-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jpfc87bTJNiEPgNkEmL0h1dX4cWhFLMo8CdgcRIOlgoOI7x/sQpqzYyhAHO5AIr7 Bwu8yWDAUcyf/Ac5d5eIFg== 0000230602-94-000004.txt : 19940404 0000230602-94-000004.hdr.sgml : 19940404 ACCESSION NUMBER: 0000230602-94-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIANGLE PACIFIC CORP CENTRAL INDEX KEY: 0000230602 STANDARD INDUSTRIAL CLASSIFICATION: 2400 IRS NUMBER: 942998971 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-22138 FILM NUMBER: 94519866 BUSINESS ADDRESS: STREET 1: 16803 DALLAS PKWY CITY: DALLAS STATE: TX ZIP: 75266-0100 BUSINESS PHONE: 2149313000 MAIL ADDRESS: STREET 1: P.O. BOX 660100 CITY: DALLAS STATE: TX ZIP: 75266-0100 10-K 1 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission File Number: 0-22138 Triangle Pacific Corp. (Exact name of registrant as specified in its charter) Delaware 94- 2998971 State or other jurisdiction or (I.R.S. Employer incorporation or organization Identification No.) 16803 Dallas Parkway, Dallas, Texas 75248 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 931-3000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Common Stock, par value $.01 per share (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At February 15, 1994, the aggregate market value of the registrant's common stock held by non-affiliates was $213,512,835. The number of shares outstanding of the registrant's Common Stock, par value $.01 per share, as of March 18, 1994: Common Stock - 14,661,329 shares. DOCUMENTS INCORPORATED BY REFERENCE Part III of this Form 10-K incorporates certain information by reference from the registrant's Proxy Statement to be issued in connection with its Annual Meeting of Shareholders to be held May 4, 1994. PART I Item 1. Business The Company is a Delaware corporation organized in February 1986 for the purpose of acquiring Triangle Pacific Corp., a New York corporation ("Old Triangle"), in a leveraged buyout transaction completed in May 1986. In September 1988, TPC Holding Corp. ("Holding") acquired the Company in a second leveraged buyout transaction pursuant to which the Company became a wholly-owned subsidiary of Holding. On June 8, 1992, the Company successfully completed a capital restructuring (the "1992 Restructuring") pursuant to which substantially all of the Company's outstanding long-term indebtedness, redeemable preferred stock and common stock were exchanged for new debt with lower interest rates and new common stock, and Holding was merged into the Company. The Company filed two registration statements with the Securities and Exchange Commission in 1993 and sold to the public 7,939,750 shares of the Company's Common Stock and $160 million aggregate principal amount of 10 1/2% Senior Notes due 2003 (collectively, "the Offerings"). The net proceeds of the Offerings together with borrowings under a new $90 million credit facility were used (i) to repay the entire unpaid balance under the Company's previously-existing senior debt financing agreements, redeem certain previously outstanding debentures and pay related accrued interest, for a total of approximately $227 million, and (ii) for working capital and general corporate purposes. The Company's operations are conducted through a single business segment which consists of the manufacture and distribution of building products. The Company through its Bruce Hardwood Floors Division produces hardwood flooring and through its Cabinet Division manufactures and distributes kitchen and bathroom cabinets. The Company's products are used primarily in the residential new construction and remodeling. The Company through its Beltsville Division also operates a general building materials distribution center located in Beltsville, Maryland. The Company's business is seasonal, with demand for its products generally highest between April and November. Presented below is a summary of sales results for each of the fiscal years 1989 through 1993.
1993 1992 1991 1990 1989 Net Sales: (in millions) Bruce Hardwood Floors Division $ 200.0 $ 151.3 $ 116.3 $ 129.9 $ 130.4 Cabinet Division 125.6 123.2 125.1 165.3 185.6 Beltsville Division 20.7 19.2 16.2 29.2 40.9 Intracompany sales* - (.9) (1.5) (3.3) (4.3) Total Net Sales $ 346.3 $ 292.8 $ 256.1 $ 321.1 $ 352.6 *Represents intracompany sales from the Cabinet Division to the Beltsville Division which are eliminated in consolidation.
Bruce Hardwood Floors Division The Company's Bruce Hardwood Floors Division is the largest and best known manufacturer of hardwood flooring in the United States. The Company produces a complete line of hardwood flooring products and believes that it is generally recognized for its superior quality and service. The Company believes the Bruce name is the most recognized brand name in hardwood flooring. Industry Overview Sales of hardwood flooring have grown from 2.9% of total United States floorcovering sales in 1982 to an estimated 5.5% of estimated total United States floorcovering sales in 1993. The Company believes that the growth of hardwood flooring sales is due to increased consumer preference for the aesthetic appeal of hardwood flooring and technological advances in the production, installation and maintenance of hardwood flooring. Hardwood flooring competes primarily with carpet, vinyl and ceramic tile in the floorcovering market. The increased sales of hardwood flooring during the last decade have been achieved at the expense of carpet and vinyl floorcovering. The Company believes that the principal competitive factors in the floorcovering market are aesthetic appeal, price, durability and ease of installation and maintenance. Products and Product Development The Company offers approximately 100 varieties of hardwood flooring products in three basic categories - 3/4" solid strip and plank, 3/8" laminated strip, plank and parquet and 5/16" solid parquet - in unfinished and a variety of pre-finished styles and colors. The Company's hardwood flooring products are generally available in various widths and lengths and are differentiated in terms of quality and price based primarily on whether the product is finished or unfinished and on the grade of the raw materials used to produce the product. The Company has been a leader in developing a wide variety of new hardwood flooring products, including (i) 5/16" solid parquet flooring, (ii) 3/8" laminated flooring, (iii) 3/8" laminated, square-edge, pre- finished flooring, (iv) 3/8" acrylic-impregnated flooring for commercial applications (all of the above for glue-down installation) and (v) 3/4" square-edge, pre-finished flooring. The Company believes that new product development has enabled it to increase its sales and has contributed to the overall growth of hardwood flooring sales since the mid- 1970s. The Company's product innovations have improved the attractiveness of hardwood flooring for a variety of floorcovering applications. The Company has been instrumental in the development of thinner hardwood flooring products which can be glued to the concrete slab foundations increasingly used in new home construction. Installation of 3/4" hardwood flooring over concrete slabs requires the construction of a false floor above the slab to which the hardwood flooring can be nailed, thereby increasing installation time and expense. The Company has developed 5/16" flooring products, which can be glued to wood or concrete slab foundations, eliminating the need for a false floor. The development of 3/8" laminated flooring (consisting of multiple layers of oak veneer, glued and pressed together), which can be glued to a wood or concrete sub-floor, further expanded the uses for hardwood flooring. The dimensional stability of laminated flooring permits its installation in kitchens and basements where the presence of moisture had previously rendered hardwood flooring impractical. More recently, the Company has pioneered the development of new products with improved durability and ease of maintenance to meet the higher standards demanded by the commercial floorcovering users. The Company's new patent-pending Wear Master line of acrylic - impregnated laminated flooring, offering the only lifetime wear surface available in hardwood floor covering today, was introduced in 1993. These products make Bruce hardwood flooring a much more viable alternative for commercial applications such as office buildings, hotels, restaurants and retail establishments. Manufacturing The Company manufactures its 3/4" solid oak hardwood flooring products at its plants in Nashville, and Jackson, Tennessee; Beverly, West Virginia, and West Plains, Missouri. These plants have the capacity to produce a total of 1.55 million square feet of 3/4" flooring per week. The Company manufactures its 3/8" laminated hardwood flooring products at its plants in Center, Texas and Port Gibson, Mississippi. The Center plant has a capacity of 500,000 square feet of 3/8" flooring per week and produces sufficient 1/8" oak veneer to supply approximately one-half of its veneer requirements. The Port Gibson, Mississippi plant has a capacity of 200,000 square feet of 3/8" flooring per week and also supplies most of the remainder of the Center plant's veneer requirements for the production of 3/8" laminated products. The Company manufactures its 5/16" solid parquet products at its plant in Jackson, Tennessee, which has the capacity to produce 400,000 square feet of 5/16" flooring per week in addition to its production of 3/4" product. To alleviate capacity limitations, the Company is currently in the process of further expanding the plants in Beverly, West Virginia and Port Gibson, Mississippi. The West Virginia project will enable that plant to increase its capacity to produce 3/4" product from 540,000 square feet per week to 690,000 square feet per week. The Port Gibson project will expand that plant's capacity to produce 3/8" laminated flooring from 200,000 square feet per week to 350,000 square feet per week, while maintaining the Port Gibson plant's ability to supply veneer to the Center plant. These capacity expansions, which are expected to be completed by mid-1994, will increase total hardwood flooring capacity from 2.65 million to 2.95 million square feet per week. The Beverly, West Virginia facility is operated by the Company under an 18-year lease with the West Virginia Economic Development Corporation expiring 2007 (subject to extension until 2017 at the option of the Company). In connection with the Beverly, West Virginia plant expansion, the Company made capital expenditures of $7.5 million for the purchase of equipment in the name of the West Virginia Economic Development Corporation. Pursuant to the operating lease, the West Virginia Economic Development Corporation reimbursed the Company for $5.5 million of the cost of such equipment. The following table sets forth certain information concerning the manufacturing facilities operated by the Bruce Hardwood Floors Division. Owned/ Capacity (1) Location Leased Product (Sq.Ft./Week)
Nashville, TN Owned 3/4" strip and plank; 450,000 pre-finished, unfinished West Plains, MO Owned 3/4" strip; pre-finished, 360,000 unfinished Beverly, WV Leased 3/4" strip; pre-finished, 540,000 unfinished Jackson, TN (2) Owned 5/16" solid parquet; 400,000 pre-finished, unfinished 3/4" strip; unfinished 200,000 Center, TX (3) Owned 3/8" laminated strip, plank 500,000 and parquet; pre-finished, unfinished Port Gibson, MS (3) Owned 3/8" laminated strip, plank 200,000 and parquet; pre-finished, unfinished __________ Total Capacity 2,650,000 ______________________ (1) Production capacity based on multiple shift operations. (2) The Jackson plant also manufactures dimension parts used by the Cabinet Division in cabinet production. See "- Cabinet Division - Manufacturing" below. (3) The Center and Port Gibson plants also produce 1/8" veneer, which is used in the manufacture of 3/8" laminated products at these plants.
In 1994, the Company plans to construct a new 3/4" solid product plant, which will add approximately 360,000 square feet of capacity per week. The new facility is currently in the design stage and the Company is in the process of selecting a site for the new plant. Construction is expected to commence in the second quarter of 1994 and will take approximately nine to twelve months to complete. Raw materials for the hardwood flooring products produced at the Nashville, Jackson, Beverly and West Plains plants consist primarily of rough cut oak lumber. Each plant obtains lumber from local independent sawmill operators, purchasing entire truckloads of ungraded, mixed specie lumber. The Company maintains an inventory of purchased lumber which is sufficient for approximately three to four months of operations. The quality and efficiency of lumber purchasing and grading operations are important determinants of manufacturing yields and productivity. Purchased lumber is stacked for drying in the open air for 90 to 120 days, and then placed in dry kilns for approximately five to seven days to reduce moisture content. Where necessary, the Company operates pre-drying kilns, which shorten the required open-air drying time. The Company's drying processes are another important determinant of satisfactory product yields. Following drying, the flooring-grade lumber is cut into various sizes of strip, plank and parquet flooring. The products are then sanded and, in most cases, bevelled. A majority of the Company's products are pre-finished with a urethane or combination stain and wax finish. Pre-finished products are more durable and do not require a time-consuming sanding and finishing process at the installation site. Recently, the Company began treating a portion of its 3/8" laminated product with an acrylic impregnating process to produce its new Wear Master line of commercial flooring. Raw materials for the laminated hardwood flooring products manufactured at the Company's plants in Center, Texas and Port Gibson, Mississippi consist of oak logs which are purchased primarily from independent loggers located within about 100 miles of the respective plants. Purchased logs are stored in soaking ponds until needed, and then debarked, soaked in hot water or steamed, cut into five-foot lengths, loaded into a lathe, and peeled to produce sheets of thin oak veneer. Layers of veneer are then pressed into plywood which is cut into strip, plank and parquet hardwood flooring and pre-finished. The Company employs advanced veneer manufacturing processes which substantially increase material yields, thereby reducing costs. The total conversion time for laminated products, from log to finished product, is approximately one week. Sales The Bruce Hardwood Floors Division sells its products to over 100 independent wholesale floorcovering distributors located throughout the United States and eight other countries. Most distributors handle a diverse line of floorcovering products in addition to hardwood flooring. The Company's distributors sell their products to retail floorcovering dealers, installation contractors, builders, remodelers and retail home center stores. The Company believes that new home construction and remodeling account for approximately 40% and 60%, respectively, of its hardwood flooring sales. The Bruce trademark is a valuable asset because of its significant brand name recognition. Based on independent surveys, the Company believes that Bruce has the highest consumer brand name recognition of any hardwood flooring product. Sales and marketing efforts for Bruce hardwood floors are designed to further solidify its well-recognized position among resellers of hardwood flooring and to heighten Bruce's brand name recognition among end users. The Company advertises its Bruce hardwood flooring products in national and regional publications, including House Beautiful, Better Homes and Gardens, Sunset, Southern Living and others. The Company has developed Bruce product displays, more than 50,000, of which have been placed in floorcovering dealer showrooms. These product displays are available in a variety of sizes designed to accommodate the varying floor spaces available in dealer showrooms. The Company has also developed marketing programs specifically tailored to retail home center stores and commercial users and has developed displays to demonstrate the ease of do-it-yourself installation of hardwood floors. The do-it-yourself installation displays have been placed in approximately 4,000 retail locations. More than half of these displays have been placed in the past two years. Management believes that both the product displays and the do-it-yourself installation displays are important sales promotion devices. The Company operates a training facility at its Nashville plant to give its floorcovering distributors, dealers and contractors training in the sale, installation and maintenance of hardwood floors. The Company believes it is the only hardwood flooring manufacturer to offer installation training services to its distributors and their customers. Providing this training, results in better educated resellers and installers, which the Company believes should enhance their ability to sell more Bruce products and improve consumer satisfaction with the installed products. The Bruce Hardwood Floors Division currently employs 44 salespersons who are assigned geographical sales territories. In addition to making direct sales to independent distributors, the sales force assists distributors in broadening their market penetration by making joint sales calls on dealers, conducting installation training for distributors and their customers, and advising on the use of advertising and special product promotions. Salespersons earn bonuses, in addition to their salaries, based on volume and sales mix. Competition The Bruce Hardwood Floors Division is currently the largest manufacturer of hardwood flooring in the United States. The floorcovering industry, which includes carpeting, sheet vinyl, vinyl tile, hardwood flooring and ceramic tile, is highly competitive. The principal competitive factors in floorcovering are aesthetic appeal, price, durability and ease of installation and maintenance. Hardwood flooring is generally more durable than other floorcoverings. Thus, although the average initial selling price of hardwood flooring is higher than that of the initial selling price of some other floorcoverings, the Company believes that the overall cost is competitive after taking into account average product life, maintenance expenses and removal and replacement costs. The Company believes it competes favorably based on the high quality of the Company's products and the additional product support services offered by the Company and on the Company's network of independent distributors, its production of a complete line of hardwood flooring products, its innovative product development and manufacturing technology, and its well-known Bruce trademark. Cabinet Division The Company estimates that new construction accounts for approximately one-third of the total cabinet industry sales with remodeling generating the remaining two-thirds. Residential new construction activity is more cyclical than remodeling activity, which has historically been relatively stable. Cabinet manufacturing is a highly fragmented industry with competitors of widely varying production capacities, distribution capabilities and financial resources. In recent years, contraction in the industry has resulted in smaller competitors leaving the market and more aggressive cost controls and marketing programs being implemented by the remaining participants. The Kitchen Cabinet Manufacturing Association estimates that there are 8,000 manufacturers of kitchen and bathroom cabinets competing for approximately 50% of the total cabinet market. The balance of the market is supplied by trim carpenters and job-site cabinet makers. The market is dependent on new home construction and remodeling activity. The entire cabinet manufacturing industry is characterized by substantial excess capacity. In the late 1970's, new construction expanded to meet the demands of more than two million housing starts annually plus remodeling. Price competition is severe, due principally to the excess industry capacity. Products The Company manufactures kitchen and bathroom cabinets in approximately 100 different styles and colors. Cabinets are marketed under the brand names "TriPac", "IXL" and "Classic Bath Products." In addition, the Company recently began marketing cabinets under the well known Bruce name. The Company continues to develop new product styles. While the styles of the Company's cabinets vary from other manufacturers' brands, kitchen and bathroom cabinet construction is fundamentally the same throughout the industry. Differences in the price and quality of the Company's cabinets result from variations in basic materials (e.g., solid oak, plywood, particleboard or fiberboard doors), the type and quality of exterior and interior finish, the quality of the hardware and other features such as adjustable shelves and interior storage aids. Manufacturing The Company operates seven cabinet manufacturing plants, generally located within 500 miles of most major population centers in the United States. These regional plants enable the Company to compete with local and regional manufacturers on the basis of the cost of freight, speed of delivery and service to customers. The Company also operates a manufacturing facility at Jefferson City, Tennessee which supplies cultured marble vanity tops, primarily to the Cabinet Division, and to retail home center stores, and a dimension parts manufacturing facility at Nappanee, Indiana. The following table sets forth certain information concerning the Company's cabinet manufacturing facilities:
Owned/ Capacity (1) Location Leased Product (Units/Week) Auburn, NE Owned Kitchen and bathroom 10,000 cabinets Elizabeth City, NC Owned Bruce and IXL kitchen 15,000 and bathroom cabinets and European frameless cabinets McKinney, TX Owned Kitchen and bathroom 6,000 cabinets Morristown, TN Owned Kitchen and bathroom 9,000 (2) cabinets Morristown, TN Owned Kitchen and bathroom 7,500 cabinets Thompsontown, PA Owned Kitchen and bathroom 15,000 cabinets Union City, IN Owned Kitchen and bathroom 9,000 cabinets ________ 71,500 ________________________ (1) Production capacity based on single shift operations. (2) This plant also produces finished end panels for certain other cabinet plants.
The plants are primarily cabinet assembly operations. The plant inventories consist of raw materials, component parts and a limited amount of work in process. Raw materials utilized by the plants consist of sheet stock of plywood, particleboard or fiberboard, and component parts consist of dimension parts (front frame parts, doors and drawer fronts), finished end panels, finishing materials and hardware. In the cabinet assembly operations, front frame parts, doors and drawer fronts are sanded smooth and color stained and finished. Then, end panels, tops, bottoms and shelves are glued and stapled to the front frames, drawers are assembled to drawer fronts and hardware is attached. The completed cabinet is inspected, packed and staged for shipment. Sheet stock is a commodity product purchased from a variety of suppliers. The Company obtains its dimension parts, consisting of front frame parts, doors and drawer fronts, primarily from its manufacturing facility located at the Bruce hardwood flooring plant in Jackson, Tennessee. See "- Bruce Hardwood Floors Division - Manufacturing" above. The Jackson plant supplies 74% of the Cabinet Division's front frame parts requirements and, together with a similar but smaller facility located in Nappanee, Indiana, approximately 85% of its door and drawer front requirements. The Company manufacturers finished end panels at its Morristown, Tennessee cabinet plants. Finishing materials and hardware are purchased from several suppliers. The Cabinet Division is not dependent on any single supplier for any of its raw materials or component parts, other than the Jackson dimension parts plant. The Company believes its sources of supply are adequate to meet its needs. Imports from foreign suppliers, which account for less than ten percent of the Company's cabinet materials, consist of wood veneer, laminated veneer door panels and certain hardware items. While the Company maintains insurance coverage on all of its properties, including the Jackson dimension parts plant, the loss of that plant could have an adverse effect on the Company's operations. See "- Properties" below. Sales and Marketing The Company distributes its cabinets directly from its regional factories and through 37 Company-operated cabinet distribution centers and approximately 22 independent distributors. Factory-direct shipments are made for full truckload orders which typically are sold to national and regional builders, retail home center chain stores and to a lesser extent, independent building materials distributors. The Company also sells its cabinets to builders, kitchen and bath dealers and remodeling contractors through its Company-operated cabinet distribution centers and its Beltsville building products distribution center. Factory- direct shipments accounted for approximately 56% of the Cabinet Division sales in 1993, with sales through the Company's distribution centers and independent distributors accounting for the balance. The Company-operated distribution centers are also used to support sales to major builders and retail home centers by providing prompt replacements for lost or damaged cabinets and delivery and storage for truckload quantities of cabinets pending staged deliveries to job sites. The Company believes that its distribution centers are an important factor in maintaining and increasing its sales, and intends to open additional distribution centers in new geographic markets as conditions warrant. Buyers Choice is an innovative marketing strategy developed to enable buyers to design semi-custom cabinets to meet their individual preferences. Buyers Choice product displays contain samples of the various types, colors and qualities of basic materials, hardware and other features available to complete a semi-custom cabinet design. The buyer chooses the preferred combination and the Cabinet Division assembles the cabinets in accordance with the buyer's specifications. The Buyers Choice program has been popular with single-family home builders, who use the displays in model homes in connection with their marketing efforts. The Company provides personal computer software for use primarily by retail home center stores to create complete kitchen floor plans, including elevations and product specifications lists, with related prices, based on room measurements provided by customers. Management believes this software package to be a significant sales aid. The Cabinet Division has one of the largest sales forces in the cabinet industry, currently employing approximately 164 salespersons. The sales force makes direct sales and service calls on builders, independent distributors and retail home center stores, and offers kitchen design, cabinet installation and cabinet display and marketing advice to retail home center stores and independent distributors. Most sales personnel are affiliated with one of the Company's distribution centers and are responsible for sales to all customers within their sales area including sales of cabinets directly by the plant. The Cabinet Division maintains a competitive salary base and provides performance incentives by compensating its sales force with bonuses tied to volume and profitability. Competition The Company is the fourth largest manufacturer in the United States cabinet industry. The cabinet industry is a mature, highly competitive, regionalized and highly fragmented industry with thousands of cabinet makers competing primarily on a local basis. There is a relatively high manual labor content in cabinet products. Because of the low capital requirements for cabinet assembly, it is relatively easy and inexpensive for small cabinet makers to enter the industry as manufacturing competitors. In addition, high transportation costs limit the area to which a manufacturer can ship cabinets and still remain competitive. This has led the Company, and more recently, some of its larger competitors, to open regional manufacturing plants and distribution centers. The Company's seven regional manufacturing plants and 37 Company-operated distribution centers are important factors in the Company's ability to maintain cost and price competitiveness with local and regional manufacturers. Due to significant excess manufacturing capacity, the cabinet industry has been subject to severe price competition. Other competitive factors include quality of product, production capacity and speed of delivery. The Company believes it competes favorably because of its breadth and quality of product offerings, and its production capacity, regional manufacturing facilities, national sales force and distribution capabilities. Beltsville Division The Company operates a general building materials distribution center in Beltsville, Maryland, located between Baltimore and Washington, D.C. Principal products sold, primarily to builders, include lumber, doors, windows, kitchen and bathroom cabinets and custom millwork. The Beltsville Division is the largest customer of the Cabinet Division and also purchases hardwood flooring products from local distributors of the Bruce Hardwood Floors Division. Management believes that the Beltsville Division has a reputation in its market area for quality products and a high level of customer service. Backlog The Company generally sells its flooring products from inventories on hand. The company produces its cabinets primarily in response to firm orders and, to a lesser extent, to maintain a working inventory at distribution centers operated by the Company. The Company generally ships its cabinets within a short time (e.g., one week) after receipt of an order. Accordingly, the dollar amount of backlog orders believed to be firm is not significant or indicative of the Company's future sales and earnings. Employees As of December 31, 1993, the Company employed approximately 3,545 persons, of which 2,171 were employed by the Bruce Hardwood Floors Division, 1,230 by the Cabinet Division, 108 by the Beltsville Division and the remainder in the Company's headquarters and other operations. The Company has entered into collective bargaining agreements with hourly employees at three of its six hardwood flooring plants, and three of its seven cabinet plants covering in the aggregate approximately 1,589 employees. Management considers its employee relations to be satisfactory. Environmental Matters The Company's operations are subject to extensive federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. Permits are required for certain of the Company's operations, and these permits are subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce compliance with their regulations, and violations may result in the payment of fines or the entry of injunctions, or both. The Company does not believe it will be required under existing environmental laws and enforcement policies to expend amounts which will have a material adverse effect on its results of operations or financial condition. However, the requirements of such laws and enforcement policies have generally become stricter in recent years. Accordingly, the Company is unable to predict the ultimate cost of compliance with environmental laws and enforcement policies. Item 2. Properties The Company's principal manufacturing facilities are described under "- Bruce Hardwood Floors Division - Manufacturing" and "- Cabinet Division - Manufacturing" above. Management believes that the Company's plants and properties are generally well-maintained and in good operating condition. The Company maintains blanket property insurance coverage on all its properties with aggregate limits of $100 million. The Company is also insured for losses arising from loss of inventory, business interruption and certain extra expense. Although this coverage is sufficient to replace any of the Company's manufacturing facilities, the complete loss of the dimension parts plant in Jackson, Tennessee for an extended period of time could adversely affect the Company's operations. See "- Cabinet Division - Manufacturing" above. Item 3. Legal Proceedings The Company is not a party to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders None. Executive Officers of the Registrant Set forth below as of December 31, 1993 are the names, ages and principal occupations of the executive officers of the Company, as well as certain other information concerning their business experience. Name and Positions held Principal Occupation with the Company and Other Information Floyd F. Sherman Mr. Sherman has served as President Chairman of the Board of of the Company since 1981 and Directors, President and Chairman of the Board Chief Executive Officer Directors, President and since July 1992. Prior thereto he served as Executive Vice President of the Company. Mr. Sherman is 54 years old and became a director of the Company in 1986. M. Joseph McHugh Mr. McHugh has served as Senior Director, Senior Executive Vice President and Treasurer Executive Vice President of the Company since 1981. Prior and Treasurer thereto he served as Executive Vice President of the Company. He became a director of the Company in 1986. Mr. McHugh is also a director of Pillowtex Corporation. He is 56 years old. Robert J. Symon Mr. Symon has served as Vice President - Vice President - Controller of the Company since Controller 1978. Mr. Symon is 62 years old and served as a director of the Company from December 19 Darryl T. Marchand Mr. Marchand has served as Vice Vice President, Secretary President Secretary and General and General Counsel Counsel of the Company since 1986. Prior thereto he served as Vice President - Legal of the Company from 1981 to 1986 and as Treasurer from February to August, 1981. Mr. Marchand is 51 years old. John G. Conklin Mr. Conklin has served as a Vice Vice President President of the Company since 1978. He has been President of the Cabinet Division since September 1993. Prior thereto he was responsible for cabinet manufacturing. Mr. Conklin is 60 years old. Charles A. Engle Mr. Engle has served as a Vice Vice President President of the Company since 1979. His primary responsibility for the Company is Cabinet Division sales. Mr. Engle is 50 years old. James T. Fidler Mr. Fidler has served as a Vice Vice President President of the Company since 1981. Mr. Fidler is primarily responsible for data processing for the Company. Mr. Fidler is 51 years old. Michael J. Kearins Mr. Kearins has served as a Vice President of Vice President the Company since 1985. He had been a divisional Vice President of sales of the Bruce Hardwood Floors Division from December, 1983 to May, 1985. He is primarily responsible for sales and marketing in the Bruce Hardwood Floors Division. Prior to 1983, he had been a Regional Sales Manager of the Company. Mr. Kearins is 47 years old. Allen Silver Mr. Silver has served as a Vice President of Vice President the Company since 1985. Prior to that time he had been a divisional Vice President of manufacturing of the Cabinet Division. Mr. Silver is 54 years old. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters A) Price range of common stock The following table shows the range of high and low sales prices for the common stock on the NASDAQ National Market System. (Trading began August 11, 1993). Market Price 1993 High Low Third Quarter 12-1/4 10 Fourth Quarter 15-7/8 11-3/8 B) Approximate number of equity security holders (As of March 21, 1994) Class of Security Number of Record Holders Common Stock ($.01 par value) 1,585 C) Dividend Policy The Company has not declared or paid any dividends on its Common Stock. Management currently intends to retain future earnings for the operation and expansion of the Company's business and does not anticipate paying any cash dividends in the foreseeable future. The payment of cash dividends is prohibited under the terms of the New Credit Facility and is restricted under the terms of the indenture relating to the Company's 10 1/2% Senior Notes due 2003. Item 6. Selected Consolidated Financial Data (In thousands, except per share amounts) The selected consolidated financial data of the Company presented below for the five fiscal years ended December 31, 1993 was derived from the consolidated financial statements of the Company and should be read in conjunction with the consolidated financial statements and related notes included herein.
Fiscal Seven Five Fiscal Fiscal Fiscal year months months year year year INCOME ended ended ended ended ended ended STATEMENT December 31, January 1, June 8, January 3, December 28, December 29, DATA 1993 1993 1992* 1992* 1990* 1989* Net sales $ 346,296 $ 173,426 $ 119,417 $ 256,112 $ 321,126 $ 352,616 Cost of sales 269,360 137,413 90,991 204,026 250,305 272,207 Gross profit 76,936 36,013 28,426 52,086 70,821 80,409 Selling, general and administra- tive 44,213 27,179 19,404 41,597 47,383 49,906 Gain on insurance settlement - (1,350) (3,624) - - - - Amortization of goodwill 1,613 884 1,863 4,463 4,463 4,462 Interest 19,406 11,289 25,786 59,719 56,983 56,406 Income (loss) before income taxes and extraordinary items 11,704 (1,989) (15,003) (53,693) (38,008) (30,365) Provision (benefit) for income taxes 4,501 (940) - (10,028) (12,857) (10,173) Income (loss) before extra- ordinary items 7,203 (1,049) (15,003) (43,665) (25,151) (20,192) Extraordinary items - gain from extin- guishment of debt - - 201,308 - - - - - Loss from repayment of debt (11,307) - - - - - - Net income (loss) $ (4,104) $ (1,049) $ 186,305 $ (43,665) $ (25,151) $ (20,192) Per share data: (1) Net income (loss) before extra- ordinary items $ 0.74 $ (0.16) Net income (loss) $ (0.42) $ 0.16 Weighted average shares outstanding 9,714 6,707
Fiscal years ended December 31, January 1, 1993 1993 Pro-Forma Income Data (3) Net income (loss) before extraordinary items, as reported $ 7,203 $ (16,052) Pro-Forma adjustments re: 1992 restructuring & 1993 recapitalization 490 16,852 Pro-Forma net income before extraordinary items $ 7,693 $ 800 Pro-Forma net income before extraordinary items, per share $ 0.53 $ 0.05 Weighted average shares outstanding 14,648 14,648
BALANCE December 31, January 1, June 8, January 3, December 28, December 29, SHEET DATA 1993 1993 1992(2) 1992 1990 1989 Working capital $ 74,082 $ 53,480 $ 79,421 $ 78,927 $ 63,599 $ 92,054 Total assets 329,099 304,813 323,563 453,105 465,352 508,656 Long-term debt and redeemable preferred stock 162,897 198,332 222,483 470,506 450,948 450,902 Common shareholders' investment 88,047 18,951 20,000 (121,081) (71,218) (45,877) * Prior to the restructuring on June 8, 1992 (See Notes 2 and 3 to the Consolidated Financial Statements). __________ (1) As the Company was a wholly-owned subsidiary of another company, earnings per share are not meaningful for the periods prior to June 8, 1992. (2) The balance sheet data as of June 8, 1992 (unaudited) reflects the quasi-reorganization adjustments recorded by the Company on that date. (See Notes 2 and 3 to the Consolidated Financial Statements). (3) See Note 10 to the Consolidated Financial Statements.
Item 7. Management's Discussion and Analysis Of Financial Condition and Results of Operations Results of Operations The following table sets forth selected information concerning the Company's results of operations for fiscal 1991, 1992 and 1993. For clarity of presentation, the discussion of results of operations for fiscal 1992 reflects the combined results of operations for the five month period ended June 8, 1992, the date the 1992 Restructuring was completed, and the seven month period ended January 1, 1993.
Fiscal Year 1991 1992 1993 (Dollars in millions) Net sales: Bruce Hardwood Floors Division $116.3 $151.3 $200.0 Cabinet Division 125.1 123.2 125.6 Beltsville Division 16.2 19.2 20.7 Intracompany sales (1.5) (.9) - - Total net sales 256.1 292.8 346.3 Gross profit 52.1 64.4 76.9 Selling, general and administrative expenses 41.6 46.6 44.2 Gain on insurance settlement - (5.0) - - Amortization of goodwill 4.5 2.7 1.6 Operating income $ 6.0 $ 20.1 $ 31.1 As a percent of net sales: Gross profit 20.3% 22.0% 22.2% Selling, general and administrative expenses 16.2 15.9 12.8 Operating income 2.3 6.9 9.0
Fiscal year 1993 compared to fiscal year 1992 Net sales for fiscal 1993 were $346.3 million, or 18.3% greater than the $292.8 million in net sales for fiscal 1992. Net sales for the Bruce Hardwood Floors Division increased 32.2% to $200.0 million from $151.3 million in the prior year. The increase in hardwood flooring sales resulted from increased unit sales and increased average sales prices. Cabinet Division net sales for the year were $125.6 million, or an increase of 1.9% over 1992 net sales of $123.2 million. During 1993, sales and marketing attention was focused on the stronger and more stable single-family housing markets, yet without deserting either the multi-family or home center business. Net sales of the Beltsville Division increased 7.8% to $20.7 million from $19.2 million in the prior year. The increased sales resulted primarily from an improved housing market in the Washington, D.C., Baltimore and Northern Virginia areas. Gross profit for fiscal 1993 was $76.9 million, or 22.2% of net sales, compared to $64.4 million, or 22.0% of net sales in the previous year. All divisions experienced higher raw material prices, especially for lumber and logs. Increased sales prices, together with improved operations and plant utilization, especially in the Bruce Hardwood Floors Division, resulted in the modest improvement in gross profit as a percent of sales. Selling, general and administrative expenses were $44.2 million, or 12.8% of net sales, in fiscal 1993 compared to $46.6 million, or 15.9% of net sales, in the prior year. The reduction in selling, general and administrative expenses was primarily in the Cabinet Division where salaried payroll and related expenses were reduced. Also in 1992, selling, general and administrative expenses included a $.9 million expense relating to the common stock issued to management in connection with the 1992 Restructuring. Operating income was $31.1 million, or 9.0% of net sales, in fiscal 1993 compared to $20.1 million, or 6.9% of net sales, in the previous year. The improvement was $16.0 million before the gain in 1992 of $5 million from the Thompsontown cabinet plant fire insurance settlement. The improved results were attributable to higher net sales, slightly higher gross margins, lower selling, general and administrative expenses and lower goodwill amortization attributable to the 1992 Restructuring. Interest expense was $19.4 million in fiscal 1993 compared to $37.1 million in the prior fiscal year due principally to the effects of the 1992 Restructuring. Net income before an extraordinary item for fiscal 1993 was $7.2 million compared to a net loss of $16.1 million before an extraordinary item in fiscal 1992. Higher net sales, the reduction in interest expense, and increase in operating income were significant factors in this improvement. Fiscal year 1992 compared to fiscal year 1991 Net sales for fiscal 1992 were $292.8 million, or 14.3% greater than the $256.1 million in net sales for fiscal 1991. Net sales for the Bruce Hardwood Floors Division increased 30.1% to $151.3 million from $116.3 million in the prior year. The sales growth in the Bruce Hardwood Floors Division was attributable to strong consumer demand for hardwood flooring, aggressive marketing programs and an improvement in general economic conditions. The increase in hardwood flooring sales resulted from increased unit sales, increased average sales prices and a favorable change in product mix resulting from increased sales of pre- finished strip and laminated plank and reduced sales of unfinished strip and parquet products. Cabinet Division sales for the year were $123.2 million, or 1.5% below the $125.1 million recorded in the prior year. Cabinet Division sales were impacted by substantial excess capacity in the industry, severe price competition, the limited availability of residential construction financing from traditional sources of such financing, the Company's decision not to pursue low-margin sales and the disruption caused by the Thompsontown plant fire discussed below. Sales of the Beltsville Division increased 18.9% to $19.2 million from $16.2 million in the prior year. That increase was attributable to a recovery in the residential construction economy in the Beltsville trade area. Gross profit for fiscal 1992 was $64.4 million, or 22.0% of net sales, compared to $52.1 million, or 20.3% of net sales, in the previous year. The improvement in gross profit was attributable to higher sales, increased selling prices and improvements in manufacturing yields and productivity, partially offset by sharply higher lumber prices. Selling prices lagged lumber price increases in the latter half of fiscal 1992, which negatively impacted gross margins in that period. Selling, general and administrative expenses were $46.6 million, or 15.9% of net sales, in fiscal 1992 compared to $41.6 million, or 16.2% of net sales, in the prior year. Of the increase, $.9 million was attributable to long-term compensation expense related to Common Stock issued to management in connection with the 1992 Restructuring. The lower expenses as a percent of net sales were attributable to greater operating efficiencies and reductions in salaried payroll. In both periods, the Cabinet and Beltsville Divisions made substantial provisions to reserves for doubtful accounts because of the difficulty experienced in the collection of accounts receivable under depressed economic conditions in the housing industry. On January 2, 1992, the Cabinet Division plant at Thompsontown, Pennsylvania was destroyed by fire. The Company was insured for the replacement cost, less a $100,000 deductible, as well as for losses arising from loss of inventory, business interruption and certain related expenses. The Company has rebuilt the plant and production there resumed in the second quarter of fiscal 1993. In fiscal 1992 the Company recorded a gain of $5.0 million, which is the settlement received from the insurance company less the net book value of the plant and equipment as of the date of the fire. Operating income was $20.1 million, or 6.9% of net sales, in fiscal 1992 compared to $6.0 million, or 2.3% of net sales, in the previous year. The improvement was attributable to higher gross profit on increased net sales, reduced operating expenses as a percent of net sales and the $5.0 million gain related to the estimated insurance settlement for the Thompsontown plant fire. Interest expense was $37.1 million in fiscal 1992 compared to $59.7 million in the prior fiscal year due principally to the effects of the 1992 Restructuring. Net income for fiscal 1992 was $185.3 million compared to a net loss of $43.7 million in fiscal 1991. An extraordinary of gain $201.3 million, net of tax benefits, arising from the extinguishment of debt pursuant to the 1992 Restructuring was the major reason for the substantial improvement in net income. The reduction in interest expense and increase in operating income were also factors in the improvement. Liquidity and Capital Resources On June 8, 1992, the Company successfully completed the 1992 Restructuring pursuant to which approximately $297.7 million of the Company's long-term indebtedness and redeemable preferred stock (including accrued interest and dividends) was exchanged for Common Stock. The 1992 Restructuring was necessitated by the highly- leveraged condition of the Company coupled with the protracted recession in the U.S. housing industry. In 1993, the Company completed two public offerings for 7,939,750 shares of the Company's Common Stock and $160 million aggregate principal amount of 10-1/2% Senior Notes due 2003. The net proceeds of the Offerings, together with borrowings under a new $90 million bank credit facility were used (i) to repay the entire unpaid balance under the Company's previously existing senior debt financing agreements, redeem certain previously outstanding debentures and pay related accrued interest, for a total of approximately $227 million, and (ii) for working capital and general corporate purposes. As a result of this repayment of debt, the Company incurred an extraordinary loss of $11.3 million, net of tax, as a result of the original issue discount on certain of the repaid notes as well as the premium required to redeem the debentures. The New Credit Facility provides for up to $90 million of revolving credit loans for working capital and for letters of credit. Availability of borrowings under the New Credit Facility is based upon a formula related to inventory and accounts receivable. For the fiscal year ended December 31, 1993, cash increased by $.2 million. The Company's primary source of liquidity during this period was cash flow from financing activities of $12.8 million, representing sale of stock and of notes of $239.4 million, offset by long-term debt payments of $217.7 million, refinancing costs of $14.9 million, and a $5.5 million reimbursement of construction deposits from the West Virginia Economic Development Authority for the Beverly, West Virginia plant expansion. Cash provided by financing activities was offset by capital expenditures of $7.6 million and $7.5 million for the construction deposits incurred in the Beverly, West Virginia plant expansion. At December 31, 1993, the Company had working capital of $74.1 million, or 22.5% of total assets, and $52.5 million of unused bank borrowing capacity. During the third quarter of 1993 the Company settled and paid the federal taxes and interest applicable to an examination of the tax returns for the years 1986 through 1990. The settlement had no material impact on the Company's financial position or results of operations. The Company believes that borrowing availability under the New Credit Facility and cash generated from operations will be adequate to fund working capital requirements, debt service payments and the planned capital expenditures. Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Triangle Pacific Corp.: We have audited the accompanying consolidated balance sheets of Triangle Pacific Corp. and subsidiaries (a Delaware corporation) as of December 31, 1993 and January 1, 1993, and the related statements of operations, shareholders' investment and cash flows for the fiscal year ended December 31, 1993, the seven month period ended January 1, 1993, the five month period ended June 8, 1992 and for the fiscal year ended January 3, 1992. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Triangle Pacific Corp. and subsidiaries as of December 31, 1993 and January 1, 1993, and the results of their operations and their cash flows for the fiscal year ended December 31, 1993, the seven month period ended January 1, 1993, the five month period ended June 8, 1992, and for the fiscal year ended January 3, 1992, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedules V, VI, VIII and X are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN & CO. Dallas, Texas, February 15, 1994 TRIANGLE PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
December 31, January 1, 1993 1993 ASSETS Current assets: Cash & cash equivalents $ 785 $ 547 Receivables (net of allowances of $3,323 & $5,098 respectively) 39,454 32,417 Inventories 64,072 47,612 Prepaid expenses 4,273 5,255 Total current assets 108,584 85,831 Property, plant & equipment Land 13,452 13,452 Buildings 43,382 38,469 Equipment, furniture & fixtures 65,759 55,360 122,593 107,281 Less: accumulated depreciation 13,171 5,255 109,422 102,026 Other assets: Goodwill 60,580 66,193 Trademark 30,733 31,533 Other 11,654 19,230 Deferred financing costs 8,126 - - Total assets $ 329,099 $ 304,813
LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Current portion of long-term debt $ 1,467 $ 4,038 Accounts payable 13,336 11,835 Accrued liabilities 19,699 14,597 Current portion of deferred compensation - 1,881 Total current liabilities 34,502 32,351 Long-term debt, net of current portion 162,897 198,332 Deferred income taxes 43,653 51,992 Deferred compensation - 3,187 Total liabilities 241,052 285,862 Shareholders' investment: Common stock - $.01 par value, authorized shares - 30,000,000 issued and outstanding shares - 14,647,607 at December 31, 1993 and 6,707,861 at January 1, 1993 146 67 Additional paid-in capital 93,054 19,933 Accumulated deficit: Post June 8, 1992 (5,153) (1,049) Total shareholders' investment 88,047 18,951 Total liabilities & shareholders' investment $ 329,099 $ 304,813 The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
Fiscal Seven Five Fiscal Year Months Months Year Ended Ended Ended Ended December 31, January 1, June 8, January 3, 1993 1993 1992* 1992* Net Sales $ 346,296 $ 173,426 $ 119,417 $ 256,112 Costs and expenses: Cost of sales 269,360 137,413 90,991 204,026 Selling, general and administrative 44,213 27,179 19,404 41,597 Gain on insurance settlement - (1,350) (3,624) - - Amortization of goodwill 1,613 884 1,863 4,463 Interest 19,406 11,289 25,786 59,719 334,592 175,415 134,420 309,805 Income (loss) before income taxes and extraordinary items 11,704 (1,989) (15,003) (53,693) Provision (benefit) for income taxes 4,501 (940) - (10,028) Net income (loss) before extraordinary items 7,203 (1,049) (15,003) (43,665) Extraordinary items Gain from extinguishment of debt - - 201,308 - - Loss from repayment of debt, net of tax (11,307) - - - - Net income (loss) $ (4,104) $ (1,049) $ 186,305 $ (43,665) Per Share Data: Net income (loss) before extraordinary items $ .74 $ (0.16) (1) (1) Net income (loss) $ (0.42) $ (0.16) Weighted average shares outstanding 9,714 6,707
Fiscal years ended December 31, January 1, 1993 1993 Pro-Forma Income Data (Unaudited) (See Note 10) Net income (loss) before extraordinary items, as reported $ 7,203 $ (16,052) Pro-Forma adjustments re: 1992 restructuring & 1993 recapitalization 490 16,852 Pro-Forma net income before extraordinary items $ 7,693 $ 800 Pro-Forma net income before extraordinary items, per share $ 0.53 $ 0.05 Weighted average shares outstanding 14,648 14,648 ________________________ * Prior to the restructuring on June 8, 1992 (see Notes 2 and 3 for additional information). (1) As the Company was a wholly-owned subsidiary of another company, earnings per share for the periods prior to June 8, 1992, are not meaningful. The accompanying notes to consolidated financial statements are an integral part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT FOR THE FISCAL YEAR ENDED JANUARY 3, 1992, FOR THE FIVE MONTHS ENDED JUNE 8, 1992, FOR THE SEVEN MONTHS ENDED JANUARY 1, 1993, AND FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 (in thousands)
Carryover Additional Basis of Common Paid-in Common Accumulated Stock Capital Stock Deficit Total Balance, December 28, 1990* $ 1 $ 14,999 $ (26,000) $ (60,218) $ (71,218) Net loss - - - (43,665) (43,665) Dividends on mandatory redeemable preferred stock - - - (6,198) (6,198) Balance, January 3, 1992* $ 1 $ 14,999 $ (26,000) $(110,081) $(121,081) Net income - - - 186,305 186,305 Dividends on mandatory redeemable preferred stock - - - (2,913) (2,913) Quasi-reorganization adjustments - net 66 4,934 26,000 (73,311) (42,311) Balance, June 8, 1992 $ 67 $ 19,933 $ - $ - $ 20,000 Net loss - - - (1,049) (1,049) Balance, January 1, 1993 $ 67 $ 19,933 $ - $ (1,049) $ 18,951 Net loss - - - (4,104) (4,104) Sale of Common Stock (Net of Refinancing Cost) 79 73,121 - - 73,200 Balance, December 31, 1993 $ 146 $ 93,054 $ - $ (5,153) $ 88,047 * Prior to the restructuring on June 8, 1992 (See notes 2 and 3 for additional information). The accompanying notes to consolidated financial statements are an integral part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Fiscal Seven Five Fiscal Year Months Months Year Ended Ended Ended Ended December 31, January 1, June 8, January 3, Cash flows from operating activities: 1993 1993 1992* 1992* Net income (loss) $ (4,104) $ (1,049) $186,305 $ (43,665) Adjustments: Depreciation 7,929 5,255 3,734 9,431 Deferred income taxes 2,680 (940) - - (10,028) Gain on insurance settlement - (1,350) (3,624) - Amortization of goodwill & trademark 2,413 1,351 2,279 5,463 Amortization of deferred financing costs 536 - 1,603 3,773 Amortization of original issue discount 1,037 749 - - 8,150 Extraordinary items 11,307 - (201,308) - Provision for doubtful accounts 485 1,438 678 2,170 Other - - 106 312 Changes in assets and liabilities: Receivables (7,522) (2,351) (4,529) 9,672 Inventories (16,460) 2,151 (7,387) 15,303 Prepaid expenses 982 1,436 (1,316) (1,983) Accounts payable 1,502 5,553 (408) (6,128) Accrued liabilities - other 1,414 (3,115) 4,058 (3,722) Accrued liabilities - interest 3,688 2,795 10,052 45,151 Deferred compensation (5,068) 147 105 (50) Other assets 1,810 (2,963) (1,847) (577) Other (126) 142 (240) (338) Net cash provided by (used in) operating activities 2,503 9,249 (11,739) 32,934 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 34 3 41 110 Additions to property, plant and equipment (7,636) (2,386) (890) (2,256) Construction deposits (7,504) - (18) (325) Net cash used in investing activities (15,106) (2,383) (867) (2,471) Cash flows from financing activities: Long-term debt borrowings 500 - - - - - Long-term debt payments (10,332) (22,890) (908) (1,954) Tranche I and II Note payments (207,400) - - - - - Restructuring costs - - (2,994) (4,966) Refinancing costs (14,860) - - - - - Proceeds from senior notes issued 160,000 - - - - - Sale of common stock 79,398 - - - - - Reimbursement for construction deposits 5,535 - - - - - Net cash provided by (used in) financing activities 12,841 (22,890) (3,902) (6,920) Net increase (decrease) in cash $ 238 $(16,024) $(16,508) $ 23,543 Cash and cash equivalents, beginning of period 547 16,571 33,079 9,536 Cash and cash equivalents, end of period $ 785 $ 547 $ 16,571 $ 33,079 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $ 14,667 $ 8,035 $ 14,029 $ 3,330 Income taxes 45 - - - 3 Supplemental schedule of non-cash investing and financing activities: Accrued dividends on preferred stock $ - $ - $ 2,913 $ 6,198 * Prior to the restructuring on June 8, 1992 (see Notes 2 and 3 for additional information). The accompanying notes to consolidated financial statements are an integral part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - 1993 RECAPITALIZATION: The Company filed, in 1993, two registration statements with the Securities and Exchange Commission and sold to the public 7,939,750 shares of the Company's Common Stock and $160 million aggregate principal amount of 10-1/2% Senior Notes due 2003 ("the Offerings"). The net proceeds of the Offerings together with borrowings under a new $90 million bank credit facility were used (i) to repay the entire unpaid balance under the Company's previously-existing senior debt financing agreements, redeem certain previously outstanding debentures and pay related accrued interest, for a total of approximately $227 million, and (ii) for working capital and general corporate purposes. As a result of this repayment of debt the Company incurred an extraordinary loss of $11.3 million, net of tax, as a result of the original issue discount on certain of the repaid notes as well as the premium required to redeem the debentures. On June 14, 1993, the Company's Board of Directors approved a reclassification pursuant to which each share of Series A Common Stock was changed and converted into .67 of a share of Common Stock. The transaction became effective upon completion of the Offerings described above and has been reflected retroactively in the accompanying consolidated financial statements. NOTE 2 - 1992 RESTRUCTURING: On June 8, 1992, the Company successfully completed a capital restructuring (the "1992 Restructuring") pursuant to which substantially all of the Company's then outstanding long-term indebtedness, redeemable preferred stock and common stock, were exchanged for new debt with lower interest rates and new common stock. Under the 1992 Restructuring, the Company entered into amendments to its previously existing senior debt financing agreements pursuant to which $237.4 million principal amount of senior indebtedness outstanding prior to the restructuring plus accrued and unpaid interest through June 8, 1992 was restructured as approximately $150.0 million principal amount of Tranche I Term Notes, $30.0 million principal amount of Tranche I Revolving Notes, $57.4 million principal amount of Tranche II Notes and approximately 9% of the Company's new Series A Common Stock. In addition, approximately $11.6 million of letters of credit remained outstanding under a facility pursuant to which they could be renewed or replaced. The Tranche II Notes were recorded at $37.3 million, which the Company and its investment bankers estimated to be the market value. The difference was treated as original issue discount and amortized over the life of the Tranche II Notes, which were to have matured on June 30, 1999. (See Note 5) The senior subordinated split coupon reset debentures, a note payable to the former principal shareholder, other obligations, the mandatory redeemable preferred stock and common stock outstanding prior to the 1992 Restructuring were exchanged for new shares of common stock. The mandatory redeemable preferred stock and the special preferred stock were retired in conjunction with the 1992 Restructuring. In addition to the exchange for common stock, the principal shareholder prior to the 1992 Restructuring received warrants entitling the holder to purchase up to approximately .8 million shares of common stock at prices ranging from $22.39 to $37.31 per share. The warrants are currently exercisable and will terminate, if not previously exercised, on June 8, 1999. In connection with the 1992 Restructuring, the Company entered into an agreement with certain members of management pursuant to which, shortly after the 1992 Restructuring, the Company issued to such members of management 200,990 shares of common stock and stock options to purchase 201,007 shares of common stock. The exercisability of such options is tied to the achievement of certain levels of operating income. A portion of the options became exercisable as a result of the Company's 1992 and 1993 operating results. In connection with the issuance of the common stock in 1992, management shareholders incurred ordinary income tax liability and were compensated by the Company for a portion of the tax liability arising from receipt of such shares and such incremental compensation. Such compensation was expensed in conjunction with the 1992 Restructuring. NOTE 3 - QUASI-REORGANIZATION ELECTION: In connection with the 1992 Restructuring, the Company's Board of Directors approved quasi-reorganization accounting procedures. Under these procedures, an entity restates its assets and liabilities at fair value and eliminates its accumulated deficit. Such adjustments are reflected entirely through the Company's capital accounts. None of the adjustments are recorded through the income statement. Such adjustments included both the quasi-reorganization related fair value restatements of assets, liabilities, and equity as well as the recognition of the 1992 Restructuring. Because the Company's historical and future expected operations exhibited an ability to cover amortization of its intangibles on an earnings before interest and tax basis, the partial write-down of such intangibles by approximately $98.4 million was reflected by the Company as a quasi-reorganization adjustment. Other principal adjustments made in conjunction with the quasi- reorganization election included (i) the extinguishment of senior bank debt of approximately $261.0 million, senior subordinated debentures of approximately $218.9 million, notes, obligations, and payables due to the former principal shareholder of Holding of approximately $10.3 million, mandatory redeemable preferred stock of approximately $44.9 million and the common stock of $15.0 million and (ii) the recording of new senior debt of approximately $217.3 million and new common stock of $20.0 million. This transfer resulted in a gain from extinguishment of debt of approximately $201.3 million, net of deferred financing costs and restructuring costs of $11.6 million. In addition, the property, plant and equipment was revalued resulting in a decrease in net book value of $3.0 million. An additional decrease in net book value of $6.5 million was recorded prior to January 1, 1993. The trademark was also reduced by approximately $4.3 million to fair value. In addition, a write-down of certain deferred financing costs of approximately $4.5 million and restructuring costs of approximately $5.9 million was included as part of the quasi-reorganization adjustments. Because the Company has adopted the provisions of SFAS No. 109, Accounting for Income Taxes, it is required to gross up the fair value of the net assets to, in effect, ignore the tax consequences of the differences between the market value and tax bases of its assets and liabilities. Such tax consequences are then recognized through the recording of a corresponding deferred tax asset or liability. The deferred tax liability was increased by approximately $20.3 million due to the loss of the net operating loss carryforwards, and by approximately $10.4 million for the tax effects of other quasi-reorganization adjustments. The final quasi-reorganization accounting adjustment was to eliminate the accumulated deficit of the Company. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Consolidation: The consolidated financial statements include the financial statements of Triangle Pacific Corp. and its subsidiaries. The Company maintains its records on a 52/53 week year. Prior Period Reclassifications: Certain reclassifications have been made to the January 1, 1993 balances, in order to conform to the current year presentation. Cash and Cash Equivalents: The Company considers all investments with an original maturity of less than three months to be a cash equivalent. Inventories: Inventories are valued at the lower of cost or market. The last- in, first-out (LIFO) method is used for certain lumber inventories and the first-in, first-out (FIFO) method is used for all other inventories. Inventories valued by the LIFO method were $23,965,000 at December 31, 1993 and $16,198,000 at January 1, 1993. Had all inventories been valued by the FIFO method, which approximates current cost, inventories would have been increased by $5,138,000 at December 31, 1993 and $2,745,000 at January 1, 1993. Raw materials inventories include purchased parts and supplies to be used in manufactured products. Work- in-process and finished goods inventories include material, labor and overhead costs incurred in the manufacturing process. The major components of inventories are as follows:
December 31, January 1, 1993 1993 (in thousands) Raw materials $ 42,045 $ 29,676 Work-in-process 3,125 3,994 Finished goods 18,902 13,942 Total $ 64,072 $ 47,612
In connection with the reorganization and the related quasi- reorganization accounting, a new basis for the LIFO inventories was established at June 8, 1992. As a result, the LIFO inventories are greater than those reportable for federal income tax purposes by $6,935,000 at December 31, 1993. Property, Plant and Equipment: Property, plant and equipment are stated at fair value as of June 8, 1992, plus acquisition or construction cost subsequent thereto. Expenditures for maintenance, repairs, renewals and improvements which do not extend the useful lives of assets are charged to appropriate expense accounts in the year incurred. Upon disposition of an asset, cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in the results of operations. Depreciation and amortization are computed on the straight-line basis using the following estimated useful lives: Buildings 10 to 50 years Equipment, furniture and fixtures 3 to 22 years Amortization of leasehold improvements is provided over the terms of the leases or the useful lives of the assets, whichever is shorter. For income tax purposes, all assets are depreciated under allowable tax depreciation methods. Intangible Assets: The Company annually evaluates its carrying value and expected period of benefit of trademark and goodwill in relation to results of operations. In determining the recoverability of these assets the Company analyzes its historical and future ability to generate earnings before interest and taxes using the non-discounted method. Deferred financing costs are being amortized on the effective interest method over the lives of the related debt. The trademark and goodwill are being amortized over 40 years. Accumulated amortization of trademark and goodwill is $1,267,000 and $2,497,000, respectively at December 31, 1993 and $467,000 and $884,000, respectively, at January 1, 1993. Fair Value of Financial Instruments: In conjunction with the offerings that took place during 1993, all debt was recorded at fair market value which was the current market rate of return to the holders of the debt. Warrants, issued to the former principal shareholder in conjunction with the 1992 Restructuring, to purchase up to approximately .8 million shares of common stock at prices ranging from $22.39 to $37.31 per share, were not assigned a value since the exercise prices are significantly higher than the current value of the common equity. NOTE 5 - LONG-TERM DEBT: Long-term debt consists of the following (in thousands):
December 31, January 1, 1993 1993 Mortgages payable $ 4,364 $ 5,294 Senior Notes, 10 1/2% due 8-1-2003 160,000 - Tranche I Notes: Term notes: Amortizing portion - 115,511 Non-amortizing portion - 34,489 Revolving credit notes - 8,500 Tranche II Notes, net of original issue discount of $19,351 - 38,049 Senior subordinated debentures, 12-1/2%, due 7-1-98 - 402 Notes payable - other - 125 164,364 202,370 Less: Current portion of long-term debt (1,467) (4,038) $ 162,897 $ 198,332
Letters of credit outstanding at December 31, 1993 and January 1, 1993 were $9.8 million and $11.6 million, respectively, under a facility pursuant to which they can be renewed or replaced. Senior Notes The Senior Notes are senior unsecured obligations of the Company with an aggregate principal of $160 million. The Senior Notes mature in 2003 and bear interest at an annual rate of 10 1/2%, payable semi- annually. The Senior Notes were issued under an Indenture (the "Indenture") between the Company and Texas Commerce Trust Company NA, as Trustee (the "Trustee"). The Senior Notes rank pari passu with all present and future senior indebtedness of the Company and senior to all present and future subordinated indebtedness of the Company. However, because borrowings under the New Credit Facility are secured by inventory and accounts receivable of the Company and the proceeds thereof, the Senior Notes are effectively subordinated to such borrowings to the extent of such security interest. The Senior Notes are not redeemable prior to August 1, 1998. Thereafter, the Senior Notes are redeemable at the option of the Company at redemption prices specified in the Indenture. The Senior Notes are not subject to any mandatory sinking fund requirements. Upon a "change of control" (as defined in the Indenture), the Company is required to offer to purchase all outstanding Senior Notes at 101% of the principal amount thereof, plus accrued interest to the date of repurchase. In addition, the Company may be required to offer to purchase the Senior Notes at 100% of the principal amount plus accrued interest with the net cash proceeds of certain sales or other dispositions of assets. The Indenture contains covenants which restrict, among other things, the incurrence of additional indebtedness by the Company and its subsidiaries, the payment of dividends and other distributions in respect of the capital stock of the Company, the creation of liens on the assets of the Company and its subsidiaries, the creation of certain restrictions on the payment of dividends and other distributions by the Company's subsidiaries, the issuance of preferred stock by the Company's subsidiaries, and certain mergers, sales of assets and transactions with affiliates. The Indenture specifies a number of events of default including, among others, the failure to make timely principal, premium and interest payments or to perform the covenants contained therein. The Indenture contains a cross-default to other indebtedness of the Company aggregating more than $5,000,000 and certain customary bankruptcy and insolvency defaults. Upon the occurrence of an event of default under the Indenture, the Trustee or the holders of not less than 25% in principal amount of the outstanding Senior Notes may declare all amounts thereunder immediately due and payable, except that such amounts automatically become immediately due and payable in the event of a bankruptcy or insolvency default. New Credit Facility The Company has entered into the New Credit Facility, which provides for up to $90 million of revolving loans for working capital and general corporate purposes and for letters of credit. Availability of borrowings under the New Credit Facility is based upon a formula related to inventory and accounts receivable. The Company had $52.5 million of unused borrowing capacity under this facility at December 31, 1993. Borrowings under the New Credit Facility bear interest at the agent's prime rate plus 1% (7.0% at December 31, 1993) or, at the Company's option, at certain alternate floating rates and is secured by a pledge of the Company's inventory and accounts receivable. The unpaid balance is due on August 4, 1996. The New Credit Facility contains covenants which restrict, among other things, the incurrence of additional indebtedness and rental obligations by the Company and its subsidiaries, the payment of dividends and other distributions in respect of the capital stock of the Company, the creation of liens on the assets of the Company and its subsidiaries, the creation of certain restrictions on the payment of dividends and other distributions by the Company's subsidiaries, the making of investments and capital expenditures by the Company and its subsidiaries, the creation of new subsidiaries by the Company, and certain mergers, sales of assets and transactions with affiliates. The New Credit Facility also contains certain financial covenants relating to the consolidated financial condition of the Company and its subsidiaries, including covenants relating to their net worth, the ratio of their earnings to their fixed charges, the ratio of their earnings to their interest expense, the ratio of their current assets to their current liabilities, and the ratio of their indebtedness to their total capitalization. At December 31, 1993, the Company was in compliance with all financial covenants. The New Credit Facility specifies a number of events of default including, among others, the failure to make timely payments of principal, fees, and interest, the failure to perform the covenants contained therein, the failure of representations and warranties to be true, the occurrence of a "change of control" (as defined in the New Credit Facility, to include, among other things, the ownership by any person or group of more than 25% or, (in the case of The TCW Group, Inc. and its affiliates, 40%) of the total voting securities of the Company), and certain impairments of the security for the New Credit Facility. The New Credit Facility also contains a cross-default to other indebtedness of the Company aggregating more than $2,000,000 and certain customary bankruptcy, insolvency and similar defaults. Upon the occurrence of an event of default under the New Credit Facility, at least three of the lenders holding at least 60% in amount of the principal indebtedness outstanding under the New Credit Facility may declare all amounts thereunder immediately due and payable, except that such amounts automatically become immediately due and payable in the event of certain bankruptcy, insolvency or similar defaults. The New Credit Facility generally prohibits the Company from prepaying the Senior Notes whether the prepayment would result from the redemption of the Senior Notes, an offer by the Company to purchase the Senior Notes following a change of control or a sale or other disposition of assets, or the acceleration of the due date for payment of the Senior Notes. Mortgages payable represent various Industrial Revenue Bond (IRB) notes. The IRB notes vary in interest rate, with several notes dependent upon the prime rate. At December 31, 1993 and January 1, 1993, the interest rates ranged up to 9.0%. These notes are payable through 2000 and are collateralized by the related underlying assets.
Maturities for all long-term debt are as follows: (in thousands) 1994 $ 1,467 1995 1,081 1996 892 1997 694 1998 127 Thereafter 160,103 Total $ 164,364
NOTE 6 - INCOME TAXES: As of June 8, 1992, the date of the quasi-reorganization, the Company elected to adopt the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The Company used the catch- up approach in adopting the provision; however, such adoption did not have a material effect on the Company's consolidated balance sheet. Prior years' financial statements have not been restated to apply this provision. The components of the deferred tax liability and asset are as follows (in thousands):
December 31, January 1, 1993 1993 Deferred Tax Liability: Property, plant and equipment $ 28,429 $ 27,892 Original issue discount - 7,411 Trademark 12,078 12,077 Other 7,123 8,614 Total $ 47,630 $ 55,994 Deferred Tax Asset: Tax carryforwards $ 1,991 $ 777 Other 1,986 3,225 Total $ 3,977 $ 4,002
The provision (benefit) for income taxes consists of the following (in thousands):
Fiscal Seven Five Fiscal Year Months Months Year Ended Ended Ended Ended December 31, January 1, June 8, January 3, 1993 1993 1992 1992 Current: Federal $ 168 $ - $ - $ - - State and Local - - - - - $ 168 $ - $ - $ - - Deferred: Federal $ 3,841 $ (834) $ - $ (8,905) State and Local 492 (106) - (1,123) $ 4,333 $ (940) $ - $ (10,028) Subtotal $ 4,501 $ (940) $ - $ (10,028) Extraordinary benefit: Federal $ (6,251) $ - $ - $ - - State and Local (768) - - - - $ (7,019) $ - $ - $ - - TOTAL $ (2,518) $ (940) $ - $ (10,028)
For the fiscal year ended January 3, 1992, deferred income tax benefits were provided for significant temporary differences in the recognition of revenue and expenses for tax and financial statement purposes. Principally, these benefits consisted of a net operating loss carryforward of $10.5 million for the year ended January 3, 1992. The tax provision or benefit for the periods ending December 31, 1993, January 1, 1993, June 8, 1992 and January 3, 1992, is 38.5%, 47.28%, 0% and 18.7% of pre-tax income or losses, respectively. The factors causing the rate to vary from the U.S. Federal statutory rate are as follows (in thousands):
Fiscal Seven Five Fiscal Year Months Months Year Ended Ended Ended Ended December 31, January 1, June 8, January 3, 1993 1993 1992 1992 Computed (expected) tax provision (benefit) $ 4,097 $ (676) $ (5,101) $ (18,256) Increase (decrease) from: State and local taxes 503 (106) - (1,123) Amortization of goodwill 634 546 - 1,517 Change due to limitation of net operating loss carryforwards - - 5,101 7,834 Other book to tax differences, net (733) (704) - - - $ 4,501 $ (940) $ - $ (10,028)
The Company has adjusted the deferred liability and current provision for taxes to reflect the change in tax rate from 34% to 35% enacted by the Revenue Reconciliation Act of 1993. At December 31, 1993, the Company has, for tax purposes, net operating loss carryforwards in the amount of $4.9 million. During the third quarter of 1993 the Company settled, and paid the federal taxes and interest applicable to an examination of the tax returns for the years 1986 through 1990. The settlement had no material impact on the Company's financial position or results of operations. In connection with the 1992 quasi-reorganization, the Company recorded an additional reserve for this contingency. As a result of this settlement, the Company adjusted the reserve by $4.0 million and correspondinely reduced goodwill. NOTE 7 - LEASE COMMITMENTS: The Company rents certain real estate and equipment under leases expiring at various dates to 2008. Several leases include options for renewal or purchase and contain clauses for payment of real estate taxes and insurance. In most cases management expects that in the normal course of business, most leases will be renewed or replaced by other leases. The following is a summary of minimum future rental payments required under operating leases that have initial non-cancellable lease terms in excess of one year:
(in thousands) 1994 $ 3,043 1995 2,035 1996 1,230 1997 1,114 1998 1,002 Thereafter 1,252 Total $ 9,676
Rental expense for operating leases amounted to $6,309,000, $3,562,000, $2,538,000, and $6,236,000 for the fiscal year ended December 31, 1993, for the seven months ended January 1, 1993, for the five months ended June 8, 1992, and for the fiscal year ended January 3, 1992, respectively. The Company has an agreement with the West Virginia Economic Development Authority to lease land, buildings and equipment for the Bruce Hardwood Floors Division plant which is located in Beverly, West Virginia. Land and buildings have a lease term of 18 years and equipment has a term of 10 years, both with 10 year renewal options. In June, 1990, the Company was reimbursed $22,653,000 by the West Virginia Economic Development Authority for the Phase I construction cost, which included all costs advanced by the Company in 1989 and the first six months of 1990 except for 28% of the cost of equipment. In December, 1993, the Company was reimbursed $5,535,000 by the West Virginia Economic Development Authority for 72% of the Phase II equipment cost. NOTE 8 - EMPLOYEE BENEFIT PLANS: Pension and Profit Sharing Plans: The Company sponsors several defined benefit pension plans and is required to contribute to several labor union-related defined contribution plans. Total pension expense was $967,000, $483,000, $217,000, and $898,000 for the year ended December 31, 1993, for the seven months ended January 1, 1993, for the five months ended June 8, 1992, and for the fiscal year ended January 3, 1992, respectively, including $481,000, $290,000, $207,000, and $722,000, respectively, for defined benefit plans, which includes amortization of prior service costs over the estimated average remaining service period of active employees. The Company does not have any requirement to provide life or health insurance coverage for retired employees. The following table sets forth the defined benefit pension plans' funded status at December 31, 1993, and January 1, 1993.
Fiscal years ended December 31, January 1, 1993 1993 (in thousands) Actuarial present value of benefit obligation: Vested $ 8,382 $ 7,959 Non-vested 481 466 Accumulated and projected benefit obligation 8,863 8,425 Plan assets at fair value 8,109 7,093 Projected benefit obligation in excess of plan assets (754) (1,332) Unrecognized prior service costs 105 72 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 928 1,324 Adjustment to recognize minimum liability (1,121) (1,434) Accrued pension expense $ (842) $ (1,370)
Net periodic pension costs for defined benefit pension plans for the year ended December 31, 1993, for the seven months ended January 1, 1993, for the five months ended June 8, 1992, and for the fiscal year ended January 3, 1992, includes the following components:
Fiscal Seven Five Fiscal year months months year ended ended ended ended December 31, January 1, June 8, January 3, 1993 1993 1992 1992 (in thousands) Service cost-benefits earned during the period $ 258 $ 152 $ 111 $ 277 Interest cost on projected benefit obligation 696 383 273 636 Actual return on plan assets (872) (247) (177) (676) Net amortization and deferral 399 2 - 485 Net periodic pension cost $ 481 $ 290 $ 207 $ 722
A weighted average discount rate of 8.50% at December 31, 1993, January 1, 1993 and January 3, 1992 was used to determine the benefit obligations of the Company's defined benefit pension plans. The plans do not provide for future compensation increases in calculating benefit obligations as the benefits do not derive from compensation levels but from length of service. The plans' assets are invested in a diversified portfolio of common stocks and fixed income securities. The expected long-term rate of return on plan assets was 8.0% in 1993, 1992, and 1991. The Company has a profit sharing plan for salaried employees to which contributions are made at the discretion of its Board of Directors as long as the Company has met specified financial goals. The fiscal 1993 and 1992 contributions were $500,000 and $400,000, respectively. In fiscal 1991, such goals were not met, and as such, no contribution was made. Deferred Compensation Plan: A liability existed under the provision of the deferred compensation plan for the Company. Final payments under this plan were made in January 1993 and August 1993. Long-Term Incentive Compensation Plan: In June 1993, the Company adopted the Triangle Pacific Corp. Long- Term Incentive Compensation Plan, which authorizes grants of various incentive awards to all regular salaried full-time officers and key employees of the Company. There are 1,000,000 shares of common stock reserved for this plan. In February 1994, stock options were granted for 37,700 shares at 100% of fair market value at the date of grant. These options expire in ten years. Also granted in February 1994 were 28,200 stock bonus shares and $425,517 in deferred cash bonuses. These awards vested 25% at the date of grant and will vest 25% each year thereafter, with the vested amount payable on the third anniversary of the date of grant. Stock Option Plan: In connection with the 1992 Restructuring, certain members of management received options for 201,007 shares of common stock pursuant to a Stock Option Plan which was adopted by the Board of Directors of the Company and approved by its sole shareholder at the time. The management options are exercisable at a price of $2.99 per share. The exercisability of the management options is tied to the achievement of certain levels of operating income. Twenty percent of the management options become exercisable in each fiscal year in which the Company meets the annual target for such fiscal year. For the years ended December 31, 1993 and January 1, 1993, twenty percent each year became exercisable. In addition, if the Company fails to meet the annual target in any fiscal year but meets the cumulative target in such fiscal year or any subsequent fiscal year, the management options for such fiscal year and all prior fiscal years will become exercisable if they had not previously become exercisable. Non-Employee Director Stock Option Plan: In June 1993, the Company adopted a Non-employee Director Stock Option Plan for up to 50,000 shares of common stock. Options have been granted to six non-employee directors for an aggregate of 30,000 shares, with option prices at 100% of fair market value at the date of grant. These options are currently exercisable and generally expire 10 years from the date of grant. Post-retirement and Post-employment Benefits: The Company, as of December 31, 1993, does not provide post- retirement medical benefits or any post-employment benefits other than those previously discussed. NOTE 9 - ACCRUED LIABILITIES: Amounts included in accrued liabilities are as follows (in thousands):
December 31, January 1, 1993 1993 Payroll $ 2,960 $ 2,410 Pension and profit sharing 2,060 2,091 Taxes, other than income 2,013 2,120 Insurance 3,043 2,512 Interest 6,623 2,935 Other 3,000 2,529 Total $ 19,699 $ 14,597
NOTE 10 - PRO-FORMA INCOME DATA (Unaudited): Pro-forma figures assume that the Company's third quarter 1993 Recapitalization and the 1992 Restructuring occurred on the first day of fiscal 1992. NOTE 11 - SUPPLEMENTARY QUARTERLY FINANCIAL DATA (Unaudited) (In thousands, except per share amounts)
Income Income (Loss) (Loss) Before Net Before Extra- Income Extra- ordinary Net (Loss) Net Gross ordinary Items Per Income Per Quarters Sales Profit Items Share (Loss) Share 1993 First Quarter $ 78,482 $ 17,947 $ 373 $ 0.04 $ 373 $ 0.04 Second Quarter 87,853 20,832 2,917 0.43 2,917 0.43 Third Quarter 85,911 18,274 1,835 0.17 (9,472) (0.88) Fourth Quarter 94,050 19,883 2,078 0.10 2,078 0.10 1992 First Quarter $ 71,408 $ 16,913 $(10,374) $ (a) $(10,374) $ (a) Second Quarter 74,416 17,672 (4,056) (a) 197,252 (a) Third Quarter 72,436 13,670 (2,180) (0.32) (2,180) (0.32) Fourth Quarter 74,583 16,184 558 0.08 558 0.08 (a) As the Company was a wholly-owned subsidiary of another company, earnings per share for the periods prior to June 8, 1992 are not meaningful. (b) The third quarter of 1993 reflects the results of the 1993 Recapitalization and the second quarter of 1992 reflects the 1992 Restructuring. (See Notes 1 and 2)
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Company The section entitled "Election of Directors" appearing in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held May 4, 1994 sets forth certain information regarding the directors and is incorporated herein by reference. The section entitled "Certain Transactions-Compliance with Section 16(a) of the Exchange Act" appearing in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held May 4, 1994 sets forth certain information regarding reporting under Section 16 of the Securities Exchange Act of 1934, as amended, and is incorporated herein by reference. Certain information with respect to the executive officers of the Registrant is set forth in Part I of this Form 10-K under the caption "Executive Officers of the Registrant." Item 11. Executive Compensation Information regarding the compensation of management is contained in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held on May 4, 1994, under the caption "Executive Compensation" and, except for the report of the compensation committee of the Board of Directors and the information contained under the caption "Performance Graph," is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information regarding ownership of the Company's Common Stock is contained in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held on May 4, 1994, under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information regarding certain relationships and related transactions is contained in the definitive proxy statement of the Registrant for the annual meeting of shareholders to be held on May 4, 1994, under the caption "Certain Transactions - Payments Pursuant to Previous Deferred Compensation Plan" and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1) Financial Statements Included in Part II of this report. - Report of independent public accountants - Consolidated balance sheets as of December 31, 1993 and January 1, 1993. - Consolidated statements of operations for the fiscal year ended December 31, 1993, for the seven months ended January 1, 1993, for the five months ended June 8, 1992, and for the fiscal year ended January 3, 1992. - Consolidated statements of changes in shareholders' investment for the fiscal year ended December 31, 1993, for the seven months ended January 1, 1993, for the five months ended June 8, 1992 and for the fiscal year ended January 3, 1992. - Consolidated statements of cash flows for the fiscal year ended December 31, 1993, for the seven months ended January 1, 1993, for the five months ended June 8, 1992 and for the fiscal year ended January 3, 1992. - Notes to consolidated financial statements. (a)(2) Financial Statement Schedules Included in Part IV of this report: For the fiscal year ended December 31, 1993, for the seven months ended January 1, 1993, for the five months ended June 8, 1992 and for the fiscal year ended January 3, 1992. - Schedule V - Property, plant and equipment. - Schedule VI - Accumulated depreciation of property, plant and equipment. - Schedule VIII - Valuation and qualifying accounts and reserves. - Schedule X - Supplementary income statement information. Information required by other schedules called for under Regulation S-X is either not applicable or is included in the consolidated financial statements or notes thereto. (a)(3) Exhibits The information required by this Item 14(a)(3) is set forth in the Index to Exhibits accompanying this annual report on Form 10-K. (b) Reports on Form 8-K No reports on Form 8-K were filed during the fourth quarter of the year ended December 31, 1993. (c) Exhibits 3.1 - Restated Certificate of Incorporation the Registrant. 3.2 - Amended and Restated Bylaws of the Registrant. 4.1 - Form of 10 1/2% Senior Notes due 2003 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64598)). 4.2 - Indenture governing 10 1/2% Senior Notes due 2003. 4.3 - Credit Agreement dated as of August 4, 1993, as amended, among the Registrant, the Lenders listed therein and CitiCorp USA, Inc., as the Co-Agent for the Lenders, and the Bank of Nova Scotia, as the Agent for the Lenders (incorporated herein by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 4.4 - Amendment No. 7 dated as of June 5, 1992 amending the Credit and Guaranty Agreement dated as of September 9, 1988 by and among TPC Holding Corp., Pacific Corp., the Registrant, the Banks listed therein and Morgan Guaranty Trust Company of New York (incorporated herein by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 4.5 - Amendment No. 5 dated as of June 5, 1992 amending the Security Agreement dated as of September 9, 1988 by and between the Registrant and J.P. Morgan (incorporated herein by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 4.6 - Subsidiary Security Agreement dated as of June 5, 1992 by and among each of the Subsidiary Guarantors listed herein and J.P. Morgan (incorporated herein by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 4.7 - Amendment No. 1 dated as of June 5, 1992 to the Subsidiary Guaranty amending the Guaranty dated as of April 1, 1991 given by the Subsidiary Guarantor listed therein (incorporated herein by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 4.8 - Pledge Agreement dated as of June 5, 1992 by and between the Registrant and J.P. Morgan (incorporated herein by reference to Exhibit 4.5 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 4.9 - Subsidiary Pledge Agreement dated as of June 5, 1992 by and between each of the Subsidiary Guarantors listed therein and J.P. Morgan (incorporated herein by reference to Exhibit 4.6 to the Registrant'sRegistration Statement on Form S-1 (Registration No. 33-50724)). 4.10 - Trademark Security Agreement dated as of June 5, 1992 by and between the Registrant and J.P. Morgan (incorporated herein by reference to Exhibit 4.7 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 4.11 - Amendment No. 6 dated as of June 5, 1992 amending the Senior Note Purchase Agreement dated as of September 30, 1988 by and among the Registrant, TPC Holding Corp and the Insurance Company Lenders listed therein (incorporated herein by reference to Exhibit 4.8 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.1 - Registration Rights Agreement, dated as of June 5, 1992 by and among the Registrant and the Persons listed therein (incorporated herein by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1 (Registration No. 33- 50724)). 10.2 - Lenders' Equity Agreement dated as of June 5, 1992 by and among the Registrant and the Banks and other financial institutions listed therein (incorporated herein by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.3 - ESJ Exchange Agreement dated as of June 5, 1992 by and among the Registrant, TPC Holding Corp. and the ESJ Entities (incorporated herein by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1 (Registration No. 33- 50724)). 10.4* - Management Equity Agreement dated as of June 5, 1992 by and among the Registrant and the individuals listed therein, and including a form of the Triangle Pacific Corp. Stock Option Plan (incorporated herein by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-1 (Registration No. 33- 50724)). 10.5* - Form of Amended and Restated Employment Agreement (incorporated herein by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1 (Registration No. 33- 50724)). 10.6* - Form of Services and Compensation Agreement (incorporated herein by reference to Exhibit 10.6 to the Registrant's Registration Statement on Form S-1 (Registration No. 33- 50724)). 10.7* - Salaried Employees Profit Sharing Plan (as restated January 1, 1993) of the Registrant (incorporated herein by reference to Exhibit 10.7 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.8* - Salaried Employees Cash Bonus plan of the Registrant (incorporated herein by reference to Exhibit 10.8 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.9*- Form of Stock Option Plan of the Registrant (incorporated herein by reference to Exhibit 10.12 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.10*- Form of Stock Option Agreement of the Registrant (incorporated herein by reference to Exhibit 10.13 to the Registrant's Registration Statement on Form S-1 (Registration No. 33- 64530)). 10.11 - Lease dated as of June 1, 1988 by and between West Virginia Jobs and Development Corporation and Registrant (incorporated herein by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-50724)). 10.12 - Amendment to Lease effective as of April 14, 1989 by and between West Virginia Jobs and Development Corporation and the Registrant (incorporated herein by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.13 - Second Amendment to lease effective as of November 1, 1991 by and between West Virginia Economic Development Authority, as successor to West Virginia Jobs and Development Corporation, and the Registrant (incorporated herein by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.14 - Third Amendment to Lease effective as of March 10, 1993 by and between West Virginia Economic Development Authority, as successor to West Virginia Jobs and Development Corporation, and the Registrant (incorporated herein by reference to Exhibit 10.17 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.15*- Triangle Pacific Corp. 1993 Long-Term Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.18 to the Registration's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.16*- Triangle Pacific Corp. Nonemployee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.17 - Form of Indemnity Agreement between the Registrant and each of its directors and executive officers. 10.18 - Amendment No. 8 dated as of January 7, 1993 amending the Credit and Guaranty Agreement dated as of September 9, 1988 by and among TPC Holding Corp., Pacific Corp, the Registrant and J.P. Morgan (incorporated herein by reference to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64530)). 10.19 - Amendment No. 6 dated as of August 15, 1992 amending the Security Agreement dated as of September 9, 1988 by and between the Registrant and J.P. Morgan (incorporated herein by reference to Exhibit 10.23 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-64570)). 23.1 - Consent of Arthur Andersen & Co. 27.1 - Financial Data Schedule. __________ * Management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. TRIANGLE PACIFIC CORP. By: /s/ Floyd F. Sherman Floyd F. Sherman Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Floyd F. Sherman Chairman of the Board March 30, 1994 Floyd F. Sherman and President (Principal Executive Officer) /s/ M. Joseph McHugh Director and Senior March 30, 1994 M. Joseph McHugh Executive Vice President (Principal Financial Officer) /s/ Robert J. Symon Vice President and March 30, 1994 Robert J. Symon Controller (Principal Accounting Officer) /s/ B. William Bonnivier Director March 30, 1994 B. William Bonnivier /s/ Charles M. Hansen, Jr. Director March 30, 1994 Charles M. Hansen, Jr. /s/ David R. Henkel Director March 30, 1994 David R. Henkel Director March __, 1994 Jack L. McDonald Director March __, 1994 Carson R. McKissick /s/ Karen Gordon Mills Director March 30, 1994 Karen Gordon Mills SCHEDULE V TRIANGLE PACIFIC CORP. AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT (in thousands)
Column A Column B Column C Column D Column E Column F Balance at Balance beginning Additions Retire- Other at end Classifications of period at cost ments changes of period Fiscal Year ended January 3, 1992: Land $ 16,302 $ 25 $ - $ - $ 16,327 Buildings and improvements 50,142 796 236 (1,613) 49,089 Equipment, furni- ture & fixtures 82,234 1,435 180 (1,824) 81,665 $ 148,678 $ 2,256 $ 416 $ (3,437) $ 147,081 Five months ended June 8, 1992: Land $ 16,327 $ 6 $ - $ (3,000) $ 13,333 Buildings and improvements 49,089 380 31 (6,532) 42,906 Equipment, furni- ture & fixtures 81,665 504 811 (26,203) 55,155 $ 147,081 $ 890 $ 842 $ (35,735)(1)$ 111,394 Seven months ended January 1, 1993: Land $ 13,333 $ 119 $ - $ - $ 13,452 Buildings and improvements 42,906 299 15 (4,721) 38,469 Equipment, furni- ture & fixtures 55,155 1,968 343 (1,420) 55,360 $ 111,394 $ 2,386 $ 358 $ (6,141)(1)$ 107,281 Fiscal year ended December 31, 1993: Land $ 13,452 $ - $ - $ - $ 13,452 Buildings and improvements 38,469 1,397 - 3,516 43,382 Equipment, furni- ture & fixtures 55,360 6,239 47 4,207 65,759 $ 107,281 $ 7,636 $ 47 $ 7,723(2) $ 122,593 (1) Results primarily from the quasi-reorganization. The Company restated its property, plant and equipment to fair value. In conncection with this, land was reduced by $3.0 million and buildings and equipment by $6.5 million. In addition, the accumulated depreciation was eliminated against the applicable property categories. (See Note 3 to Consolidated Financial Statements.) (2) Represent costs incurred to replace the buildings and equipment at Thompsontown, Pennsylvania which was destroyed by fire. The Company was reimbursed for these costs by an insurance company.
SCHEDULE VI TRIANGLE PACIFIC CORP. AND SUBSIDIARIES ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT (in thousands)
Column A Column B Column C Column D Column E Column F Additions Balance at charged to Balance beginning costs and Retire- Other at end Classifications of period expenses ments changes of period Fiscal Year ended January 3, 1992: Buildings and improvements $ 4,323 $ 2,000 $ 38 $ (254) $ 6,031 Equipment, furni- ture & fixtures 17,259 7,431 294 (432) 23,964 $ 21,582 $ 9,431 $ 332 $ (686) $ 29,995 Five months ended June 8, 1992: Buildings and improvements $ 6,031 $ 797 $ 21 $ (6,807) $ - - Equipment, furni- ture & fixtures 23,964 2,937 780 (26,121) - - $ 29,995 $ 3,734 $ 801 $ (32,928)(1)$ - - Seven months ended January 1, 1993: Buildings and improvements $ - $ 1,155 $ - $ - $ 1,155 Equipment, furni- ture & fixtures - 4,100 - - 4,100 $ - $ 5,255 $ - $ - $ 5,255 Fiscal year ended December 31, 1993: Buildings and improvements $ 1,155 $ 1,700 $ - $ - $ 2,855 Equipment, furni- ture & fixtures 4,100 6,229 13 - 10,316 $ 5,255 $ 7,929 $ 13 $ - $ 13,171 (1) Results primarily from the quasi-reorganization. The accumulated depreciation was eliminated against the applicable property categories. (See Note 3 to Consolidated Financial Statements.)
SCHEDULE VIII TRIANGLE PACIFIC CORP. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in thousands)
Column A Column B Column C Column D Column E Additions Balance at charged to Balance beginning costs and at end of Classifications of period expenses Deductions(1) period Fiscal Year ended January 3, 1992: Reserve for doubtful accounts and returns and and allowances $ 3,674 $ 2,170 $ 2,406 $ 3,438 Five months ended June 8, 1992: Reserve for doubtful accounts and returns and and allowances $ 3,438 $ 678 $ (19) $ 4,135 Seven months ended January 1, 1993: Reserve for doubtful accounts and returns and and allowances $ 4,135 $ 1,438 $ 475 $ 5,098 Fiscal Year ended December 31, 1993: Reserve for doubtful accounts and returns and and allowances $ 5,098 $ 485 $ 2,260 $ 3,323 (1) Write-offs of specific accounts, net of recoveries. SCHEDULE X TRIANGLE PACIFIC CORP. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION (in thousands)
Column A Column B Charged to costs and expenses Fiscal Seven Five Fiscal year months months year ended ended ended ended December 31, January 1, June 8, January 3, Item 1993 1993 1992 1992 Maintenance and repairs $ 7,442 $ 3,502 $ 2,630 $ 5,148 Depreciation and amortization of intangible assets, pre-operating costs and similar deferrals: Amortization of goodwill $ 1,613 $ 884 $ 1,863 $ 4,463 Amortization of deferred financing costs 536 - 1,537 3,773 Amortization of trademark 800 416 467 1,000 $ 2,949 $ 1,300 $ 3,867 $ 9,236 Taxes, other than payroll and income taxes * * * * Royalties * * * * Advertising costs $ 6,317 $ 3,986 $ 3,213 $ 5,010 *Less than 1% of sales.
EX-1 2 ARTICLES RESTATED CERTIFICATE OF INCORPORATION OF TRIANGLE PACIFIC CORP. TRIANGLE PACIFIC CORP., a corporation organized and existing under the laws of the State of Delaware (herein called the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is Triangle Pacific Corp. The Corporation was originally incorporated under the name "Tripac Holding Corp.", and the original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on February 25, 1986. 2. This Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Restated Certificate of Incorporation of the Corporation filed with the Secretary of State of Delaware on October 19, 1992. 3. The text of the Restated Certificate of Incorporation of the Corporation filed with the Secretary of State of Delaware on October 19, 1992, is hereby restated and further amended to read in its entirety as set forth on Annex A attached hereto and incorporated herein by reference. 4. Upon this Restated Certificate of Incorporation becoming effective pursuant to the General Corporation Law of the State of Delaware (the "Effective Time"): (a) Each outstanding share of Series A Common Stock, par value $.01 per share, of the Corporation ("Series A Stock") shall be automatically reclassified as and changed and converted into .67 of a share of Common Stock, par value $.01 per share, of the Corporation ("Common Stock"), without any action by the holder thereof. (b) No fractional shares of Common Stock shall be issued as a result of the reclassification of Series A Stock into Common Stock, but each stockholder whose shares of Series A Stock are reclassified into shares of Common Stock and who would otherwise be entitled to receive a fractional share of Common Stock by reason of such reclassification shall be entitled to receive from the Corporation, in lieu of such fractional share, a cash payment in an amount equal to $10.00 multiplied by such fraction. (c) Each certificate that represents shares of Series A Stock outstanding immediately prior to the Effective Time shall thereafter be deemed to represent that number of whole shares of Common Stock determined by multiplying the number of shares of Series A Stock previously represented by such certificate by .67. Each person who is a holder of record of outstanding shares of Series A Stock at the Effective Time shall thereafter be entitled to receive from the Corporation a certificate or certificates representing the number of whole shares of Common Stock into which such shares of Series A Stock are reclassified and a check in payment of the value of any fractional share, upon the surrender by such holder to the Corporation of the certificate or certificates that represented such shares of Series A Stock. -2- (d) The aggregate amount of capital represented by the shares of Common Stock into which the outstanding shares of Series A Stock are reclassified shall be the amount determined by multiplying the total number of such shares of Common Stock outstanding immediately after such reclassification by the amount of One Cent ($.01); provided, however, that the foregoing shall not prohibit the Corporation from thereafter increasing or reducing the amount of capital represented by any of such shares in any manner permitted by applicable law. The reclassification of the Series A Stock effects a reduction of the capital of the Corporation in the amount of $33,039, which shall be transferred to the surplus of the Corporation. The assets of the Corporation remaining after such reduction are sufficient to pay any debts of the Corporation for which payment has not been otherwise provided. 5. This Restated Certificate of Incorporation has been duly adopted in accordance with the requirements of Sections 242 and 245 of the General Corporation Law of the State of Delaware. The stockholders of the Corporation have duly adopted this Restated Certificate of Incorporation pursuant to written consents given in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware, and written notice of the taking of such corporate action without a meeting by less than unanimous written consent has been given to stockholders who did not consent in writing to the action in accordance with the provisions of that Section. 6. This Restated Certificate of Incorporation shall become effective on August 17, 1993, concurrently with the consummation of the underwritten public offerings of the Corporation's equity and debt securities registered with the Securities and Exchange Commission pursuant to Registration Statement No. 33-64530 and Registration Statement No. 33-64598, and in any event by not later than 5:00 p.m., eastern time, on such date. IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been signed under the seal of the Corporation this 13th day of August, 1993. TRIANGLE PACIFIC CORP. By: /s/ M J. McHugh Name: M. Joseph McHugh Title: Senior Executive Vice President and Treasurer [Seal] -3- Attest: /s/ Darryl T. Marchand Name: Darryl T. Marchand Title: Secretary 83411 08208 CORP 32701 -4- ANNEX A RESTATED CERTIFICATE OF INCORPORATION OF TRIANGLE PACIFIC CORP. ARTICLE I The name of the corporation is Triangle Pacific Corp. (the "Corporation"). ARTICLE II The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is 40,000,000, divided into 10,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"), and 30,000,000 shares of Common Stock, par value $.01 per share (the "Common Stock"). The following is a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of the classes of stock of the Corporation: Section I. Preferred Stock Shares of Preferred Stock may be issued from time to time in one or more series as from time to time may be determined by the Board of Directors of the Corporation. Each series shall be distinctly designated. The Board of Directors of the Corporation is hereby expressly granted authority to fix, by resolution or resolutions adopted prior to the issuance of any shares of each particular series of Preferred Stock, the designation, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, if any, of such series, including, but without limiting the generality of the foregoing, the following: -2- (1) the designation of, and the number of shares of Preferred Stock which shall constitute, the series, which number may be increased (except as otherwise fixed by the Board of Directors, and in any event not above the total number of authorized shares of the class) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (2) the rate and times at which (or the method of determination thereof), and the terms and conditions upon which, dividends, if any, on shares of the series shall be paid, the nature of any preferences or the relative rights of priority of such dividends to the dividends payable on any other class or classes of stock of the Corporation or on any other series of Preferred Stock, and a statement whether such dividends shall be cumulative; (3) whether shares of the series shall be convertible into or exchangeable for shares of capital stock or other securities or property of the Corporation or of any other corporation or entity, and, if so, the terms and conditions of such conversion or exchange, including any provisions for the adjustment of the conversion or exchange rate in such events as the Board of Directors shall determine; (4) whether shares of the series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount and type of consideration payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (5) the rights, if any, of the holders of shares of the series upon voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up of the Corporation; (6) whether shares of the series shall have a sinking fund or purchase account for the redemption or purchase of shares of the series, and, if so, the terms, conditions and amount of such sinking fund or purchase account; (7) whether shares of the series shall have voting rights in addition to the voting rights provided by law, which may, without limiting the generality of the foregoing, include (a) the right to more or less than one vote per share on any or all matters voted upon by the Corporation's stockholders and (b) the right to vote, as a series by itself or together with other series of Preferred Stock or together with all series of Preferred Stock as a class or -3- with the Common Stock as a class, upon such matters, under such circumstances and upon such conditions as the Board of Directors may fix, including, without limitation, the right, voting as a series by itself or together with other series of Preferred Stock or together with all series of Preferred Stock as a class, to elect one or more directors of the Corporation in the event there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such other circumstances and upon such conditions as the Board of Directors may determine; and (8) any other powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions, of shares of that series. The relative powers, preferences and rights of each series of Preferred Stock in relation to the powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to the authority granted in this Section I, and the consent, by class or series vote or otherwise, of the holders of Preferred Stock or such of the series of the Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Corporation of any other series of Preferred Stock, whether the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in such resolution or resolutions adopted with respect to any series of Preferred Stock that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. Section II. Common Stock (1) Dividends. After the requirements with respect to preferential dividends on Preferred Stock, if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts and subject further to any other conditions which may be fixed in accordance with the provisions of this Restated Certificate of Incorporation, then, but not otherwise, the holders of Common Stock shall be entitled to receive such dividends, if any, as may -4- be declared from time to time by the Board of Directors on the Common Stock, which dividends shall be paid out of assets legally available for the payment of dividends and shall be distributed among the holders of shares of the Common Stock pro rata in accordance with the number of shares of such stock held by each such holder. (2) Liquidation. After distribution in full of the preferential amount, if any, to be distributed to the holders of Preferred Stock or both such classes of stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up of the Corporation, the holders of the Common Stock shall be entitled to receive all the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders, which assets shall be distributed pro rata in accordance with the number of shares of such stock held by each such holder. (3) Voting. Except as may otherwise be required by law, this Restated Certificate of Incorporation or the provisions of the resolution or resolutions as may be adopted by the Board of Directors pursuant to Section I of this Article IV, each holder of Common Stock shall have one vote in respect of each share of Common Stock held by such holder on each matter voted upon by the stockholders. Cumulative voting of shares of Common Stock is prohibited. ARTICLE V The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: (1) Management. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. (2) Number, Election and Terms of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the Board of Directors shall consist of not less than seven and not more than eleven directors, and the exact number of directors which shall constitute the Board of Directors shall be fixed from time to time by resolution adopted by at least two-thirds of the members of the Board of Directors then in office. The directors, other than those who may be elected by the holders of any series of Preferred Stock under specified circumstances, shall be -5- classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the annual meeting of stockholders to be held in 1994, the term of office of the second class to expire at the annual meeting of stockholders to be held in 1995 and the term of office of the third class to expire at the annual meeting of stockholders to be held in 1996, with each director to hold office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. At each annual meeting of stockholders of the Corporation, commencing with the annual meeting to be held in 1994, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualified or until their earlier resignation or removal. Election of directors need not be by written ballot unless the Bylaws of the Corporation so provide. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. (3) Stockholder Nomination of Directors and Introduction of Business. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner and to the extent provided in the Bylaws of the Corporation. (4) Vacancies and Newly Created Directorships. Subject to the rights of the holders of any series of Preferred Stock, any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the authorized number of directors, may be filled only by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until their successors are duly elected and qualified or until their earlier resignation or removal. (5) Removal. Subject to the rights of the holders of any series of Preferred Stock, any director may be removed from office at any time, but only for cause, as defined below, and only by the affirmative vote of the holders of a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote in the election of directors generally, voting together as a single class. For purposes of the immediately preceding sentence, and except as may otherwise be provided by law, "cause" shall mean: (a) the willful and continuous failure of a director to substantially perform such -6- director's duties to the Corporation (other than any such failure resulting from incapacity due to physical or mental illness); (b) the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation; or (c) the termination for cause of the director's employment as a director, officer or employee of any other corporation, partnership or other enterprise. (6) Action by Written Consent. Subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. (7) Bylaws. In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to adopt, alter, amend and repeal the Bylaws of the Corporation, subject to the power of the stockholders of the Corporation to adopt, alter, amend and repeal the Bylaws; provided, however, that, with respect to the power of the stockholders to adopt, alter, amend and repeal the Bylaws of the Corporation, notwithstanding any other provision of this Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Corporation required by law, this Restated Certificate of Incorporation or any resolution or resolutions as may be adopted by the Board of Directors pursuant to Section I of Article IV hereof, the affirmative vote of the holders of at least 66_% of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote in the election of directors generally, voting together as a single class, shall be required to adopt, alter, amend or repeal any provision of the Bylaws of the Corporation. (8) Powers of Directors. In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the statutes of Delaware, this Restated Certificate of Incorporation and any Bylaws adopted by the stockholders; provided, however, that no Bylaws thereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such Bylaws had not been adopted. (9) Amendment, Repeal or Alteration. Notwithstanding any other provision of this Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote -7- or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Corporation required by law, this Restated Certificate of Incorporation or any resolution or resolutions as may be adopted by the Board of Directors pursuant to Section I of Article IV hereof, the affirmative vote of the holders of at least 66_% of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote in the election of directors generally, voting together as a single class, shall be required to alter, amend or repeal, or adopt any provision inconsistent with, this Article V. ARTICLE VI No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof shall not be permitted under the General Corporation Law of the State of Delaware as amended from time to time. Any repeal or modification of this Article VI shall not adversely affect any right or protection of a director of the Corporation in respect of any act or omission occurring prior to the time of such repeal or modification. The provisions of this Article VI shall not be deemed to limit or preclude indemnification of a director by the Corporation for any liability of a director which has not been eliminated by the provisions of this Article VI. ARTICLE VII The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. 83411 08208 CORP 33281 -8- EX-2 3 BYLAWS AMENDED AND RESTATED BYLAWS OF TRIANGLE PACIFIC CORP. Effective August 17, 1993 TABLE OF CONTENTS .Begin Table C. ARTICLE I OFFICES........................................ 1 Section 1..................................Registered Office 1 Section 2......................................Other Offices 1 ARTICLE II ..........................MEETINGS OF STOCKHOLDERS 1 Section 1..................................Place of Meetings 1 Section 2....................................Annual Meetings 1 Section 3...................................Special Meetings 1 Section 4.............................................Quorum 2 Section 5.............................................Voting 2 Section 6..............List of Stockholders Entitled to Vote 2 Section 7........................................Record Date 3 Section 8............Conduct of Meetings by Presiding Person 3 Section 9........................Notification of Nominations 4 Section 10....................Notice of Stockholder Business 5 Section 11.........................Action by Written Consent 6 ARTICLE III DIRECTORS...................................... 6 Section 1...................Number and Election of Directors 6 Section 2..........................................Vacancies 7 Section 3..................................Duties and Powers 7 Section 4...........................................Meetings 7 Section 5.............................................Quorum 7 Section 6.........................Actions by Written Consent 8 Section 7...................Meetings by Conference Telephone 8 Section 8.........................................Committees 8 Section 9.......................................Compensation 8 Section 10..............................Interested Directors 8 Section 11...........................................Removal 9 ARTICLE IV OFFICERS....................................... 9 Section 1............................................General 9 Section 2...........................................Election 9 Section 3.................Chairman of the Board of Directors 10 Section 4..........................................President 10 Section 5..........................Executive Vice Presidents 10 Section 6....................................Vice Presidents 10 Section 7..........................................Secretary 11 Section 8.........................................Controller 11 Section 9..........................................Treasurer 11 Section 10.............................Assistant Secretaries 11 Section 11..............................Assistant Treasurers 12 Section 12....................................Other Officers 12 ARTICLE V STOCK.......................................... 12 Section 1...............................Form of Certificates 12 Section 2.........................................Signatures 12 Section 3..................................Lost Certificates 12 Section 4..........................................Transfers 13 ARTICLE VI NOTICES........................................ 13 Section 1............................................Notices 13 Section 2..................................Waivers of Notice 13 ARTICLE VII INDEMNIFICATION................................ 13 Section 1............................................General 13 Section 2....................Expenses Related to Proceedings 14 -2- Section 3............................Advancement of Expenses 14 Section 4........................Request for Indemnification 14 Section 5......Determining Entitlement to Indemnification if no Change of Control................................ 14 Section 6......Determining Entitlement to Indemnification if Change of Control................................... 14 Section 7..................Procedures of Independent Counsel 15 Section 8....................Expenses of Independent Counsel 15 Section 9......................................Trial De Novo 15 Section 10...................................Non-Exclusivity 16 Section 11.........................Insurance and Subrogation 17 Section 12......................................Severability 17 Section 13...................Certain Persons Not Entitled to Indemnification..................................... 17 Section 14.......................................Definitions 17 Section 15...........................................Notices 18 Section 16................................Contractual Rights 19 ARTICLE VIII GENERAL PROVISIONS............................. 19 Section 1..........................................Dividends 19 Section 2......................................Disbursements 19 Section 3........................................Fiscal Year 19 Section 4.....................................Corporate Seal 19 ARTICLE IX AMENDMENT...................................... 19 .End Table C. -3- BYLAWS OF TRIANGLE PACIFIC CORP. (hereinafter the "Corporation") ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be located at 1209 Orange Street, City of Wilmington, State of Delaware 19801. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. The annual meeting of stockholders shall be held on such date and at such time as may be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meeting the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting, except that where the matter to be acted upon is a merger or consolidation of the Corporation or a sale, lease or exchange of all or substantially all its assets, such notice shall be given not less than twenty nor more than sixty days prior to such meeting. Section 3. Special Meetings. Unless otherwise prescribed by law or by the Corporation's Restated Certificate of Incorporation as may be amended and restated from time to time (the "Certificate of Incorporation"), special meetings of stockholders, for any purpose or purposes, may be called by (a) the Chairman of the Board of Directors, (b) the President or (c) the Chairman of the Board of Directors, the President or the Secretary of the Corporation at (i) the instruction of a majority of the Board of Directors or (ii) the written request of the holders of at least 50% of the total number of shares of stock then outstanding and entitled to vote stating the specific purpose or purposes thereof. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is being called shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the meeting, except that where the matter to be acted upon is a merger or consolidation of the Corporation or a sale, lease or exchange of all or substantially all its assets, such notice shall be given not less than twenty nor more than sixty days prior to such meeting. Section 4. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. Section 5. Voting. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the voting power of the stock represented and entitled to vote thereat. Such votes may be cast in person or by proxy but no proxy shall be voted or acted upon after three years from its date, unless such proxy provides for a longer period. The presiding person at a meeting of stockholders, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 6. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the -2- stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder of the Corporation who is present. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders of the Corporation. Section 7. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which, in the case of a meeting, shall not be less than the minimum nor more than the maximum number of days prior to the scheduled date of such meeting permitted under the laws of the State of Delaware or the rules of any exchange on which shares of capital stock of the Company are listed for trading and which, in the case of any other action, shall be not more than the maximum number of days prior to any such action permitted by the laws of the State of Delaware. If no such record date is fixed by the Board of Directors, the record date shall be that prescribed by the laws of the State of Delaware. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 8. Conduct of Meetings by Presiding Person. All determinations of the presiding person at each meeting of stockholders shall be conclusive unless a matter is determined otherwise upon motion duly adopted by the affirmative vote of the holders of at least 66_% of the voting power of the shares of capital stock of the Corporation entitled to vote in the election of directors generally, held by stockholders present in person or represented by proxy at such meeting. Accordingly, in any meeting of stockholders or part thereof, the presiding person shall have the sole power to determine appropriate rules or to dispense with theretofore prevailing rules. Without limiting the foregoing, the following rules shall apply: -3- (a) The presiding person may ask or require that anyone not a bona fide stockholder or proxy leave the meeting. (b) A resolution or motion shall be considered for vote only if proposed by a stockholder or duly authorized proxy, and seconded by an individual, who is a stockholder or duly authorized proxy, other than the individual who proposed the resolution or motion, subject to compliance with any other requirements concerning such a proposed resolution or motion contained in these Bylaws. The presiding person may propose any motion for vote. The order of business at all meetings of stockholders shall be determined by the presiding person. (c) The presiding person may impose any reasonable limits with respect to participation in the meeting by stockholders, including, but not limited to, limits on the amount of time at the meeting taken up by the remarks or questions of any stockholder, limits on the numbers of questions per stockholder and limits as to the subject matter and timing of questions and remarks by stockholders. (d) Before any meeting of stockholders, the Board of Directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the presiding person may, and on the request of any stockholder or a stockholder's proxy shall, appoint inspector(s) of election at the meeting of stockholders. If any person appointed as inspector fails to appear or fails or refuses to act, the presiding person may, and upon the request of any stockholder or a stockholder's proxy shall, appoint a person to fill such vacancy. The duties of these inspectors shall be as follows: (i) determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; (ii) receive votes or ballots; (iii) hear and determine all challenges and questions in any way arising in connection with the right to vote; (iv) count and tabulate all votes; (v) report to the Board of Directors the results based on the information assembled by the inspectors; and -4- (vi) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders. Notwithstanding the foregoing, the final certification of the results of any election or other matter acted upon at a meeting of stockholders shall be made by the Board of Directors. Section 9. Notification of Nominations. Subject to the rights of the holders of any series of Preferred Stock of the Corporation to elect directors under specified circumstances, nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. Subject to the foregoing, only a stockholder of record entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting of stockholders and only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation and has been received by the Secretary: (i) with respect to an election to be held at an annual meeting of stockholders, not less than ninety days nor more than 180 days prior to the anniversary of the previous year's annual meeting of stockholders; and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, not less than forty days nor more than sixty days prior to the date of such meeting, provided, however, that in the event that less than fifty days' notice or prior public disclosure of the date of the special meeting of stockholders is given or made to the stockholders, such notice must be so received not later than the close of business on the seventh day following the day on which such notice of date of the meeting was mailed or such public disclosure was made. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; and (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors. To be effective, each notice of intent to make a nomination given hereunder shall be accompanied by the written -5- consent of each nominee to serve as a director of the Corporation if elected. The presiding person at the meeting shall, if the facts warrant, determine that a nomination was not properly brought before the meeting in accordance with the provisions hereof and, if such presiding person should so determine, he or she shall declare to the meeting that such nomination was not properly brought before the meeting and shall not be considered. Section 10. Notice of Stockholder. At a meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting, business must (a) be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or by or at the direction of the stockholders calling the meeting pursuant to Section 3 of this Article II, (b) otherwise be properly brought before the meeting by or at the direction of the Board of Directors or (c) otherwise (i) be properly requested to be brought before the meeting by a stockholder of record entitled to vote in the election of directors generally and (ii) constitute a proper subject to be brought before such meeting. For business to be properly brought before a meeting of stockholders, any stockholder who intends to bring any matter (other than the election of directors) before a meeting of stockholders and is entitled to vote on such matter must deliver written notice of such stockholder's intent to bring such matter before the meeting of stockholders, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation. Such notice must be received by the Secretary: (i) with respect to an annual meeting of stockholders, not less than ninety days nor more than 180 days prior to the anniversary of the previous year's annual meeting of stockholders; and (ii) with respect to a special meeting of stockholders, not less than forty days nor more than sixty days prior to the date of such meeting, provided, however, that in the event that less than fifty days' notice or prior public disclosure of the date of the special meeting of stockholders is given or made to the stockholders, such notice must be so received not later than the close of business on the seventh day following the day on which such notice of date of the meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting of stockholders: (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business; (c) the class and number of shares of the Corporation which are beneficially owned by the -6- stockholder; and (d) any material interest of the stockholder in such business. No business shall be conducted at a meeting of stockholders except in accordance with the procedures set forth in this Section 10. The presiding person at the meeting shall, if the facts warrant, determine that (i) the business proposed to be brought before the meeting is not a proper subject therefor and/or (ii) such business was not properly brought before the meeting in accordance with the provisions hereof and, if such presiding person should so determine, he or she shall declare to the meeting that (i) the business proposed to be brought before the meeting is not a proper subject therefor and/or (ii) such business was not properly brought before the meeting and shall not be transacted. Section 11. Action by Written Consent. Subject to the rights of the holders of any series of Preferred Stock of the Corporation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. ARTICLE III DIRECTORS Section 1. Number and Election of Directors. The business and affairs of the Corporation shall be managed by a Board of Directors. Subject to the rights of the holders of any series of Preferred Stock of the Corporation to elect additional directors under specified circumstances, the Board of Directors shall consist of not less than seven and not more than eleven directors, and the exact number of directors which shall constitute the Board of Directors shall be fixed from time to time by resolution adopted by at least two-thirds of the members of the Board of Directors then in office. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Except as provided in Section 2 of this Article III, and subject to the rights of the holders of any series of Preferred Stock of the Corporation, directors shall be elected by a plurality of the votes cast at annual meetings of stockholders. The directors, other than those who may be elected by the holders of any series of Preferred Stock of the Corporation under specified circumstances, shall be classified, with respect to the time for which they severally hold office, into three classes, as -7- nearly equal in number as possible, with the term of office of the first class to expire at the annual meeting of stockholders to be held in 1994, the term of office of the second class to expire at the annual meeting of stockholders to be held in 1995 and the term of office of the third class to expire at the annual meeting of stockholders to be held in 1996, with each director to hold office until his or her successor is duly elected and qualified or until his or her resignation or removal. At each annual meeting of stockholders of the Corporation, commencing with the annual meeting to be held in 1994, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon notice to the Corporation. A director need not be a stockholder, a citizen of the United States or a resident of the State of Delaware. Section 2. Vacancies. Subject to the rights of the holders of any series of Preferred Stock of the Corporation, any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the authorized number of directors, may be filled only by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until their successors are duly elected and qualified or until their earlier resignation or removal. If there are no directors in office, then an election of directors may be held in the manner provided by statute. Section 3. Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. Section 4. Meetings. Meetings of the Board of Directors shall be held at such time as the Board of Directors shall fix. Meetings shall be held at such place within or without the State of Delaware as may be fixed by the Board of Directors. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board of Directors, the President or any two directors then in office. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral or any other mode of notice of -8- the time and place shall be given for special meetings at least one day before the meeting. Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him or her before or after the time stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he or she attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice. Section 5. Quorum. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 6. Actions by Written Consent. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, in one document or in counterparts, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 7. Meetings by Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or any committee may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting. Section 8. Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate -9- members of any committee who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 9. Compensation. The Board of Directors may from time to time by resolution authorize the payment of fees or other compensation to the directors for services as such to the Corporation, including, but not limited to, a fixed sum and expenses for attendance at each regular or special meeting of the Board of Directors or any committee thereof; provided that nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 10. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if (a) the material facts as to his, her or their relationship or interest as to the contract or transaction are disclosed or are known to the Board of Directors or committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum, (b) the material facts as to his, her or their relationship or interest as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of the stockholders or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in -10- determining the presence of a quorum at a meeting of the Board of Directors or a committee that authorizes the contract or transaction. Section 11. Removal. Subject to the rights of the holders of any series of Preferred Stock of the Corporation, any director may be removed from office at any time, but only for cause, as defined below, and only by the affirmative vote of the holders of a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote in the election of directors generally, voting together as a single class. For purposes of the immediately preceding sentence, and except as may otherwise be provided by law, "cause" shall mean: (1) the willful and continuous failure of a director to substantially perform such director's duties to the Corporation (other than any such failure resulting from incapacity due to physical or mental illness); (2) the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation; or (3) the termination for cause of the director's employment as a director, officer or employee of any other corporation, partnership or other enterprise. ARTICLE IV OFFICERS Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President and a Secretary. The Board of Directors, in its discretion, may also choose a Chairman of the Board (who must be a director), a Treasurer and one or more Executive Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders of the Corporation or, except in the case of the Chairman of the Board of Directors, directors of the Corporation. Section 2. Election. The Board of Directors at its first meeting held after each annual meeting of stockholders shall elect the officers of the Corporation, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified or until their earlier death, resignation or removal. Any officer elected -11- by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors and may be altered from time to time except as otherwise provided by contract. Section 3. Chairman of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and of the Board of Directors. Except where by law the signature of the President is required, the Chairman of the Board of Directors shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation. During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all the powers and discharge all the duties of the President. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these Bylaws or by the Board of Directors. Section 4. President. The President shall, subject to the control of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He or she shall be the Chief Executive Officer of the Corporation and shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these Bylaws, the Board of Directors or the President. In the absence or disability of the Chairman of the Board of Directors, or if there be none, the President shall preside at all meetings of the stockholders and (if the President is a director) the Board of Directors. The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these Bylaws or by the Board of Directors. Section 5. Executive Vice Presidents. At the request of the President or in his or her absence or in the event of his or her inability or refusal to act (and if there be no Chairman of the Board of Directors or if the Chairman of the Board of Directors shall be unable or refuses to act or is absent), the Executive Vice President or the Executive Vice Presidents, if there be more than one, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Executive Vice President shall perform such other duties and have -12- such other powers as the Board of Directors or the President from time to time may prescribe. Section 6. Vice Presidents. In the absence or disability of the President (and if there be no Chairman of the Board of Directors and no Executive Vice Presidents or if the Chairman of the Board of Directors and the Executive Vice Presidents shall be unable or refuse to act or are absent), the Vice President or the Vice Presidents, if there be more than one, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors, the President or the Executive Vice Presidents from time to time may prescribe. If there be no Chairman of the Board of Directors, Executive Vice President or Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. If any standing committee should appoint someone other than the Secretary to perform such duties at any meeting of such standing committee, the person so appointed shall promptly furnish to the Secretary a true and accurate copy of the minutes of the meeting of such standing committee. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he or she shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or an Assistant Secretary, if there by one, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The Secretary shall see that all books, reports, statements, certificates and other documents -13- and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 8. Controller. The Controller, if there be one, shall be the principal officer in charge of the accounts of the Corporation and shall perform such duties as from time to time may be assigned to him by the Board of Directors. Section 9. Treasurer. The Treasurer, if there be one, shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meeting, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. Section 10. Assistant Secretaries. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Executive Vice President, if there be one, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his or her disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 11. Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Executive Vice President, if there be one, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his or her disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If -14- required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. Section 12. Other Officers. Such other officers as the Board of Directors may appoint shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. ARTICLE V STOCK Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed in the name of the Corporation (a) by the President or an Executive Vice President or Vice President and (b) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such holder. Section 2. Signatures. Where a certificate is countersigned by (a) a transfer agent other than the Corporation or its designated employees or (b) a registrar other than the Corporation or its designated employees, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his or -15- her legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond or other indemnity deemed satisfactory by the Board of Directors in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his or her attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. ARTICLE VI NOTICES Section 1. Notices. Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his or her address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when same shall be deposited in the United States mail. Written notice may also be given personally or by facsimile transmission, telegram, telex or cable, and such notice shall be deemed given at the time when the same shall be sent. Section 2. Waivers of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE VII INDEMNIFICATION Section 1. General. The Corporation shall indemnify, and advance Expenses (as this and all other capitalized words used in this Article VII and not previously defined in these Bylaws are defined in Section 14 of this Article VII) to, Indemnitee to the fullest extent permitted by applicable law in effect on the date of the effectiveness of these Bylaws, and to -16- such greater extent as applicable law may thereafter permit. The rights of Indemnitee provided under the preceding sentence shall include, but not be limited to, the right to be indemnified to the fullest extent permitted by Section 145(b) of the D.G.C.L. in Proceedings by or in the right of the Corporation and to the fullest extent permitted by Section 145(a) of the D.G.C.L. in all other Proceedings. The provisions set forth below in this Article VII are provided in furtherance, and not by way of limitation, of the obligations expressed in this Section 1. Section 2. Expenses Related to Proceedings. If Indemnitee is, by reason of his or her Corporate Status, a witness in or a party to and is successful, on the merits or otherwise, in any Proceeding, he or she shall be indemnified against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to any Matter in such Proceeding, the Corporation shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her or on his or her behalf relating to each Matter. The termination of any Matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such Matter. Section 3. Advancement of Expenses. Indemnitee shall be advanced Expenses within ten days after requesting them to the fullest extent permitted by Section 145(e) of the D.G.C.L. Section 4. Request for Indemnification. To obtain indemnification Indemnitee shall submit to the Corporation a written request with such information as is reasonably available to Indemnitee. The Secretary of the Corporation shall promptly advise the Board of Directors of such request. Section 5. Determining Entitlement to Indemnification if no Change of Control. If there has been no Change of Control at the time the request for indemnification is sent, Indemnitee's entitlement to indemnification shall be determined in accordance with Section 145(d) of the D.G.C.L. If entitlement to indemnification is to be determined by Independent Counsel, the Corporation shall furnish notice to Indemnitee within ten days after receipt of the request for indemnification, specifying the identity and address of Independent Counsel. Indemnitee may, within fourteen days after receipt of such written notice of selection, deliver to the Corporation a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of Independent Counsel and the objection shall set forth with particularity the factual basis of such assertion. If there is an objection to the selection of Independent Counsel, -17- either the Corporation or Indemnitee may petition the Court of Chancery of the State of Delaware or any other court of competent jurisdiction for a determination that the objection is without a reasonable basis and/or for the appointment as Independent Counsel of a person selected by the court. Section 6. Determining Entitlement to Indemnification if Change of Control. If there has been a Change of Control at the time the request for indemnification is sent, Indemnitee's entitlement to indemnification shall be determined in a written opinion by Independent Counsel selected by Indemnitee. Indemnitee shall give the Corporation written notice advising of the identity and address of the Independent Counsel so selected. The Corporation may, within seven days after receipt of such written notice of selection, deliver to Indemnitee a written objection to such selection. Indemnitee may, within five days after receipt of such objection from the Corporation, submit the name of another Independent Counsel and the Corporation may, within seven days after receipt of such written notice of selection, deliver to Indemnitee a written objection to such selection. Any objection is subject to the limitations in Section 5 of this Article VII. Indemnitee may petition the Court of Chancery of the State of Delaware or any other court of competent jurisdiction for a determination that the Corporation's objection to the first and/or second selection of Independent Counsel is without a reasonable basis and/or for the appointment as Independent Counsel of a person selected by the court. Section 7. Procedures of Independent Counsel. If there has been a Change of Control before the time the request for indemnification is sent by Indemnitee, Indemnitee shall be presumed (except as otherwise expressly provided in this Article VII) to be entitled to indemnification upon submission of a request for indemnification in accordance with Section 4 of this Article VII, and thereafter the Corporation shall have the burden of proof to overcome the presumption in reaching a determination contrary to the presumption. The presumption shall be used by Independent Counsel as a basis for a determination of entitlement to indemnification unless the Corporation provides information sufficient to overcome such presumption by clear and convincing evidence or the investigation, review and analysis of Independent Counsel convinces him or her by clear and convincing evidence that the presumption should not apply. Except in the event that the determination of entitlement to indemnification is to be made by Independent Counsel, if the person or persons empowered under Section 5 or 6 of this Article VII to determine entitlement to indemnification shall not have made and furnished to Indemnitee in writing a determination within sixty days after receipt by the Corporation of the request -18- therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification unless Indemnitee knowingly misrepresented a material fact in connection with the request for indemnification or such indemnification is prohibited by law. The termination of any Proceeding or of any Matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Article VII) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that (a) Indemnitee did not act in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the Corporation, or (b) with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful. Section 8. Expenses of Independent Counse. The Corporation shall pay any and all reasonable fees and expenses of Independent Counsel incurred acting pursuant to this Article VII and in any proceeding to which it is a party or witness in respect of its investigation and written report and shall pay all reasonable fees and expenses incident to the procedures in which such Independent Counsel was selected or appointed. No Independent Counsel may serve if a timely objection has been made to his or her selection until a court has determined that such objection is without a reasonable basis. Section 9. Trial De Novo. In the event that (a) a determination is made pursuant to Section 5 or 6 of this Article VII that Indemnitee is not entitled to indemnification under this Article VII, (b) advancement of Expenses is not timely made pursuant to Section 3 of this Article VII, (c) Independent Counsel has not made and delivered a written opinion determining the request for indemnification (i) within ninety days after being appointed by a court, (ii) within ninety days after objections to his or her selection have been overruled by a court or (iii) within ninety days after the time for the Corporation or Indemnitee to object to his or her selection or (d) payment of indemnification is not made within five days after a determination of entitlement to indemnification has been made or deemed to have been made pursuant to Section 5, 6 or 7 of this Article VII, Indemnitee shall be entitled to an adjudication in any court of competent jurisdiction of his or her entitlement to such indemnification or advancement of Expenses. In the event that a determination shall have been made that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 9 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding commenced pursuant to this Section 9, the -19- Corporation shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. If a determination shall have been made or deemed to have been made that Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 9, or otherwise, unless Indemnitee knowingly misrepresented a material fact in connection with the request for indemnification, or such indemnification is prohibited by law. The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 9 that the procedures and presumptions of this Article VII are not valid, binding and enforceable and shall stipulate in any such court that the Corporation is bound by all provisions of this Article VII. In the event that Indemnitee, pursuant to this Section 9, seeks a judicial adjudication to enforce his or her rights under, or to recover damages for breach of, this Article VII, Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all Expenses actually and reasonably incurred by him or her in such judicial adjudication, but only if he or she prevails therein. If it shall be determined in such judicial adjudication that Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. Section 10. Non-Exclusivity. The rights of indemnification and to receive advancement of Expenses as provided by this Article VII shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, these Bylaws, any agreement, a vote of stockholders, a resolution of the Board of Directors or otherwise. No amendment, alteration or repeal of this Article VII or any provision hereof shall be effective as to any Indemnitee for acts, events and circumstances that occurred, in whole or in part, before such amendment, alteration or repeal. The provisions of this Article VII shall continue as to an Indemnitee whose Corporate Status has ceased and shall inure to the benefit of his or her heirs, executors and administrators. Section 11. Insurance and Subrogation. To the extent the Corporation maintains an insurance policy or policies providing liability insurance for directors or officers of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Corporation, Indemnitee shall be covered by such policy or policies in accordance with its or -20- their terms to the maximum extent of coverage available for any such director or officer under such policy or policies. In the event of any payment hereunder, the Corporation shall be subrogated to the extent of such payment to all the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights. The Corporation shall not be liable under this Article VII to make any payment of amounts otherwise indemnifiable hereunder if, and to the extent that, Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. Section 12. Severability. If any provision or provisions of this Article VII shall be held to be invalid, illegal or unenforceable for any reason whatsoever, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby; and, to the fullest extent possible, the provisions of this Article VII shall be construed so as to give effect to the intent manifested by the provisions held invalid, illegal or unenforceable. Section 13. Certain Persons Not Entitled to Indemnification. Notwithstanding any other provision of this Article VII, no person shall be entitled to indemnification or advancement of Expenses under this Article VII with respect to any Proceeding, or any Matter therein, brought or made by such person against the Corporation. Section 14. Definitions. For purposes of this Article VII: "Change of Control" means a change in control of the Corporation after the date of effectiveness of these Bylaws in any one of the following circumstances: (a) there shall have occurred an event required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Corporation is then subject to such reporting requirement; (b) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) shall have become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation's then outstanding voting securities without prior approval of at least two-thirds of the members of the Board -21- of Directors in office immediately prior to such person's attaining such percentage interest; (c) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (d) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. "Corporate Status" describes a status of a person who is or was a director, officer, or employee or agent of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Corporation. "D.G.C.L." means the General Corporation Law of the State of Delaware, as currently in effect or as amended from time to time. "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in a Proceeding. "Indemnitee" includes any person who is, or is threatened to be made, a witness in or a party to any Proceeding as described in Section 1 or 2 of this Article VII by reason of his or her Corporate Status. "Independent Counsel" means a law firm, or member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the five years previous to his or her selection or appointment has been, retained to represent: (a) the Corporation or Indemnitee in any matter material to either such party, (b) any other party to the Proceeding giving rise to a claim for indemnification hereunder or (c) the beneficial owner, directly or indirectly, of securities of the Corporation representing 5% or more of the combined voting power of the Corporation's then outstanding voting securities. -22- "Matter" is a claim, a material issue or a substantial request for relief. "Proceeding" includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee pursuant to Section 9 of this Article VII to enforce his or her rights under this Article VII. Section 15. Notices. Any notice or other communication required or permitted to be given or made to the Corporation or Indemnitee pursuant to this Article VII shall be given or made in writing by depositing the same in the United States mail, with postage thereon prepaid, addressed to the person to whom such notice or communication is directed at the address of such person on the records of the Corporation, and such notice or communication shall be deemed given or made at the time when the same shall be so deposited in the United States mail. Any such notice or communication to the Corporation shall be addressed to the Secretary of the Corporation. Section 16. Contractual Rights. The right to be indemnified or to the advancement or reimbursement of Expenses under this Article VII (i) is a contract right based upon good and valuable consideration, pursuant to which Indemnitee may sue as if these provisions were set forth in a separate written contract between him or her and the Corporation, (ii) is and is intended to be retroactive and shall be available as to events occurring prior to the effectiveness of these provisions and (iii) shall continue after any rescission or restrictive modification of such provisions as to events occurring prior thereto. ARTICLE VIII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of law and of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. -23- Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced. ARTICLE IX AMENDMENT These Bylaws may be altered, amended or repealed, or new bylaws may be adopted, (a) by the affirmative vote of at least two-thirds of all directors then in office at any regular or special meeting of the Board of Directors called for that purpose or (b) by the stockholders at any annual or special meeting of the stockholders called for that purpose; provided, however, that, with respect to the power of the stockholders to adopt, alter, amend or repeal the Bylaws of the Corporation, notwithstanding any other provision of these Bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Corporation required by law, the Certificate of Incorporation or any resolution or resolutions as may be adopted by the Board of Directors pursuant to Section I of Article IV of the Certificate of Incorporation, the affirmative vote of the holders of at least 66_% of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote in the election of directors generally, voting together as a single class, shall be required to adopt, alter, amend or repeal any provision of the Bylaws of the Corporation. 83411 08208 CORP 35143 -24- EX-3 4 INDENTURE [EXECUTIONCOPY] TRIANGLE PACIFIC CORP., Issuer and AMERITRUST TEXAS NATIONAL ASSOCIATION, Trustee _______________ INDENTURE Dated as of August 1, 1993 _______________ $160,000,000 10-1/2% Senior Notes due 2003 L1103/WP88/03AV18 TABLE OF CONTENTS .Begin Table C. ARTICLE I - DEFINITIONS AND INCORPORATION BY REFERENCE............................................1 SECTION 1.1...............................Definitions. 1 SECTION 1.2.........Incorporation by Reference of TIA. 19 SECTION 1.3.....................Rules of Construction. 19 ARTICLE II - THE SECURITIES..............................20 SECTION 2.1...........................Form and Dating. 20 SECTION 2.2..............Execution and Authentication. 20 SECTION 2.3 Registrar and Paying Agent..............21 SECTION 2.4.............Paying Agent to Hold Assets in Trust. 22 SECTION 2.5......................Securityholder Lists. 22 SECTION 2.6.....................Transfer and Exchange. 22 SECTION 2.7....................Replacement Securities. 23 SECTION 2.8....................Outstanding Securities. 23 SECTION 2.9.......................Treasury Securities. 24 SECTION 2.10.....................Temporary Securities. 24 SECTION 2.11.............................Cancellation. 24 SECTION 2.12.......................Defaulted Interest. 25 ARTICLE III - REDEMPTION.................................25 SECTION 3.1.......................Right of Redemption. 25 SECTION 3.2........................Notices to Trustee. 26 L1103/WP88/03AV18 2 SECTION 3.3..............Selection of Securities to Be Redeemed.......................................26 SECTION 3.4......................Notice of Redemption. 26 SECTION 3.5...............Deposit of Redemption Price. 28 SECTION 3.6........Payment of Securities on Redemption Date. 28 SECTION 3.7...............Securities Redeemed in Part. 28 ARTICLE IV - COVENANTS...................................29 SECTION 4.1.....................Payment of Securities. 29 SECTION 4.2...........Maintenance of Office or Agency. 29 SECTION 4.3.......................Corporate Existence. 30 SECTION 4.4.........Payment of Taxes and Other Claims. 30 SECTION 4.5..............Maintenance of Properties and Insurance......................................30 SECTION 4.6. Limitations on Incurrence of Additional Indebtedness............................31 SECTION 4.7.........Limitation on Restricted Payments. 34 SECTION 4.8.......................Limitation on Liens. 35 SECTION 4.9............Limitations on Sales of Assets. 35 SECTION 4.10...........Limitation on Transactions with Affiliates.....................................40 SECTION 4.11. Limitations on Restricting Subsidiary Dividends...............................41 SECTION 4.12 Limitation on Issuance of Preferred Stock by Subsidiaries............................41 SECTION 4.13..............................SEC Reports. 41 SECTION 4.14.........Compliance Certificate; Notice of Default........................................42 SECTION 4.15........Waiver of Stay, Extension or Usury Laws. 43 L1103/WP88/03AV18 3 ARTICLE V - SUCCESSOR CORPORATION........................43 SECTION 5.1...............When Company May Merge, Etc. 43 SECTION 5.2.........Successor Corporation Substituted. 45 ARTICLE VI - EVENTS OF DEFAULT AND REMEDIES..............45 SECTION 6.1.........................Events of Default. 45 SECTION 6.2.............Acceleration of Maturity Date; Rescission and Annulment................47 SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by Trustee..................49 SECTION 6.4..........Trustee May File Proofs of Claim. 49 SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities...........................50 SECTION 6.6................................Priorities. 51 SECTION 6.7..........Limitation on Suits and Remedies. 51 SECTION 6.8. Unconditional Right of Holders to Receive Principal, Premium and Interest.........52 SECTION 6.9............Rights and Remedies Cumulative. 52 SECTION 6.10.............Delay or Omission Not Waiver. 52 SECTION 6.11.......................Control by Holders. 53 SECTION 6.12........................Waiver of Default. 53 SECTION 6.13....................Undertaking for Costs. 54 SECTION 6.14.......Restoration of Rights and Remedies. 54 ARTICLE VII - TRUSTEE....................................54 SECTION 7.1.........................Duties of Trustee. 54 SECTION 7.2.........................Rights of Trustee. 56 L1103/WP88/03AV18 4 SECTION 7.3..............Individual Rights of Trustee. 56 SECTION 7.4......................Trustee's Disclaimer. 57 SECTION 7.5.........................Notice of Default. 57 SECTION 7.6.............Reports by Trustee to Holders. 57 SECTION 7.7................Compensation and Indemnity. 57 SECTION 7.8....................Replacement of Trustee. 59 SECTION 7.9..........Successor Trustee by Merger, Etc. 60 SECTION 7.10............Eligibility; Disqualification. 60 SECTION 7.11. Preferential Collection of Claims against Company.........................60 ARTICLE VIII - SATISFACTION AND DISCHARGE................60 SECTION 8.1. Satisfaction, Discharge of the Indenture and Defeasance of the Securities............60 SECTION 8.2. Termination of Obligations Upon Cancellation of the Securities.......................62 SECTION 8.3...........Survival of Certain Obligations. 63 SECTION 8.4............Acknowledgement of Discharge by Trustee........................................63 SECTION 8.5...............Application of Trust Assets. 63 SECTION 8.6..................Repayment to the Company. 64 SECTION 8.7.............................Reinstatement. 64 ARTICLE IX - AMENDMENTS, SUPPLEMENTS AND WAIVERS.........65 SECTION 9.1............Supplemental Indentures Without Consent of Holders......................65 SECTION 9.2........Amendments, Supplemental Indentures and Waivers with Consent of Holders. 65 L1103/WP88/03AV18 5 SECTION 9.3.......................Compliance with TIA. 67 SECTION 9.4.........Revocation and Effect of Consents. 67 SECTION 9.5.................Notation on or Exchange of Securities.....................................68 SECTION 9.6...........Trustee to Sign Amendments, Etc. 68 ARTICLE X - MEETINGS OF HOLDERS..........................69 SECTION 10.1........Purposes for Which Meetings May Be Called.........................................69 SECTION 10.2...............Manner of Calling Meetings. 69........................................ SECTION 10.3............Call of Meetings by Company or Holders.................................70 SECTION 10.4........Who May Attend a Vote at Meetings. 70 SECTION 10.5. Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights; Adjournment.............................70 SECTION 10.6.......Voting at the Meeting and Record to Be Kept........................................71 SECTION 10.7. Exercise of Rights of Trustee or holders of Securities May Not Be Hindered or Delayed by Call of Meeting.........................72 ARTICLE XI - RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL........................................72 SECTION 11.1. Repurchase of Securities at Option of the Holder Upon a Change of Control.........72 ARTICLE XII - MISCELLANEOUS..............................75 SECTION 12.1. TIA Controls.........................75 SECTION 12.2. Notices..............................75 SECTION 12.3. Communications by Holders with Other Holders..................................76 SECTION 12.4. Certificate and Opinion as to Conditions Precedent...........................76 L1103/WP88/03AV18 6 SECTION 12.5. Statements Required in Certificate or Opinion.....................................76 SECTION 12.6. Rules by Trustee, Paying Agent, Registrar......................................77 SECTION 12.7. Legal Holidays.......................77 SECTION 12.8. Governing Law........................77 SECTION 12.9. No Adverse Interpretation of Other Agreements.....................................78 SECTION 12.10..............No Recourse against Others. 78 SECTION 12.11..............................Successors. 78 SECTION 12.12.....................Duplicate Originals. 78 SECTION 12.13............................Severability. 79 SECTION 12.14........Table of Contents, Headings, Etc. 79 .End Table C. L1103/WP88/03AV18 7 CROSS-REFERENCE TABLE TIA Inde nture Section Section _ 310(a)(1)........................................ 7.10 (a)(2)......................................... 7.10 (a)(3)......................................... N.A. (a)(4)......................................... N.A. (a)(5)......................................... 7.10 (b)............................................ 7.8; 7.10; 12.2 (c)............................................ N.A. 311(a)........................................... 7.11 (b)............................................ 7.11 (c)............................................ N.A. 312(a)........................................... 2.5 (b)............................................ 12.3 (c)............................................ 12.3 313(a)........................................... 7.6 (b)(1)......................................... N.A. (b)(2)......................................... 7.6 (c)............................................ 7.6; 12.2 (d)............................................ 7.6; 12.2 314(a)........................................... 4.13; 12.2 (b)............................................N.A. (c)(1).........................................2.2; 7.2; 12.4 (c)(2).........................................7.2; 12.4 (c)(3).........................................N.A. (d)............................................N.A. (e)............................................12.5 (f)............................................N.A. 315(a)...........................................7.1(b) (b)............................................7.5; 7.6; 12.2 (c)............................................7.1(a) (d)............................................6.11; 7.1(c) (e)............................................6.13 L1103/WP88/03AV18 8 TIA Inde nture Section Section _ 316(a) (last sentence)........................... 2.9 (a)(1)(A)...................................... 6.11 (a)(1)(B)...................................... 6.12 (a)(2)......................................... N.A. (b)............................................ 6.12; 6.8 317(a)(1)........................................ 6.3 (a)(2)......................................... 6.4 (b)............................................ 2.4 318(a)........................................... 12.1 __________ N.A. means Not Applicable Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of the Indenture. L1103/WP88/03AV18 9 INDENTURE, dated as of August 1, 1993, between Triangle Pacific Corp., a Delaware corporation, and Ameritrust Texas National Association, a national banking association, as Trustee. Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the holders of the Company's 10-1/2% Senior Notes due 2003: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. "Accounts Receivable" means, with respect to any person, all accounts, contracts or contract rights of such person and any other rights of such person to payment for goods sold or leased or for services rendered, whether or not evidenced by any chattel paper, documents or instruments, together with (i) all rights and interests of such person in any goods the sale or lease of which gave rise to such accounts, contracts, contract rights or other rights, including any security interests or liens therein, (ii) all guaranties, security agreements, leases, indemnities, warranties and other contracts securing or otherwise relating to such accounts, contracts, contract rights or other rights, and (iii) all chattel paper, documents, instruments, books, records, writings, data bases, information and information media relating to, used or useful in connection with, evidencing, embodying or incorporating such accounts, contracts, contract rights or other rights or the goods the sale or lease of which gave rise thereto. "Accumulated Amount" has the meaning specified in Section 4.9(a). "Acquired Indebtedness" means Indebtedness of any person existing at the time such person becomes a Subsidiary of the Company (or such person is merged into the Company or one of its Subsidiaries) or assumed in connection with the acquisition of assets from such person by the Company or any of its Subsidiaries, including Indebtedness Incurred in connection with, or in contemplation of, such person becoming a Subsidiary of the Company (but excluding Indebtedness of such person which is extinguished, retired or repaid in connection with such person becoming a Subsidiary of the Company). "Affiliate" means, with respect to any person, any other person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such person. For purposes of this definition, the term "control" means the power to direct the management and policies of a person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise. "Affiliate Transaction" means, with respect to any person, any sale, lease, transfer or other disposition of any properties, assets or securities to, any purchase or lease of any properties, assets or securities from, or the entering into or amendment of any contract or agreement with or for the benefit of, (i) any Affiliate of such person, (ii) any "person" or "group" (as such terms are used for purposes of Sections 13(d)(3) and 14(d) of the Exchange Act, whether or not applicable) that, directly or indirectly, is the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a 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) of more than 10% of the Capital Stock of any class of equity securities of such person, (iii) any person who is an Affiliate of any such beneficial owner or (iv) any officer, employee or director of any of the foregoing. "Agent" means any Registrar, Paying Agent or co- Registrar. "Asset Acquisition" means (i) an investment by the Company or any Subsidiary of the Company in any other person pursuant to which such person shall become a Subsidiary of the Company or shall be merged with the Company or any Subsidiary of the Company or (ii) the acquisition by the Company or any Subsidiary of the Company of the assets of any person which constitute substantially all of an operating unit or business of such person. "Asset Sale" has the meaning specified in Section 4.9(a). L1103/WP88/03AV18 -2- "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors. "Board of Directors" means, with respect to any person, the Board of Directors of such person or any committee of the Board of Directors of such person authorized, with respect to any particular matter, to exercise the power of the Board of Directors of such person. "Board Resolution" means, with respect to any person, a resolution duly adopted by the Board of Directors of such person and certified as being in full force and effect. "Business Day" means any day other than a Saturday, Sunday or other day on which banks are required or authorized to close in the City of New York. "Capital Stock" means, with respect to any person, any and all shares, interests, participations or other equivalents (however designated) of capital stock of such person and any rights (other than debt securities convertible into any of the foregoing), warrants or options to purchase any of the foregoing, whether outstanding on the Issue Date or thereafter issued, and includes all Common Stock and Preferred Stock. "Capitalized Lease" means, with respect to any person, a lease of property (whether real, personal or mixed) by such person if the obligations of such person thereunder are required to be capitalized for financial reporting purposes in accordance with GAAP. "Capitalized Lease Obligation" means, with respect to any person, the capitalized amount of the rental obligations under any Capitalized Lease, as determined in accordance with GAAP. "Change of Control" means (i) a direct or indirect sale, lease, exchange or other transfer of all or substantially all of the assets of the Company, on a consolidated basis, to any "person" or "group" (as such terms are used for purposes of Sections 13(d)(3) and 14(d) of the Exchange Act, whether or not applicable), as an entirety or substantially as an entity in one transaction L1103/WP88/03AV18 -3- or series of related transactions, in each case with the effect that the ultimate beneficial owners of the Company's Capital Stock having the right to vote generally in an election of directors immediately prior to the transaction own, directly or indirectly, in the aggregate, and in the same proportion with respect to each other, less than 50% of the total voting power entitled to vote in the election of directors, managers or trustees of the transferee entity immediately after such transaction, (ii) any "person" or "group" (as such terms are used for purposes of Sections 13(d)(3) and 14(d) of the Exchange Act, whether or not applicable), is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a 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 50% of the total voting power in the aggregate of all classes of Capital Stock then outstanding of the Company entitled to vote generally in elections of directors, (iii) the merger or consolidation of the Company with or into another corporation or the merger of another corporation into the Company with the effect that immediately after such transaction any "person" or "group" (as such terms are used for purposes of Sections 13(d)(3) and 14(d) of the Exchange Act, whether or not applicable) of persons holds more than 50% of the total voting power of the then outstanding securities of the surviving corporation of such merger or consolidation entitled to vote generally in the election of directors, managers or trustees of such surviving corporation, or (iv) during any period of 24 consecutive months, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office. "Change of Control Offer" has the meaning specified in Section 11.1(b). L1103/WP88/03AV18 -4- "Change of Control Payment Date" has the meaning specified in Section 11.1(a). "Change of Control Purchase Price" has the meaning specified in Section 11.1(a). "Common Stock" means with respect to any person, any shares, interests, participations or other equivalents (however designated) of the common stock of such person, whether outstanding on the Issue Date or thereafter issued, and includes all series and classes of such common stock. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the Indenture and thereafter means such successor. "Consolidated EBIT" means, with respect to any person, for any period, Consolidated Net Income of such person, plus, to the extent Consolidated Net Income has been reduced thereby, the sum of (i) all income taxes of such person and its Subsidiaries paid or accrued for such period (other than income taxes attributable to extraordinary, unusual or non-recurring gains or losses) determined on a consolidated basis for such person and its Consolidated Subsidiaries in accordance with GAAP, (ii) Consolidated Interest Expense and (iii) all foreign currency exchange losses less all foreign currency exchange gains, in each case determined on a consolidated basis for such person and its Consolidated Subsidiaries in accordance with GAAP. "Consolidated EBITDA" means, with respect to any person, for any period, the Consolidated EBIT of such person, plus the sum of (i) amortization expense (including write-offs of deferred financing costs) and depreciation expense, and (ii) all other non-cash items reducing Consolidated Net Income of such person for such period, less all non-cash items increasing Consolidated Net Income of such person during such period, all determined on a consolidated basis for such person and its Consolidated Subsidiaries in accordance with GAAP. "Consolidated EBITDA Coverage Ratio" means, with respect to any person, the ratio, on a pro forma basis, of (i) the Consolidated EBITDA of any person for the Reference Period immediately prior to the date of the transaction L1103/WP88/03AV18 -5- giving rise to the need to calculate the Consolidated EBITDA Coverage Ratio (the "Transaction Date") to (ii) the Consolidated Fixed Charges of such person for such Reference Period; provided, however, that (A) for purposes of such computation, in calculating Consolidated EBITDA and Consolidated Fixed Charges, (1) the Incurrence of the Indebtedness giving rise to the need to calculate the Consolidated EBITDA Coverage Ratio and the application of the proceeds therefrom shall be assumed to have occurred on the first day of the Reference Period, (2) the Incurrence of any Indebtedness during the Reference Period or subsequent to the Reference Period and prior to the Transaction Date and the application of the proceeds therefrom shall be assumed to have occurred on the first day of such Reference Period, (3) Consolidated Interest Expense attributable to any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period, unless such person or any of its Subsidiaries is a party to an Interest Rate Agreement (which will remain in effect for the 12-month period after the Transaction Date) which has the effect of fixing the interest rate in effect on the date of computation, in which case such rate (whether higher or lower) shall be used, and (4) there shall be excluded from Consolidated Fixed Charges any Consolidated Fixed Charges related to any Indebtedness which was outstanding during and subsequent to the Reference Period but is not outstanding on the Transaction Date, except for Consolidated Fixed Charges actually Incurred with respect to Indebtedness borrowed (as adjusted pursuant to clause (3)) (x) under a revolving credit or similar arrangement to the extent the commitment thereunder remains in effect on the Transaction Date or (y) pursuant to Section 4.6(e), and (B) in making any calculation of the Consolidated EBITDA Ratio for any period commencing prior to the Recapitalization, the Recapitalization shall be deemed to have taken place on the first day of such period. For purposes of making the computation referred to in clause (A) above, Asset Sales and Asset Acquisitions which have been made by any person which has become a Subsidiary of the Company or has been merged with or into the Company or any Subsidiary of the Company during the Reference Period or subsequent to the Reference Period and prior to the Transaction Date and Asset Acquisitions to be made by the Company or a L1103/WP88/03AV18 -6- Subsidiary of the Company with the Indebtedness referred to in clause (A)(1) above shall be calculated on a pro forma basis (including all of the calculations referred to in clauses (A)(1) through (A)(4) above) as if such Asset Sales or Asset Acquisitions had occurred on the first day of the Reference Period. "Consolidated Fixed Charges" means, with respect to any person, for any period, the sum of (i) Consolidated Interest Expense and (ii) the product of (a) cash and non- cash dividends and other payments made in respect of any Subsidiary Preferred Stock and Disqualified Capital Stock of such person and (b) a fraction the numerator of which is one and the denominator of which is one minus the then current effective consolidated Federal, state and local tax rate of such person (expressed as a decimal). "Consolidated Interest Expense" means, with respect to any person, for any period, the aggregate amount (without duplication) of interest expensed in accordance with GAAP (including, in accordance with the following sentence, interest attributable to Capitalized Lease Obligations) during such period in respect of all Indebtedness of such person and its Consolidated Subsidiaries (but including (i) amortization of original issue discount on any Indebtedness, (ii) the interest portion of all deferred payment obligations, calculated in accordance with GAAP, and (iii) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and, the net costs associated with Interest Rate Agreements, in each case to the extent attributable to such period). For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. "Consolidated Net Income" means, with respect to any person, for any period, the Net Income of such person and its Consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided, however, that there shall be excluded (i) the Net Income of any person other than a Consolidated Subsidiary in which such person or any of its Consolidated Subsidiaries has a joint interest with a third party except to the extent of the amount of dividends or distributions L1103/WP88/03AV18 -7- actually paid to such person or a Consolidated Subsidiary during such period, (ii) except to the extent includible pursuant to the foregoing clause (i), the Net Income of any person accrued prior to the date it becomes a Subsidiary of such person or is merged into or consolidated with such person or any of its Subsidiaries or the assets of that person are acquired by such person or any of its Subsidiaries (except that clause (ii) shall not be effective for any calculation of the Consolidated EBITDA Coverage Ratio to be made in accordance with the last sentence of the definition of the term "Consolidated EBITDA Coverage Ratio" contained in this Section 1.1), (iii) the Net Income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions or intercompany loans or advances or tax sharing payments by that Subsidiary to the Company of such Net Income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) any gains or losses attributable to asset sales not in the ordinary course of business (including any sales of Capital Stock), (v) the cumulative effect of a change in accounting principles and (vi) amounts paid as dividends in cash on Subsidiary Preferred Stock of a Subsidiary of such person. "Consolidated Net Worth" means, with respect to any person, the consolidated stockholders' equity of such person and its Consolidated Subsidiaries, as determined in accordance with GAAP, adjusted to exclude (to the extent included in calculating such equity) (a) the amount of equity attributable to any Disqualified Capital Stock and (b) all upward revaluations and other write-ups in the book value of any asset of such person or a Consolidated Subsidiary of such person subsequent to the date of this Indenture. "Consolidated Subsidiary" means, with respect to any person, each Subsidiary of such person (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated for financial statement reporting purposes with the financial statements of such person in accordance with GAAP. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar L1103/WP88/03AV18 -8- agreement or arrangement designed to protect the Company or any of its Subsidiaries against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "Disqualified Capital Stock" means, with respect to any person, any class or series of Capital Stock of such person that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of an event or the passage of time would be, (i) required to be redeemed or repurchased by such person or any of its Subsidiaries, in whole or in part, prior to the Stated Maturity of the Securities or (ii) convertible into or exchangeable for Capital Stock referred to in clause (i) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Securities. "Eligible Receivables" means Accounts Receivable (net of any valid offsets, counterclaims or defenses or any repurchase obligations or rights of return) which (a) are not past due for more than 60 days and (b) constitute legal, valid and binding obligations of the account debtors obligated thereon and are enforceable against such account debtors in accordance with their respective terms. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "Event of Default" has the meaning specified in Section 6.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder. "Final Change of Control Put Date" has the meaning specified in Section 11.1(b). L1103/WP88/03AV18 -9- "Final Put Date" has the meaning specified in Section 4.9(b). "GAAP" means generally accepted accounting principles as in effect in the United States as of the date of this Indenture. "Guarantee" means, with respect to any person, any obligation, contingent or otherwise, of such person directly or indirectly guaranteeing any Indebtedness or other obligation of any other person and, without limiting the generality of the foregoing, includes 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 other person (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or- pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). The term "Guarantee" used as a verb has a correlative meaning. "holder" or "holder of Securities" means the person in whose name a Security is registered on the Registrar's books. "Incur" has the meaning specified in Section 4.6(a). "Incurrence Date" has the meaning specified in Section 4.6(b). "Indebtedness" means, with respect to any person at any date, without duplication, (a) all obligations of such person (i) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar instruments, (iii) representing the balance deferred and unpaid of the purchase price of any property or services (other than trade accounts payable arising in the ordinary course of business), (iv) evidenced by bankers' acceptances L1103/WP88/03AV18 -10- or similar instruments issued or accepted by banks, (v) for the payment of money relating to Capitalized Leases or (vi) evidenced by a letter of credit or a reimbursement obligation of such person with respect to any letter of credit; (b) all Indebtedness of other persons secured by a Lien to which the property or assets (including, but not limited to, leasehold interests and any other tangible or intangible property rights) of such person are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be a legal liability of such person; provided, however, that, for purposes of determining the amount of any Indebtedness of the type described in this clause (b), if recourse with respect to such indebtedness is limited to such asset, the amount of such indebtedness shall be limited to the fair market value of such asset; (c) all Indebtedness of other persons Guaranteed by such person; (d) all Disqualified Capital Stock of such person, which Disqualified Capital Stock shall be valued at the greater of its voluntary or involuntary liquidation preference, plus accrued and unpaid dividends; (e) to the extent not otherwise included in the preceding clauses (a), (b), (c) or (d), obligations under Currency Agreements and Interest Rate Agreements; and (f) any and all deferrals, renewals, extensions, refinancings and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b), (c), (d) or (e), or this clause (f), whether or not between or among the same parties. "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Independent Financial Advisor" means a nationally recognized investment banking firm which does not (and whose directors, officers, employees and Affiliates do not) have a direct or indirect material financial interest in the Company or any of its Subsidiaries and which is otherwise independent and qualified to perform the task for which such firm is being engaged. "Interest Payment Date" means the stated due date of an installment of interest on the Securities. L1103/WP88/03AV18 -11- "Interest Rate Agreement" means any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge arrangement to which the Company or any of its Subsidiaries is or becomes a party or a beneficiary. "Inventory" means, with respect to a person, any and all of the goods, merchandise, inventory and all other personal property (including goods in transit) of such person wheresoever located, which are or may be at any time held for sale or lease, furnished under any contract of service, or held as raw materials, work in process or supplies or materials used or consumed in such person's business and all documents of title or other documents representing the same, together with all accessions thereto or products thereof and all chattel paper, documents, instruments, books, records, writings, data bases, information and information media relating to, used or useful in connection with, evidencing, embodying or incorporating the foregoing. "Issue Date" means the date of first issuance of the Securities under this Indenture. "Legal Holiday" has the meaning provided in Section 12.7. "Lien" means any mortgage, lien, pledge, charge, security interest or other encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement and any lease deemed to constitute a security interest and any option or other agreement to give any security interest). "Maturity Date" means, when used with respect to any Security, the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity, Change of Control Payment Date, Purchase Date or by declaration of acceleration, call for redemption or otherwise. "Net Cash Proceeds" means, when used with respect to any Asset Sale, the aggregate amount of U.S. Legal Tender received by the Company and its Subsidiaries from such Asset Sale, less the sum of all legal, title and recording expenses, commissions and other fees and expenses L1103/WP88/03AV18 -12- incurred in connection with such Asset Sale, including the amount (estimated reasonably and in good faith by the Company) of all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP as a consequence of such Asset Sale, and less a reasonable reserve for the after-tax cost of any indemnification payments (fixed and contingent) attributable to the seller's indemnities to the purchaser undertaken by the Company or any of its Subsidiaries in connection with such Asset Sale, and less all payments made on any Indebtedness which is secured by such property, in accordance with the terms of any Lien upon or with respect to such property or which must by its terms or by applicable law be repaid out of the proceeds from such Asset Sale, and less all distributions and other payments made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale. "Net Income" of any person, for any period, means the net income (loss) of such person for such period, determined in accordance with GAAP, except that extraordinary or nonrecurring gains and losses, as determined in accordance with GAAP, shall be excluded. "New Credit Facility" means the Credit Agreement, dated as of August 4, 1993, among the Company, the banks and other financial institutions named therein, and Citicorp USA, Inc., as co-agent, and The Bank of Nova Scotia, as agent, as the same may be supplemented, amended or restated from time to time. "Offer Amount" has the meaning specified in Section 4.9(b). "Offer Price" has the meaning specified in Section 4.9(b). "Offer to Purchase" means any offer made by the Company to holders of the Securities required by the provisions of Section 4.9(a) and made pursuant to the provisions of Section 4.9(b). "Officer" means, with respect to the Company, the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller or the Secretary of the Company. L1103/WP88/03AV18 -13- "Officer's Certificate" means, with respect to the Company, a certificate signed by two Officers or by an Officer and an Assistant Secretary of the Company and otherwise complying with the requirements of Sections 12.4 and 12.5. "Old Debentures" means the Company's outstanding 12-1/2% Senior Subordinated Debentures due 1998 issued pursuant to the Old Debenture Indenture. "Old Debenture Indenture" means the Indenture, dated as of June 19, 1986, between the Company and Manufacturers Hanover Trust Company, as trustee, relating to the Old Debentures. "Old Financing Agreements" means (a) the Credit and Guaranty Agreement, dated as of September 9, 1988, among the Company, TPC Holding Corp., Pacific Corp., the financial institutions parties thereto and Morgan Guaranty Trust Company of New York, as agent, as amended or otherwise modified from time to time and in effect on the Issue Date, and (b) the Senior Note Purchase Agreement, dated as of September 9, 1988, among the Company, TPC Holding Corp., Teachers Insurance and Annuity Association of America, AIG Life Insurance Company and American International Life Assurance Company of New York, as amended or otherwise modified from time to time and in effect on the Issue Date. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee complying with the requirements of Sections 12.4 and 12.5. Unless otherwise required by the Trustee, the counsel may be an employee of, or counsel to, the Company. "Paying Agent" has the meaning specified in Section 2.3. "Permitted Business" means any line of business conducted by the Company or any of its Subsidiaries on the Issue Date and any other line of business that is an extension of or is substantially similar to any such line of business as determined in good faith by the Board of Directors of the Company. L1103/WP88/03AV18 -14- "Permitted Liens" means (i) Liens granted on Inventory and Accounts Receivable and the products and proceeds thereof (including proceeds which constitute property of the types described in the definitions of the terms "Inventory" and "Accounts Receivable" contained in this Section 1.1, proceeds deposited in any collateral account or lock box of the Company or any of its Subsidiaries for the benefit of the lenders party to any Working Capital Facility, all payments under insurance with respect to Inventory and any indemnity, warranty or guaranty payable by reason of loss or damage to or otherwise with respect to any of the foregoing) to secure any Working Capital Financing; (ii) Liens for taxes, assessments, government charges or claims not yet delinquent or which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted if adequate reserves with respect thereto are maintained on the books and records of the Company or a Subsidiary of the Company in accordance with GAAP and so long as no item or portion of property subject thereto is in jeopardy of being seized, levied upon or forfeited; (iii) statutory Liens of carriers, warehousemen, mechanics, suppliers, materialmen, landlords or repairmen or other like Liens arising in the ordinary course of business and deposits made to obtain the release of such Liens if the underlying obligations are not overdue or such Liens are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and adequate reserves with respect thereto are maintained on the books and records of the Company or a Subsidiary of the Company in accordance with GAAP and so long as no item or portion of property subject thereto is in jeopardy of being seized, levied upon or forfeited; (iv) Liens incurred or deposits made to secure the performance of bids, surety and appeal bonds, performance or return of money bonds, leases, statutory obligations, tenders, governmental contracts and other similar obligations incurred in the ordinary course of business (exclusive of obligations for the payment of Indebtedness); (v) attachment or judgment Liens arising by operation of law, except to the extent that such Liens give rise to an Event of Default; (vi) rights of a bank to set off deposits against debts owed to such bank; (vii) any title or other interest of a lessor in the property demised pursuant to a lease; (viii) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects which do not in any case materially detract from the value of the property subject L1103/WP88/03AV18 -15- thereto (as such property is used by the Company and its Subsidiaries) or interfere with the ordinary conduct of the business of the Company or its Subsidiaries; provided, however, that such Liens are not incurred in connection with any borrowing of money or any commitment to loan any money or to extend any credit; (ix) Liens securing Indebtedness to the extent existing on the Issue Date, after giving effect to the Recapitalization; (x) customary Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security legislation or regulations; (xi) Liens consisting of mortgages or pledges by Subsidiaries of the Company in favor of the Company or a Wholly Owned Subsidiary of the Company as security for Indebtedness owing by them solely to the Company or its Wholly Owned Subsidiaries; (xii) purchase money mortgages, purchase money security interests or other Liens securing Purchase Money Obligations incurred in respect of property acquired or purchased by the Company or any of its Subsidiaries at any time after the Issue Date ("Acquired Property") and other Indebtedness incurred for the purpose of financing the construction of properties or fixed improvements at any time after the Issue Date as permitted pursuant to Section 4.6(i); provided, however, that such purchase money mortgages, purchase money security interests and other Liens shall not encumber or extend to any property or assets of the Company or any of its Subsidiaries other than Acquired Property or facilities or fixed improvements which are constructed by the Company or any of its Subsidiaries at any time after the Issue Date, in each case together with accessions and fixtures thereto (it being understood that any Liens so granted on Acquired Property may also extend to facilities or fixed improvements constructed thereon and any Liens so granted on facilities and improvements may also encumber or extend to Acquired Property on which such facilities or fixed improvements are constructed, in each case so long as (a) all such Liens are entered into within the period specified in clause (i) of the definition of the term "Purchase Money Obligations" contained in this Section 1.1 and (b) the Indebtedness secured by such Liens meets the conditions specified in clauses (ii) and (iii) of the definition of the term "Purchase Money Obligations" contained in this Section 1.1); (xiii) Liens pursuant to Capitalized Lease Obligations permitted to be Incurred by the Company or its Subsidiaries pursuant to Section 4.6(i); (xiv) Liens L1103/WP88/03AV18 -16- securing Acquired Indebtedness permitted to be Incurred by the Company or its Subsidiaries pursuant to Section 4.6(i); (xv) Liens consisting of mortgages of or security interests in the property owned by the Company on the Issue Date located in Port Gibson, Mississippi which are granted in connection with the financing of the construction of facilities or fixed improvements thereon; provided, however, that the Indebtedness secured thereby shall be Incurred in compliance with Section 4.6 and shall be in an aggregate amount at any time outstanding not exceeding $3,000,000; (xvi) Liens consisting of pledges of or security interests in equipment and fixtures used in the facilities operated by the Company on the Issue Date located in Auburn, Nebraska which are granted to secure Indebtedness to state and local governmental authorities or agencies Incurred in connection with the financing of the construction or expansion of such facilities; provided, however, that the Indebtedness secured thereby shall be Incurred in compliance with Section 4.6 and shall be in an aggregate amount at any time outstanding not exceeding $500,000; (xvii) Liens securing Indebtedness Incurred in exchange for, or to exchange, renew, refund or replace, Indebtedness to the extent that the Indebtedness being exchanged, extended, renewed, refunded or replaced was permitted to be secured pursuant to clause (ix), (xii), (xiii), (xiv) or (xv) above; provided, however, that such Indebtedness shall not encumber or extend to any property of the Company or its Subsidiaries other than the property theretofore subject thereto; and (xviii) other Liens securing obligations in an aggregate amount at any time not exceeding $500,000, as determined in good faith by the Board of Directors of the Company. "Permitted Payment" means, with respect to the Company or any of its Subsidiaries, (i) any dividend, distribution or other payment by the Company or any of its Subsidiaries on Capital Stock to the extent payable solely in Capital Stock (other than Disqualified Capital Stock); (ii) any dividend, distribution or other payment to the Company or any of its Subsidiaries by any of its or their Subsidiaries; (iii) any defeasance, redemption, purchase or other acquisition or retirement by the Company or any of its Subsidiaries of Capital Stock or Indebtedness that is subordinated in right of payment to the Securities with the net proceeds received by the Company or such Subsidiary from the substantially concurrent sale of its Capital Stock L1103/WP88/03AV18 -17- (other than Disqualified Capital Stock); and (iv) any defeasance, redemption, purchase or other acquisition or retirement by the Company or any of its Subsidiaries of Indebtedness that is subordinated in right of payment to the Securities with the net proceeds received by the Company or such Subsidiary from the substantially concurrent sale of Indebtedness (a) if such Indebtedness is subordinated in right of payment to the Securities at least to the same extent and in the same manner as the Indebtedness to be retired and (b) if no payments or principal of such Indebtedness by way of sinking fund, amortization, mandatory redemption or otherwise (including defeasance) may be made or required (including, but not limited to, at the option of the holder thereof) in an amount greater than or at a time prior to the amounts and times specified in the Indebtedness being retired and the Weighted Average Life to Maturity of such Indebtedness is greater than the Weighted Average Life to Maturity of the Indebtedness to be retired. "person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. "Plan of Liquidation" means, with respect to any person, a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously) (i) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such person as an entirety or substantially as an entirety and (ii) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and all or substantially all of the remaining assets of such person to holders of Capital Stock or a class or classes of Indebtedness of such person. "Preferred Stock" means, with respect to any person, any and all shares, interests, participations or other equivalents (however designated) of preferred or preference stock of such person, whether outstanding on the Issue Date or issued thereafter, and includes all series and classes of such preferred or preference stock. L1103/WP88/03AV18 -18- "principal" of any Indebtedness (including the Securities) means the principal of such Indebtedness plus any premium, if any, applicable to such Indebtedness. "property" means any right or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Prospectus" means the prospectus relating to $160,000,000 principal amount of Securities constituting a part of the Registration Statement on Form S-1 (Commission File No. 33-64598) filed by the Company with the SEC, in the form first used to confirm sales of Securities (as amended or supplemented, if the Company shall thereafter have furnished any amendments or supplements thereto.) "Purchase Date" has the meaning specified in Section 4.9(b). "Purchase Money Obligation" means any Indebtedness secured by a Lien on Acquired Property; provided, however, that (i) the purchase money mortgages, purchase money security interests or other Liens on such Acquired Property shall be entered into within 180 days after the purchase or acquisition of such Acquired Property; (ii) the aggregate outstanding principal amount of Indebtedness secured by such Acquired Property and the facilities and fixed improvements constructed thereon shall not at any time exceed 80% of the aggregate of (a) the purchase price paid by the Company or any of its Subsidiaries for the Acquired Property and (b) the cost of the facilities and fixed improvements constructed on such Acquired Property; and (iii) at no time after such Indebtedness has been fully funded shall the aggregate principal amount of the outstanding Indebtedness secured by such Lien be increased. "Recapitalization" means the transactions to be consummated on the Issue Date which are described under the caption "Recapitalization Plan" in the Prospectus, including, but not limited to, (i) the issuance and sale by the Company of $160,000,000 aggregate principal amount of Securities and the application of the net proceeds therefrom as described therein, (ii) the issuance and sale by the Company of 6,960,000 shares of its common stock, par value $.01 per share, and the application of the net proceeds therefrom as described therein and (iii) the L1103/WP88/03AV18 -19- establishment of the New Credit Facility and the initial borrowings of funds thereunder for the purposes described therein. "Record Date" means a Record Date specified in the Securities whether or not such Record Date is a Business Day. "Redemption Date" means, when used with respect to any Security to be redeemed, the date fixed for such redemption pursuant to this Indenture and Paragraph 5 of the Security. "Redemption Price" means, when used with respect to any Security to be redeemed, the redemption price for such redemption specified in Paragraph 5 of the Security. "Reference Period" means, with respect to any person, the four full fiscal quarters ended immediately preceding any date upon which any determination is to be made pursuant to the terms of the Securities or the Indenture. "Registrar" has the meaning specified in Section 2.3. "Restricted Payment" means, with respect to any person, (i) the declaration or payment of any dividend or other distribution in respect of the Capital Stock of such person or any Subsidiary of such person, (ii) any payment on account of the purchase, redemption, retirement or other acquisition or retirement for value of the Capital Stock of such person or any Subsidiary of such person, or (iii) any purchase, redemption, or other acquisition or retirement for value of, or any payment in respect of any amendment of the terms of, or any defeasance of, any Indebtedness, directly or indirectly, by such person or a Subsidiary of such person prior to the scheduled maturity, any scheduled repayment of principal, or scheduled sinking fund payment, as the case may be, of such Indebtedness, if such Indebtedness is subordinate in right of payment (whether pursuant to its terms or by operation of law) to the Securities; provided, however, that the term "Restricted Payment" does not include any Permitted Payment. L1103/WP88/03AV18 -20- "SEC" means the Securities and Exchange Commission. "Securities" means the 10-1/2% Senior Notes due 2003, as supplemented from time to time in accordance with the terms hereof, issued under this Indenture. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Significant Subsidiary" means, with respect to any person as of any date, any Subsidiary of such person (a) the value of whose assets, as such assets would appear on a consolidated balance sheet of such Subsidiary and its Consolidated Subsidiaries prepared as of the end of the fiscal quarter next preceding such date in accordance with GAAP, is at least 10% of the value of the assets of such person and its Consolidated Subsidiaries, determined as aforesaid, or (b) which has revenues, Consolidated EBITDA or Consolidated Net Income, as such revenues and Consolidated Net Income would appear on a consolidated income statement of such Subsidiary and its Consolidated Subsidiaries prepared as of the end of the fiscal quarter next preceding such date in accordance with GAAP, constituting at least 10% of the revenues, Consolidated EBITDA or Consolidated Net Income of such person and its Consolidated Subsidiaries. "Stated Maturity" means, when used with respect to any Security, August 1, 2003. "Subsidiary" means, with respect to any person, (i) a corporation a majority of whose Capital Stock is directly or indirectly, owned by such person, by such person and one or more Subsidiaries of such person or by one or more Subsidiaries of such person or (ii) any other person (other than a corporation) in which such person, one or more Subsidiaries of such person, or such person and one or more Subsidiaries of such person, directly or indirectly, has at least majority ownership interest. "Subsidiary Preferred Stock" means, with respect to any person, any series of Preferred Stock issued by a Subsidiary of such person. L1103/WP88/03AV18 -21- "Surviving Person" has the meaning specified in Section 5.1(a). "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the execution of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Trust Officer" means any officer within the corporate trust department (or any successor group) of the Trustee including any vice president, assistant vice president, secretary, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at that time shall be such officers, and also means, with respect to a particular corporate trust matter, any other officer of the corporate trust department (or any successor group) of the Trustee to whom such trust matter is referred because of his knowledge of and familiarity with the particular subject. "U.S. Government Obligations" means direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which obligation or guarantee the full faith and credit of the United States of America is pledged. "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the dates of each successive scheduled principal (or redemption) payment of such Indebtedness multiplied by the amount of such principal (or redemption) payment by (ii) the sum of all principal (or redemption) payments. L1103/WP88/03AV18 -22- "Wholly Owned Subsidiary" means, with respect to any person, a Subsidiary of such person all of the Capital Stock of which is owned by such person. "Working Capital Facility" means a credit facility (including, but not limited to, the New Credit Facility) which, if secured, is secured exclusively by any of Inventory, Accounts Receivable and the products and proceeds thereof (including proceeds which constitute property of the types described in the definitions of the terms "Inventory" and "Accounts Receivable" contained in this Section 1.1, proceeds deposited in any collateral account or lock box of the Company or any of its Subsidiaries for the benefit of the lenders party to any Working Capital Facility, all payments under insurance with respect to Inventory and any indemnity, warranty or guaranty payable by reason of loss or damage to or otherwise with respect to any of the foregoing) of the Company and its Subsidiaries. "Working Capital Financing" means, at any time, the sum of (i) the aggregate outstanding principal amount of all loans, advances and other extensions of credit made pursuant to any Working Capital Facilities and (ii) the aggregate amount of all outstanding reimbursement obligations in respect of and all amounts available to be drawn under any outstanding letters of credit issued pursuant to any Working Capital Facilities. SECTION 1.2. Incorporation by Reference of TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture securityholder" means a holder or holder of Securities. "indenture to be qualified" means this Indenture. L1103/WP88/03AV18 -23- "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them thereby. SECTION 1.3. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; (6) the words "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision hereof; and (7) references to Sections or Articles constitute reference to such Section or Article in this Indenture, unless stated otherwise. ARTICLE II L1103/WP88/03AV18 -24- THE SECURITIES SECTION 2.1. Form and Dating. The Securities and the Trustee's certificate of authentication in respect thereof shall be substantially in the form of Exhibit A hereto, which is part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall approve the form of the Securities and any notation, legend or endorsement thereon. Any such notations, legends or endorsements not contained in the form of Security attached as Exhibit A hereto shall be delivered in writing to the Trustee. Each Security shall be dated the date of its authentication. The terms and provisions contained in the form of Securities shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. SECTION 2.2. Execution and Authentication. Two Officers shall sign, or one Officer shall sign and one Officer shall attest to, the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless and the Company shall nevertheless be bound by the terms of the Securities and this Indenture. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated pursuant to the terms of this Indenture. L1103/WP88/03AV18 -25- The Trustee shall authenticate Securities for original issue in the aggregate principal amount of up to $160,000,000 upon a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of Securities to be authenticated and the date on which the Securities are to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $160,000,000, except as provided in Section 2.7. Upon the written order of the Company in the form of an Officers' Certificate, the Trustee shall authenticate Securities in substitution of Securities originally issued to reflect any name change of the Company. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company, an Affiliate of the Company or any of their respective Subsidiaries. Securities shall be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. SECTION 2.3 Registrar and Paying Agent. The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, where Securities may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Securities may be presented for payment ("Paying Agent") and an office or agency where notices and demands to or upon the Company in respect of the Securities may be served. The Company may act as its own Registrar or Paying Agent, except that, for the purposes of Articles III, VIII, XI and Section 4.9, neither the Company nor any Affiliate of the Company shall act as Paying Agent. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-Registrars and one or more additional Paying Agents. The term "Paying Agent" includes any additional Paying Agent. The Company hereby initially appoints the Trustee L1103/WP88/03AV18 -26- as the initial Registrar and Paying Agent, and the Trustee hereby initially agrees so to act. The Company shall enter into an appropriate written agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall promptly notify the Trustee in writing of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. SECTION 2.4. Paying Agent to Hold Assets in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Securities (whether such assets have been distributed to it by the Company or any other obligor on the Securities), and shall notify the Trustee in writing of any Default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate such assets and hold them as a separate trust fund for the benefit of the holders or the Trustee. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent (if other than the Company) shall have no further liability for such assets. SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee in writing on or before the third Business Day preceding each Interest Payment Date and at such other L1103/WP88/03AV18 -27- times as the Trustee may request a list in such form and as of such date as the Trustee reasonably may require of the names and addresses of holders. SECTION 2.6. Transfer and Exchange. When Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Securities surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar or co- Registrar, duly executed by the holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments or similar governmental charges payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charges payable upon exchanges or transfers pursuant to Section 2.10, 3.7, 4.9, 9.5 or 11.1). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of (a) any security selected for redemption in whole or in part pursuant to Article III, except the unredeemed portion of any Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Securities and ending at the close of business on the day of such mailing. SECTION 2.7. Replacement Securities. If a mutilated Security is surrendered to the Trustee or if the holder of a Security claims and submits an affidavit or other evidence, satisfactory to the Company and the Trustee, to the effect that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement L1103/WP88/03AV18 -28- Security if the requirements of the Company and the Trustee are met. If required by the Company or the Trustee, such holder must provide an indemnity bond or other security, sufficient in the judgment of both the Company and the Trustee, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such holder for its reasonable, out-of-pocket expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.8. Outstanding Securities. Securities outstanding at any time are all the Securities that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security, except as provided in Section 2.9. If a Security is replaced pursuant to Section 2.7 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Company and the Trustee receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.7. If on a Redemption Date or the Maturity Date the Paying Agent (other than the Company or an Affiliate of the Company) holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Securities payable on that date and payment of the Securities called for redemption is not otherwise prohibited, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. SECTION 2.9. Treasury Securities. In determining whether the holders of the required principal amount of Securities have concurred in any direction, amendment, supplement, waiver or consent, L1103/WP88/03AV18 -29- Securities owned by the Company and Affiliates of the Company shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, amendment, supplement, waiver or consent, only Securities that the Trustee knows are so owned shall be disregarded. SECTION 2.10. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive securities but may have variations that the Company reasonably and in good faith considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as permanent Securities authenticated and delivered hereunder. SECTION 2.11. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Company or an Affiliate of the Company) and no one else, shall cancel and, at the written direction of the Company, shall dispose of all Securities surrendered for transfer, exchange, payment or cancellation. Subject to Section 2.7, the Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section 2.11, except as expressly permitted in the form of Securities and as permitted by this Indenture. SECTION 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest, plus (to the extent lawful) interest on the defaulted interest, to the persons who are holders on a subsequent L1103/WP88/03AV18 -30- special record date, which date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not the subsequent record date is a Business Day. At least 15 days before the subsequent special record date, the Company shall mail to the Trustee and each holder a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13 Persons Deemed Owners. Except as otherwise required by law, prior to the presentment of a Security for registration of transfer, the Company, the Trustee and any Agents shall treat the person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of, and interest on, said Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any Agent shall be affected by any notice to the contrary. ARTICLE III REDEMPTION SECTION 3.1. Right of Redemption. The Securities may be redeemed at the election of the Company, as a whole or from time to time in part, at any time on or after August 1, 1998, at the Redemption Prices specified in Paragraph 5 of the form of Securities, in each case, together with accrued and unpaid interest to the Redemption Date. The election by the Company to redeem any Securities pursuant to this Section 3.1 shall be evidenced by a Board Resolution of the Company. SECTION 3.2. Notices to Trustee. If the Company elects to redeem Securities pursuant to Paragraph 5 of the Securities, it shall notify the Trustee in writing of the Redemption Date and the principal amount of Securities to be redeemed and whether it wants the Trustee to give notice of redemption to the holders. L1103/WP88/03AV18 -31- The Company shall give each notice to the Trustee provided for in this Section 3.2 at least 60 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). SECTION 3.3. Selection of Securities to Be Redeemed. If less than all of the Securities are to be redeemed pursuant to Paragraph 5 of the Securities, the Trustee shall select the Securities to be redeemed pro rata or by lot or by such other method as the Trustee shall determine to be fair and appropriate and in such manner as complies with any applicable legal and stock exchange requirements. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption and shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.4. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first class mail, postage prepaid, to the Trustee and each holder whose Securities are to be redeemed. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Each notice of redemption shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price, including the amount of accrued and unpaid interest to be paid upon such redemption; L1103/WP88/03AV18 -32- (3) the name, address and telephone number of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent at the address specified in such notice to collect the Redemption Price; L1103/WP88/03AV18 -33- (5) that, unless (a) the Company defaults in its obligation to deposit U.S. Legal Tender sufficient to pay the Redemption Price and accrued and unpaid interest on the Securities called for redemption with the Paying Agent in accordance with Section 3.5 hereof or (b) the payment of the Redemption Price and accrued and unpaid interest is prohibited, interest on the Securities called for redemption ceases to accrue on and after the Redemption Date and thereafter the only remaining right of the holders of such Securities is to receive payment of the Redemption Price and accrued and unpaid interest upon surrender to the Paying Agent of the Securities called for redemption; (6) if any Security is being redeemed in part, the portion of the principal amount, equal to $1,000 or any integral multiple thereof, of such Security to be redeemed and that, after the Redemption Date, and upon surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued; (7) if less than all the Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of such Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption; (8) the CUSIP number of the Securities to be redeemed; and (9) that the notice is being sent pursuant to this Section 3.4 and pursuant to the optional redemption provisions of Paragraph 5 of the Securities. SECTION 3.5. Deposit of Redemption Price. L1103/WP88/03AV18 -34- At least two Business Days prior to the Redemption Date, the Company shall deposit with the Paying Agent (other than the Company or an Affiliate of the Company) U.S. Legal Tender sufficient to pay the Redemption Price of all Securities to be redeemed on such Redemption Date and accrued and unpaid interest on such Securities to the Redemption Date. The Paying Agent shall promptly return to the Company any U.S. Legal Tender so deposited which is not required for that purpose upon the written request of the Company. If the Company complies with the preceding paragraph and payment of the Redemption Price for the Securities called for redemption and accrued and unpaid interest thereon is not prohibited, interest on the Securities to be redeemed will cease to accrue on the applicable Redemption Date, whether or not such Securities are presented for payment. Notwithstanding anything herein to the contrary, if any Security surrendered for redemption in the manner provided in the Securities shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall continue to accrue and be paid from the Redemption Date until such payment is made on the unpaid principal, and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the rate and in the manner provided in Section 4.1 hereof and the Security. SECTION 3.6. Payment of Securities on Redemption Date. Once notice of redemption is mailed in accordance with Section 3.4, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price, together with accrued and unpaid interest to such date. Upon surrender to the Trustee or Paying Agent, such Securities called for redemption shall be paid at the Redemption Price, together with accrued and unpaid interest thereon to the Redemption Date; provided, however, that if the Redemption Date is after a regular Record Date and on or prior to the next succeeding Interest Payment Date, the accrued interest shall be payable to the holder of the redeemed Securities registered on the relevant Record Date; and provided, further, that if a Redemption Date is a Legal Holiday, payment shall be made on the next L1103/WP88/03AV18 -35- succeeding Business Day and no interest shall accrue for the period from such Redemption Date to such succeeding Business Day. SECTION 3.7. Securities Redeemed in Part. Upon surrender of a Security that is to be redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the holder, without service charge, a new Security or Securities equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE IV COVENANTS SECTION 4.1. Payment of Securities. The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities. An installment of principal of or interest on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or an Affiliate of the Company) holds for the benefit of the holders, on or before 10:00 a.m., New York City time, on that date, U.S. Legal Tender deposited and designated for and sufficient to pay such installment of principal or interest. The Company shall pay interest on overdue principal and on overdue installments of interest at the rate specified in the Securities compounded semi-annually, to the extent lawful. SECTION 4.2. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company hereby initially designates the office of the Trustee located at 5 Hanover L1103/WP88/03AV18 -36- Square, 10th Floor, New York, New York 10004 as such office or agency. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.2. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 4.3. Corporate Existence. Subject to Article V, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate or other existence of each of its Subsidiaries in accordance with the respective organizational documents of each of them and the rights (charter and statutory) and corporate franchises of the Company and each of its Subsidiaries; provided, however, that the Company shall not be required to preserve, with respect to itself, any right or franchise, and with respect to any of its Subsidiaries, any such existence, right or franchise, if (a) the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and (b) the loss thereof is not disadvantageous in any material respect to the holders. SECTION 4.4. Payment of Taxes and Other Claims. The Company shall, and shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all taxes, assessments and governmental charges L1103/WP88/03AV18 -37- (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon the Company or any of its Subsidiaries or the properties and assets of the Company or any of its Subsidiaries and (ii) all lawful claims, whether for labor, materials, supplies, services or anything else, which have become due and payable and which by law have or may become a Lien upon the property and assets of the Company or any of its Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts adequate reserves have been established and are maintained on the books of the Company or a Subsidiary of the Company in accordance with GAAP so long as no item or portion of property of the Company or any of its subsidiaries subject thereto is in jeopardy of being seized, levied upon or forfeited. SECTION 4.5. Maintenance of Properties and Insurance. The Company shall cause all properties used or useful to the conduct of its business and the business of each of its Subsidiaries to be maintained and kept in good condition, repair and working order (reasonable wear and tear excepted) and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in its reasonable judgment may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing contained in this Section 4.5 shall prevent the Company from discontinuing any operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is (a) in the judgment of the Board of Directors of the Company, desirable in the conduct of the business of the Company, and (b) not disadvantageous in any material respect to the holders. The Company shall provide, or cause to be provided, for itself and each of its Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the reasonable, good L1103/WP88/03AV18 -38- faith opinion of the Company, are adequate and appropriate for the conduct of the business of the Company and such Subsidiaries in a prudent manner, with reputable insurers or with the government of the United States of America or an agency or instrumentality thereof, in such amounts, with such deductibles, and by such methods as shall be customary, in the reasonable, good faith opinion of the Company, and adequate and appropriate for the conduct of the business of the Company and such Subsidiaries in a prudent manner for corporations similarly situated in the industry. SECTION 4.6. Limitations on Incurrence of Additional Indebtedness (a) Except as set forth in this Section 4.6, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, issue, incur, assume, Guarantee, become directly or indirectly liable with respect to (including as a result of an Asset Acquisition), or otherwise become responsible for, contingently or otherwise (individually and collectively, to "Incur," or, as appropriate, an "Incurrence"), any Indebtedness (including Acquired Indebtedness) from and after the Issue Date. For purposes of this Indenture, Indebtedness of any person, which Indebtedness is outstanding at the time such person becomes a Subsidiary of the Company or is merged or consolidated with the Company or a Subsidiary of the Company, shall (subject to the provisions set forth in the definition of the term "Consolidated EBITDA Coverage Ratio" contained in Section 1.1) be deemed to have been Incurred by the Company or its Subsidiaries, as the case may be, at the time such person becomes a Subsidiary of the Company or is merged or consolidated with the Company or a Subsidiary of the Company. (b) If (i) no Default or Event of Default shall exist and be continuing at the time of, or would occur, on a pro forma basis, after giving effect to the Incurrence of such Indebtedness, and (ii) on the date of the Incurrence of such Indebtedness (the "Incurrence Date"), the Consolidated EBITDA Coverage Ratio of the Company for the Reference Period immediately preceding the Incurrence Date, on a pro forma basis, after giving effect to the Incurrence of such Indebtedness, would have been (A) at any time prior to August 1, 1995, at least 2.0 to 1 and (B) at any time on L1103/WP88/03AV18 -39- or after August 1, 1995, 2.25 to 1, then the Company may Incur such Indebtedness. (c) The Company or any of its Subsidiaries may Incur Indebtedness evidenced by the Securities and other obligations under this Indenture up to the amounts specified herein as of the date hereof. (d) The Company or any of its Subsidiaries may Incur Indebtedness under the Old Debentures; provided, however, that, on the Issue Date, the Company or the trustee for the Old Debentures on behalf of the Company shall have given irrevocable notice of redemption of all the outstanding Old Debentures in accordance with the terms of the Old Debenture Indenture and shall have deposited the funds necessary to effect such redemption with the trustee for the Old Debentures. (e) The Company may Incur Indebtedness under any Working Capital Facility; provided, however, that the amount of Working Capital Financing at any time outstanding shall not exceed the greater of (i) the aggregate amount of the commitments under the New Credit Facility on the Issue Date or (ii) the sum of (A) 85% of the net book value of the Eligible Receivables of the Company and its Consolidated Subsidiaries, determined on a consolidated basis for the Company and its Consolidated Subsidiaries in accordance with GAAP, and (B) 65% of the net book value of the Inventory of the Company and its Consolidated Subsidiaries, determined on a consolidated basis for the Company and its Consolidated Subsidiaries in accordance with GAAP, less in the case of clauses (i) and (ii) above, the aggregate amount applied by the Company to the permanent reduction of Working Capital Financing pursuant to clause (C)(y) of Section 4.9(a). (f) Any Subsidiary of the Company may Incur Indebtedness consisting of Guarantees of Working Capital Financing; provided, however, that the obligation of any Subsidiary of the Company in respect of such Guarantees shall not at any time exceed the net book value of the Accounts Receivable and Inventory of such Subsidiary pledged to secure such Working Capital Financing. (g) Subject to the limitations set forth in paragraph (d) above, the Company or any of its Subsidiaries L1103/WP88/03AV18 -40- may Incur Indebtedness outstanding on the Issue Date, after giving effect to (i) the repayment by the Company of the Indebtedness outstanding under the Old Financing Agreements and (ii) the redemption by the Company of the Old Debentures, in each case as contemplated by the Recapitalization. (h) The Company may Incur Indebtedness to any Wholly Owned Subsidiary of the Company and any Subsidiary of the Company may Incur Indebtedness to the Company or to a Wholly Owned Subsidiary of the Company; provided, however, that the Company or such Subsidiary of the Company, as the case may be, shall not become liable to any person other than the Company or a Wholly Owned Subsidiary of the Company in respect of Indebtedness permitted to be Incurred pursuant to this paragraph (h). (i) The Company or any of its Subsidiaries may Incur Indebtedness consisting of (i) Purchase Money Obligations for property used in a Permitted Business, (ii) Indebtedness Incurred for the purpose of financing the construction of properties or fixed improvements used in a Permitted Business, (iii) Capitalized Lease Obligations Incurred in connection with a Permitted Business and (iv) Acquired Indebtedness Incurred in connection with a Permitted Business; provided, however, that the amount of Indebtedness Incurred by the Company and its Subsidiaries in any fiscal year pursuant to this paragraph (i) shall not exceed $25,000,000; and provided, further, that any portion of such $25,000,000 which is not so Incurred by the Company and its Subsidiaries in any fiscal year may be carried forward to subsequent fiscal years. Notwithstanding the foregoing, in no event shall the maximum amount that may be Incurred by the Company and its Subsidiaries in any fiscal year pursuant to this paragraph (i) exceed $50,000,000. (j) The Company or any of its Subsidiaries may Incur Indebtedness so long as such Indebtedness is Incurred in the ordinary course of business under (i) Interest Rate Agreements, (ii) Currency Agreements, (iii) appeal bonds, performance bonds, or letters of credit or reimbursement obligations in respect thereof, (iv) letter of credit obligations related to insurance (including self-insurance) or (v) bank over-drafts that are repaid within three Business Days. L1103/WP88/03AV18 -41- (k) The Company may Incur Indebtedness other than that permitted under paragraphs (b), (c), (d), (e), (f), (g), (h), (i) and (j) above; provided, however, that the aggregate principal amount of Indebtedness outstanding at any time permitted to be Incurred pursuant to this paragraph (k) shall not exceed $20,000,000; and, provided, further that such Indebtedness will rank pari passu with or subordinate in right of payment to the Securities. (l) The Company may extend the final maturity or any mandatory redemption date of outstanding Indebtedness permitted under paragraphs (c), (g) or (i) above and may Incur Indebtedness in exchange for, or the proceeds of which are used to refinance, such outstanding Indebtedness in an amount (or, if such new Indebtedness is issued at a price less than the principal amount thereof, with an original issue price) not to exceed the amount so exchanged or refinanced (plus accrued interest and fees and expenses related thereto); provided, however, that the Indebtedness being extended or exchanged for, or the proceeds of which are used to refinance, the Securities or other Indebtedness of the Company which is pari passu with or subordinate in right of payment to the Securities shall only be permitted (a) if, in case the Indebtedness to be extended, exchanged or refinanced is subordinated in right of payment to the Securities, each new Indebtedness is subordinated in right of payment to the Securities at least to the same extent and in the same manner as the Indebtedness to be extended, exchanged or refinanced and (b) if, in case the Securities are extended, exchanged or refinanced in part or the Indebtedness to be extended, exchanged or refinanced is pari passu with or subordinated to the Securities, no payments of principal of such Indebtedness by way of sinking fund, amortization, mandatory redemption or otherwise (including defeasance) may be made or required (including, but not limited to, at the option of the holder thereof) in an amount greater than or at the time prior to the amounts and times specified in the Indebtedness being extended, exchanged or refinanced and the Weighted Average Life to Maturity of such Indebtedness is greater than the Weighted Average Life to Maturity of the Indebtedness being extended, exchanged or refinanced; and provided, further, that in no event may Indebtedness of the Company be refinanced by means of the Incurrence of Indebtedness by any Subsidiary pursuant to this paragraph (l). The Company may Incur Indebtedness L1103/WP88/03AV18 -42- pursuant to this paragraph (l) not more than three months prior to the application of the proceeds to repay the Indebtedness to be exchanged or refinanced. SECTION 4.7. Limitation on Restricted Payments. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, make any Restricted Payment, if, after giving effect thereto, (a) a Default or an Event of Default shall have occurred and be continuing, (b) the Company would not be entitled to Incur $1.00 of additional Indebtedness pursuant to Section 4.6(b) or (c) the aggregate amount of all Restricted Payments made by the Company and its Subsidiaries, including such proposed Restricted Payment (the amount of any Restricted Payment not made in cash to be the fair market value of any property used therefor, as determined in good faith by the Board of Directors of the Company and evidenced by a Board Resolution), from and after the Issue Date, shall exceed the sum, if positive, of (i) 50% of Consolidated Net Income of the Company accrued for the period (taken as one accounting period), commencing on the first day of the first full fiscal quarter which commenced after the Issue Date to and including the last day of the first fiscal quarter ended immediately prior to the date of each calculation (or, in the event Consolidated Net Income for such period is a deficit, then minus 100% of such deficit), minus 100% of the amount of any writedowns, writeoffs, other negative evaluations and other negative extraordinary charges not otherwise reflected in Consolidated Net Income during such period; (ii) the aggregate net proceeds, including the fair market value of property other than cash (as determined in good faith by the Board of Directors of the Company) received by the Company from the substantially concurrent sale or issuance (other than to a Subsidiary of the Company) of its Capital Stock, but excluding the proceeds from the sale or issuance of (x) any Capital Stock convertible into or exchangeable for (whether at the option of the Company or the holder thereof or upon the happening of any event) any security other than its Capital Stock and (y) any Disqualified Capital Stock; and (iii) $5,000,000. The foregoing provisions of this Section 4.7 will not prohibit the payment of any dividend on Capital Stock within 60 days after the date of its declaration or authorization if such dividend or redemption could have been made on the date of L1103/WP88/03AV18 -43- such declaration or authorization in compliance with the foregoing provisions; provided, however, that the full amount of such dividend will be deducted in the calculation of the aggregate amount of Restricted Payments available to be made by the Company and its Subsidiaries referred to in clause (c) above. SECTION 4.8. Limitation on Liens. The Company shall not, and shall not permit any of its Subsidiaries to, create, incur or assume or suffer to exist any Lien upon any of their respective property or assets, whether now owned or hereafter acquired, except for Permitted Liens, unless prior thereto or contemporaneously therewith, the Securities are secured equally and ratably with, or prior to, any other Indebtedness secured by such Lien for so long as such other Indebtedness shall be so secured. SECTION 4.9. Limitations on Sales of Assets. (a) Neither the Company nor any of its Subsidiaries shall in one or a series of related transactions convey, sell, transfer, assign or otherwise dispose of, directly or indirectly (including by way of merger, consolidation or sale and leaseback transaction), any of its property, business or assets (including any sale or other transfer or issuance of any Capital Stock of any Subsidiary of the Company whether by the Company or through the issuance, sale or transfer of Capital Stock by a Subsidiary of the Company) whether owned (or conducted) on the Issue Date, or thereafter acquired (or conducted) (an "Asset Sale"), unless (A) the Company or such Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value of the Capital Stock or assets sold or otherwise disposed of (as determined, in the case of any Asset Sale involving Capital Stock or assets with a fair market value in excess of $1,000,000, in good faith by the Board of Directors of the Company, as evidenced by a Board Resolution delivered to the Trustee); (B) at least 80% of the value of the consideration for such Asset Sale consists of U.S. Legal Tender; provided, however, that (x) any note or other obligation received by the Company or such Subsidiary for such Asset Sale shall be deemed to be in U.S. Legal Tender, if such note or other obligation is converted into U.S. Legal Tender immediately L1103/WP88/03AV18 -44- following such Asset Sale, and (y) any liabilities of the Company or any of its Wholly Owned Subsidiaries (as shown on the most recent balance sheet of the Company or such Wholly Owned Subsidiary) that are assumed upon the transfer of any asset pursuant to such Asset Sale, other than Indebtedness under the Securities or this Indenture or any Indebtedness that is subordinated (whether by contract or by operation of law, or otherwise) in right of payment to the Securities, shall be deemed to be in the form of U.S. Legal Tender; and (C) within 180 days from the date of the Asset Sale, the Net Cash Proceeds of such Asset Sale are either (x) invested in a Permitted Business; provided, however, that such an investment may be made at any time prior to 360 days from the date of such Asset Sale, if no later than 180 days from the date of such Asset Sale, the Board of Directors of the Company commits to make such investment within such time period, as evidenced by a Board Resolution delivered to the Trustee; or (y) applied to the payment of the principal amount of any Working Capital Financing, if in connection with any such payment, any related commitment, standby obligation or the like under the applicable Working Capital Facility shall be permanently reduced by an amount equal to the principal amount so repaid. If such Net Cash Proceeds are not actually applied in accordance with clause (x) or (y) above, or if after the application thereof there remain any Net Cash Proceeds, the Company shall make an Offer to Purchase (as defined below) the Securities. Notwithstanding the immediately preceding paragraph: (i) the Company may convey, sell, lease, transfer, assign, or otherwise dispose of any or all of its assets, business or property to a Wholly Owned Subsidiary of the Company and any Subsidiary of the Company may convey, sell, lease, transfer, assign, or otherwise dispose of any or all of its assets, business and property (upon voluntary liquidation or otherwise) to the Company or a Wholly Owned Subsidiary of the Company, in each case, so long as upon the completion of such transaction, no item or portion of any assets, business or property involved in such transaction which is material to the Company and its Subsidiaries taken as a whole L1103/WP88/03AV18 -45- is in jeopardy of being seized, levied upon or forfeited; (ii) the Company and any Subsidiary of the Company may in the ordinary course of business, consistent with past practice, convey, sell, lease, transfer, assign or otherwise dispose of assets acquired and held for resale in the ordinary course of business; (iii) the Company may convey, sell, lease, transfer or otherwise dispose of assets pursuant to and in accordance with the provisions of Article V; (iv) the Company and its Subsidiaries may, for value, convey, sell, lease, transfer, or assign damaged, worn out or other obsolete property in the ordinary course of business or other property no longer necessary for the proper conduct of their businesses; (v) the Company and any of its Subsidiaries may abandon assets and properties which are no longer useful in their businesses and cannot be sold; and (vi) the Company and its Subsidiaries may convey, sell, lease, transfer, assign or otherwise dispose of assets to the extent that the aggregate Net Cash Proceeds from all such Asset Sales not otherwise permitted pursuant to clause (i), (ii), (iii), (iv) or (v) above do not exceed $3,000,000 in any fiscal year. The Company shall accumulate all Net Cash Proceeds in excess of the amount provided in clause (vi) of the immediately preceding paragraph, and the aggregate amount of such accumulated Net Cash Proceeds not used for the purposes permitted by this Section 4.9(a) and within the time period provided by this Section 4.9(a) shall be referred to as the "Accumulated Amount." For the purposes of this Section 4.9, the term "Minimum Accumulation Date" means each date on which the Accumulated Amount first exceeds $5,000,000. L1103/WP88/03AV18 -46- (b) Following each Minimum Accumulation Date, the Company shall make an unconditional offer (an "Offer to Purchase") to the holders pursuant to the notice referred to below to purchase, on a pro rata basis, Securities having a principal amount (the "Offer Amount") equal to the Accumulated Amount, at a purchase price (the "Offer Price") equal to 100% of principal amount of such Securities, plus accrued and unpaid interest to and including the date the Securities tendered are purchased and paid for in accordance with this Section 4.9 and including any premium that would be payable if the Company were to have, on such date (or, on the earliest date thereafter on which the Securities may be redeemed by the Company as provided in Paragraph 5 of the Securities), redeemed the Securities pursuant to Article III and Paragraph 5 of the Securities (the "Purchase Date"). Notice of an Offer to Purchase shall be sent, at least 20 Business Days prior to the Final Put Date (as hereinafter defined), by first-class mail, by the Company to each holder at its registered address, with a copy to the Trustee. The notice to the holders shall contain all information, instructions and materials required by applicable law or otherwise material to such holders' decision to tender Securities pursuant to the Offer to Purchase. The notice, which shall govern the terms of the Offer to Purchase, shall state: (1) that the Offer to Purchase is being made pursuant to such notice and this Section 4.9; (2) the Offer Amount, the Offer Price (including the amount of accrued and unpaid interest) and the Final Put Date and the purchase date (the "Purchase Date"), which shall be on or prior to 40 Business Days following the Minimum Accumulation Date; (3) that any Security or portion thereof not tendered and accepted for payment will continue to accrue interest, if interest is then accruing; (4) that, unless the Company defaults in depositing U.S. Legal Tender with the Paying Agent in accordance with the last paragraph of this clause (b), any Security or portion thereof L1103/WP88/03AV18 -47- accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest after the Purchase Date; (5) that holders electing to have a Security or portion thereof purchased pursuant to an Offer to Purchase will be required to surrender the Security, with the form entitled "Election of Holder to Require Purchase" on the reverse of the Security completed, to the Paying Agent (which may not for purposes of this Section 4.9, notwithstanding any other provision of this Indenture, be the Company or any Affiliate of the Company) at the address specified in the notice prior to the close of business on the third Business Day prior to the Purchase Date (the "Final Put Date"); (6) that holders will be entitled to withdraw their elections, in whole or in part, if the Paying Agent (which may not for purposes of this Section 4.9, notwithstanding any other provision of this Indenture, be the Company or any Affiliate of the Company) receives, prior to the close of business on the Final Put Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the principal amount of the Securities the holder is withdrawing and a statement containing a manual or facsimile signature that such holder is withdrawing his election to have such principal amount of Securities purchased; (7) that, if Securities in a principal amount in excess of the Offer Amount are tendered and not withdrawn, the Company shall purchase Securities on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or integral multiples thereof shall be acquired); (8) that holders whose Securities were purchased only in part will be issued a new Security in principal amount equal to the unpurchased portion of the Securities surrendered; and L1103/WP88/03AV18 -48- (9) a brief description of the circumstances and relevant facts regarding the Asset Sales. Any such Offer to Purchase shall comply with all applicable provisions of Federal and state laws, including Rule 14e-1 under the Exchange Act and other laws regulating tender offers, if applicable, and any provisions of this Indenture that conflict with such laws shall be deemed to be superseded by the provisions of such laws. On or before a Purchase Date, the Company shall (i) accept for payment Securities or portions thereof properly tendered pursuant to the Offer to Purchase on or prior to the Final Put Date (on a pro rata basis if required pursuant to Paragraph (7) above), (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Offer Price (together with accrued and unpaid interest) for all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate setting forth the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail or deliver to holders of Securities or portions thereof so accepted payment in an amount equal to the Offer Price (together with accrued and unpaid interest) for such Securities or portions thereof, and the Trustee shall promptly authenticate and mail or deliver to such holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the holder thereof. The Company will issue a public announcement of the results of the Offer to Purchase on or as soon as practicable after the Purchase Date and will furnish a copy of such announcement to the Trustee. (c) If the amount required to acquire all Securities tendered by holders pursuant to the Offer to Purchase (the "Acceptance Amount") shall be less than the Offer Amount, the excess of the Offer Amount over the Acceptance Amount may be (i) invested in a Permitted Business or (ii) applied to the repayment, redemption or repurchase of the principal amount of Indebtedness that ranks pari passu in right of payment with the Securities or, in the case of an Asset Sale by a Subsidiary, any L1103/WP88/03AV18 -49- Indebtedness of such Subsidiary or of any Wholly Owned Subsidiary of the Company (other than Indebtedness owed to the Company or another Subsidiary), and in connection with any such payment any related loan commitment, standby facility or the like shall be permanently reduced by an amount equal to the principal amount so repaid, redeemed or repurchased. Upon consummation of any Offer to Purchase made in accordance with the terms of this Section 4.9, the Accumulated Amount as of the Minimum Accumulation Date shall be reduced to zero and accumulations thereof shall be deemed to recommence from the day next following such Minimum Accumulation Date. SECTION 4.10. Limitation on Transactions with Affiliates. Neither the Company nor any of its Subsidiaries shall make, effect or enter into any Affiliate Transaction, except for transactions evidenced by an Officers' Certificate addressed and delivered to the Trustee stating that (i) such Affiliate Transaction is made in good faith and (ii) the terms of such Affiliate Transaction are fair and reasonable to the Company or such Subsidiary, as the case may be, or, with respect to Affiliate Transactions between the Company and its Subsidiaries, to the Company, and are at least as favorable as the terms which could be obtained by the Company or such Subsidiary, as the case may be, or, with respect to Affiliate Transactions between the Company and its Subsidiaries, by the Company in a comparable transaction made on an arm's length basis with persons who are not affiliated with the Company or such Subsidiary; provided, however, that with respect to any Affiliate Transaction with an aggregate value (to either party) in excess of $1,000,000, a majority of the Board of Directors of the Company (including a majority of the directors who are not employees, officers or Affiliates of the Company) must approve such transaction and such approval shall be evidenced by a Board Resolution to the effect set forth in clause (ii) above; and provided, further, that with respect to any Affiliate Transaction with an aggregate value (to either party) in excess of $5,000,000, the Company must, prior to the consummation thereof, obtain a written favorable opinion as to the fairness of such transaction to the Company or such Subsidiary, as the case may be, from a financial point of view from an Independent Financial Advisor. Notwithstanding the foregoing, the provisions of L1103/WP88/03AV18 -50- this Section 4.10 shall not apply to (w) transactions effected pursuant to an agreement that is in effect on the Issue Date in accordance with the terms thereof as in effect on such date, (x) transactions exclusively between or among the Company and any of its Wholly Owned Subsidiaries, (y) Restricted Payments made in compliance with Section 4.7 and (z) transactions permitted by, and complying with, the provisions of Article V. SECTION 4.11. Limitations on Restricting Subsidiary Dividends. Neither the Company nor any of its Subsidiaries may, directly or indirectly, create, assume or suffer to exist any consensual encumbrance or restriction on the ability of any Subsidiary of the Company to pay dividends or make other distributions on the Capital Stock of any Subsidiary of the Company or pay dividends or any other obligation to the Company or any of its Subsidiaries or otherwise transfer assets or make or pay loans or advances to the Company or any of its Subsidiaries, except for restrictions (a) imposed by this Indenture, (b) existing on the Issue Date pursuant to the express terms of the New Credit Facility as in effect on such date or are existing thereafter under the terms of any other Working Capital Facility; provided, however, that the restrictions imposed by any such other Working Capital Facility shall not be in any respect more restrictive than those existing on the Issue Date pursuant to the express terms of the New Credit Facility as in effect on such date; or (c) customary provisions in instruments or agreements, entered into in the ordinary course of business, relating to a Lien created, incurred, or assumed in accordance with Section 4.8 prohibiting the transfer of the property subject to such Lien. SECTION 4.12 Limitation on Issuance of Preferred Stock by Subsidiaries. The Company will not permit any Subsidiary to issue, create, assume or otherwise cause or suffer to be outstanding or otherwise exist any Preferred Stock of such Subsidiary, except Preferred Stock held of record and beneficially by the Company or a Wholly Owned Subsidiary of the Company. SECTION 4.13. SEC Reports. L1103/WP88/03AV18 -51- (a) The Company shall file with the Trustee, simultaneously with any filing of the same with the SEC, copies of the quarterly and annual reports and the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe), if any, which it is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Company is not subject to the requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the Trustee, at the time it would have been required to file such information with the SEC were it required to do so, financial statements, including any notes thereto (and, in the case of a fiscal year end, an auditors' report by an independent certified public accounting firm of established national reputation), comparable to those which it would have been required to include in such quarterly or annual reports, information, documents or other reports if it had been subject to the requirements of Section 13 or 15(d) of the Exchange Act. The Company shall also comply with the other provisions of Section 314(a) of the TIA. (b) The Company shall cause its annual reports to stockholders containing audited consolidated financial statements and any quarterly or other financial reports furnished by it to stockholders pursuant to the Exchange Act, if any, to be mailed to the holders (no later than the date such materials are mailed or made available to its stockholders) at their addresses appearing in the register of Securities maintained by the Registrar and shall cause to be disclosed in financial statements in each such report the amount available for Restricted Payments pursuant to Section 4.7 hereof. If the Company is not required to furnish annual or quarterly reports to its stockholders pursuant to the Exchange Act, the Company shall cause its financial statements referred to in Section 4.13(a) above, including any notes thereto (and, in the case of a fiscal year end, an auditors' report by an independent certified public accounting firm of established national reputation), to be so mailed to the holders within 125 days after the end of each of its fiscal years and within 50 days after the end of each of the first three fiscal quarters of each fiscal year. If the Trustee (at the Company's request and expense) is to mail the foregoing information to the holders, the Company shall supply such information to the Trustee at least three Business Days prior thereto. L1103/WP88/03AV18 -52- SECTION 4.14. Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee within 120 days after the end of its fiscal year an Officers' Certificate complying with Section 314(a)(4) of the TIA and stating that a review of its activities and the activities of its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate, whether or not the signer knows of any failure by the Company or any Subsidiary of the Company to comply with any conditions or covenants in this Indenture and, if such signer does know of such a failure to comply, the certificate shall describe such failure with particularity. The Officers' Certificate shall also notify the Trustee should the relevant fiscal year end on any date other than the current year end date. (b) The Company shall deliver to the Trustee within 120 days after the end of each of its fiscal years a written report of a firm of independent certified public accountants with an established national reputation stating that in conducting their audit for such fiscal year, nothing has come to their attention that caused them to believe that the Company or any Subsidiary of the Company was not in compliance with the provisions set forth in Sections 4.6, 4.7, 4.9 and 4.10 of this Indenture. (c) The Company shall, so long as any of the Securities are outstanding, deliver to the Trustee, immediately upon becoming aware of any Default or Event of Default under this Indenture, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. The Trustee shall not be deemed to have knowledge of a Default or an Event of Default unless one of its Trust Officers receives notice of the Default giving rise thereto from the Company or any of the holders. SECTION 4.15. Waiver of Stay, Extension or Usury Laws. L1103/WP88/03AV18 -53- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law, wherever enacted, how or at any time hereafter in force which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Securities as contemplated herein or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law insofar as such law applies to the Securities, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, and will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE V SUCCESSOR CORPORATION SECTION 5.1. When Company May Merge, Etc. (a) The Company may not, in a single transaction or through a series of related transactions, (i) consolidate with or merge with or into any other person or, directly or indirectly, sell, lease, assign, transfer or convey all or substantially all of its properties and assets as an entirety or substantially as an entirety to another person or group of affiliated persons, or (ii) adopt a Plan of Liquidation, unless, in either case: L1103/WP88/03AV18 -54- (1) the Company shall be the continuing person, or the person (if other than the Company) formed by such consolidation or into which the Company is merged or to which all or substantially all of the properties and assets of the Company are transferred as an entirety or substantially as an entirety (or, in the case of a Plan of Liquidation, any person to whom assets are transferred) (the Company or such other person being hereinafter referred to as the "Surviving Person") shall be a corporation organized and validly existing under the laws of the United States, any State thereof or the District of Columbia, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (2) on a pro forma basis, immediately after giving effect to such transaction and the assumption of the obligations contemplated by clause (1) above, and the Incurrence or issuance or anticipated Incurrence or issuance of any Indebtedness or Disqualified Capital Stock to be Incurred or issued in connection therewith, the Surviving Person (x) shall have a Consolidated Net Worth equal to not less that 100% of the Consolidated Net Worth of the Company immediately preceding the transaction, and (y) could Incur $1.00 of additional Indebtedness pursuant to Section 4.6(b); provided, however, that in the case of a merger of a Consolidated Subsidiary of the Company with and into the Company or a Wholly Owned Subsidiary of the Company or a sale, lease, assignment, transfer or conveyance by a Consolidated Subsidiary of all or substantially all of its properties and assets to the Company or a Wholly Owned Subsidiary of the Company, the foregoing provisions of this clause (2) shall not apply if on a pro forma basis, L1103/WP88/03AV18 -55- immediately after giving effect to such merger or such sale, lease, assignment, transfer or conveyance, as the case may be, the Consolidated EBITDA Coverage Ratio of the Company is equal to or greater than the Consolidated EBITDA Coverage Ratio of the Company immediately prior to such merger or such sale, lease, assignment, transfer or conveyance, as the case may be; L1103/WP88/03AV18 -56- (3) immediately before and, on a pro forma basis, immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1) above, and to the Incurrence or issuance or anticipated Incurrence or issuance of any Indebtedness to be Incurred or Disqualified Capital Stock to be issued in connection therewith, no Default or Event of Default shall have occurred and be continuing; and (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, assignment, or transfer and such supplemental indenture comply with this Article V and that all conditions precedent herein provided relating to such transaction have been satisfied. (b) For purposes of clause (a), the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. SECTION 5.2. Successor Corporation Substituted. Upon any consolidation or merger, or any transfer of assets in accordance with Section 5.1, the Surviving Person formed by such consolidation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Surviving Person had been named as the Company herein. When a Surviving Person duly assumes all of the obligations of the Company pursuant hereto and pursuant to the Securities, the predecessor shall be released from such obligations. L1103/WP88/03AV18 -57- ARTICLE VI EVENTS OF DEFAULT AND REMEDIES SECTION 6.1. Events of Default. The term "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be caused voluntarily or involuntarily or effected, without limitation, by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) a default in the payment of any installment of interest upon any Security as and when the same becomes due and payable, and the continuance of such default for a period of 30 days; (2) a default in the payment of all or any part of the principal of the Securities when and as the same becomes due and payable at maturity, upon redemption, by declaration or otherwise, including a default in the payment of the Change of Control Purchase Price in accordance with Article XI or the Offer Price in accordance with Section 4.9; (3) a default in the observance or performance of, or breach of, any covenant, agreement or warranty of the Company contained in Article XI or Sections 4.6, 4.7 and 4.9; (4) a default in the observance or performance of, or breach of, any covenant, agreement or warranty of the Company contained in the Securities or in this Indenture (other than a default in the performance of any covenant, agreement or warranty which is specifically dealt with elsewhere in this Section 6.1), and continuance of such default or breach for a period of 30 days after there has been L1103/WP88/03AV18 -58- given, by registered or certified mail, return receipt requested, to the Company by the Trustee, or to the Company and the Trustee by holders of at least 25% in aggregate principal amount of the outstanding Securities, a written notice specifying such default or breach, requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (5) a default in the payment of all or any part of the principal of or interest on, or a default under any bond, debenture, note, mortgage, indenture or instrument under which there is then outstanding any Indebtedness of the Company or any of its Subsidiaries, whether now existing or hereafter created, aggregating in excess of $5,000,000 at any one time, if (i) in the case of a failure to pay principal of, or interest on, such Indebtedness, such a failure would permit the holders of such Indebtedness to accelerate the same so that it becomes due and payable prior to the date on which it would otherwise have been due and payable or (ii) in the case of any default (other than a failure to pay principal of, or interest on, such Indebtedness) under any bond, debenture, note, mortgage, indenture or other instrument under which such Indebtedness was issued, such a failure has resulted in the acceleration of the L1103/WP88/03AV18 -59- same so that it has become due and payable prior to the date on which it would otherwise have been due and payable; (6) final judgments for the payment of money which, in the aggregate, exceed $5,000,000 at any one time shall be entered against the Company or any of its Subsidiaries or any of their respective properties by a court of competent jurisdiction and shall remain in effect and undischarged for a period (during which execution shall not be effectively stayed) of 60 days (or, in the case of any such final judgment which provides for payment over time, which shall so remain undischarged beyond any applicable payment date provided therein); (7) a decree, judgment, or order by a court of competent jurisdiction shall have been entered adjudging the Company or any Significant Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company or any Significant Subsidiary under any Bankruptcy Law, and such decree or order shall have continued in effect and undischarged for a period (during which such decree or order shall not be effectively stayed) of 60 consecutive days; or a decree or order of a court of competent jurisdiction for the appointment of a Custodian of the Company or any Significant Subsidiary, or any substantial part of its assets or property, for the winding up or liquidation of the affairs of any such person, shall have been entered, and such decree or order shall have remained in effect and undischarged for a period (during which such decree or order shall not be effectively stayed) of 60 consecutive days; or (8) the Company or any Significant Subsidiary shall institute L1103/WP88/03AV18 -60- proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under any Bankruptcy Law, or shall consent to the filing of any such petition, or shall consent to the appointment of a Custodian of the Company or any Significant Subsidiary, or any substantial part of its assets or property, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall take any corporate action in furtherance of any of the foregoing. SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 6.1(7) and (8)) occurs and is continuing, then, and in every such case, unless the principal of all of the Securities shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of then outstanding Securities, by a notice in writing to the Company (and to the Trustee if given by holders) (an "Acceleration Notice"), may declare all of the principal of the Securities determined as set forth below, together with accrued interest thereon, to be due and payable immediately. If an Event of Default specified in Section 6.1(7) or (8) occurs, all principal of, premium applicable to, and accrued interest on, the Securities shall ipso facto be immediately due and payable on all outstanding Securities without any declaration or other act on the part of the Trustee or the holders. At any time after such acceleration and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article VI, the holders of a majority in aggregate principal amount of then outstanding Securities, by written notice to the Company and the Trustee, may waive, on behalf of all holders, a Default or Event of Default if: L1103/WP88/03AV18 -61- (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of any Securities which would become due otherwise than by such declaration of acceleration, and interest thereon at the rate borne by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities, (D) all sums paid or advanced by the Trustee hereunder and the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and (2) all Defaults and Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.12. SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if an Event of Default in payment of principal or interest specified in clauses (1) or (2) of Section 6.1 occurs and is continuing, the Company shall, upon demand of the Trustee, pay to it, for the benefit of the holders of such Securities, the whole amount then due and payable on such Securities for principal and interest, and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and on any overdue interest, at the rate borne by the Securities, and, in addition thereto, such L1103/WP88/03AV18 -62- further amount as shall be sufficient to cover the costs and expenses of collection, including compensation to, and expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust in favor of the holders, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the holders by such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 6.4. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise to take any and all actions under the TIA, including L1103/WP88/03AV18 -63- (i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel) and of the holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each holder to make such payments to the Trustee and in the event that the Trustee shall consent to the making of such payments directly to the holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any holder any plan of reorganization, arrangement, adjustment, or composition affecting the Securities or the rights of any holder thereof or to authorize the Trustee to vote in respect of a claim of any holder in any such proceeding. SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust in favor of the holders, and any recovery of judgment shall, after provision for the payment of compensation to, and expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable L1103/WP88/03AV18 -64- benefit of the holders of the Securities in respect of which such judgment has been recovered. SECTION 6.6. Priorities. Any money collected by the Trustee pursuant to this Article VI shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the Trustee in payment of all amounts due pursuant to Section 7.7; SECOND: To the holders in payment of the amounts then due and unpaid for principal of, and interest on, the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest, respectively; and THIRD: To whomsoever may be lawfully entitled thereto, the remainder, if any. SECTION 6.7. Limitation on Suits and Remedies. No holder or holders of any Securities shall have any right to order or direct the Trustee to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or to direct the Trustee in the conduct of any proceeding for any remedy available to the Trustee, unless (A) such holder has previously given written notice to the Trustee of a continuing Event of Default; (B) the holders of not less than 25% in principal amount of then outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; L1103/WP88/03AV18 -65- (C) such holder or holders have furnished to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred or reasonably probable to be incurred in compliance with such request; (D) the Trustee for 60 days after its receipt of such notice and request and the furnishing of such security or indemnity has failed to institute any such proceeding; and (E) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the holders of a majority in principal amount of the outstanding Securities; it being understood and intended that no one or more holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other holders, or to obtain or to seek to obtain priority or preference over any other holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the holders. SECTION 6.8. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision of this Indenture, the holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of, and interest on, such Security on the Maturity Dates of such payments as expressed in such Security and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such holder. SECTION 6.9. Rights and Remedies Cumulative. L1103/WP88/03AV18 -66- Except as otherwise provided with respect to there placement or payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no right or remedy herein conferred upon or reserved to the Trustee or to the holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.10. Delay or Omission Not Waiver. No delay or omission by the Trustee or by any holder of any Security to exercise any right or remedy arising upon any Event of Default shall impair the exercise of any such right or remedy or constitute a waiver of any such Event of Default. Every right and remedy given by this Article VI or by law to the Trustee or to the holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the holders, as the case may be. SECTION 6.11. Control by Holders. Subject to Section 6.7, the holder or holders of a majority in aggregate principal amount of then outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred upon the Trustee; provided, however, that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction, and (3) the Trustee may take any other action deemed proper by the Trustee L1103/WP88/03AV18 -67- which is not inconsistent with such direction. SECTION 6.12. Waiver of Default. The holder or holders of not less than a majority in aggregate principal amount of the outstanding Securities may, on behalf of all holders, prior to the declaration of the maturity of the Securities, waive any Default or Event of Default hereunder and its consequences, except a Default or Event of Default (A) in respect of the payment of the principal of, or interest on, any Security as specified in clauses (1) and (2) of Section 6.1, or (B) in respect of a covenant or provision hereof which, under Article IX, cannot be modified or amended without the consent of the holder of each outstanding Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair the exercise of any right arising therefrom. SECTION 6.13. Undertaking for Costs. All parties to this Indenture agree, and each holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted to be taken by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due L1103/WP88/03AV18 -68- regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any holder, or group of holders, holding in the aggregate more than 10% in aggregate principal amount of the outstanding Securities, or to any suit instituted by any holder for enforcement of the payment of principal of, or interest on, any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). SECTION 6.14. Restoration of Rights and Remedies. If the Trustee or any holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such holder, then and in every case, subject to any determination in such proceeding, the Company, the Trustee and the holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the holders shall continue as though no such proceeding had been instituted. ARTICLE VII TRUSTEE The Trustee hereby accepts the trust imposed upon it by this Indenture and covenants and agrees to perform the same, as herein expressed. SECTION 7.1. Duties of Trustee. (a) If a Default or an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as L1103/WP88/03AV18 -69- a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of a Default or an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture and no others, and no covenants or obligations shall be implied in or read into this Indenture which are adverse to the Trustee. L1103/WP88/03AV18 -70- (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.1. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.11. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or at the request, order or direction of the holders or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section 7.1. L1103/WP88/03AV18 -71- (f) The Trustee shall not be liable for interest on any assets received by it except as the Trustee may agree in writing with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. SECTION 7.2. Rights of Trustee. Subject to Section 7.1: (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may consult with counsel and may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Sections 12.4 and 12.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the holders, pursuant to the provisions of this Indenture, unless such holders shall have furnished to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred therein or thereby. L1103/WP88/03AV18 -72- SECTION 7.3. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries, or their respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.4. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities and it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities, other than the Trustee's certificate of authentication, or the use or application of any funds received by a Paying Agent other than the Trustee. SECTION 7.5. Notice of Default. If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each holder of Securities notice of the uncured Default or Event of Default within 90 days after such Default or Event of Default occurs. Except in the case of a Default or an Event of Default in payment of principal of, or interest on, any Security (including the payment of the Change of Control Purchase Price on the Change of Control Purchase Date, the payment of the Redemption Price on the Redemption Date and the Offer Price on the Purchase Date), the Trustee may withhold the notice if and so long as a Trust Officer in good faith determines that withholding the notice is in the interest of the holder of Securities. SECTION 7.6. Reports by Trustee to Holders. If required by the TIA, within 60 days after each May 15, beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each holder of Securities a brief report dated as of such May 15 that L1103/WP88/03AV18 -73- complies with TIA Section 313(a). The Trustee also shall comply with TIA Sections 313(b) and 313(c). The Company shall promptly notify the Trustee in writing if the Securities become listed on any stock exchange or automatic quotation system. A copy of each report, at the time of its mailing to holder of Securities, shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Securities are listed. SECTION 7.7. Compensation and Indemnity. The Company shall pay to the Trustee, from time to time, reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents, accountants, experts and counsel. The Company shall indemnify the Trustee (in its capacity as Trustee) and each of its officers, directors, attorneys-in-fact and agents for, and hold it harmless against, any claim, demand, expense (including but not limited to reasonable compensation, disbursements and expenses of the Trustee's agents and counsel), loss or liability incurred by it without negligence or willful misconduct on its part, arising out of or in connection with the administration of this trust and its rights or duties hereunder including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company shall defend the claim and the Trustee shall provide reasonable cooperation at the Company's expense in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided, that the Company will not be required to pay such fees and expenses if it assumes the Trustee's defense with counsel reasonably acceptable to the Trustee and there is no L1103/WP88/03AV18 -74- conflict of interest between the Company and the Trustee in connection with such defense. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence or willful misconduct. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a lien prior to the Securities on all assets held or collected by the Trustee, in its capacity as Trustee, except assets held in trust to pay principal of or interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(7) or (8) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The Company's obligations under this Section 7.7 and any lien arising hereunder shall survive the resignation or removal of the Trustee, the discharge of the Company's obligations pursuant to Article VIII of this Indenture and any rejection or termination of this Indenture under any Bankruptcy Law. SECTION 7.8. Replacement of Trustee. The Trustee may resign by so notifying the Company in writing. The holder or holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee in writing and may appoint a successor trustee with the Company's consent. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver, Custodian, or other public officer takes charge of the Trustee or its property; or L1103/WP88/03AV18 -75- (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the holder or holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that and provided that all sums owing to the Trustee provided for in Section 7.7 have been paid, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.7, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each holder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the holder or holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any holder of Securities may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee. SECTION 7.9. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any L1103/WP88/03AV18 -76- further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a)(1) and TIA Section 310(a)(5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b). SECTION 7.11. Preferential Collection of Claims against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE VIII SATISFACTION AND DISCHARGE SECTION 8.1. Satisfaction, Discharge of the Indenture and Defeasance of the Securities. The Company shall be deemed to have paid and discharged the entire Indebtedness on the Securities and the provisions of this Indenture shall cease to be of further effect (subject to Section 8.3), if: (1) The Company irrevocably deposits in trust with the Trustee, pursuant to an irrevocable trust and security agreement in form and substance reasonably satisfactory to the Trustee, (i) U.S. Legal Tender, (ii) U.S. Government Obligations, or (iii) a combination thereof which, after payment of all Federal, state and local taxes or other charges or assessments in respect thereof payable by the Trustee, are in an amount sufficient to pay, or which will provide, through the payment of L1103/WP88/03AV18 -77- principal and interest, not later than one day before the due date of payment in respect of the Securities, U.S. Legal Tender in an amount which, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof (in form and substance reasonably satisfactory to the Trustee) delivered to the Trustee, is sufficient to pay, the principal of, and each installment of interest on, the Securities then outstanding on the dates on which any such payments are due and payable in accordance with the terms of this Indenture and of the Securities; (2) Such deposits shall not cause the Trustee to have a conflicting interest as defined in and for purposes of the TIA; (3) No Default or Event of Default shall have occurred or be continuing on the date of such deposit or shall occur on or before the 91st day (or one day after such other greater period of time in which any such deposit of trust funds may remain subject to bankruptcy or insolvency laws) after the date of such deposit, and such deposit will not result in a Default or Event of Default under this Indenture or a breach or violation of, or constitute a default under, any other instrument to which the Company or any Subsidiary of the Company is a party or by which it or its property is bound; (4) The deposit, defeasance and discharge will not be deemed, or result in, a Federal income taxable event to the holders of the Securities and the holders will be subject to Federal income tax in 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; L1103/WP88/03AV18 -78- (5) The deposit shall not result in the Company, the Trustee or the trust becoming an "investment company" under the Investment Company Act of 1940; (6) After the passage of 90 days (or any greater period of time in which any such deposit of trust funds may remain subject to Bankruptcy Laws insofar as those laws apply to the Company) following the deposit of the trust funds, such funds will not be subject to any Bankruptcy Laws affecting creditors' rights generally; (7) Holders of the Securities will have a valid, perfected and non- avoidable first-priority security interest in the trust funds; and (8) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (who may be outside counsel to the Company, but not an employee of the Company), each in form and substance satisfactory to the Trustee, stating that all conditions precedent specified herein relating to the defeasance contemplated by this Section 8.1 have been complied with. In the event all or any portion of the Securities are to be redeemed through such irrevocable trust, the Company must make arrangements satisfactory to the Trustee, at the time of such deposit, for the giving of the notice of such redemption or redemptions by the Trustee in the name and at the expense of the Company. In the event that the Company takes the necessary action to comply with the provisions described in this Section 8.1 and the Securities are declared due and payable because of the occurrence of an Event of Default, the Company will remain liable for all amounts due on the Securities at the time of acceleration resulting from such Event of Default in excess of the amount of U.S. Legal Tender and U.S obligations deposited with the Trustee pursuant to this Section 8.1 at the time of such acceleration. L1103/WP88/03AV18 -79- SECTION 8.2. Termination of Obligations Upon Cancellation of the Securities. In addition to the Company's rights under Section 8.1, the Company may terminate all of their respective obligations under this Indenture (subject to Section 8.3) when: (1) all Securities theretofore authenticated and delivered (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.7) have been delivered to the Trustee for cancellation; (2) the Company has paid or caused to be paid all sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent specified herein relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 8.3. Survival of Certain Obligations. Notwithstanding the satisfaction and discharge of this Indenture and of the Securities referred to in Section 8.1 or 8.2, the respective obligations of the Company and the Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.11, 2.12, Article III, 4.1, 4.2, 4.3, 6.7, 6.8, 7.7, 7.8, 8.5, 8.6, 8.7, 12.1, 12.2, 12.7, 12.8, and this Section 8.3 shall survive until the Securities are no longer outstanding, and thereafter the obligations of the Company and the Trustee under Sections 6.8, 7.7, 7.8, 8.5, 8.6, 8.7 and this Section 8.3 shall survive. Nothing contained in this Article VIII shall abrogate any of the obligations or duties of the Trustee under this Indenture. SECTION 8.4. Acknowledgement of Discharge by Trustee. After (i) the conditions of Section 8.1 or 8.2 have been satisfied, (ii) the Company has paid or caused to L1103/WP88/03AV18 -80- be paid all other sums payable hereunder by the Company and (iii) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent referred to in clause (i), above, relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.3. SECTION 8.5. Application of Trust Assets. The Trustee shall hold any U.S. Legal Tender or U.S. Government Obligations deposited with it in the irrevocable trust established pursuant to Section 8.1. The Trustee shall apply the deposited U.S. Legal Tender or U.S. Government Obligations, together with earnings thereon, through the Paying Agent (other than the Company or any Subsidiary of the Company), in accordance with this Indenture and the terms of the irrevocable trust agreement, to the payment of principal of and interest on the Securities. SECTION 8.6. Repayment to the Company. Upon termination of the trust established pursuant to Section 8.1, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess U.S. Legal Tender or U.S. Government Obligations held by them. The Trustee and the Paying Agent shall pay to the Company upon request, and, if applicable, in accordance with the irrevocable trust established pursuant to Section 8.1, any U.S. Legal Tender or U.S. Government Obligations held by them for the payment of principal of or interest on the Securities that remain unclaimed for two years after the date on which such payment shall have become due; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may, at the expense of the Company, cause to be published once, in a newspaper customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, L1103/WP88/03AV18 -81- which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining shall be repaid to the Company. After payment to the Company, holders entitled to such payment must look to the Company for such payment as general creditors unless an applicable abandoned property law designates another person. SECTION 8.7. Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.1 or 8.2 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.1 or 8.2 until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.1 or 8.2; provided, however, that if the Company has made any payment of principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the holders of such Securities to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.1. Supplemental Indentures Without Consent of Holders. Without the consent of any holder, the Company, when authorized by Board Resolutions, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to cure any ambiguity, defect, or inconsistency, or to make any other provisions with respect to matters or questions arising under this Indenture which L1103/WP88/03AV18 -82- shall not be inconsistent with the provisions of this Indenture, provided such action pursuant to this clause (1) shall not adversely affect the interests of any holder in any respect; (2) to add to the covenants of the Company for the benefit of the holders, or to surrender any right or power herein conferred upon the Company or to make any other change that does not adversely affect the rights of any holder, provided, that the Company has delivered to the Trustee an Opinion of Counsel stating that such change does not adversely affect the rights of any holder; (3) to provide for collateral for the Securities; (4) to evidence the succession of another person to the Company, and the assumption by any such successor of the obligations of the Company, herein and in the Securities in accordance with Article V; or (5) to comply with the TIA. SECTION 9.2. Amendments, Supplemental Indentures and Waivers with Consent of Holders. Subject to Section 6.8, with the consent of the holders of a majority in aggregate principal amount of then outstanding Securities, by written act of said holders delivered to the Company and the Trustee, the Company, when authorized by Board Resolutions, and the Trustee may amend or supplement this Indenture or the Securities or enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or the Securities or of modifying in any manner the rights of the holders under this Indenture or the Securities. Subject to Section 6.8, the holder or holders of a majority in aggregate principal amount of then outstanding Securities may waive compliance by the Company with any provision of this Indenture or the L1103/WP88/03AV18 -83- Securities. Notwithstanding any of the above, however, no such amendment, supplemental indenture or waiver shall, without the consent of the holder of each outstanding Security affected thereby: (1) change the percentage of principal amount of Securities whose holders must consent to an amendment, supplement or waiver of any provision of this Indenture or the Securities; (2) reduce the rate or extend the time for payment of interest on any Security; (3) reduce the principal amount of any Security, or reduce the Change of Control Purchase Price, the Offer Price or the Redemption Price; (4) change the Stated Maturity or the Change of Control Payment Date or the Purchase Date of any Security; (5) alter the redemption provisions of Article III or the terms or provisions of Section 4.9 or the terms or provisions of Article XI, in any case, in a manner adverse to any holder; (6) make any changes in the provisions concerning waivers of Defaults or Events of Default by holders of the Securities or the rights of holders to recover the principal of, interest on, or redemption payment with respect to, any Security; (7) make any changes in Section 6.4, 6.7 or this third sentence of this Section 9.2; (8) make the principal of, or the interest on, any Security payable with anything or in any manner other than as provided for in this Indenture and the L1103/WP88/03AV18 -84- Securities as in effect on the date hereof; or (9) make the Securities subordinated in right of payment to any extent or under any circumstances to any other indebtedness. It shall not be necessary for the consent of the holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. After an amendment, supplement or waiver under this Section 9.2 or 9.4 becomes effective, it shall bind each holder. In connection with any amendment, supplement or waiver under this Article IX, the Company may, but shall not be obligated to, offer to any holder who consents to such amendment, supplement or waiver, or to all holders, consideration for such holder's consent to such amendment, supplement or waiver. SECTION 9.3. Compliance with TIA. Every amendment, waiver or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.4. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a holder is a continuing consent by the holder and every subsequent holder of a Security or portion of a Security that evidences the same debt as the consenting holder's Security, even if notation L1103/WP88/03AV18 -85- of the consent is not made on any Security. However, any such holder or subsequent holder may revoke the consent as to his Security or portion of his Security by written notice to the Company or the person designated by the Company as the person to whom consents should be sent received before the date on which the Trustee receives an Officers' Certificate certifying that the holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the holders entitled to consent to any amendment, supplement or waiver, which record date shall be the date so fixed by the Company notwithstanding the provisions of the TIA. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those persons who were holders at such record date, and only those persons (or their duly designated proxies), shall be entitled to revoke any consent previously given, whether or not such persons continue to be holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every holder of Securities, unless it makes a change described in any of clauses (1) through (9) of Section 9.2, in which case, the amendment, supplement or waiver shall bind only each holder of a Security who has consented to it and every subsequent holder of a Security or portion of a Security that evidences the same debt as the consenting holder's Security; provided, however, that any such waiver shall not impair or affect the right of any holder to receive payment of principal of and interest on a Security, on or after the respective dates set for such amounts to become due and payable expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates. SECTION 9.5. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the holder of the Security to deliver it to the Trustee or require the L1103/WP88/03AV18 -86- holder to put an appropriate notation on the Security. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Any failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment, supplement or waiver. SECTION 9.6. Trustee to Sign Amendments, Etc. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article IX; provided, that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article IX is authorized or permitted by this Indenture. ARTICLE X MEETINGS OF HOLDERS OF SECURITIES SECTION 10.1. Purposes for Which Meetings May Be Called. A meeting of holders of Securities may be called at any time and from time to time pursuant to the provisions of this Article X for any of the following purposes: (a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to waive or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by the holders of Securities pursuant to any of the provisions of Article VI; (b) to remove the Trustee or appoint a successor Trustee pursuant to the provisions of Article VII; L1103/WP88/03AV18 -87- (c) to consent to an amendment, supplement or waiver pursuant to the provisions of Section 9.2; or (d) to take any other action (i) authorized to be taken by or on behalf of the holder or holders of any specified aggregate principal amount of the Securities under any other provision of this Indenture, or authorized or permitted by law or (ii) which the Trustee deems necessary or appropriate in connection with the administration of this Indenture. SECTION 10.2. Manner of Calling Meetings. The Trustee may at any time call a meeting of holders of Securities to take any action specified in Section 10.1, to be held at such time and at such place in the City of New York, New York or elsewhere as the Trustee shall determine. Notice of every meeting of holders of Securities, setting forth the time and place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed by the Trustee, first-class postage prepaid, to the Company and to the holders at their last addresses as they shall appear on the registration books of the Registrar, not less than 10 nor more than 60 days prior to the date fixed for a meeting. Any meeting of holders of Securities shall be valid without notice if the holders of all Securities then outstanding are present in person or by proxy, or if notice is waived before or after the meeting by the holders of all Securities outstanding, and if the Company and the Trustee are either present by duly authorized representatives or have, before or after the meeting, waived notice. SECTION 10.3. Call of Meetings by Company or Holders. In case at any time the Company, pursuant to a Board Resolution, or the holders of not less than 10% in aggregate principal amount of the Securities then outstanding, shall have requested the Trustee to call a meeting of holders of Securities to take any action specified in Section 10.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or the holders of Securities in L1103/WP88/03AV18 -88- the amount above specified may determine the time and place in the City of New York, New York or elsewhere for such meeting and may call such meeting for the purpose of taking such action, by mailing or causing to be mailed notice thereof as provided in Section 10.2, or by causing notice thereof to be published at least once in each of two successive calendar weeks (on any Business Day during such week) in a newspaper or newspapers printed in the English language, customarily published at least five days a week, of a general circulation in the City of New York, State of New York, the first such publication to be not less than 10 nor more than 60 days prior to the date fixed for the meeting. SECTION 10.4. Who May Attend a Vote at Meetings. To be entitled to vote at any meeting of holders of Securities, a person shall (a) be a registered holder of one or more Securities or (b) be a person appointed by an instrument in writing as proxy for the registered holder or holders of Securities. The only persons who shall be entitled to be present or to speak at any meeting of holders of Securities shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 10.5. Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights; Adjournment. Notwithstanding any other provision of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any action by or any meeting of holders of Securities, in regard to proof of the holding of Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, and submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think appropriate. Such regulations may fix a record date and time for determining the holders of record of Securities entitled to vote at such meeting, in which case those and only those persons who are holders of Securities at the record date and time so fixed, or their proxies, shall be entitled to vote at such meeting whether L1103/WP88/03AV18 -89- or not they shall be such holders at the time of themeeting. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by holders of Securities as provided in Section 10.3, in which case the Company or the holders of Securities calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the holders of a majority in principal amount of the Securities represented at the meeting and entitled to vote. At any meeting each holder of Securities or proxy shall be entitled to one vote for each $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Securities challenged as not outstanding and ruled by the chairman of the meeting to be not then outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities held by him or instruments in writing as aforesaid duly designating him as the proxy to vote on behalf of other holders of Securities. Any meeting of holders of Securities duly called pursuant to the provisions of Section 10.2 or Section 10.3 may be adjourned from time to time by vote of the holder or holders of a majority in aggregate principal amount of the Securities represented at the meeting and entitled to vote, and the meeting may be held as so adjourned without further notice. SECTION 10.6. Voting at the Meeting and Record to Be Kept. The vote upon any resolution submitted to any meeting of holders of Securities shall be by written ballots on which shall be subscribed the signatures of the holders of Securities or of their representatives by proxy and the principal amount of the Securities voted by the ballot. The permanent chairman of the meeting shall appoint two inspectors of votes, who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of L1103/WP88/03AV18 -90- each meeting of holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to such record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts, setting forth a copy of the notice of the meeting and showing that such notice was mailed as provided in Section 10.2 or published as provided in Section 10.3. The record shall be signed and verified by the affidavits of the permanent chairman and the secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 10.7. Exercise of Rights of Trustee or holders of Securities May Not Be Hindered or Delayed by Call of Meeting. Nothing contained in this Article X shall be deemed or construed to authorize or permit, by reason of any call of a meeting of holders of Securities or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the holders of Securities under any of the provisions of this Indenture or of the Securities. ARTICLE XI RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL SECTION 11.1. Repurchase of Securities at Option of the Holder Upon a Change of Control. (a) In the event that a Change of Control occurs, each holder of Securities shall have the right, at option of such holder and in accordance with the provisions of this Section 11.1, to require the Company to repurchase all or any part of such holder's Securities on the date that is no later than 40 Business Days after the occurrence of a Change of Control (the "Change of Control Payment L1103/WP88/03AV18 -91- Date"), at a cash purchase price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to and including the Change of Control Payment Date (as defined below). (b) Following a Change of Control, the Company shall make an unconditional offer (a "Change of Control Offer") to the holders pursuant to the notice referred to below to purchase all of the Securities pursuant to the offer described in clause (c) of this Section 11.1 at the Change of Control Purchase Price. Within five days after each date upon which a Change of Control shall occur requiring the Company to make a Change of Control Offer pursuant to this Section 11.1, the Company shall so notify the Trustee. Notice of a Change of Control Offer shall be sent, at least 20 Business Days prior to the Final Change of Control Put Date (as hereinafter defined), by first class mail, by the Company to each holder at its registered address, with a copy to the Trustee. The notice to the holders shall contain all instructions and materials required by applicable law or otherwise material to such holders' decision to tender Securities pursuant to the Change of Control Offer. The notice, which shall govern the terms of the Change of Control Offer, shall state: (1) that the Change of Control Offer is being made pursuant to such notice and this Section 11.1 and that all Securities, or portions thereof, tendered will be accepted for payment; (2) the Change of Control Purchase Price (including the amount of accrued and unpaid interest), the Change of Control Payment Date and the Final Change of Control Put Date (as defined below); (3) that any Security or portion thereof not tendered and accepted for payment will continue to accrue interest, if interest is then accruing; L1103/WP88/03AV18 -92- (4) that, unless the Company defaults in depositing U.S. Legal Tender with the Paying Agent in accordance with the last paragraph of this clause (b), any Security or portion thereof accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that holders electing to have a Security or portion thereof purchased pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Election of Holder to Require Purchase" on the reverse of the Security completed, to the Paying Agent (which may not for purposes of this Section 11.1, notwithstanding anything in this Indenture to the contrary, be the Company or any Affiliate of the Company) at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date (the "Final Change of Control Put Date"); (6) that holders will be entitled to withdraw their election, in whole or in part, if the Paying Agent receives, prior to the close of business on the Final Change of Control Put Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the principal amount of the Securities the holder is withdrawing and a statement containing a manual or facsimile signature that such holder is withdrawing his election to have such principal amount of Securities purchased; (7) that holders electing to have a portion of a Security purchased pursuant to a Change of Control Offer will be issued a new Security in a principal amount equal to the unpurchased portion of the Securities surrendered; and L1103/WP88/03AV18 -93- (8) a brief description of the events resulting in such Change of Control. Any such Change of Control Offer shall comply with all applicable provisions of Federal and state laws, including Rule 14e-1 under the Exchange Act and any other laws regulating tender offers, if applicable, and any provisions of this Indenture which conflict with such laws shall be deemed to be superseded by the provisions of such laws. On or before the Change of Control Payment Date, the Company shall (i) accept for payment Securities or portions thereof properly tendered pursuant to the Change of Control Offer prior to the close of business on the Final Change of Control Put Date, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Change of Control Purchase Price (together with accrued and unpaid interest) of all Securities so tendered and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate listing the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail or deliver to the holders of Securities or portions thereof so accepted payment in an amount equal to the Change of Control Purchase Price (together with accrued and unpaid interest) for such Securities or portions thereof, and the Trustee shall promptly authenticate and mail or deliver to such holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the holder thereof. The Company shall issue a public announcement of the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date and will furnish a copy of such announcement to the Trustee. ARTICLE XII MISCELLANEOUS SECTION 12.1. TIA Controls. If any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by L1103/WP88/03AV18 -94- operation of the TIA, the imposed duties, upon qualification of this Indenture under the TIA, shall control. SECTION 12.2. Notices. Any notices or other communications to the Company or the Trustee required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company: Triangle Pacific Corp. 16803 Dallas Parkway Dallas, Texas 75248 Attention: Darryl T. Marchand L1103/WP88/03AV18 -95- if to the Trustee: Ameritrust Texas National Association 1201 Elm Street Suite 300 Dallas, Texas 75201 Attention: Corporate Trust Administration The Company or the Trustee by notice to the other party may designate additional or different addresses as shall be furnished in writing by such party. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered, if personally delivered; when the appropriate answer back is received, if telexed; when receipt is acknowledged, if telecopied; and five Business Days after mailing, if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a holder of Securities shall be mailed to him by first class mail or other equivalent means at his address as it appears on the register of the Registrar and shall be sufficiently given to him if so mailed within the time period prescribed. Failure to mail a notice or communication to a holder of Securities or any defect in it shall not affect its sufficiency with respect to other holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 12.3. Communications by Holders with Other Holders. Holders of Securities may communicate pursuant to Section 312(b) of the TIA with other holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of Section 312(c) of the TIA. SECTION 12.4. Certificate and Opinion as to Conditions Precedent. L1103/WP88/03AV18 -96- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate (in form and substance reasonably satisfactory to the Trustee) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel (in form and substance reasonably satisfactory to the Trustee) stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 12.5. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied L1103/WP88/03AV18 -97- with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 12.6. Rules by Trustee, Paying Agent, Registrar. The Trustee may make reasonable rules for action by or at a meeting of holders of Securities. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 12.7. Legal Holidays. The term "Legal Holiday" means any day other than a Business Day. If a payment date is a Legal Holiday, payment may be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. L1103/WP88/03AV18 -98- SECTION 12.8. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK AND WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. SECTION 12.9. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. No Recourse against Others. A director, officer, employee, stockholder or incorporator, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder by accepting a Security waives and releases all such liability. Such waiver and release are L1103/WP88/03AV18 -99- part of the consideration for the issuance of theSecurities. SECTION 12.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.12. Duplicate Originals. All parties may sign any number of copies or counterparts of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. SECTION 12.13. Severability. In case of any one or more of the provisions in this Indenture or in the Securities shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. SECTION 12.14. Table of Contents, Headings, Etc. The Table of Contents and Cross-Reference Table and the headings of the Articles and the Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. L1103/WP88/03AV18 -100- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above. TRIANGLE PACIFIC CORP. By: /s/ M.J. McHugh Name: M. J. McHugh Title: Sr. Executive Vice President [SEAL] Attest: /s/ Darryl T. Marchand AMERITRUST TEXAS NATIONAL ASSOCIATION By: /s/ J. Gary Jones Name: J. Gary Jones Title: Vice President Attest: /s/ Steve Shmell L1103/WP88/03AV18 -101- EXHIBITS Exhibit A - Form of Note L1103/WP88/03AV18 EXHIBIT A TRIANGLE PACIFIC CORP. 10-1/2% SENIOR NOTE DUE 2003 No. $ CUSIP No. 895912 AC 7 Triangle Pacific Corp., a Delaware corporation (hereinafter called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of , on August 1, 2003. Interest Payment Dates: August 1 and February 1. Record Dates: July 15 and January 15. Reference is made to the further provisions of this Security on the reverse side, which will, for all purposes, have the same effect as if set forth at this place. Terms used herein which are defined in the Indenture shall have the meanings assigned to them in the Indenture. IN WITNESS WHEREOF, the Company has caused this Instrument to be duly executed under its corporate seal. Dated: TRIANGLE PACIFIC CORP. By: Senior Executive Vice President Attest: Corporate Secretary [Seal] This is one of the Securities described in the within-mentioned Indenture. AMERITRUST TEXAS NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory Dated: L1103/WP88/03AV18 A-2 TRIANGLE PACIFIC CORP. 10-1/2% Senior Note due 2003 1. Interest. Triangle Pacific Corp., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security at a rate of 10-1/2% per annum. To the extent it is lawful, the Company promises to pay interest on any interest payment due but unpaid on such principal amount at a rate of 10-1/2% per annum compounded semi-annually. The Company will pay interest semi-annually on August 1 and February 1 of each year (each, an "Interest Payment Date"), commencing February 1, 1994. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from . Interest will be computed on the basis of a 360-day year for the actual number of days elapsed. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the persons who are the registered holders at the close of business on the July 15 or January 15 (each, a "Record Date") immediately preceding the Interest Payment Date. Holders must surrender Securities to a Paying Agent to collect principal payments. Except as provided below, the Company shall pay principal and interest in such coin or currency of the United States of America as at the time of payment shall be legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay interest by wire transfer of Federal funds or by its check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or the Company may mail any such interest payment to a holder at the holder's registered address. 3. Paying Agent and Registrar. L1103/WP88/03AV18 A-3 Ameritrust Texas National Association will act as the initial Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the holders. The Company or any of its Subsidiaries may, subject to certain exceptions, act as Paying Agent, Registrar or co-Registrar. 4. Indenture. This Security is issued under an Indenture, dated as of August 1, 1993 (the "Indenture"), between the Company and Ameritrust Texas National Association, as Trustee (the "Trustee"). The terms of the Securities 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 Securities are subject to all such terms, and holders of Securities are referred to the Indenture and said Act for a statement thereof. The Securities are unsecured obligations of the Company limited in aggregate principal amount to $160,000,000. 5. Redemption. The Securities may be redeemed in whole or from time to time in part at any time on and after August 1, 1998, at the option of the Company, at the Redemption Price (expressed as a percentage of principal amount) set forth below with respect to the indicated Redemption Date, in each case, together with any accrued and unpaid interest to the Redemption Date. The Securities may not be so redeemed before August 1, 1998. Redemption Year Price _ 1998..........................103.938% 1999..........................102.625% 2000..........................101.313% 2001 and thereafter........... 100.000% Any such redemption will comply with Article III of the Indenture. 6. Notice of Redemption. L1103/WP88/03AV18 A-4 Notice of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the Redemption Date to each holder of Securities to be redeemed. Securities in denominations larger than $1,000 may be redeemed in part. Except as set forth in the Indenture, from and after any Redemption Date, if monies for the redemption of Securities called for redemption shall have been deposited with the Paying Agent on such Redemption Date, the Securities called for redemption will cease to bear interest and the only right of the holders of such Securities will be to receive payment of the Redemption Price for such securities and accrued and unpaid interest thereon to the Redemption Date. 7. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. A holder may register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption. 8. Persons Deemed Owners. The registered holder of a Security shall be treated as the owner thereof for all purposes. 9. Unclaimed Money. To the extent lawful, if money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent will return such money to the Company at its written request. Upon the return thereof, all liability of the Trustee and the Paying Agent with respect to such money shall cease. 10. Discharge Prior to Redemption of Maturity. If the Company at any time deposits into an irrevocable trust with the Trustee U.S. Legal Tender or L1103/WP88/03AV18 A-5 U.S. Government Obligations sufficient to pay the principal of and interest on the Securities to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Securities (including certain restrictive covenants contained in the Indenture, but excluding its obligation to pay the principal of and interest on the Securities). 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived with the consent of the holders of a majority in aggregate principal amount of the Securities then outstanding. Any such consent or waiver by the holder of a Security shall be conclusive and binding upon such holder and all future holders of such Security and any Security issued upon the transfer of or in exchange for such Security, whether or not notation of such consent or waiver is made upon such Security. Without notice to or consent of any holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any holder of a Security. 12. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, Incur additional Indebtedness, make Restricted Payments, enter into Affiliate Transactions, incur Liens, sell assets, merge or consolidate with any other person and sell, lease, transfer or otherwise dispose of all or substantially all of its properties or assets. These limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 13. Change of Control. L1103/WP88/03AV18 A-6 In the event there shall occur any Change of Control, each holder of Securities shall have the right, at such holder's option, but subject to the limitations and conditions set forth in the Indenture, to require the Company to purchase on the Change of Control Payment Date and in the manner specified in the Indenture, all or any part (in integral multiples of $1,000) of such holder's Securities at a Change of Control Purchase Price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the Change of Control Payment Date. 14. Successors. When a successor assumes all the obligations of its predecessor under the Securities and the Indenture, the predecessor will be released from those obligations. 15. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Securities may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. The Indenture provides that no holder of any Securities may enforce any remedy under the Indenture except in the case of failure of the Trustee to act after its receipt of (i) notice of default, (ii) a written request by the holders of 25% in principal amount of the then outstanding Securities and (iii) security and indemnity reasonably satisfactory to the Trustee. The Trustee may require security and indemnity reasonably satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, holders of a majority in aggregate principal amount of the then outstanding Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal or interest), if it determines that withholding notice is in their interest. 16. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept L1103/WP88/03AV18 A-7 deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates as if it were not the Trustee. 17. No Recourse Against Others. No stockholder, director, officer, employee or incorporator, as such, past, present or future, of the Company or any successor corporation shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. The holder of this Security by accepting this Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 18. Interest Limitation. If any usury law now or at any time hereafter in force shall be applicable to the Securities or the Indenture or any other document or instrument related hereto or thereto, it is the intention of the Company and each holder of the Securities to conform strictly to any such usury laws and any subsequent revisions or repeals thereof. In furtherance thereof, the Company and each holder of the Securities stipulate and agree that none of the terms and provisions contained in the Securities or the Indenture or any other document or instrument related hereto or thereto shall ever be construed to give rise to a contract or obligation to pay interest in excess of the maximum amount permitted to be contracted for, taken, reserved, charged, collected or received under any applicable law, and the provisions of this paragraph 18 shall control in the event of any conflict between such provisions and any other provisions contained in the Securities or the Indenture or any other document or instrument related hereto or thereto. Accordingly, if the transactions contemplated by the Securities or the Indenture or any other document or instrument related hereto or thereto would be usurious under any applicable law, then, in such event, all amounts that constitute interest under applicable law that are contracted for, taken, reserved, charged, collected or received under the Securities or the Indenture or any other document or instrument shall under no circumstances exceed the maximum L1103/WP88/03AV18 A-8 amount allowed by applicable law, and the excess, if any, shall be credited to the principal amount of the Securities (or, if the principal amount of the Securities shall have been paid or deemed to be paid in full, shall be refunded to the Company). 19. Authentication. This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the face of this Security. 20. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 21. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities as a convenience to the holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. L1103/WP88/03AV18 A-9 FORM OF ASSIGNMENT I or we assign this Security to: (Print or type name, address and zip code of assignee) Please insert Social Security or other identifying number of assignee: and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date: Signature: _ (Sign exactly as name appears on the other side of this Security) Signature guarantee: (Signatures must be guaranteed by a bank, a trust company or a member firm of the New York Stock Exchange, Inc.) L1103/WP88/03AV18 A-10 ELECTION OF HOLDER TO REQUIRE PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.9 or Article XI of the Indenture, check the appropriate box: o Section 4.9 o Article XI If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.9 or Article XI of the Indenture, as the case may be, state the amount you want to be purchased: $__________. Date: Signature: (Sign exactly as your name appears on the other side of this Security) Signature guarantee: (Signatures must be guaranteed by a bank, a trust company or a member firm of the New York Stock Exchange, Inc.) L1103/WP88/03AV18 A-11 EX-4 5 AUDITOR CONSENT Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statements Nos. 33-69682 and 33- 69684 on Form S-8 for Triangle Pacific Corp. 1993 Long-Term Incentive Compensation Plan and the Triangle Pacific Corp. Nonemployee Director Stock Option Plan. Arthur Andersen & Co. Dallas, Texas March 29, 1994 -----END PRIVACY-ENHANCED MESSAGE-----