the Henderson site. The
results of the Company's tests have shown perchlorate concentrations in the
ground water at the Henderson property ranging from 0 to approximately 600,000
ppb at certain wells. It has been reported that levels as high as 3.7 million
ppb have been detected at a well at the Kerr-McGee site. The State of California
has adopted a standard of 18 ppb for perchlorate levels in drinking water, but
there are currently no federal or State of Nevada standards for acceptable
levels of perchlorate in ground water or drinking water. The Company is
cooperating with State and local agencies, and with Kerr-McGee and other
interested firms, in the investigation and evaluation of perchlorate found at
its site and of the source or sources of perchlorates in Lake Mead and potential
remediation methods. Until these investigations and evaluations have reached
appropriate conclusions, it will not be possible for the Company to determine
the extent to which, if at all, the Company may be called upon to contribute to
or assist with future remediation efforts, or the financial impact, if any, of
such contributions or assistance.
DEPENDENCE UPON KEY PERSONNEL
The Company's AP manufacturing operations depend upon the skill and
experience of key officers and management personnel. The loss of key personnel
could have a material adverse effect on the Company.
RESTRICTIONS ON CHANGE IN CONTROL AND ABILITY TO REMOVE DIRECTORS
The Company's Restated Certificate of Incorporation, as amended, and
By-laws contain provisions that have the effect of delaying or preventing a
change in control of the Company. These provisions include a staggered Board of
Directors, provisions authorizing the incumbent directors to fill vacancies that
may exist in the membership of the Board of Directors and restrictions on the
ability of stockholders to nominate directors and to call special meetings of
the Board of Directors or to elect new directors. The Company's Restated
Certificate of Incorporation, as amended, also requires an 80% vote of
stockholders to take certain actions, including the election and removal of
directors. The Company's Certificate of Incorporation also empowers the Board of
Directors to issue shares of preferred stock having such rights and preferences,
including voting rights, as the Board of Directors may determine.
LACK OF PUBLIC MARKET FOR THE NOTES
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes, or the
ability of holders of the New Notes to sell their Notes or the price at which
such holders may be able to sell their Notes. If such a market were to develop,
the Notes could trade at prices that may depend on many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. The Initial Purchaser has advised the Company that it
currently intends to make a market in the Notes. The Initial Purchaser is not
obligated to do so, however, and any market-making with respect to the Notes may
be discontinued at any time without notice. Therefore, there can be no assurance
as to the liquidity of any trading market for the Notes, or that an active
public market for the Notes will develop. The Company does not intend to apply
for listing or quotation of the Notes on any securities exchange or stock
market. See "Plan of Distribution".
Historically, the market for non-investment grade debt has from time to
time been subject to disruptions that have caused substantial volatility in the
prices of such securities. There can be no assurance that the market for the New
Notes will not be subject to similar disruptions. Any such disruptions may have
an adverse effect on holders of the New Notes.
-15-
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on March 12, 1998 to the Initial
Purchaser, which placed the Old Notes with certain institutional investors in
reliance on Section 4(2) of, and Rule 144A under, the Securities Act. In
connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement, pursuant to which the Company agreed to use its
best efforts to consummate an offer to exchange the Old Notes for the New Notes
pursuant to an effective registration statement on or before August 10, 1998. A
copy of the Registration Rights Agreement has been filed as an exhibit to this
Registration Statement. Unless the context requires otherwise, the term "Holder"
with respect to the Exchange Offer means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered Holder, or any person whose
Old Notes are held of record by DTC who desires to deliver such Old Notes by
book-entry transfer at DTC.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any Holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Based on interpretations by the staff of the Commission set
forth in no-action letters issued to third parties, the Company believes that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any Holder of such New
Notes (other than any such Holder that is an "affiliate" of the Company, within
the meaning of Rule 405 under the Securities Act and except in the case of
broker-dealers, as set forth below) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and such
Holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes. Any Holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes or who is an
affiliate of the Company may not rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
By tendering in the Exchange Offer, each Holder of Old Notes will represent
to the Company that, among other things, (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is such Holder, (ii)
neither the Holder of Old Notes, nor any such other person, has an arrangement
or understanding with any person to participate in the distribution of such New
Notes, (iii) if the Holder is not a broker-dealer, or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the Holder, nor any such other person, is engaged in or intends to
participate in the distribution of such New Notes and (iv) neither the Holder
nor any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act or, if such Holder is an "affiliate," that
such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Following the consummation of the Exchange Offer, Holders of Old Notes not
tendered will not have any further registration rights and the Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for the Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City
-16-
time, on the Expiration Date. Subject to the minimum denomination requirements
of the New Notes, the Company will issue $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of outstanding Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000 principal amount.
The forms and terms of the New Notes will be identical in all material
respects to the forms and terms of the corresponding Old Notes, except that the
offer and sale of the New Notes will have been registered under the Securities
Act and, therefore, the New Notes will not bear legends restricting the transfer
thereof. The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange. As of the date of
this Prospectus, $75.0 million aggregate principal amount of the Old Notes were
outstanding. This Prospectus, together with the Letter of Transmittal, is being
sent to all Holders as of ________, 1998. Holders of Old Notes do not have any
appraisal or dissenters' rights under the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the applicable rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
for the purpose of receiving the New Notes from the Company. If any tendered Old
Notes are not accepted for exchange because of an invalid tender, the occurrence
of certain other events set forth herein or otherwise, such unaccepted Old Notes
will be returned, without expense, to the tendering Holder thereof as promptly
as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
" -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
_____________, 1998 [20 BUSINESS DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE
OFFER], unless the Company in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended. Although the Company has no current
intention to extend the Exchange Offer, the Company reserves the right to extend
the Exchange Offer at any time and from time to time by giving oral or written
notice to the Exchange Agent and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service. During any extension of the Exchange Offer, all
Old Notes previously tendered pursuant to the Exchange Offer and not withdrawn
will remain subject to the Exchange Offer. The date of the exchange of the New
Notes for Old Notes will be the first Nasdaq trading day following the
Expiration Date.
The Company expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Old Notes if any of the events set forth
below under " -- Conditions to the Exchange Offer" shall have occurred and shall
not have been waived by the Company and (ii) amend the terms of the Exchange
Offer in any manner that, in its good faith judgment, is advantageous to the
Holders of the Old Notes, whether before or after any tender of the Old Notes.
PROCEDURES FOR TENDERING
The tender to the Company of Old Notes by a Holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
Holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal signed by such
holder. A Holder of the Old Notes may tender such Old Notes by (i) properly
completing and signing a Letter of Transmittal or a facsimile thereof (all
-17-
references in this Prospectus to a Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with any
corresponding certificate or certificates representing the Old Notes being
tendered (if in certificated form) and any required signature guarantees, to the
Exchange Agent at its address set forth in the Letter of Transmittal on or prior
to the Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in DTC whose name appears on a security listing as the owner of
Old Notes), the signature of such signer need not be guaranteed. In any other
case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered Holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" as defined by Rule 17Ad-15 under
the Exchange Act (any of the foregoing hereinafter referred to as an "Eligible
Institution"). If the New Notes and/or the Old Notes not exchanged are to be
delivered to an address other than that of the registered Holder appearing on
the register for the Old Notes, the signature in the Letter of Transmittal must
be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, LETTER OF TRANSMITTAL AND ALL OTHER
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO
THE COMPANY.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish an account with respect
to the Old Notes at DTC for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC's system may make book-entry delivery of Old Notes by causing
DTC to transfer such Old Notes into the Exchange Agent's account with respect to
the Old Notes in accordance with DTC's procedure for such transfer. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an appropriate Letter of Transmittal with any
required signature guarantee and all other revised documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at the address
set forth in the Letter of Transmittal on or prior to the Expiration Date, or,
if the guaranteed delivery procedures described below are complied with, within
the time period provided under such procedures.
If the Holder desires to accept the Exchange Offer and time will not permit
a Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its office, on or prior to the Expiration Date, a letter, telegram or facsimile
transmission from an Eligible Institution setting forth the name and address of
the tendering Holder, the name(s) in which the Old Notes are registered and the
certificate number(s) of the Old Notes to be tendered, and stating that the
tender is being made thereby and guaranteeing that, within three Nasdaq trading
days after the date of execution of such letter, telegram or facsimile
transmission by the Eligible Institution, such Old Notes, in proper form for
transfer (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Old Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery, which may
be used by Eligible Institutions for the purposes described in this paragraph,
are available from the Exchange Agent.
-18-
A tender will be deemed to have been received as of the date when (i) the
tendering Holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC), is received by the Exchange
Agent or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible Institution
is received by the Exchange Agent. Issuances of New Notes in exchange for Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against submission of a duly signed Letter of
Transmittal (and any other required documents) and deposit of the tendered Old
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptance for exchange of which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any Old Notes. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or will incur any liability for failure to give any
such notification. Any Old Notes received by the Exchange Agent that are not
validly tendered and as to which the defects or irregularities have not been
cured or waived, or if Old Notes are submitted in an aggregate principal amount
greater than the aggregate principal amount of Old Notes being tendered by such
tendering Holder, will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date and (b) to the extent permitted by applicable law, purchase
Old Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers will differ from the terms of the
Exchange Offer.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire New Notes issuable
upon the exchange of such tendered Old Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Company to be necessary or desirable to complete the exchange, assignment
and transfer of tendered Old Notes or transfer ownership of such Old Notes on
the account books maintained by DTC. All authority conferred by the Transferor
will survive the death, bankruptcy or incapacity of the Transferor and every
obligation of the Transferor will be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
By executing a Letter of Transmittal, each Holder will make to the Company
the representations set forth above under the heading " -- Purpose and Effect of
the Exchange Offer."
-19-
WITHDRAWAL OF TENDERS
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except
that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent at the address set
forth in the Letter of Transmittal prior to 5:00 p.m., New York City time on the
Expiration Date. Any such notice of withdrawal must specify the holder named in
the Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers and designation of Old Notes to be withdrawn, the principal
amount of Old Notes delivered for exchange, a statement that such Holder is
withdrawing his election to have such Old Notes exchanged, and the name of the
registered Holder of such Old Notes, and must be signed by the Holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory to
the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawn Old Notes or otherwise
comply with DTC procedure. All questions as to the validity of notices of
withdrawal, including time of receipt, will be determined by the Company, and
such determination will be final and binding on all parties.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue New Notes in
exchange for any properly tendered Old Notes not theretofore accepted and may
terminate the Exchange Offer, or, at its option, modify or otherwise amend the
Exchange Offer, if either of the following events occur:
(a) any statute, rule or regulation shall have been enacted, or any action
shall have been taken by any court or governmental authority which, in the
sole judgment of the Company, would prohibit, restrict or otherwise render
illegal consummation of the Exchange Offer, or
(b) there shall occur a change in the current interpretation by the staff
of the Commission which, in the Company's sole judgment, might materially
impair the Company's ability to proceed with the Exchange Offer.
The Company expressly reserves the right to terminate the Exchange Offer
and not accept for exchange any Old Notes upon the occurrence of either of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes).
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its sole discretion. The
foregoing conditions must be either satisfied or waived prior to termination of
the Exchange Offer. Any determination made by the Company concerning an event,
development or circumstance described or referred to above will be final and
binding on all parties.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By Mail (registered or certified mail recommended):
United States Trust Company of New York
P.O. Box 844
Cooper Station
New York, New York 10276-0844
By Overnight Courier:
United States Trust Company of New York
770 Broadway, 13th Floor
Corporate Trust Operations Department
New York, New York 10003
By Hand Delivery:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attn: Corporate Trust Services
By Facsimile: (212) 780-0592 Confirm by Telephone: (800) 548-6565
(For Eligible Institutions Only)
-20-
FEES AND EXPENSES
The expense of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitations
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will be
paid to any such officers and employees who engage in soliciting tenders.
The Company has not retained any dealer-manager or other soliciting
agent in connection with the Exchange Offer and will not make any payments to
brokers, dealers or others soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, the Letter of
Transmittal and related documents to the beneficial owners of the Old Notes and
in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees of the Company, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, New Notes, or
Old Notes for principal amounts not tendered or accepted for exchange, are to be
delivered to, or are to be issued in the name of, any person other than the
registered Holder of the Old Notes tendered or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
-21-
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old
Notes as reflected in the Company's accounting records on the date of the
exchange because the exchange of the Old Notes for the New Notes is the
completion of the selling process contemplated in the issuance of the Old Notes.
Accordingly, no gain or loss for accounting purposes will be recognized. The
expenses of the Exchange Offer and the unamortized expenses related to the
issuance of the Old Notes will be amortized over the term of the New Notes.
OTHER
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) Holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to Holders of Old Notes
in such jurisdiction.
As a result of the making of the Exchange Offer, the Company will have
fulfilled a covenant contained in the Registration Rights Agreement. Holders of
the Old Notes who do not tender their Old Notes in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
limitations applicable thereto under the Indenture except for any such rights
under the Registration Rights Agreement and except that the Old Notes will not
be entitled to the contingent increase in interest rate provided for in the Old
Notes. All untendered Old Notes will continue to be subject to the restrictions
on transfer set forth in the Indenture and the Old Notes. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market, if
any, for untendered Old Notes could be adversely affected.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
New Notes offered hereby. In consideration for issuing the New Notes as
contemplated in this Prospectus, the Company will receive in exchange Old Notes
in like principal amount, the terms of which are identical in all material
respects to the New Notes, except that the offer and sale of such New Notes will
be registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. Old Notes surrendered in exchange for New
Notes will be retired and cancelled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in a change in the indebtedness of the
Company.
The Company received net proceeds of approximately $72.0 million from
the March Offering, of which $39.0 million was used to pay the consideration in
connection with the Acquisition, approximately $28.2 million was used to
repurchase the Azide Notes and the balance was and will be used for general
corporate purposes.
-22-
MATERIAL CHANGES
THE MARCH OFFERING
On March 12, 1998, the Company sold $75.0 million principal amount of
the Old Notes in the March Offering, consummated the Acquisition and repurchased
the Azide Notes. See "Use of Proceeds."
THE KERR-MCGEE ACQUISITION
On March 12, 1998 (the "Closing Date"), the Company acquired, pursuant
to the Purchase Agreement with Kerr-McGee, certain process data, technical
information, customer lists, marketing contacts and related expertise of
Kerr-McGee related to its production of AP (the "Rights") for a purchase price
of $39.0 million. Under the Purchase Agreement, the Company acquired an option
(the "Option") to purchase all or any portion of the inventory of AP stored at
Kerr-McGee's premises on the Closing Date, which is not owned by, or identified
to a firm order from, a Kerr-McGee customer (the "Inventory"). The Option is
exercisable from time to time within the 12 month period commencing on the
Closing Date (the "Option Period"). The Acquisition did not include Kerr-McGee's
production facilities (the "Production Facilities") and certain related water
and power supply agreements used by Kerr-McGee in the production of AP. Under
the Purchase Agreement, Kerr-McGee ceased the production and sale of AP, except
under certain limited circumstances described below, and the Production
Facilities may continue to be used by Kerr-McGee for production of AP under
those circumstances. Under the Purchase Agreement, Kerr-McGee reserved a
perpetual, royalty-free, nonexclusive license to use any of the technology
forming part of the Rights as may be necessary or useful to use, repair or sell
the Production Facilities (the "Reserved License").
Under the Purchase Agreement, Kerr-McGee reserved the right to sell the
Inventory to the extent not purchased by the Company pursuant to the Option, to
process and sell certain reclaimed AP that is not suitable for use in solid fuel
rocket motors (the "Reclaimed Product"), and to produce and sell AP (i) to
fulfill orders scheduled for delivery after the closing, subject to making
payments to the Company with respect to such orders, as provided in the Purchase
Agreement and (ii) in the event of the Company's inability to meet customer
demand or requirements, breach of the Purchase Agreement or termination of the
Company's AP business.
The Purchase Agreement provides that, together with the Reserved
License, Kerr-McGee is permitted in its discretion to (i) lease, sell,
dismantle, demolish and/or scrap all or any portion of the Production
Facilities, (ii) retain the Production Facilities for manufacture of Reclaimed
Product and (iii) maintain the Production Facilities in a "standby" or
"mothballed" condition so they will be capable of being used to produce AP under
the limited circumstances referred to above.
Under the Purchase Agreement, Kerr-McGee has agreed to indemnify the
Company against loss or liability from claims associated with the ownership and
use of the Rights prior to consummation of the Acquisition or resulting from any
breach of its warranties, representations and covenants. The Company has agreed
to indemnify Kerr-McGee against loss and liability from claims associated with
the ownership and use of the Rights after consummation of the Acquisition or
resulting from any breach of its warranties, representations and covenants. In
addition, Kerr-McGee has agreed that it will, at the Company's request, store
any inventory as to which the Option is exercised until 90 days after the Option
expires, introduce the Company to AP customers that are not currently customers
of the Company, and consult with the Company regarding the production and
marketing of AP. The Company has agreed that, at Kerr-McGee's request, it will
use reasonable efforts to market Reclaimed Product on Kerr-McGee's behalf for up
to three years following consummation of the Acquisition.
REPURCHASE OF THE AZIDE NOTES
The Azide Notes were 11% noncallable subordinated secured term notes,
which were issued and sold in February 1992 to finance the design, construction
and start-up of the Company's sodium azide facility. A portion of the net
proceeds from sale of the Old Notes was applied to repurchase the Azide Notes
for approximately
-23-
$28.2 million (approximately 113% of the outstanding principal amount thereof).
In connection with the repurchase, the Company recognized an extraordinary loss
on debt extinguishment of approximately $5.1 million.
-24-
DESCRIPTION OF THE NEW NOTES
The Old Notes were issued under the Indenture among the Company, as issuer
and United States Trust Company of New York, as Trustee (in such capacity, the
"Trustee"). The New Notes will be issued under the Indenture, which will be
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), upon the effectiveness of the Registration Statement of which
this Prospectus is a part. The form and terms of the New Notes are the same in
all material respects as the form and terms of the Old Notes, except that the
offer and sale of the New Notes will have been registered under the Securities
Act and, therefore, the New Notes will not bear legends restricting transfer
thereof. Upon the consummation of the Exchange Offer, Holders of Notes will not
be entitled to registration rights under, or the contingent increase in interest
rate provided pursuant to, the Registration Rights Agreement. The New Notes will
evidence the same debt as the Old Notes and will be treated as a single class
under the Indenture with any Old Notes that remain outstanding.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act as in effect on
the date of the Indenture. The Notes are subject to all such terms and reference
is made to the Indenture and the Trust Indenture Act for a statement thereof. A
copy of the Indenture has been filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summary, which describes certain provisions of the Indenture and the Notes, does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Indenture and the Notes, including the definitions therein
of terms not defined herein and those terms made a part thereof by the Trust
Indenture Act. Whenever particular defined terms of the Indenture not otherwise
defined herein are referred to, such defined terms are incorporated herein by
reference.
The Notes are issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
shall be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes are unsecured senior obligations of the Company, limited to $75.0
million aggregate principal amount, and will mature on March 1, 2005. The Notes
will bear interest at the rate of 9 1/4 per annum from March 12, 1998, or from
the most recent date to which interest has been paid or provided for, payable
semiannually to Holders of record at the close of business on the February 15 or
August 15 immediately preceding the interest payment date on March 1 and
September 1 of each year, commencing September 1, 1998. The Company will pay
interest on overdue principal at 1% per annum in excess of such rate, and it
will pay interest on overdue installments of interest at such higher rate to the
extent lawful.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the option of the Company prior to
March 1, 2002. Thereafter, the Notes will be redeemable, at the Company's
option, in whole or in part, at any time or from time to time, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period commencing on March 1 of the years set forth below:
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REDEMPTION
PERIOD PRICE
------ -----
2002.............................................. 104.625%
2003.............................................. 102.313
2004 and thereafter............................... 100.000
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The indebtedness evidenced by the Notes is a senior unsecured obligation of
the Company, ranks pari passu in right of payment with all existing and future
senior indebtedness of the Company and is senior in right of payment to all
future subordinated indebtedness of the Company. As of December 31, 1997, after
giving effect to the issuance of the Notes and the application of the proceeds
therefrom, the Company's senior indebtedness outstanding would have been
approximately $76.2 million.
All of the operations of the Company are conducted through its
subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors, secured creditors and creditors holding indebtedness and guarantees
issued by such subsidiaries, and claims of preferred stockholders (if any) of
such subsidiaries generally have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the Company,
including holders of the Notes. The Notes, therefore, are effectively
subordinated to creditors (including trade creditors) and preferred stockholders
(if any) of subsidiaries of the Company. At December 31, 1997, after giving pro
forma effect to the Transactions, the total liabilities of the Company's
subsidiaries would have been approximately $4.4 million, including trade
payables. Although the Indenture limits the incurrence of Indebtedness and
preferred stock of certain of the Company's subsidiaries, such limitation is
subject to a number of significant qualifications. Moreover, the Indenture does
not impose any limitation on the incurrence by such subsidiaries of liabilities
that are not considered Indebtedness or Preferred Stock under the Indenture. See
"--Certain Covenants --Limitation on Indebtedness."
BOOK-ENTRY, DELIVERY AND FORM
The New Notes will be issued in the form of a Global Note. The Global Note
will be deposited with, or on behalf of, The Depository Trust Company (the
"Depository") and registered in the name of the Depository or its nominee.
Except as set forth below, the Global Note may be transferred, in whole and not
in part, only to the Depository or another nominee of the Depository. Investors
may hold their beneficial interests in the Global Note directly through the
Depository if they have an account with the Depository or indirectly through
organizations that have accounts with the Depository.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's
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participants include securities brokers and dealers banks, trust companies,
clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of participants. Ownership of
beneficial interests in the Global Note will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests in the Global Note will be shown on, and the transfer of those
ownership interests will be effected only through, records maintained by the
Depository (with respect to participants' interest) and such participants (with
respect to the owners of beneficial interests in the Global Note other than
participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Note will not be entitled to have the Notes
represented by the Global Note registered in their names, will not receive or be
entitled to receive physical delivery of certificated Notes in definitive form
and will not be considered to be the owners or holders of any Notes under the
Global Note. The Company understands that under existing industry practice, in
the event an owner of a beneficial interest in the Global Note desires to take
any action that the Depository, as the holder of the Global Note, is entitled to
take, the Depository would authorize the participants to take such action, and
that the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
Payment of principal of and interest on Notes represented by the Global
Note registered in the name of and held by the Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Note may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
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CERTIFICATED NOTES
The Notes represented by the Global Note are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of U.S.
$1,000 and integral multiples thereof if (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for the Global Note or
if at any time the Depository ceases to be a clearing agency registered under
the Exchange Act and a successor Depository is not appointed by the Company
within 90 days, (ii) the Company in its discretion at any time determines not to
have all of the Notes represented by the Global Note or (iii) an Event of
Default has occurred and is continuing. Any Note that is exchangeable pursuant
to the preceding sentence is exchangeable for certificated Notes issuable in
authorized denominations and registered in such names as the Depository shall
direct. Subject to the foregoing, the Global Note is not exchangeable, except
for a Global Note of the same aggregate denomination to be registered in the
name of the Depository or its nominee.
SAME-DAY PAYMENT
The Indenture requires that payments in respect of Notes (including
principal, premium and interest) be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date):
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that for purposes of this
clause (i) such person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting power of the
Voting Stock of the Company;
(ii) individuals who on the Issue Date constituted the Board of
Directors (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66 2/3% of the directors of the Company
then still in office who were either directors on the Issue Date or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in
office;
(iii) the adoption of a plan relating to the liquidation or
dissolution of the Company; or
(iv) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
Person, and, in the case of any such merger or consolidation, the
securities of the Company that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of the
Voting Stock of the Company are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such securities
are changed into or exchanged for, in addition to any other consideration,
securities of the surviving corporation that represent immediately after
such transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving corporation.
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Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee (the "Change of Control Offer")
stating: (1) that a Change of Control has occurred and that such Holder has the
right to require the Company to purchase such Holder's Notes at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest on the relevant interest
payment date); (2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to historical and pro forma income,
cash flow and capitalization after giving effect to such Change of Control, if
such information is then available to the Company or can be obtained without
unreasonable effort or expense); (3) the repurchase date (which shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed); and (4) the instructions determined by the Company, consistent with the
covenant described hereunder, that a Holder must follow in order to have its
Notes purchased.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if 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 the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchaser. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to incur additional Indebtedness are contained in the
covenants described under "--Certain Covenants--Limitation on Indebtedness,"
"--Limitation on Liens" and "--Limitation on Sale/Leaseback Transactions." Such
restrictions can only be waived with the consent of the holders of a majority in
principal amount of the Notes then outstanding. Except for the limitations
contained in such covenants, however, the Indenture will not contain any
covenants or provisions that may afford holders of the Notes protection in the
event of a highly leveraged transaction.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require the Company to repurchase
the Notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders of Notes
following the occurrence of a Change of Control may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases. The
provisions under the Indenture relative to the Company's obligation to make an
offer to repurchase the Notes as a result of a Change of Control may be waived
or modified with the written consent of the holders of a majority in principal
amount of the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
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Limitation on Indebtedness. (a) The Company shall not, and shall not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that the Company may Incur Indebtedness if, on the date of
such Incurrence and after giving effect thereto, the Consolidated Coverage Ratio
exceeds 2.5 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness pursuant to the Revolving Credit Facility; provided,
however, that, after giving effect to any such Incurrence, the aggregate
principal amount of such Indebtedness then outstanding together with the
aggregate principal amount of Indebtedness then outstanding pursuant to
clause (8) below does not exceed the greater of $10.0 million or the
Borrowing Base;
(2) Indebtedness owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that (i) any subsequent issuance or transfer
of any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such Indebtedness
by the obligor thereon and (ii) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the Notes;
(3) the Notes;
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of this covenant);
(5) Indebtedness of a Subsidiary Incurred and outstanding on or prior
to the date on which such Subsidiary was acquired by the Company (other
than Indebtedness Incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company); provided ,
however, that on the date of such acquisition and after giving effect
thereto, the Company would have been able to Incur at least $1.00 of
additional Indebtedness pursuant to clause (a);
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (3), (4) or (5) or this
clause (6); provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary
Incurred pursuant to clause (5), such Refinancing Indebtedness shall be
Incurred only by such Subsidiary;
(7) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
pursuant to the Indenture; and
(8) Indebtedness in an aggregate principal amount which, together with
all other Indebtedness of the Company outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through (7)
above or paragraph (a)) does not exceed $5.0 million; provided, however,
that, after giving effect to any such Incurrence, the aggregate principal
amount of such Indebtedness then outstanding together with the aggregate
principal amount of Indebtedness then outstanding pursuant to clause (1)
above does not exceed the greater of $10.0 million or the Borrowing Base.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to the foregoing paragraph (b) if the proceeds
thereof are used, directly or indirectly, to Refinance any Subordinated
Obligations unless such Indebtedness shall be subordinated to the Notes to
at least the same extent as such Subordinated Obligations.
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(d) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above
clauses and (ii) an item of Indebtedness may be divided and classified in
more than one of the types of Indebtedness described above.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Company is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"--Limitation on Indebtedness;" (3) the Company would have on its balance sheet
less than $10.0 million of cash and cash equivalents after giving effect to such
Restricted Payment; or (4) the aggregate amount of such Restricted Payment and
all other Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such Restricted Payment (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an employee
stock ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness
of the Company convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash, or the
fair value of any other property, distributed by the Company upon such
conversion or exchange);
(D) an amount equal to the sum of (i) the net reduction in Investments
in Unrestricted Subsidiaries resulting from dividends, repayments of loans
or advances or other transfers of assets, in each case to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the
portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of an Unrestricted Subsidiary at
the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, however, that the foregoing sum shall not exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary; and
(E) 50% of (i) the cash returns on real estate equity investments
related to the Real Estate Joint Venture (as indicated on the Company's
cash flow statement prepared in accordance with GAAP) during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such Restricted Payment less (ii) the
increase (if any) in the Company's real estate equity investments related
to the Real Estate Joint Venture (as indicated on the Company's income
statement prepared in accordance with GAAP) during such period.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any acquisition of any Capital Stock of the Company made out of
the proceeds of the substantially concurrent sale of, or made by exchange
for, Capital Stock of the Company (other than Disqualified Stock and
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other than Capital Stock issued or sold to a Subsidiary of the Company or
an employee stock ownership plan or to a trust established by the Company
or any of its Subsidiaries for the benefit of their employees); provided,
however, that (A) such acquisition of Capital Stock shall be excluded in
the calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of amounts
under clause (4)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted to be Incurred pursuant
to the covenant described under "--Limitation on Indebtedness;" provided,
however, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation of
the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that at the time of payment of such
dividend, no other Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such dividend shall be included
in the calculation of the amount of Restricted Payments;
(iv) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its Subsidiaries
from employees, former employees, directors or former directors of the
Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to
the terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
shares of such common stock; provided, however, that the aggregate amount
of such repurchases and other acquisitions shall not exceed $500,000 in any
calendar year; provided further, however, that such repurchases and other
acquisitions shall be excluded in the calculation of the amount of
Restricted Payments;
(v) any purchase of the Warrants; provided, however, that (A) the
aggregate amount of such purchases shall not exceed $5.0 million and (B) at
the time of such purchase and after giving effect thereto the Company would
not be prohibited from making a Restricted Payment in the amount of $1.00
pursuant to clause (1), (2) or (3) of paragraph (a) above; provided
further, however, that such purchases shall be included in the calculation
of the amount of Restricted Payments; or
(vi) any payment or distribution in the nature of satisfaction of
dissenters' rights pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of the
Indenture applicable to consolidations, mergers and transfers of all or
substantially all the assets of the Company; provided, however, that (A)
the aggregate amount of such payments and distributions shall not exceed
$500,000 and (B) at the time of such payment or distribution and after
giving effect thereto the Company would not be prohibited from making a
Restricted Payment in the amount of $1.00 pursuant to clause (1), (2) or
(3) of paragraph (a) above; provided further, however, that such payment or
distribution shall be included in the calculation of the amount of
Restricted Payments.
Excess Cash Purchase Offer. Within 90 days following the end of each fiscal
year, commencing with the fiscal year ending September 30, 1998, the Company
shall make an offer to all holders of Notes (the "Excess Cash Purchase Offer")
to purchase the maximum principal amount of Notes that is an integral multiple
of $1,000 that may be purchased with 50% of the Excess Cash Flow (the "Excess
Cash Offer Amount") in respect of the year then ended, at an offer price equal
to 102% of the principal amount of the Notes to be purchased, plus accrued and
unpaid interest, if any, to the date fixed for the closing of such Excess Cash
Purchase Offer (the "Excess Cash Offer Price"). The Excess Cash Purchase Offer
will be required to remain open for 20 Business Days following its commencement
and no longer, except to the extent that a longer period is required by
applicable law. Upon the expiration of such
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period, the Company will apply the Excess Cash Offer Amount to the purchase of
all Notes tendered at the Excess Cash Offer Price. If the aggregate principal
amount of Notes tendered pursuant to any such Excess Cash Purchase Offer exceeds
the Excess Cash Offer Amount, the Company will be required to purchase Notes on
a pro rata basis (subject to minimum denominations) in the manner described in
the Indenture. To the extent that the aggregate principal amount of Notes
tendered pursuant to any Excess Cash Purchase Offer is less than the Excess Cash
Offer Amount with respect thereto, the Company may, subject to the other
provisions of the Indenture, use any remaining Excess Cash Flow for general
corporate purposes. Notwithstanding the foregoing provisions of this paragraph,
the Company shall not be required to make an Excess Cash Purchase Offer or to
apply any Excess Cash Flow in accordance with this paragraph unless and until
Excess Cash Flow exceeds $1.0 million.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this covenant or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or
(ii) of this covenant or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such refinancing agreement or amendment are no less
favorable to the Noteholders than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such predecessor
agreements;
(iv) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; and
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of Directors, of the
shares and assets subject to such Asset Disposition and at least 85% of the
consideration thereof received by the Company or such Restricted Subsidiary
(other than in the case of a Permitted Asset Disposition) is in the form
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of cash or cash equivalents and (ii) an amount equal to 100% of the Net
Available Cash from such Asset Disposition is applied by the Company (or such
Restricted Subsidiary, as the case may be) (A) first, to the extent the Company
elects (or is required by the terms of any Indebtedness), to prepay, repay,
redeem or purchase Senior Indebtedness or Indebtedness (other than any
Disqualified Stock) of a Wholly Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within one year
from the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), to the extent the Company
elects, to acquire Additional Assets within one year from the later of the date
of such Asset Disposition or the receipt of such Net Available Cash; (C) third,
to the extent of the balance of such Net Available Cash after application in
accordance with clauses (A) and (B), to make an offer to the holders of the
Notes to purchase Notes pursuant to and subject to the conditions contained in
the Indenture; and (D) fourth, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A), (B) and (C) to
(x) the acquisition by the Company or any Wholly Owned Subsidiary of Additional
Assets or (y) the prepayment, repayment or purchase of Indebtedness (other than
any Disqualified Stock) of the Company (other than Indebtedness owed to an
Affiliate of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each case
within one year from the later of the receipt of such Net Available Cash and the
date the offer described in clause (b) below is consummated; provided , however,
that in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (C) or (D) above, the Company or such Restricted
Subsidiary shall permanently retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this paragraph, the Company and the Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
with this paragraph except to the extent that the aggregate Net Available Cash
from all Asset Dispositions which are not applied in accordance with this
paragraph exceeds $5.0 million. Pending application of Net Available Cash
pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the assumption of Indebtedness of the Company or any
Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Restricted
Subsidiary from the transferee that are promptly converted by the Company or
such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes pursuant to clause (a)(ii)(C) above, the Company will be required to
purchase Notes tendered pursuant to an offer by the Company for the Notes at a
purchase price of 100% of their principal amount (without premium) plus accrued
but unpaid interest in accordance with the procedures (including prorating in
the event of oversubscription) set forth in the Indenture. If the aggregate
purchase price of Notes tendered pursuant to such offer is less than the Net
Available Cash allotted to the purchase thereof, the Company will be required to
apply the remaining Net Available Cash in accordance with clause (a)(ii)(D)
above. The Company shall not be required to make such an offer to purchase Notes
pursuant to this covenant if the Net Available Cash available therefor is less
than $5.0 million (which lesser amount shall be carried forward for purposes of
determining whether such an offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Company (an
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"Affiliate Transaction") unless the terms thereof (1) are no less favorable to
the Company or such Restricted Subsidiary than those that could be obtained at
the time of such transaction in arm's-length dealings with a Person who is not
such an Affiliate, (2) if such Affiliate Transaction involves an amount in
excess of $500,000, (i) are set forth in writing and (ii) have been approved by
a majority of the members of the Board of Directors having no personal stake in
such Affiliate Transaction and (3) if such Affiliate Transaction involves an
amount in excess of $2.5 million, have been determined by a nationally
recognized investment banking firm to be fair, from a financial standpoint, to
the Company and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "--Limitation on Restricted Payments," (ii) any issuance of securities, or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors, (iii) the grant of stock options or
similar rights to employees and directors of the Company pursuant to plans
approved by the Board of Directors, (iv) the payment of reasonable fees to
directors of the Company and its Restricted Subsidiaries who are not employees
of the Company or its Restricted Subsidiaries, (v) any Affiliate Transaction
between the Company and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries and (vi) the issuance or sale of any Capital Stock (other than
Disqualified Stock) of the Company.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary,
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own any Capital
Stock of such Restricted Subsidiary, (iii) if, immediately after giving effect
to such issuance, sale or other disposition, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect thereto would have been permitted to be made under
the covenant described under "--Limitation on Restricted Payments" if made on
the date of such issuance, sale or other disposition or (iv) to the holders of
the Warrants to the extent required by the terms of the Warrants in effect on
the Issue Date.
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any
Lien of any nature whatsoever on any of its properties (including Capital Stock
of a Restricted Subsidiary), whether owned at the Issue Date or thereafter
acquired, other than Permitted Liens, without effectively providing that the
Notes shall be secured equally and ratably with (or prior to) the obligations so
secured for so long as such obligations are so secured.
Limitation on Sale/Leaseback Transactions. The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless (i) the Company or such
Subsidiary would be entitled to (A) Incur Indebtedness in an amount equal to the
Attributable Debt with respect to such Sale/Leaseback Transaction pursuant to
the covenant described under "--Limitation on Indebtedness" and (B) create a
Lien on such property securing such Attributable Debt without equally and
ratably securing the Notes pursuant to the covenant described under
"--Limitation on Liens," (ii) the net proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair value (as determined by the Board of Directors) of such
property and (iii) the Company applies the proceeds of such transaction in
compliance with the covenant described under "--Limitation on Sale of Assets and
Subsidiary Stock."
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") shall be
a Person organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Company (if not
the Company) shall expressly assume, by an indenture supplemental thereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture;
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(ii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "--Limitation on Indebtedness;" (iv) immediately after giving
effect to such transaction, the Successor Company shall have Consolidated Net
Worth in an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; (v) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture and (vi) the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders
will not recognize income, gain or loss for Federal income tax purposes as a
result of such transaction 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 transaction had not occurred.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
SEC Reports. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC and provide the Trustee and Noteholders with such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, such information, documents and other reports to be so
filed and provided at the times specified for the filing of such information,
documents and reports under such Sections.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--Certain
Covenants-- Merger and Consolidation" above, (iv) the failure by the Company to
comply for 30 days after notice with any of its obligations in the covenants
described above under "Change of Control" (other than a failure to purchase
Notes) or under "--Certain Covenants" under "--Limitation on Indebtedness,"
"--Limitation on Restricted Payments," "--Excess Cash Purchase Offer" (other
than a failure to purchase Notes), "--Limitation on Restrictions on
Distributions from Restricted Subsidiaries," "--Limitation on Sales of Assets
and Subsidiary Stock" (other than a failure to purchase Notes), "--Limitation on
Affiliate Transactions," "--Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries," "--Limitation on Liens," "--Limitation on
Sale/Leaseback Transactions" or "--SEC Reports," (v) the failure by the Company
to comply for 60 days after notice with its other agreements contained in the
Indenture, (vi) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $5.0 million (the "cross acceleration
provision"), (vii) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the "bankruptcy provisions") or (viii)
any judgment or decree for the payment of money in excess of $5 million is
entered against the Company or a Significant Subsidiary, remains outstanding for
a period of 60 days following such judgment and is not discharged, waived or
stayed within 10 days after notice (the "judgment default provision"). However,
a default under clauses (iv), (v) and (viii) will not constitute an Event of
Default until the Trustee or the holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified after receipt of such notice.
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If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder of a Note or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the amount of Notes whose holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the amount payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "--Optional
Redemption" above, (v) make any Note payable in money other than that stated in
the Note, (vi) impair the right of any holder of the Notes to receive payment of
principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's
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Notes or (vii) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
Without the consent of any holder of the Notes, the Company and Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of the obligations of the
Company under the Indenture, to provide for uncertificated Notes in addition to
or in place of certificated Notes (provided that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in Section 163(f)(2)(B)
of the Code), to add guarantees with respect to the Notes, to secure the Notes,
to add to the covenants of the Company for the benefit of the holders of the
Notes or to surrender any right or power conferred upon the Company, to make any
change that does not adversely affect the rights of any holder of the Notes or
to comply with any requirement of the SEC in connection with the qualification
of the Indenture under the Trust Indenture Act.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes are issued in registered form and are transferable only upon the
surrender of the Notes being transferred for registration of transfer. The
Company may require payment of a sum sufficient to cover any tax, assessment or
other governmental charge payable in connection with certain transfers and
exchanges.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "Change of
Control" and under the covenants described under "--Certain Covenants" (other
than the covenant described under "--Merger and Consolidation"), the operation
of the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"--Defaults" above and the limitations contained in clauses (iii) and (iv) under
"--Certain Covenants--Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "--Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) under "--Certain
Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal
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income tax on the same amounts and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not occurred (and,
in the case of legal defeasance only, such Opinion of Counsel must be based on a
ruling of the Internal Revenue Service or other change in applicable Federal
income tax law).
CONCERNING THE TRUSTEE
United States Trust Company of New York is the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest, it
must eliminate such conflict within 90 days and apply to the SEC for permission
to continue or resign.
The Holders of a majority in principal amount of the outstanding Notes have
the right to direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee, subject to certain exceptions.
The Indenture provides that if an Event of Default occurs (and is not cured),
the Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes are governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants--Limitation on
Restricted Payments," "--Certain Covenants--Limitation on Affiliate
Transactions" and "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 5% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
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"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Company or any Restricted Subsidiary or (iii) any
other assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (w) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (x) for purposes of the covenant described under
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only,
a disposition that constitutes a Restricted Payment permitted by the covenant
described under "--Certain Covenants--Limitation on Restricted Payments," (y)
disposition of assets with a fair market value of less than $250,000 and (z) a
disposition of real estate in the Gibson Business Park near Las Vegas, Nevada).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Azide Notes" means the Company's 11% subordinated secured notes originally
issued on February 21, 1992, in an original principal amount of $40.0 million.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means at any time an amount equal to the sum of (i) 50% of
the book value of the inventory of the Company and its Restricted Subsidiaries
and (ii) 80% of the book value of the accounts receivable of the Company and its
Restricted Subsidiaries.
"Business Day" means each day that is not a Legal Holiday.
"Capital Expenditures" means, for any period, (a) the additions to
property, plant and equipment and other capital expenditures of the Company and
its consolidated Subsidiaries that are (or would be) set forth in a consolidated
statement of cash flows of the Company for such period prepared in accordance
with GAAP and (b) Capital Lease Obligations incurred by the Company and its
consolidated Subsidiaries during such period.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the discharge
of any other Indebtedness repaid, repurchased, defeased or otherwise discharged
with the proceeds of such new Indebtedness as if such discharge had occurred on
the first day of such period, (2) if the Company or any Restricted Subsidiary
has repaid, repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Company or such Restricted Subsidiary has
not earned the interest income actually earned during such period in respect of
cash or Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness, (3) if since the beginning of such period
the Company or any Restricted Subsidiary shall have made any Asset Disposition,
the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (4) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such period and (5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined 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 of
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication, (i)
interest expense attributable to capital leases and the interest expense
attributable to leases constituting part of a Sale/Leaseback Transaction, (ii)
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amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock held by Persons other than the Company or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
to the exclusion contained in clause (iv) below, the Company's equity in
the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such period to
the Company or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid
to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company, its consolidated Subsidiaries or
any other Person (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of
business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants--Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most
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recent fiscal quarter of the Company ending at least 45 days prior to the taking
of any action for the purpose of which the determination is being made, as (i)
the par or stated value of all outstanding Capital Stock of the Company plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable or must be purchased, upon the occurrence of certain events
or otherwise, by such Person at the option of the holder thereof, in whole or in
part, in each case on or prior to the first anniversary of the Stated Maturity
of the Notes; provided, however, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to purchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if (x) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Notes and described under
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" and
"--Certain Covenants--Change of Control" and (y) any such requirement only
becomes operative after compliance with such terms applicable to the Notes,
including the purchase of any Notes tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its consolidated Restricted Subsidiaries, (b) depreciation expense
of the Company and its consolidated Restricted Subsidiaries, (c) amortization
expense of the Company and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period) and (d) all other non-cash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash expenditures in any
future period), in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and non-cash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Excess Cash Flow" means, for any period, the sum (without duplication) of
the following with respect to the Company and its consolidated Subsidiaries:
(a) the Consolidated Net Income for such period; plus
(b) the depreciation, amortization and other non-cash charges or
losses deducted in determining the Consolidated Net Income for such period;
plus
(c) the amount, if any, by which Net Working Capital decreased during
such period; plus
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(d) Net Available Cash from Asset Dispositions received in such period
to the extent not included in Consolidated Net Income in such period; plus
(e) the aggregate principal amount of Capital Lease Obligations and
other Indebtedness Incurred during such period to finance Capital
Expenditures, to the extent that mandatory principal payments in respect of
such Indebtedness would not be excluded from clause (i) below when made;
minus
(f) any non-cash gains included in determining Consolidated Net Income
for such period; minus
(g) the amount, if any, by which Net Working Capital increased during
such period; minus
(h) Capital Expenditures for such period; minus
(i) the aggregate principal amount of Indebtedness repaid or prepaid
by the Company and its consolidated Subsidiaries during such period,
excluding (i) Indebtedness in respect of any Revolving Credit Facility,
(ii) Notes prepaid pursuant to the covenant described under "Certain
Covenants--Excess Cash Purchase Offer," (iii) Indebtedness Refinanced with
Refinancing Indebtedness and (iv) Indebtedness referred to in clauses (7)
and (8) of paragraph (b) of the covenant described under "Certain
Covenants--Limitation on Indebtedness;" minus
(j) the aggregate cash used by the Company and its Restricted
Subsidiaries to acquire Additional Assets and not otherwise included in
clause (h) above.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
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consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a non
interest-bearing or other discount security shall not be deemed the Incurrence
of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
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others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form), in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Restricted Subsidiaries as a result of such Asset Disposition and
(iv) the deduction of appropriate amounts provided by the seller as a reserve,
in accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Disposition and retained by the Company or
any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds" means with respect to any issuance or sale of Capital
Stock, the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Net Working Capital" means, at any date, (a) the consolidated current
assets of the Company and its consolidated Subsidiaries as of such date
(excluding cash and Permitted Investments) minus (b) the consolidated current
liabilities of the Company and its consolidated Subsidiaries as of such date
(excluding current liabilities in respect of Indebtedness). Net Working Capital
at any date may be a positive or negative number. Net Working Capital increases
when it becomes more positive or less negative and decreases when it becomes
less positive or more negative.
"Permitted Asset Disposition" means any Asset Disposition of all or any
part of the Company's Halotron business or environmental protection equipment
business.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, a Restricted Subsidiary or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary;
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provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) any Person to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition as permitted pursuant to the covenant described under
"--Certain Covenants-- Limitation on Sales of Assets and Subsidiary Stock;" (ix)
Investments existing on the Issue Date; (x) a joint venture of which the Company
or any Wholly Owned Subsidiary owns at least 50% of the economic and voting
interest; provided, however, that (A) such Investment consists solely of a
capital contribution of real property at the Gibson Business Park near Las
Vegas, Nevada, (B) the constitutive documents of such joint venture prohibit it
from having outstanding at any time Indebtedness in excess of $5.0 million and
(C) at the time of the Investment, the Consolidated Coverage Ratio exceeds 2.0
to 1; and (xi) Investments in the Real Estate Joint Venture other than capital
contributions of real property made prior to the Issue Date; provided, however,
that the aggregate amount of all such Investments pursuant to this clause (xi)
shall not exceed $4.1 million (including any such Investments existing on the
Issue Date).
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case Incurred in the ordinary course of business; (b) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due or being contested in good faith by appropriate proceedings or other
Liens arising out of judgments or awards against such Person with respect to
which such Person shall then be proceeding with an appeal or other proceedings
for review; (c) Liens for taxes, assessments, government charges and claims, in
each case not yet subject to penalties for non-payment or which are being
contested in good faith and by appropriate proceedings; (d) Liens in favor of
issuers of surety bonds or letters of credit issued pursuant to the request of
and for the account of such Person in the ordinary course of its business;
provided, however, that such letters of credit do not constitute Indebtedness;
(e) minor survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for, licenses, rights-of-way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real property or Liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (f) Liens securing
Indebtedness Incurred to finance the construction, purchase or lease of, or
repairs, improvements or additions to, property of such Person; provided,
however, that the Lien may not extend to any other property owned by such Person
or any of its Subsidiaries at the time the Lien is Incurred, and the
Indebtedness (other than any interest thereon) secured by the Lien may not be
Incurred more than 180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation of
the property subject to the Lien; (g) Liens on inventory, receivables and
proceeds thereof to secure Indebtedness permitted under the provisions described
in clause (b)(1) under "--Certain Covenants--Limitation on Indebtedness;" (h)
Liens existing on the Issue Date; (i) Liens on property or shares of Capital
Stock of another Person at the time such other Person becomes a Subsidiary of
such Person; provided, however, that such Liens are not created, incurred or
assumed in connection with, or in contemplation of, such other Person becoming
such a Subsidiary; provided further, however,
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that such Lien may not extend to any other property owned by such Person or any
of its Subsidiaries; (j) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such Person;
provided, however, that such Liens are not created, incurred or assumed in
connection with, or in contemplation of, such acquisition; provided further,
however, that the Liens may not extend to any other property owned by such
Person or any of its Subsidiaries; (k) Liens securing Indebtedness or other
obligations of a Subsidiary of such Person owing to such Person or a wholly
owned Subsidiary of such Person; (l) Liens securing Hedging Obligations so long
as such Hedging Obligations relate to Indebtedness that is, and is permitted to
be under the Indenture, secured by a Lien on the same property securing such
Hedging Obligations; and (m) Liens to secure any Refinancing (or successive
Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clauses (f), (h), (i) and (j); provided, however,
that (x) such new Lien shall be limited to all or part of the same property that
secured the original Lien (plus improvements to or on such property) and (y) the
Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount or, if greater,
committed amount of the Indebtedness described under clauses (f), (h), (i) or
(j) at the time the original Lien became a Permitted Lien and (B) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement. Notwithstanding the
foregoing, "Permitted Liens" will not include any Lien described in clauses (f),
(i) or (j) above to the extent such Lien applies to any Additional Assets
acquired directly or indirectly from Net Available Cash pursuant to the covenant
described under "--Certain Covenants--Limitation on Sale of Assets and
Subsidiary Stock." For purposes of this definition, the term "Indebtedness"
shall be deemed to include interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Real Estate Joint Venture" means the Company's joint venture existing on
the Issue Date in connection with the Ventana Canyon residential project.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
-48-
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
to the businesses (not including the real estate business) of the Company and
the Restricted Subsidiaries on the Issue Date.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Revolving Credit Facility" means any revolving credit facility available
to the Company from time to time.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means (i) Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter Incurred, and (ii) accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
the Company is responsible or liable unless, in the case of (i) and (ii), in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinate in right of
payment to the Notes; provided, however, that Senior Indebtedness shall not
include (1) any obligation of the Company to any Subsidiary, (2) any liability
for Federal, state, local or other taxes owed or owing by the Company, (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of the Company (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect to
any other Indebtedness or other obligation of the Company or (5) that portion of
any Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
-49-
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and
(v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, 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 either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under
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"--Certain Covenants--Limitation on Restricted Payments." The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that immediately after giving effect to such designation (x)
the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of
the covenant described under "--Certain Covenants-- Limitation on Indebtedness"
and (y) no Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the resolution of the Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Warrants" means the Company's warrants outstanding on the Issue Date
originally issued to purchasers of the Azide Notes.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Olshan Grundman Frome & Rosenzweig LLP, tax counsel to
the Company, subject to the limitations set forth herein, the following is an
accurate summary of the material U.S. Federal income tax consequences of the
exchange of Old Notes for New Notes pursuant to the Exchange Offer. This
discussion assumes that a holder of Notes will hold such Notes as capital assets
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). This discussion does not deal with all U.S. Federal income
tax consequences that may be relevant to particular investors in light of their
personal investment circumstances, including persons holding Notes as part of a
conversion or constructive sale transaction or as part of a hedge or hedging
transaction, or as a position in a straddle for tax purposes, nor does it
discuss U.S. Federal income tax consequences applicable to certain types of
investors subject to special treatment under U.S. Federal income tax laws,
including insurance companies, tax-exempt organizations, financial institutions
or broker-dealers, persons that have a functional currency other than the U.S.
dollar, investors in pass-through entities and foreign persons, including
foreign corporations, partnerships and individuals. In addition, this discussion
does not consider the effect of any foreign, state, local, gift, estate or other
tax laws that may be applicable to a particular investor.
This discussion is based upon current provisions of the Code, Treasury
regulations promulgated thereunder, administrative rulings and pronouncements of
the Internal Revenue Service ("IRS") and judicial decisions currently in effect,
all of which are subject to change, possibly with retroactive effect. The
Company has not and will not seek any rulings or opinions from the IRS with
respect to the matters discussed herein, and as a result, there can be no
assurance that the IRS will not disagree with or challenge any of the
conclusions set forth in this discussion.
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a taxable event for U.S. Federal income tax purposes. As a
result, (i) a holder of Old Notes should not recognize taxable gain or loss as a
result of the exchange of Old Notes for New Notes pursuant to the Exchange
Offer, (ii) the holding period of the New Notes should include the holding
period of the Old Notes surrendered in exchange therefor and (iii) a holder's
adjusted tax basis in the New Notes should be the same as such holder's adjusted
tax basis in the Old Notes immediately prior to the surrender of such Old Notes
pursuant to the Exchange Offer.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF
THE NOTES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX LAWS.
-52-
PLAN OF DISTRIBUTION
Except as described below, (i) a broker-dealer may not participate in the
Exchange Offer in connection with a distribution of the New Notes, (ii) such
broker-dealer would be deemed an underwriter in connection with such
distribution and (iii) such broker-dealer would be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transactions. A broker-dealer may, however,
receive New Notes for its own account pursuant to the Exchange Offer in exchange
for Old Notes when such Old Notes were acquired as a result of market-making
activities or other trading activities. Each such broker-dealer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer (other than an "affiliate" of the Company) in
connection with resales of such New Notes. The Company has agreed that for a
period of 180 days after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any such broker-dealer for use in
connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in a Letter of Transmittal. The Company has agreed to pay all expenses incident
to the Exchange Offer other than commissions or concessions of any brokers or
dealers and transfer taxes and will indemnify the Holders of the Old Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The Initial Purchaser has indicated to the Company that it intends to
effect offers and sales of the New Notes in market-making transactions at
negotiated prices related to prevailing market prices at the time of sale, but
is not obligated to do so and such market-making activities may be discontinued
at any time. The Initial Purchaser may act as principal or agent in such
transactions. There can be no assurance that an active market for the New Notes
will develop.
LEGAL MATTERS
Certain legal matters with respect to the issuance and sale of the Notes
offered hereby will be passed upon for the Company by Olshan Grundman Frome &
Rosenzweig LLP, New York, New York. Victor M. Rosenzweig, a member of Olshan
Grundman Frome & Rosenzweig LLP, is a Director of the Company and holds 1,400
shares and options to purchase an additional 15,000 shares of the Company's
Common Stock.
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EXPERTS
The consolidated financial statements of American Pacific Corporation and
Subsidiaries incorporated in this Prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended September 30, 1997 and financial
statements of Gibson Ranch Limited Liability Company incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K as amended
by Form 10-K/A for the year ended September 30, 1997 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
-54-
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware (the "DGCL")
permits indemnification of directors, employees and agents of corporations under
certain conditions and subject to certain limitations. Pursuant to the DGCL, the
Company has included provisions in its Restated Certificate of Incorporation, as
amended, (A) to provide that the Company shall indemnify its directors and
officers to the full extent permitted by the DGCL and any other laws of Delaware
as from time to time in effect and (B) to limit the personal liability of a
director to the Company for monetary damages for breach of fiduciary duty as a
director; except that liability is not eliminated for (i) any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) unlawful payment of dividends or stock purchases or
redemptions pursuant to Section 174 of the DGCL, or (iv) any transaction from
which the director derived an improper personal benefit.
The Company's by-laws provide that the Company shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he is or was a director, officer, employee or an agent of the Company
or is or was serving at the request of the Company as a director, officer,
employee or agent of (or in any other capacity) another corporation,
partnership, joint venture, trust or other enterprise, against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the defense or
settlement of such action, suit or proceeding, to the extent and in the manner
substantially the same as set forth in and permitted by the DGCL. Such right of
indemnification is not to be deemed exclusive of any other rights to which such
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of each such person.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a complete list of Exhibits filed as a part of this
Registration Statement:
1 Purchase Agreement dated March 6, 1998, by and between the
Company and the Initial Purchaser.
4.1 Indenture dated as of March 1, 1998, by and between the Company
and United States Trust Company of New York.
5 Opinion of Olshan Grundman Frome & Rosenzweig LLP.
8 Opinion of Olshan Grundman Frome & Rosenzweig LLP (included in
Exhibit 5 to this Registration Statement).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Olshan Grundman Frome & Rosenzweig LLP (included in
Exhibit 5 to this Registration Statement).
25 Statement of eligibility of trustee.
99.1 Registration Rights Agreement dated March 12, 1998, by and
between the Company and the Initial Purchaser.
99.2 Form of Letter of Transmittal for Tender of outstanding 9 1/4%
Senior Notes Due 2005 in exchange for 9 1/4% Senior Notes Due
2005 of the Company.
II-1
99.3 Form of Tender for outstanding 9 1/4% Senior Notes Due 2005 in
exchange for 9 1/4% Senior Notes Due 2005 of the Company.
99.4 Form of Instruction to Registered Holder from Beneficial Owner of
9 1/4% Senior Unsecured Notes due 2005 of the Company.
99.5 Form of Notice of Guaranteed Delivery for outstanding 9 1/4%
Senior Notes Due 2005 in exchange for 9 1/4% Senior Notes Due
2005 of the Company.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415 under the Securities Act, will be filed as a part
of an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) 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 Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceedings) 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 indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
(e) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
American Pacific Corporation has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Las Vegas, State of Nevada, on April 9, 1998.
AMERICAN PACIFIC CORPORATION
By: /S/ JOHN R. GIBSON
-----------------------------------------
John R. Gibson
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints John
R. Gibson and David N. Keys, and each of them singly, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him, and his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) and supplements to this
Registration Statement, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as full to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on April 9, 1998.
SIGNATURE TITLE
--------- -----
/s/ JOHN R. GIBSON President, Chief Executive Officer (Principal
------------------------- Executive Officer) and Director
(John R. Gibson)
/s/ DAVID N. KEYS Executive Vice President, Chief Financial
------------------------- Officer (Principal Financial and Principal
(David N. Keys) Accounting Officer), Treasurer, Secretary and
Director
/s/ FRED D. GIBSON
------------------------
(Fred D. Gibson, Jr.) Director
/s/ EUGENE A. CAFIERO
------------------------
(Eugene A. Cafiero) Director
/s/ THOMAS A. TURNER
------------------------
(Thomas A. Turner) Director
/s/ JAN H. LOEB
------------------------
(Jan H. Loeb) Director
/s/ NORVAL F. POHL
------------------------
(Norval F. Pohl) Director
/s/ C. KEITH ROOKER
------------------------
(C. Keith Rooker) Director
/s/ JANE L. WILLIAMS
------------------------
(Jane L. Williams) Director
/s/ BERLYN D. MILLER
------------------------
(Berlyn D. Miller) Director
/s/ VICTOR M. ROSENZWEIG
------------------------
(Victor M. Rosenzweig) Director
/s/ DEAN M. WILLARD
------------------------
(Dean M. Willard) Director
II-4
EXHIBIT INDEX
1 Purchase Agreement dated March 6, 1998, by and between the
Company and the Initial Purchaser.
4.1 Indenture dated as of March 1, 1998, by and between the Company
and United States Trust Company of New York.
5 Opinion of Olshan Grundman Frome & Rosenzweig LLP.
8 Opinion of Olshan Grundman Frome & Rosenzweig LLP (included in
Exhibit 5 to this Registration Statement).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Olshan Grundman Frome & Rosenzweig LLP (included in
Exhibit 5 to this Registration Statement).
25 Statement of eligibility of trustee.
99.1 Registration Rights Agreement dated March 12, 1998, by and
between the Company and the Initial Purchaser.
99.2 Form of Letter of Transmittal for Tender of outstanding 9 1/4%
Senior Notes Due 2005 in exchange for 9 1/4% Senior Notes Due
2005 of the Company.
99.3 Form of Tender for outstanding 9 1/4% Senior Notes Due 2005 in
exchange for 9 1/4% Senior Notes Due 2005 of the Company.
99.4 Form of Instruction to Registered Holder from Beneficial Owner of
9 1/4% Senior Unsecured Notes due 2005 of the Company.
99.5 Form of Notice of Guaranteed Delivery for outstanding 9 1/4%
Senior Notes Due 2005 in exchange for 9 1/4% Senior Notes Due
2005 of the Company.
Dates Referenced Herein and Documents Incorporated by Reference
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